Document:

Exhibit
10.3

 

SECOND AMENDED AND
RESTATED REGISTRATION RIGHTS AGREEMENT (the “Agreement”), dated as of
June 30, 2003, among the investors listed on Schedule I hereto (the
“Investors”) and Ness Technologies, Inc., a Delaware corporation (the
“Company”).

 

R E C I T A L S

 

WHEREAS, the Investors
other than certain of the APAR Holders (as defined below) are parties to an
Amended and Restated Registration Rights Agreement with respect to the Company
dated as of May 18, 2000 (the “May Registration Rights Agreement”), as amended
by that certain First Amendment to Registration Rights Agreement, dated as of
September 30, 2002 (the “First Amendment”), and that certain Second
Amendment to Registration Rights Agreement, dated as of December 27, 2002
(the “Second Amendment” and, together with the May Registration Rights
Agreement and the First Amendment, the “Registration Rights Agreement”); and

 

WHEREAS, the parties
hereto desire to amend the Registration Rights Agreement to allow certain APAR
Holders to become party to the Registration Rights Agreement (as amended
hereby) by the execution and delivery of this Agreement upon their acquisition
from the Company of shares of Common Stock, $0.01 par value per share, of the
Company (“Common Stock”) pursuant to that certain Merger Agreement, dated as of
May 12, 2003, by and among the Company, Ness Acquisition Corp., Apar Holding
Corp. and the APAR Holders (as defined therein) (the “Merger Agreement”);

 

WHEREAS, as a condition
to closing the Merger Agreement, each APAR Holder that is not already a party
to the Registration Rights Agreement is to become a party to the Registration
Rights Agreement (as amended hereby) by the execution and delivery of this
Agreement;

 

WHEREAS, the Company and
the Investors desire to define the registration rights of the Investors, and to
amend and restate the Registration Rights Agreement, on the terms and subject
to the conditions herein set forth; and

 

WHEREAS, undersigned
Persons that are Investors immediately prior to the effectiveness of this Agreement,
holding, in the aggregate, at least a majority of the currently outstanding
Registrable Securities (as defined in the Registration Rights Agreement) and
can, therefore, together with the Company, amend and restate the Registration
Rights Agreement effective upon execution of this Agreement.

 

NOW, THEREFORE, in
consideration of the foregoing premises and for other good and valuable
consideration, the parties hereby agree as follows:

 

1.     DEFINITIONS

 

As used in this
Agreement, the following terms have the respective meanings set forth below:

 

Commission:  shall mean the Securities and Exchange
Commission or any other federal agency at the time administering the Securities
Act;

 

Exchange Act:  shall mean the Securities Exchange Act of
1934, as amended;

 

 

Holder:  shall mean any holder of Registrable
Securities;

 

Initial Public Offering:  shall mean the initial underwritten public
offering of shares of Common Stock for the account of the Corporation and
listing of the Common Stock so offered on an internationally recognized
securities exchange or Nasdaq;

 

Initiating Holder:  shall mean (A) Warburg Pincus Equity
Partners, L.P., its affiliates and assigns so long as such entities
beneficially own any of the then outstanding Registrable Securities, (B) GOWRON
(International) Ltd., its affiliates and assigns so long as such entities
beneficially own any of the outstanding Registrable Securities, (C) Gmul-Amgal
Investments Ltd., its affiliates and assigns so long as such entities own any
of the outstanding Registrable Securities, (D) G.L.Y. High-Tech Investments
Inc. (“GLY”), its affiliates and assigns so long as such entities own any of
the outstanding Registrable Securities, (E) Velston Pte. Ltd. (“Velston”), its
affiliates and assigns so long as such entities own any of the outstanding
Registrable Securities and (F) Nesstech LLC, its affiliates and assigns so long
as such entities own any of the outstanding Registrable Securities;

 

Person:  shall mean an individual, partnership,
joint-stock company, corporation, trust or unincorporated organization, and a
government or agency or political subdivision thereof;

 

Preferred Stock:  shall mean the Class B Convertible Preferred
Stock, $0.01 par value per share, of the Company and the Class C Convertible
Preferred Stock, $0.01 par value per share, of the Company;

 

Priority Agreements:  shall mean the Registration Rights Agreement
dated as of March 26, 1999 heretofore entered into between the Company and
GLY (the “GLY Registration Rights Agreement”), the Registration Rights
Agreement dated as of May 13, 1999 heretofore entered into between the Company
and Velston (the “Velston Registration Rights Agreement”) and an agreement that
may be entered into hereafter between the Company and Leah Atad, pursuant to
which certain persons are entitled to have securities of the Company held by
them included in a registration;

 

Register, Registered and
Registration:  shall
refer to a registration effected by preparing and filing a registration
statement in compliance with the Securities Act (and any post-effective
amendments filed or required to be filed) and the declaration or ordering of
effectiveness of such registration statement;

 

Registrable Securities:  shall mean (A) shares of Common Stock issued
or issuable upon conversion of the shares of Preferred Stock, (B) shares of
Common Stock issued pursuant to that certain Stock Purchase Agreement, dated as
of August 30, 2002, by and among the APP Holders (as defined therein) and
the Company, (C) shares of Common Stock issued pursuant to that certain
Securities Exchange Agreement, dated as of December 27, 2002, among the
Company and the Stockholders (as defined therein), (D) shares of Common Stock
issued to the APAR Holders pursuant to the Merger Agreement, (E) any additional
shares of Common Stock acquired by the Investors hereafter and (F) any
securities of the Company issued as a dividend or other distribution with
respect to, or in exchange for or in replacement of, the shares of Preferred
Stock or Common Stock referred to in clauses (A) through (E) unless and until,
in the case of any such securities, (i) they have been effectively registered
under the Securities Act and can be disposed of in

 

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accordance with the
registration statement covering them, (ii) they are distributed to the public,
or all of such securities held by a Holder are eligible to be sold in any
90-day period, pursuant to Rule 144 (without the Holder having to take any
further action in order to meet the requirements of Rule 144(k)), or any
similar provision then in force, under the Securities Act, or (iii) they are
otherwise freely transferable without restriction under the Securities Act;

 

Registration Expenses:  shall mean all expenses incurred by the
Company in compliance with Sections 2(a) and (b) hereof, including, without
limitation, all registration and filing fees, printing expenses, fees and
disbursements of counsel for the Company, fees and expenses of one counsel for
all the Holders in an amount not to exceed $15,000, blue sky fees and expenses
and the expense of any special audits incident to or required by any such
registration;

 

Security, Securities:  shall have the meaning set forth in
Section 2(1) of the Securities Act;

 

Securities Act:  shall mean the Securities Act of 1933, as
amended; and

 

Selling Expenses:  shall mean all underwriting discounts and
selling commissions applicable to the sale of Registrable Securities and all
fees and disbursements of counsel for each of the Holders other than fees and
expenses of one counsel for all the Holders in an amount not to exceed $15,000.

 

2.     REGISTRATION RIGHTS

 

(a)  Requested Registration.

 

(i)      Request for Registration.  If the Company shall receive from an
Initiating Holder, at any time after the earlier of (i) six months following
the consummation of the Initial Public Offering or (ii) November 2, 2001,
a written request that the Company effect any registration with respect to all
or a part of the Registrable Securities, the Company will:

 

(A)  promptly give written notice of the proposed
registration, qualification or compliance to all other Holders; and

 

(B)  as soon as practicable, use its diligent
best efforts to effect such registration (including, without limitation, the
execution of an undertaking to file post-effective amendments, appropriate
qualification under applicable blue sky or other state securities laws and
appropriate compliance with applicable regulations issued under the Securities
Act) as may be so requested and as would permit or facilitate the sale and
distribution of all or such portion of such Registrable Securities as are
specified in such request, together with all or such portion of the Registrable
Securities of any Holder or Holders joining in such request as are specified in
a written request received by the Company within 10 business days after written
notice from the Company is received by the Holders under
Section 2(a)(i)(A) above; provided that the Company shall not be obligated
to effect, or take any action to effect, any such registration pursuant to this
Section 2(a):

 

(w)          In any particular
jurisdiction in which the Company would be required to execute a general
consent to service of process in effecting such registration, qualification or
compliance, unless the Company is already subject to

 

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service in such
jurisdiction and except as may be required by the Securities Act or applicable
rules or regulations thereunder;

 

(x)            After the Company has
effected three (3) such registrations pursuant to this Section 2(a) and
such registrations have been declared or ordered effective and the sales of
such Registrable Securities shall have closed;

 

(y)           If the Registrable
Securities requested by all Holders to be registered pursuant to such request
have an anticipated aggregate public offering price (before any underwriting
discounts and commissions) of less than $15,000,000 (or $30,000,000 if such
requested registration is the Initial Public Offering); or

 

(z)            Within 180 days after
the effective date of a registration statement filed by the Company in which
the Holders shall have been entitled to participate.

 

The registration
statement filed pursuant to the request of an Initiating Holder may, subject to
the provisions of Section 2(a)(ii) below, include other securities of the
Company which are held by Persons who, by virtue of agreements with the Company
other than this Agreement, are entitled to include their securities in any such
registration (“Other Stockholders”).

 

The registration rights
set forth in this Section 2 may be assigned, in whole or in part, to any
transferee of Registrable Securities who shall agree in writing to be bound by
all obligations of this Agreement.

 

(ii)  Underwriting.  If the Initiating Holder intends to distribute
the Registrable Securities covered by the request by means of an underwriting,
they shall so advise the Company as a part of its request made pursuant to
Section 2(a).

 

If Other Stockholders
request such inclusion, the Holders shall offer to include the securities of
such Other Stockholders in the underwriting and may condition such offer on
their acceptance of the further applicable provisions of this
Section 2.  The Holders whose
shares are to be included in such registration and the Company shall (together
with all Other Stockholders proposing to distribute their securities through
such underwriting) enter into an underwriting agreement in customary form with
the representative of the underwriter or underwriters selected for such
underwriting by the Initiating Holder and reasonably acceptable to the
Company.  Notwithstanding any other
provision of this Section 2(a), if the representative advises the Holders
in writing that marketing factors require a limitation on the number of shares
to be underwritten, the securities of the Company held by Other Stockholders
(other than securities that are subject to the Priority Agreements) shall be
excluded from such registration to the extent so required by such
limitation.  If, after the exclusion of
such shares, further reductions are still required, the number of shares
included in the registration by each Holder shall be reduced on a pro rata
basis (based on the number of shares held by such Holder), by such minimum
number of shares as is necessary to comply with such request.  No Registrable Securities or any other
securities excluded from the underwriting by reason of the underwriter’s
marketing limitation shall be included in such registration.  If any Other Stockholder who has requested
inclusion in such registration as provided above disapproves of the terms of
the underwriting, such person may elect to withdraw therefrom by written notice
to the

 

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Company, the underwriter
and the Initiating Holders.  The securities
so withdrawn shall also be withdrawn from registration.  If the underwriter has not limited the
number of Registrable Securities or other securities to be underwritten, the
Company and officers and directors of the Company may include its or their
securities for its or their own account in such registration if the
representative so agrees and if the number of Registrable Securities and other
securities which would otherwise have been included in such registration and
underwriting will not thereby be limited.

 

(iii)   Limitation.  If the Company reasonably determines that
there are material developments which require the filing of a post-effective
amendment to the Registration Statement, then each Holder shall refrain from
selling any Registrable Securities until the post-effective amendment is
declared effective.  The Company shall
use its best efforts to file and attempt to have declared effective such
post-effective amendment as soon as possible. 
Notwithstanding any other provision of this Agreement, (A) if the Board
of Directors of the Company determines in its good faith judgment, after
consultation with a firm of nationally recognized underwriters, that there will
be an adverse effect on a then contemplated public offering of the Company’s equity
securities, the Company may defer the filing of the registration statement
which is required to effect any registration and may withdraw any registration
statement without thereby incurring any liability to the Holders and (B) if the
Company shall at any time furnish to a Holder who requests registration a
certificate signed by the President or any other executive officer of the
Company stating that the Company has pending or in process a material
transaction, the disclosure of which would, in the good faith judgment of the
Board of Directors of the Company, materially and adversely affect the Company,
the Company may defer the filing of a registration statement for up to 90
days.  The Company shall not be deemed to
have effected a registration under this Section 2(a) unless and until such
registration is declared effective (provided that a registration which is
withdrawn by or at the request of the Holders, the expenses of which are borne
by the Holders, shall not be deemed to be a registration pursuant to this
Section 2(a), and provided further, that a registration which is withdrawn
by, or at the request of, the Holders, the expenses of which are borne by the
Company, shall be deemed to be a completed, effective registration for purposes
of this Section 2(a), other than any registration which the withdrawal, or
request for withdrawal, of which is due to the Holders’ reasonable belief that
a claim, suit or liability may be brought based on any untrue statement (or
alleged untrue statement) of a material fact provided by the Company and
contained in any prospectus, offering circular or other document (including any
related registration statement, notification or the like) incident to any such
registration, qualification or compliance, or based on any omission (or alleged
omission) by the Company to state therein a material fact required to be stated
therein or necessary to make the statements therein not misleading, in light of
the circumstances under which they were made, or any violation by the Company of
the Securities Act or the Exchange Act or any rule or regulation thereunder
applicable to the Company and relating to any action or inaction required of
the Company in connection with any such registration, qualification or
compliance).

 

(b)  Company Registration.

 

(i)  If the Company shall determine to register
any of its equity securities either for its own account or for the account of
any Initiating Holder pursuant to Section 2(a) or

 

5

 

Section 2(c) or for
the account of Other Stockholders, other than a registration relating solely to
employee benefit plans, or a registration relating solely to a Commission Rule
145 transaction, or a registration on any registration form which does not
permit secondary sales or does not include substantially the same information
as would be required to be included in a registration statement covering the
sale of Registrable Securities, the Company will:

 

(A)  promptly give to each of the Holders a
written notice thereof (which shall include a list of the jurisdictions in
which the Company intends to attempt to qualify such securities under the
applicable blue sky or other state securities laws); and

 

(B)  include in such registration (and any
related qualification under blue sky laws or other compliance), and in any
underwriting involved therein, all the Registrable Securities specified in a
written request or requests, made by the Holders within fifteen (15) days after
receipt of the written notice from the Company described in clause (i) above,
except as set forth in Section 2(b)(ii) below.  Such written request may specify all or a part of the Holders’
Registrable Securities.

 

(ii)  Underwriting.  If the registration of which the Company
gives notice is for a registered public offering involving an underwriting, the
Company shall so advise each of the Holders as a part of the written notice
given pursuant to Section 2(b)(i)(A). 
In such event, the right of each of the Holders to registration pursuant
to this Section 2(b) shall be conditioned upon such Holders’ participation
in such underwriting and the inclusion of such Holders’ Registrable Securities
in the underwriting to the extent provided herein.  The Holders whose shares are to be included in such registration
shall (together with the Company and the Other Stockholders distributing their
securities through such underwriting) enter into an underwriting agreement in
customary form with the representative of the underwriter or underwriters
selected for underwriting by the Company. 
Notwithstanding any other provision of this Section 2(b), if the
representative determines that marketing factors require a limitation on the
number of shares to be underwritten, and (x) if such registration is the
Initial Public Offering, the representative may (subject to the allocation
priority set forth below) exclude from such registration and underwriting some
or all of the Registrable Securities which would otherwise be underwritten
pursuant hereto, and (y) if such registration is other than the Initial Public
Offering, the representative may (subject to the allocation priority set forth
below) limit the number of Registrable Securities to be included in the
registration and underwriting to not less than twenty five percent (25%) of the
shares included therein (based on the number of shares).  The Company shall so advise all holders of
securities requesting registration, and the number of shares of securities that
are entitled to be included in the registration and underwriting shall be allocated
in the following manner:  The securities
of the Company held by officers, directors and Other Stockholders of the
Company (other than Registrable Securities and securities that are subject to
the Priority Agreements and other than Holders who by contractual right
demanded such registration (“Demanding Holders”)) shall be excluded from such
registration and underwriting to the extent required by such limitation, and,
if a limitation on the number of shares is still required, the number of shares
that may be included in the registration and underwriting by each of the
Holders and Demanding Holders (other than persons entitled to the benefit of
the Priority Agreements with respect to the securities covered thereby) shall
be reduced, on a pro rata basis (based on the

 

6

 

number of shares held by
such Holder), by such minimum number of shares as is necessary to comply with
such limitation.  If any of the Holders
or any officer, director or Other Stockholder disapproves of the terms of any
such underwriting, he may elect to withdraw therefrom by written notice to the
Company and the underwriter.  Any
Registrable Securities or other securities excluded or withdrawn from such
underwriting shall be withdrawn from such registration.

 

(c)  Form S-3.  Following the Initial Public Offering, the Company shall use its
best efforts to qualify for registration on Form S-3 for secondary sales.  After the Company has qualified for the use
of Form S-3, the Initiating Holders shall have the right to request three (3)
registrations on Form S-3 (such requests shall be in writing and shall state
the number of shares of Registrable Securities to be disposed of and the
intended method of disposition of shares by such holders), subject only to the
following:

 

(i)  The Company shall not be required to effect
a registration pursuant to this Section 2(c) unless the Holder or Holders
requesting registration propose to dispose of shares of Registrable Securities
having an aggregate price to the public (before deduction of underwriting
discounts and expenses of sale) of more than $5,000,000.

 

(ii)  The Company shall not be required to effect
a registration pursuant to this Section 2(c) within 180 days of the
effective date of the most recent registration pursuant to this Section 2
in which securities held by the requesting Holder could have been included for
sale or distribution.

 

(iii)  The Company shall not be obligated to effect
any registration pursuant to this Section 2(c) in any particular
jurisdiction in which the Company would be required to execute a general
consent to service of process in effecting such registration, qualification or
compliance, unless the Company is already subject to service in such
jurisdiction and except as may be required by the Securities Act or applicable
rules or regulations thereunder.

 

(iv)  If the Company shall furnish to the Holders
a certificate signed by the President or other executive officer of the Company
stating that in the good faith judgment of the Board of Directors of the
Company, it would be seriously detrimental to the Company and its shareholders
for such Form S-3 registration to be effected at such time, the Company shall
have the right to defer the filing of the Form S-3 registration statement for a
period not greater than 90 days after receipt of the request of the Holder or
Holders under this Section 2(c).

 

The Company shall give
written notice to all Holders of the receipt of a request for registration
pursuant to this Section 2(c) and shall provide a reasonable opportunity
(not less than 20 days) for other Holders to participate in the registration,
provided that if the registration is for an underwritten offering, the terms of
Section 2(a)(ii) shall apply to all participants in such offering.  Subject to the foregoing, the Company will
use its best efforts to effect promptly the registration of all shares of
Registrable Securities on Form S-3 to the extent requested by the Holder or
Holders thereof for purposes of disposition.

 

7

 

(d)  Expenses of Registration.  All Registration Expenses incurred in
connection with any registration, qualification or compliance pursuant to this
Section 2 shall be borne by the Company, and all Selling Expenses shall be
borne by the Holders of the securities so registered pro rata on the basis of
the number of their shares so registered.

 

(e)  Registration Procedures.  In the case of each registration effected by
the Company pursuant to this Section 2, the Company will keep the Holders,
as applicable, advised in writing as to the initiation of each registration and
as to the completion thereof.  At its
expense, the Company will:

 

(i)   keep
such registration effective for a period of one hundred twenty (120) days or
until the Holders, as applicable, have completed the distribution described in
the registration statement relating thereto, whichever first occurs; provided,
however, that (A) such 120-day period shall be extended for a period of time
equal to the period during which the Holders, as applicable, refrain from
selling any securities included in such registration in accordance with
provisions in Section 2(a)(iii) hereof; and (B) in the case of any
registration of Registrable Securities on Form S-3 which are intended to be
offered on a continuous or delayed basis, such 120-day period shall be extended
until all such Registrable Securities are sold, provided that Rule 415, or any
successor rule under the Securities Act, permits an offering on a continuous or
delayed basis, and provided further that applicable rules under the Securities
Act governing the obligation to file a post-effective amendment permit, in lieu
of filing a post-effective amendment which (y) includes any prospectus required
by Section 10(a) of the Securities Act or (z) reflects facts or events
representing a material or fundamental change in the information set forth in
the registration statement, the incorporation by reference of information
required to be included in (y) and (z) above to be contained in periodic
reports filed pursuant to Section 12 or 15(d) of the Exchange Act in the
registration statement;

 

(ii)   furnish
such number of prospectuses and other documents incident thereto as each of the
Holders, as applicable, from time to time may reasonably request;

 

(iii)   notify
each Holder of Registrable Securities covered by such registration at any time
when a prospectus relating thereto is required to be delivered under the
Securities Act of the happening of any event as a result of which the
prospectus included in such registration statement, as then in effect, includes
an untrue statement of a material fact or omits to state a material fact
required to be stated therein or necessary to make the statements therein not
misleading in the light of the circumstances then existing; and

 

(iv)   furnish,
on the date that such Registrable Securities are delivered to the underwriters
for sale, if such securities are being sold through underwriters or, if such
securities are not being sold through underwriters, on the date that the
registration statement with respect to such securities becomes effective, (1)
an opinion, dated as of such date, of the counsel representing the Company for
the purposes of such registration, in form and substance as is customarily
given to underwriters in an underwritten public offering and reasonably
satisfactory to a majority in interest of the Holders participating in such
registration, addressed to the underwriters, if any, and to the Holders
participating in such registration and (2) a letter, dated as of such date,
from the independent certified public accountants of the Company, in form and
substance as is customarily given by

 

8

 

independent certified
public accountants to underwriters in an underwritten public offering and
reasonably satisfactory to a majority in interest of the Holders participating
in such registration, addressed to the underwriters, if any, and if permitted
by applicable accounting standards, to the Holders participating in such
registration.

 

(f)  Indemnification.

 

(i)   The
Company will indemnify each of the Holders, as applicable, and each of its
officers, directors and partners, and each person controlling (within the
meaning of the Securities Act) each of the Holders, with respect to each
registration which has been effected pursuant to this Section 2, and each
underwriter, if any, and each person who controls (within the meaning of the
Securities Act) any underwriter, against all claims, losses, damages and
liabilities (or actions in respect thereof) arising out of or based on any
untrue statement (or alleged untrue statement) of a material fact contained in
any prospectus, offering circular or other document (including any related
registration statement, notification or the like) incident to any such
registration, qualification or compliance, or based on any omission (or alleged
omission) to state therein a material fact required to be stated therein or
necessary to make the statements therein not misleading, in light of the
circumstances under which they were made, or any violation by the Company of
the Securities Act or the Exchange Act or any rule or regulation thereunder
applicable to the Company and relating to any action or inaction required of
the Company in connection with any such registration, qualification or
compliance, and will reimburse each of the Holders, each of its officers,
directors and partners, and each person controlling (within the meaning of the
Securities Act) each of the Holders, each such underwriter and each person who
controls (within the meaning of the Securities Act) any such underwriter, for
any legal and any other expenses reasonably incurred in connection with
investigating and defending any such claim, loss, damage, liability or action
or in connection with the enforcement of any rights under this Agreement,
provided that the Company will not be liable in any such case to the extent
that any such claim, loss, damage, liability or expense arises out of or is
based on any untrue statement or omission (or alleged untrue statement or
omission) based upon written information furnished to the Company by any of the
Holders (insofar as the indemnification relates to a Holder) or any such
underwriter or person controlling such underwriter (insofar as the
indemnification relates to such underwriter) and stated to be specifically for
use therein.

 

(ii)   Each
of the Holders will, if Registrable Securities held by it are included in the
securities as to which such registration, qualification or compliance is being
effected, indemnify the Company, each of its directors and officers and each
underwriter, if any, of the Company’s securities covered by such a registration
statement, each person who controls (within the meaning of the Securities Act)
the Company or such underwriter, each Other Stockholder and each of their
officers, directors, and partners, and each person controlling (within the
meaning of the Securities Act) such Other Stockholder against all claims,
losses, damages and liabilities (or actions in respect thereof) arising out of
or based on any untrue statement (or alleged untrue statement) of a material
fact contained in any such registration statement, prospectus, offering
circular or other document made by such Holder, or any omission (or alleged
omission) to state therein a material fact required to be stated therein or
necessary to make the statements by such Holder therein not misleading, in
light of the circumstances under which they were made, and will reimburse the

 

9

 

Company and such Other
Stockholders, directors, officers, partners, persons, underwriters or control
(within the meaning of the Securities Act) persons for any legal or any other
expenses reasonably incurred in connection with investigating or defending any
such claim, loss, damage, liability or action, in each case to the extent, but
only to the extent, that such untrue statement (or alleged untrue statement) or
omission (or alleged omission) is made in such registration statement,
prospectus, offering circular or other document in reliance upon and in
conformity with written information furnished to the Company by such Holder and
stated to be specifically for use therein; provided, however, that the
obligations of each of the Holders hereunder shall be limited to an amount
equal to the net proceeds to such Holder of securities sold as contemplated
herein.

 

(iii)   Each
party entitled to indemnification under this Section 2(f) (the
“Indemnified Party”) shall give notice to the party required to provide
indemnification (the “Indemnifying Party”) promptly after such Indemnified
Party has actual knowledge of any claim as to which indemnity may be sought,
and shall permit the Indemnifying Party to assume the defense of any such claim
or any litigation resulting therefrom; provided that counsel for the
Indemnifying Party, who shall conduct the defense of such claim or any
litigation resulting therefrom, shall be approved by the Indemnified Party
(whose approval shall not unreasonably be withheld) and the Indemnified Party
may participate in such defense at such party’s expense (unless the Indemnified
Party shall have reasonably concluded that there may be a conflict of interest
between the Indemnifying Party and the Indemnified Party in such action, in
which case the fees and expenses of counsel shall be at the expense of the
Indemnifying Party), and provided further that the failure of any Indemnified
Party to give notice as provided herein shall not relieve the Indemnifying
Party of its obligations under this Section 2 unless the Indemnifying
Party is materially prejudiced thereby. 
No Indemnifying Party, in the defense of any such claim or litigation
shall, except with the consent of each Indemnified Party, consent to entry of
any judgment or enter into any settlement which does not include as an
unconditional term thereof the giving by the claimant or plaintiff to such
Indemnified Party of a release from all liability in respect to such claim or
litigation.  Each Indemnified Party
shall furnish such information regarding itself or the claim in question as an
Indemnifying Party may reasonably request in writing and as shall be reasonably
required in connection with the defense of such claim and litigation resulting
therefrom.

 

(iv)   If
the indemnification provided for in this Section 2(f) is held by a court
of competent jurisdiction to be unavailable to an Indemnified Party with
respect to any loss, liability, claim, damage or expense referred to herein, then
the Indemnifying Party, in lieu of indemnifying such Indemnified Party
hereunder, shall contribute to the amount paid or payable by such Indemnified
Party as a result of such loss, liability, claim, damage or expense (i) in such
proportion as is appropriate to reflect the relative benefits received by the
Indemnifying Party on the one hand and the Indemnified Party on the other from
the registration or (ii) if the allocation provided by clause (i) above is not
permitted by applicable law, or provides a lesser sum to the Indemnified Party
than the amount hereinafter calculated, in such proportion as is appropriate to
reflect not only the relative benefits received by the Indemnifying Party on
the one hand and the Indemnified Party on the other but also the relative fault
of the Indemnifying Party on the one hand and of the Indemnified Party on the
other in connection with the statements or omissions which resulted in such
loss, liability, claim, damage or expense, as well as any other relevant

 

10

 

equitable
considerations.  The relative fault of
the Indemnifying Party and of the Indemnified Party shall be determined by
reference to, among other things, whether the untrue (or alleged untrue)
statement of a material fact or the omission (or alleged omission) to state a
material fact relates to information supplied by the Indemnifying Party or by
the Indemnified Party and the parties’ relative intent, knowledge, access to
information and opportunity to correct or prevent such statement or omission.

 

(v)   Notwithstanding
the foregoing, to the extent that the provisions on indemnification and
contribution contained in the underwriting agreement entered into in connection
with any underwritten public offering contemplated by this Agreement are in
conflict with the foregoing provisions, the provisions in such underwriting
agreement shall be controlling.

 

(vi)   The
foregoing indemnity agreement of the Company and Holders is subject to the
condition that, insofar as they relate to any loss, claim, liability or damage
made in a preliminary prospectus but eliminated or remedied in the amended
prospectus on file with the Commission at the time the registration statement
in question becomes effective or the amended prospectus filed with the
Commission pursuant to Commission Rule 424(b) (the “Final Prospectus”), such
indemnity or contribution agreement shall not inure to the benefit of any
underwriter or Holder if a copy of the Final Prospectus was furnished to the
underwriter and was not furnished to the person asserting the loss, liability,
claim or damage at or prior to the time such action is required by the
Securities Act.

 

(g)  Information by the Holders.

 

(i)  Each of the Holders holding securities
included in any registration shall furnish to the Company such information
regarding such Holder and the distribution proposed by such Holder as the
Company may reasonably request in writing and as shall be reasonably required
in connection with any registration, qualification or compliance referred to in
this Section 2.

 

(ii)  In the event that, either immediately prior
to or subsequent to the effectiveness of any registration statement, any Holder
shall distribute Registrable Securities to its partners, such Holder shall so
advise the Company and provide such information as shall be necessary to permit
an amendment to such registration statement to provide information with respect
to such partners, as selling security holders. 
Promptly following receipt of such information, the Company shall file
an appropriate amendment to such registration statement reflecting the
information so provided.  Any
incremental expense to the Company resulting from such amendment shall be borne
by such Holder.

 

(h)  Rule 144 Reporting.  With a view to making available the benefits
of certain rules and regulations of the Commission which may permit the sale of
restricted securities to the public without registration, the Company agrees
to:

 

(i)  make and keep public information available
as those terms are understood and defined in Rule 144 under the Securities Act
(“Rule 144”), at all times from and after ninety (90) days following the
effective date of the first registration under the Securities Act filed by the
Company for an offering of its securities to the general public;

 

11

 

(ii)  use its best efforts to file with the
Commission in a timely manner all reports and other documents required of the
Company under the Securities Act and the Exchange Act at any time after it has
become subject to such reporting requirements; and

 

(iii)  so long as the Holder owns any Registrable
Securities, furnish to the Holder upon request, a written statement by the
Company as to its compliance with the reporting requirements of Rule 144 (at
any time from and after ninety (90) days following the effective date of the
first registration statement filed by the Company for an offering of its
securities to the general public), and of the Securities Act and the Exchange
Act (at any time after it has become subject to such reporting requirements), a
copy of the most recent annual or quarterly report of the Company, and such
other reports and documents so filed as the Holder may reasonably request in
availing itself of any rule or regulation of the Commission allowing the Holder
to sell any such securities without registration.

 

(i)   “Market Stand-off” Agreement.  Each of the Holders agrees, if requested by
the Company and an underwriter of equity securities of the Company, not to sell
or otherwise transfer or dispose of any Registrable Securities held by such
Holder during the 180-day period following the effective date of a registration
statement of the Company filed under the Securities Act, provided that:

 

(i)   such
agreement only applies to the Initial Public Offering and any other
underwritten offering in which such Holder participates; and

 

(ii)   all
executive officers and directors of the Company enter into similar agreements.

 

If requested by the
underwriters, the Holders shall execute a separate agreement to the foregoing
effect.  The Company may impose
stop-transfer instructions with respect to the shares (or securities) subject
to the foregoing restriction until the end of said 180-day period.  The provisions of this Section 2(i)
shall be binding upon any transferee who acquires Registrable Securities.

 

(j)  Termination.  The registration rights set forth in this
Section 2 shall not be available to any Holder if, in the written,
reasoned opinion of counsel to the Company, all of the Registrable Securities
then owned by such Holder (i) could be sold in any 90-day period pursuant to
Rule 144 (without the Holder having to take any further action in order to meet
the requirements of Rule 144(k)), or (ii) are not otherwise Registrable
Securities, as defined in this Agreement.

 

3.     MISCELLANEOUS

 

(a)  Directly or Indirectly.  Where any provision in this Agreement refers
to action to be taken by any Person, or which such Person is prohibited from
taking, such provision shall be applicable whether such action is taken
directly or indirectly by such Person.

 

(b)  Governing Law.  This Agreement shall be governed by and
construed in accordance with the laws of the State of New York applicable to
contracts made and to be performed entirely within such State.

 

12

 

(c)   Section Headings.  The headings of the sections and subsections
of this Agreement are inserted for convenience only and shall not be deemed to
constitute a part thereof.

 

(d)   Notices.

 

(i)   All
communications under this Agreement shall be in writing and shall be delivered
by hand or facsimile or mailed by overnight courier:

 

(A)  if to the Company, at the following address,
or at such other address as it may have furnished in writing to the Investors:

 

	
   

  	
  Ness Technologies, Inc.

  
	
   

  	
  Ness Tower

  
	
   

  	
  Atidim, Bldg. 4

  
	
   

  	
  P.O. Box 58152

  
	
   

  	
  Tel-Aviv 61580

  
	
   

  	
  Israel

  
	
   

  	
  Facsimile:  972-3-766-6809

  
	
   

  	
  Attention:  Raviv Zoller

  
	
   

  	
   

  
	
   

  	
  with copies to:

  
	
   

  	
  Ephraim Abramson &
  Co.

  
	
   

  	
  16 B King George Street
  - Ninth Floor

  
	
   

  	
  Jerusalem 94229

  
	
   

  	
  Israel

  
	
   

  	
  Facsimile:  972-2-623-3694

  
	
   

  	
  Attention:  Ilan Rotem

  
	
   

  	
   

  
	
   

  	
  and

  
	
   

  	
   

  
	
   

  	
  Olshan Grundman Frome

  
	
   

  	
  Rosenzweig &
  Wolosky LLP

  
	
   

  	
  505 Park Avenue

  
	
   

  	
  New York, New York  10022

  
	
   

  	
  Facsimile:  212-755-1467

  
	
   

  	
  Attention:  Steven Wolosky

  

 

(B)  if to the Investors, at the address or
facsimile number set forth in the Company’s records, or at such other address
or facsimile number as may be furnished to the Company in writing after the
date of this Agreement.

 

(ii)   Any
notice so addressed shall be deemed to be given:  if delivered by hand or facsimile, on the date of such delivery;
if mailed by courier, upon receipt.

 

(e)  Reproduction of Documents.  This Agreement and all documents relating
thereto, including, without limitation, any consents, waivers and modifications
which may hereafter be executed may be reproduced by the Investor by any
photographic, photostatic, microfilm, microcard, miniature photographic or
other similar process and the Investors may destroy any

 

13

 

original document so reproduced.  The parties hereto agree and stipulate that
any such reproduction shall be admissible in evidence as the original itself in
any judicial or administrative proceeding (whether or not the original is in
existence and whether or not such reproduction was made by the Investors in the
regular course of business) and that any enlargement, facsimile or further
reproduction of such reproduction shall likewise be admissible in evidence.

 

(f)  Successors and Assigns.  This Agreement shall inure to the benefit of
and be binding upon the successors and assigns of each of the parties.

 

(g)  Entire Agreement; Amendment and Waiver.  This Agreement constitutes the entire
understanding of the parties hereto and supersedes all prior agreements and
understandings among such parties (including without limitation the Class B
Registration Rights Agreement) except that the GLY Registration Rights
Agreement and the Velston Registration Rights Agreement shall continue in full
force and effect.  This Agreement may be
amended, and the observance of any term of this Agreement may be waived, with
(and only with) the written consent of the Company and the Investors holding a
majority of the then outstanding Registrable Securities, except that no
amendment or waiver affecting the GLY Registration Rights Agreement or the
Velston Registration Rights Agreement shall be effective without the written
consent of GLY or Velston, respectively.

 

(h)  Severability.  In the event that any part or parts of this
Agreement shall be held illegal or unenforceable by any court or administrative
body of competent jurisdiction, such determination shall not effect the
remaining provisions of this Agreement which shall remain in full force and
effect.

 

(i)  Counterparts.  This Agreement may be executed in two or
more counterparts, each of which shall be deemed an original and all of which
together shall be considered one and the same agreement.

 

[Signatures begin
on the following page.]

 

14

 

[SIGNATURE PAGE
TO SECOND AMENDED AND RESTATED

REGISTRATION
RIGHTS AGREEMENT]

 

IN WITNESS WHEREOF, the
undersigned have executed this Agreement as of the date first set forth above.

 

	
   

  	
  NESS TECHNOLOGIES, INC.

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
    /s/ Raviv
  Zoller

  
	
   

  	
   

  	
  Name: Raviv Zoller

  
	
   

  	
   

  	
  Title: President

  
	
   

  	
   

  	
   

  
	
   

  	
  INVESTORS:

  
	
   

  	
   

  	
   

  
	
   

  	
  NESSTECH LLC

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
    /s/ Morris
  Wolfson

  
	
   

  	
   

  	
  Name: Morris Wolfson

  
	
   

  	
   

  	
  Title: Managing Member

  
	
   

  	
   

  	
   

  
	
   

  	
  WARBURG, PINCUS EQUITY
  PARTNERS, L.P.

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  Warburg, Pincus &
  Co., General Partner

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
    /s/ Frank
  Brochin

  
	
   

  	
   

  	
  Name: Frank Brochin

  
	
   

  	
   

  	
  Title: Partner

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  WARBURG, PINCUS
  NETHERLANDS EQUITY

  PARTNERS I, C.V.

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  WARBURG, PINCUS &
  CO., General Partner

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
    /s/ Frank
  Brochin

  
	
   

  	
   

  	
  Name: Frank Brochin

  
	
   

  	
   

  	
  Title: Partner

  

 

 

[SIGNATURE PAGE
TO SECOND AMENDED AND RESTATED

REGISTRATION
RIGHTS AGREEMENT]

 

IN WITNESS WHEREOF, the
undersigned have executed this Agreement as of the date first set forth above.

 

	
   

  	
  WARBURG, PINCUS
  NETHERLANDS EQUITY

  PARTNERS II, C.V.

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  WARBURG, PINCUS &
  CO., General Partner

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
    /s/ Frank
  Brochin

  
	
   

  	
   

  	
  Name: Frank Brochin

  
	
   

  	
   

  	
  Title: Partner

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  WARBURG, PINCUS
  NETHERLANDS EQUITY

  PARTNERS III, C.V.

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  WARBURG, PINCUS &
  CO., General Partner

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
    /s/ Frank
  Brochin

  
	
   

  	
   

  	
  Name: Frank Brochin

  
	
   

  	
   

  	
  Title: Partner

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  WARBURG, PINCUS
  VENTURES

  INTERNATIONAL, L.P.

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  WARBURG, PINCUS &
  CO., General Partner

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
    /s/ Frank
  Brochin

  
	
   

  	
   

  	
  Name: Frank Brochin

  
	
   

  	
   

  	
  Title: Partner

  

 

 

[SIGNATURE PAGE
TO SECOND AMENDED AND RESTATED

REGISTRATION
RIGHTS AGREEMENT]

 

IN WITNESS WHEREOF, the
undersigned have executed this Agreement as of the date first set forth above.

 

	
   

  	
  GOWRON (INTERNATIONAL)
  LIMITED

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
   

  	
  Name:

  
	
   

  	
   

  	
  Title:

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  GMUL - AMGAL
  INVESTMENTS LTD.

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
   

  	
  Name:

  
	
   

  	
   

  	
  Title:

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  G.L.Y. HIGH-TECH
  INVESTMENTS INC.

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
   

  	
  Name:

  
	
   

  	
   

  	
  Title:

  
	
   

  	
   

  	
   

  
	
   

  	
  VELSTON PTE. LTD.

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
   

  	
  Name:

  
	
   

  	
   

  	
  Title:

  
	
   

  	
   

  	
   

  
	
   

  	
   

  
	
   

  	
    JOHN
  AUGUST ROLLWAGEN

  

 

 

[SIGNATURE PAGE
TO SECOND AMENDED AND RESTATED

REGISTRATION
RIGHTS AGREEMENT]

 

IN WITNESS WHEREOF, the
undersigned have executed this Agreement as of the date first set forth above.

 

	
   

  	
    ERWIN KELEN
  FAMILY LTD. PARTNERSHIP

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
    By:

  	
   

  
	
   

  	
   

  	
    Name:

  
	
   

  	
   

  	
    Title:

  
	
   

  	
   

  	
   

  
	
   

  	
   

  
	
   

  	
    ESTHER
  DYSON

  
	
   

  	
   

  	
   

  
	
   

  	
   

  
	
   

  	
    GEOFF
  SQUIRE

  
	
   

  	
   

  	
   

  
	
   

  	
   

  
	
   

  	
    PETR
  NEVICKY

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
    INSIGHT
  CAPITAL PARTNERS II, L.P.

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
    By:

  	
   

  
	
   

  	
   

  	
    Name:

  
	
   

  	
   

  	
    Title:

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
    INSIGHT CAPITAL PARTNERS (CAYMAN) II,

  L.P.

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
    By:

  	
   

  
	
   

  	
   

  	
    Name:

  
	
   

  	
   

  	
    Title:

  

 

 

[SIGNATURE PAGE
TO SECOND AMENDED AND RESTATED

REGISTRATION
RIGHTS AGREEMENT]

 

IN WITNESS WHEREOF, the
undersigned have executed this Agreement as of the date first set forth above.

 

	
   

  	
  WI SOFTWARE INVESTORS
  LLC

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
   

  	
    Name:

  
	
   

  	
   

  	
    Title:

  
	
   

  	
   

  	
   

  
	
   

  	
   

  
	
   

  	
    MANFRED
  JOSEPH

  
	
   

  	
   

  	
   

  
	
   

  	
   

  
	
   

  	
    ROBERT
  GLANVILLE

  
	
   

  	
   

  	
   

  
	
   

  	
   

  
	
   

  	
    BEN
  TANDOWSKI

  
	
   

  	
   

  	
   

  
	
   

  	
   

  
	
   

  	
    NATHAN
  SCHLEIFER

  
	
   

  	
   

  	
   

  
	
   

  	
   

  
	
   

  	
    ANDREW
  WRIGHT

  
	
   

  	
   

  	
   

  
	
   

  	
   

  
	
   

  	
    THOMAS W.
  GENEGA

  
	
   

  	
   

  	
   

  
	
   

  	
   

  
	
   

  	
    DAVID
  JAROSLAWICZ

  
	
   

  	
   

  	
   

  
	
   

  	
   

  
	
   

  	
    IRENE MATH

  
	
   

  	
   

  	
   

  
	
   

  	
   

  
	
   

  	
    DAVID I.
  KUBERSKY

  
	
   

  	
   

  	
   

  
	
   

  	
   

  
	
   

  	
    JOSEPH C.
  FUNG

  

 

 

[SIGNATURE PAGE
TO SECOND AMENDED AND RESTATED

REGISTRATION
RIGHTS AGREEMENT]

 

IN WITNESS WHEREOF, the
undersigned have executed this Agreement as of the date first set forth above.

 

	
   

  	
   

  
	
   

  	
    APAR
  INVESTMENTS (SINGAPORE) PRIVATE

    LTD.

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
    By:

  	
    /s/ Kushal
  Desai

  
	
   

  	
   

  	
  Name: Kushal Desai

  
	
   

  	
   

  	
  Title: Director

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
    /s/ Rajeev
  Srivastava

  
	
   

  	
    RAJEEV
  SRIVASTAVA

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
    WARBURG,
  PINCUS VENTURES, L.P.

  
	
   

  	
   

  	
   

  
	
   

  	
    By:

  	
    WARBURG,
  PINCUS & CO., General Partner

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
    By:

  	
    /s/ Frank
  Brochin

  
	
   

  	
   

  	
  Name: Frank Brochin

  
	
   

  	
   

  	
  Title: Partner

  

 

 

[SIGNATURE PAGE
TO SECOND AMENDED AND RESTATED

REGISTRATION
RIGHTS AGREEMENT]

 

IN WITNESS WHEREOF, the
undersigned have executed this Agreement as of the date first set forth above.

 

	
   

  	
   

  
	
   

  	
    JEANNE M.
  O’BYRNE

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
    MARTIN R.
  SCHUCHMAN

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
    KENNETH M.
  HARNEY

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
    MITCHELL
  MOND

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
    CHRIS P.
  KARTCHNER

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
    DOUGLAS J.
  STOCK

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
    STEPHEN
  EMMERICH

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
    RUSSELL S.
  PERLMAN

  

 

 

SCHEDULE I

 

Investors

 

	
  Nesstech LLC

  
	
  Warburg, Pincus Netherlands
  Equity Partners I, C.V.

  
	
  Warburg, Pincus
  Netherlands Equity Partners III, C.V.

  
	
  GMUL - Amgal
  Investments Ltd.

  
	
  G.L.Y High-Tech
  Investments Inc.

  
	
  Warburg, Pincus
  Ventures, L.P.

  
	
  Erwin Kelen Family Ltd.
  Partnership

  
	
  Geoff Squire

  
	
  InSight Capital Partners
  II, L.P.

  
	
  WI Software Investors
  LLC

  
	
  Robert Glanville

  
	
  Nathan Schleifer

  
	
  Andrew Wright

  
	
  Stephen Emmerich

  
	
  Kenneth M. Harney

  
	
  David I. Kubersky

  
	
  Mitchell Mond

  
	
  Russell S. Perlman

  
	
  Douglas J. Stock

  
	
  Rajeev Srivastava

  
	
  Warburg, Pincus Equity
  Partners, L.P.

  
	
  Warburg, Pincus
  Netherlands Equity Partners II, C.V.

  
	
  Warburg, Pincus
  Ventures International, L.P.

  
	
  GOWRON (International)
  Limited

  
	
  Velston Pte. Ltd.

  
	
  John
  August Rollwagen

  
	
  Esther Dyson

  
	
  Petr Nevicky

  
	
  InSight Capital
  Partners (Cayman) II, L.P.

  
	
  Manfred Joseph

  
	
  Ben Tandowski

  
	
  David Jaroslawicz

  
	
  Thomas W. Genega

  
	
  Joseph C. Fung

  
	
  Chris P. Kartchner

  
	
  Irene Math

  
	
  Jeanne M. O’Byrne

  
	
  Martin R. Schuchman

  
	
  Apar Investments
  (Singapore) Private Ltd.Exhibit
10.5

 

LOAN
AGREEMENT

 

 

between

 

 

ISRAEL
DISCOUNT BANK LTD

 

 

and

 

 

NESSTECH
ADVANCED TECHNOLOGIES (1999) LTD.

 

 

dated

 

 

29-7-99

 

 

INDEX

 

	
  Clause

  	
   

  	
  Headings

  	
   

  	
  Page

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  1.

  	
   

  	
  Interpretation

  	
  4

  
	
  2.

  	
   

  	
  Definitions

  	
  5

  
	
  3.

  	
   

  	
  Availability
  and Disbursement of the Loan

  	
  8

  
	
  4.

  	
   

  	
  Linkage
  and Interest

  	
  9

  
	
  5.

  	
   

  	
  Payment
  of Interest

  	
  10

  
	
  6.

  	
   

  	
  Repayment
  of the Loan

  	
  10

  
	
  7.

  	
   

  	
  Default
  Interest

  	
  10

  
	
  8.

  	
   

  	
  Increased Costs

  	
  11

  
	
  9.

  	
   

  	
  Prepayment

  	
  12

  
	
  10.

  	
   

  	
  Time, Place and Manner of Payment

  	
  13

  
	
  11.

  	
   

  	
  Collaterals

  	
  14

  
	
  12.

  	
   

  	
  Conditions
  Precedent

  	
  16

  
	
  13.

  	
   

  	
  Representations and
  Warranties

  	
  16

  
	
  14.

  	
   

  	
  Undertakings

  	
  17

  
	
  15.

  	
   

  	
  Events of
  Default

  	
  19

  
	
  16.

  	
   

  	
  Unlawfulness,
  Substitute Basis

  	
  22

  
	
  17.

  	
   

  	
  Set Off and
  Application of Payments

  	
  23

  
	
  18.

  	
   

  	
  The Borrower’s Duty to
  Notify

  	
  23

  
	
  19.

  	
   

  	
  Compensation for Broken
  Funding

  	
  24

  
	
  20.

  	
   

  	
  Remedies
  and Waivers

  	
  24

  
	
  21.

  	
   

  	
  Assignment

  	
  24

  
	
  22.

  	
   

  	
  Administration of the Loan

  	
  24

  
	
  23.

  	
   

  	
  Disclosure of Information

  	
  24

  
	
  24.

  	
   

  	
  Expenses

  	
  25

  
	
  25.

  	
   

  	
  Additional
  Provisions

  	
  25

  
	
  26.

  	
   

  	
  Notices

  	
  26

  
	
  27.

  	
   

  	
  Governing Law and
  Jurisdiction

  	
  26

  
	
  28.

  	
   

  	
  Currency
  Indemnity

  	
  26

  
	
  29.

  	
   

  	
  Severability

  	
  27

  

 

2

 

This Loan Agreement is
dated as of the 29 day of July, 1999 and made between:

 

ISRAEL
DISCOUNT BANK LTD

 

(“The Bank”)

 

and

 

NESSTECH
ADVANCED TECHNOLOGIES (1999) LTD. (51- 279744-0)

 

a company duly
established and existing under the laws of the State of Israel (“the
Borrower”);

 

Whereas
the Borrower has requested the Bank to grant it a loan in a total sum
equivalent to $ 21,000,000 (Twenty One Million Dollars)according to the terms
and conditions of this Agreement in order to participate in financing the
acquisition of 87.4% of the outstanding share capital of the Company comprising
40% of the credit which will be borrowed by the Borrower other than the capital
contribution stated in Clause 12 ( d ) below;

 

Whereas the Bank is prepared to accede to the
Borrower’s request upon the conditions hereinafter set forth;

 

NOW,
THEREFORE, IT IS HEREBY AGREED AND DECLARED BETWEEN THE PARTIES AS  FOLLOWS:

 

1.             INTERPRETATION -

 

1. 1.        This
Agreement forms an integral part of the Borrower’s applications to open an
account and the general conditions for operating an account which have been
signed by the Borrower in the Bank (“the
Applications to Open an Account”).

 

1. 2.        Unless
otherwise agreed the Borrower’s obligations in this Agreement are in addition
to those contained in the Application to open an account and nothing in this
Agreement shall derogate from any of the Banks rights under the Applications to
open an account.

 

1. 3.        In
the case of any contradiction between this Agreement and the Application to
open an account and \ or the provisions of the Deed of Pledge the provisions of
this Agreement shall prevail.  In
addition , in the event that the Application to Open an Account refers to a
matter which this Agreement refers to ( even not in a case of contradiction )
then the terms of this Agreement shall prevail concerning such subject matter..

 

3

 

1. 4.        The
Preamble to this Agreement constitutes an inseparable part thereof.

 

1. 5.        Clause headings and the table of contents are inserted for convenience
of reference only and shall be ignored in the interpretation of this Agreement.

 

1. 6.        In this Agreement, unless the context otherwise requires:

 

1. 6. l.  reference to Clauses and Annexes are to be construed as reference to
the clauses of, and annexes to, this Agreement and references to this Agreement
include its Annexes; and

 

1. 6. 2. words importing the plural shall include the singular and vice versa.

 

2.             DEFINITIONS -

 

In
this Agreement, the following words and expressions shall bear the following
meanings unless the context otherwise requires:-

 

“Bank”
means - ISRAEL DISCOUNT BANK LTD and any of its branches or offices existing on
the date hereof and or to be subsequently opened, whenever they may be, its
successors, assignees, or attorneys in fact;

 

“Banking Day” means - a day on which dealings in Dollar deposits are carried on in
the London Interbank Eurodollar market and (if payment is required to be made
on such day) on which banks are open for business in London and in Israel.

 

“Bank’s Books” _ shall be construed so as to include any book, record, statement of
account, and copy of any statement of account, loan agreement, deed of
undertaking, customers’ bill, card index, page, film, any means of storage and
retrieval of data for purpose of electronic computers and any other means of
storage and retrieval of data;

 

“Bond Rate” means - the arithmetic mean of the gross yield to maturity (rounded
upwards, if necessary, to four decimal places) as published by the Tel-Aviv
Stock Exchange Ltd. (“TASE”), of at least 6 (six) series of fixed rate bonds
issued by the State of Israel and listed on the TASE, and having a remaining
period until maturity of 18 - 41 months except for the first period of 12
months of the Loan from the Disbursement Date on which the said bonds will have
remaining period until maturity of 12 months, denominated in NIS and fully
linked to the Israeli consumer price index, in each of the 5 (five) trading
dates of the TASE immediately preceding the beginning of the relevant rate
period.

 

“The Closing Date” means -July 29 1999
or any other date as shall be agreed upon;

 

4

 

“The Company” means - Advanced Technology Ltd

 

Deed of Pledge means - an undertaking of the Borrower pursuant to which the Borrower
shall create pledges and charges described in clause 11 hereof.

 

“Disbursement Date” means - a Banking Day upon which the disbursement of the Loan will be
made and which is the Closing Date.

 

“Dollars and “$” mean - the lawful currency of the United States of America.

 

“Encumbrance” - includes any mortgage, pledge, lien, charge, assignment,
hypothecation, security interest, title retention, preferential right or trust
arrangement or other agreement or arrangement the effect of any of which is the
creation of security;

 

“Event of Default” means - any of the events or circumstances described in Clause 15;

 

“Fixed Linked Rate” means - the rate of interest which is applied by the Bank at the time
of your notification to reflect its wholesale rate interest for credits linked
to the Israeli consumer price index, before application of any margin for the
purpose of determining the rate of interest to be charged by the Bank in
respect of Cost of Living Index based loans to its customers in amounts similar
to the amount of the relevant credit and for similar periods for such credit.

 

“Indebtedness” means - any obligation for the payment or repayment of money, whether
as principal or as surety and whether present or future, actual or contingent;

 

Interest means - for Loan B -LIBOR plus the Margin.

 

for
Loan A and Loan C - (1) Bond Rate plus the Margin,

or

(2) Fixed Linked Rate plus the Margin

 

The
Interest for loans granted on a Bond Rate basis will be computed on the last
Banking Day of the Interest Period which ends at the end of the first year from
the Disbursement Date and on the last Banking Day every 2 (two) years after
such date (the “Computation Date”) as follows: one month before the end of the
relevant Computation Date the Borrower will notify the Bank if he wishes the
Interest to be on the Bond Rate basis or the Fixed Linked Rate basis.  If the Borrower chooses the Fixed Linked
Rate basis, the rate of interest applicable for the Loan from the relevant
Computation Date until the end of the duration will be the Fixed Linked Rate
plus the Margin.  If the Borrower
chooses the Bond Rate basis, the Interest which will be applicable for the next
2 (two) years period from the relevant Computation Date will be the Bond Rate
plus the Margin.

 

5

 

If
the Borrower does not notify the Bank which rate basis he has chosen then the
Interest for the following two year period will be the Bond Rate basis plus the
Margin.

 

“Interest Period” Each Interest Period shall be as follows:

 

for
Loan A and C - a period of 12 (twelve) months duration.

 

for
Loan B - a period of six months duration.

 

all
commencing and including the Disbursement Date, Provided, however, that if any
Interest Period would otherwise end on a day which is not a Banking Day, the
termination thereof shall be postponed to the next day which is a Banking Day,
unless such Banking Day falls in the next calendar month, in which case such
Interest Period shall end on the immediately preceding day which is a Banking
Day.

 

“LIBOR”, means the rate of interest (expressed as any annual rate) determined
by the Bank to be the arithmetic meaning (rounded up, if necessary to the
nearest whole multiple of 1/8%) of the (i) rates for Dollar deposits offered to
the Bank for the respective Interest Period which appears on the FRBD page of
the Reuters Screen for Dollars as of 11:00 a.m. London time, two Banking Days
prior to the commencement of the respective Interest Period, or (ii) if Clause
(i) above is inapplicable, the rates of interest communicated to, and at the
request of, the Bank, by or on behalf of the principal London offices of the
Reference Banks or any two of them, as being the rates at which they would
offer to the Bank deposits in Dollars in the London Interbank Eurodollar
Market, for the respective Interest Period as of 11:00 a.m London time two
Banking Days prior to the commencement of that respective Interest Period, or
(iii) if Clauses (i) and (ii) are inapplicable the rates of interest communicated
to and at the request of, the Bank, by at least two other banks in London
Interbank Eurodollar Market, at the rates at which such banks would offer the
Bank a deposit in the Dollars for the respective Interest Period as of 11:00
a.m. London time, two Banking Days prior to the commencement of that respective
Interest Period.

 

Loan A
- NIS 45,606,000 ($ 11,000,000)

 

Loan B
- $ 7,200,000

 

Loan C
- NIS 11,608,800 ($ 2,800,000)

 

“Loan”
means - the principal amount outstanding hereunder at any time of Loan A, Loan
B and Loan C.

 

6

 

“Margin” means - for Loan A and -C -

 

(1)        1.5%
p.a. for the first 12 months from the Disbursement Date and 1.75% p.a. for the
rest of the duration

 

(2)        On
Fixed Linked Rate basis 1.25% p.a.

 

for Loan B - 1.25% p.a.

 

“NIS”
- means New Israeli Shekel

 

“Reference Bank” means Barclays Bank PLC, National Westminster Bank PLC and Bankers
Trust Company ( in its name or as Deutsche Bank).

 

“The Purchase Agreement” means an agreement signed on July 8
1999 between the Borrower and Tadiran Ltd. pursuant to which the Borrower
purchased the Shares.

 

“Security Documents” means - this Agreement, the Deed of Pledge and any other documents as
may have been executed according to this Agreement to secure all or any part of
the Loan, Interest thereon and other moneys from time to time owing by the
Borrower pursuant to this Agreement;

 

“The Shares” means - 12,570,725 ordinary shares of the Company purchased by the
Borrower under the Purchase Agreement, which shares constitute 87.4% of the
issued and outstanding share capital of the Company.

 

“Taxes” includes all present and future income and other taxes, levies,
imposts, deductions, charges and withholdings whatsoever, together with
interest thereon and penalties with respect thereto, if any, and any payment of
principal, interest, charges, fees or other amounts made on or in respect
thereof and “Tax, “Taxation” and similar words shall be construed accordingly.

 

3.             AVAILABILITY AND DISBURSEMENT OF THE LOAN -

 

3. 1.        Provided the obligations and conditions set forth in Clause 12 have
been fulfilled, the Bank shall make the Loan available to the Borrower on the
Closing Date in one tranche provided, always, that the Borrower shall have
given the Bank a request for disbursement in the form of Schedule “A”  attached hereto, at least three (3)
Banking Days prior thereto.  The Loans
which will be granted in NIS will be made available only between the 25th day
of the month till the 15th day of the following month.  The Loan shall be made available to the
Borrower by crediting the Borrower’s account with the Central Branch of the
Bank with the amount mentioned in the preamble;

 

7

 

The
Bank shall not be required to grant the Loan unless the Closing Date shall be
on or before July 29, 1999

 

3. 2.        The Borrower declares and warrants that all the proceeds of the Loan
will be utilised for the purchase of the Shares, said sum includes also
expenses paid in connection with the Purchase Agreement.

 

4.             LINKAGE AND INTEREST -

 

4. 1.        Loan A , Loan C and the payments of Interest of the said loans shall be
linked to the Consumer Price Index (as hereinafter defined) in accordance with
the following provisions;

 

4. 2.        For the purpose of the linkage provisions under this Clause 4 following
terms shall have the following meanings:

 

4. 2. l.     The “Consumer Price Index” - or the “Index” shall mean - the consumer
price index (also known as the cost of living index), which includes fruit and
vegetables and which is published by the Central Bureau of Statistics
(hereinafter - “the Bureau”),or that same index even if it is published by any
other government institution or including any official index replacing same
irrespective of whether it is based on the same data on which the existing
index is based or not If another index replaces the existing index, the Bureau
shall determine the relation between them, and if the Bureau does not determine
the relation between them with 6 months of the publication of the other index,
it shall be determined by the Bank in consultation with economic experts.

 

4. 2. 2.    “The Basic Index” shall mean the last known Index on the Disbursement
Date;

 

4. 2. 3.    The “New Index” shall mean the last known Index on the Banking Day on
which any payment on account of the principal amount of the Loan and/ or
Interest on the Loan (and/ or any other linked amounts which the Borrower is
required to pay in respect of the Loan) is actually paid (hereinafter - the, or
a, “Payment Date”).

 

4. 3.                         In the event that upon any Payment Date it
shall transpire, that the New Index has risen in comparison to the Basic Index,
the Borrower shall make all payments to the Bank on such Payment Date, whether
in respect of the principal of the Loan, if applicable , Interest, or any other
amount payable hereunder, multiplied by the New Index and divided by the Basic
Index.

 

8

 

If
it transpires that the New Index has not risen or has fallen in comparison to
the Basic Index, the Borrower shall effect full payment of all such amount
payable hereunder at their stated values, without any reduction.

 

4. 4.        In the event that the last monthly Index which was to have been
published before any Payment Date shall not have been published for any reason
whatsoever, then, notwithstanding any other provision of Clause 4 the “New
Index” with respect to any payment made on such Payment Date shall mean the
last published Index prior thereto.  Provided,
however, that such “New Index” shall serve as a provisional Index until the
publication of the proper New Index (or its substitute as stated above).

 

If
it transpires that the New Index, which was published late and after the
aforesaid Payment Date, has risen or fallen in comparison to the Index which
served as a provisional basis for making the aforesaid payments, then the
Borrower shall pay to the Bank or be paid by the Bank, the resulting
differences, (as the case may be) within 2 (two) Banking Days from publication
of the New Index.

 

Provided,
however, that if it transpires that such New Index has fallen in comparison to
the Basic Index, then the Basic Index shall serve as the New Index for the
purpose of calculating any such differences.

 

5.             PAYMENT OF INTEREST -

 

5. 1.        The Borrower shall pay Interest on the outstanding balance of the
principal amount of Loan A and B as of the Disbursement Date on the last day of
each Interest Period of such respective Loan.

 

5. 2.        The Borrower shall pay Interest on the outstanding balance of Loan C on
the payment date of the principal amount of Loan C as stated in
Section 6.01 below ( the “ Payment Date”) it being understood and agreed
that all Interest accrued during each Interest Period shall be capitalised on
the last day of such Interest Period and as of such date shall also bear
Interest at the rate applicable to the principal amount of Loan C during the
following Interest Periods until the Payment Date.

 

5. 3.        Interest shall accrue from day to day and be calculated on the basis of
the actual number of days elapsed, divided by 360 for Loan B and on Loans A and
C on the basis of the actual number of days elapsed, divided by 365.

 

9

 

6.             REPAYMENT OF THE LOAN -

 

6. 1.        The Borrower shall repay the Loans as follows:

 

Loan “A”  - in 8 (eight) consecutive and equal
instalments each in the * amount of 5,700,750 NIS* on the last day of every 12 months
period from the Disbursement Date..

 

Loan “B” - in one lump sum
on                                 .(
5 years)

 

Loan “C”  - in one lump sum
on                                 .(
4 years)

 

The
Bank shall furnish to the Borrower a repayment schedule of the principal
amount of the Loan as soon as practicable (“the Repayment Schedule”)which shall be approved by the Borrower.

 

The
Borrower hereby confirms the Repayment Schedule shall be binding upon it
and shall be deemed to constitute an integral part of this Agreement.

 

7.             DEFAULT INTEREST -

 

7. 1.        In the event that the Borrower shall not pay any amount due from it
hereunder on its due date, then the Bank in its sole discretion may decide that
either of the following options shall apply: (1) such overdue amount shall
carry default interest from the due date and up to the date of actual payment
(as well after as before judgement) at a rate determined by the Bank to be the
highest rate charged by the Bank for any overdue payments in respect of Index
linked credits extended to its customer, up to 5% (five percent) per annum in
excess of the rate of Interest or (2) such overdue amounts be treated as an
unlinked credit from the due date and date and up to the date of actual payment
(as well after as before judgement) and shall carry default interest as shall
be charged by the Bank, from time to time during such period on excess balances
in revolving debitory accounts (“Default
Interest”).

 

7. 2.        The Borrower shall pay Default Interest on sums which are payable on
demand under any of the Security Documents and which shall not have been paid
within 5 (five) Banking Days of the date of such demand, unless otherwise
stipulated in any such Security Document, from the due date up to the date of
actual payment (as well after as before judgement).

 

7. 3.        Default Interest shall be due and payable on demand and compounded
monthly, calculated on the basis of actual number of days elapsed divided by
360 for sums which are due on Dollars and by 365 for sum which are due in NIS.

 

10

 

8.             INCREASED
COSTS
-

 

If
by reason of any change in law or in its interpretation and/or by reason of
compliance with any request from or requirement of the Bank of Israel, any
governmental authority or other fiscal or monetary authority addressed to all
major Israeli banks , after the date hereof and implemented by the Bank upon
its customers:

 

(i)            the
Bank incurs a cost as a result of its having entered into and/or performing its
obligations under this Agreement and/or maintaining the outstanding balance of
the Loan; or

 

(ii)           the
Bank is unable to obtain the rate of return on its overall capital which it
would have been able to obtain but for its having entered into and/or
performing its obligations and/ or maintaining the outstanding balance of the
Loan; or

 

(iii)          there
is any increase in the cost to the Bank of funding or maintaining all or any or
the outstanding balance of the Loan; or

 

(iv)          to
hold liquid assets to any degree or in any currencies in connection with the
Loan and/ or the continued funding of the Loan; and/ or

 

(v)           to
pay and/ or make provision for any payments whatsoever to the State of Israel
and/ or the State Treasury and/or any other competent authority in connection
with the disbursing of the Loan and/or the continued funding of the Loan.

 

then
the Borrower shall, from time to time, within 30 days from demand of the Bank,
promptly pay to the Bank such additional amounts sufficient to indemnify the
Bank against, as the case may be, (1) such cost, (2) such reduction in such
rate of return, (3) such increased cost or (4) and (5) such liability;

 

Without
derogating from the provisions of Clause 8 hereof, the Borrower may, after
receipt of the demand referred to in this clause, notify the Bank that it will
prepay, on the last day of the Interest Period the whole (but not part only of
the outstanding balance of the Loan; whereupon the Borrower shall prepay to the
Bank the outstanding balance of the Loan together with accrued interest thereon
and all other amounts owing to the Bank hereunder.

 

11

 

9.             PREPAYMENT -

 

9. 1.        Provided no Event of Default and/or any event which with the lapse of
time or giving of notice or both would constitute an Event of Default, (whether
under this Agreement or under any of the other Security Documents) has occurred
and is continuing, the Borrower may, on the last Banking Day of each Interest
Period in case of a Loan granted in Dollars and on every Computation Date in
case of a Loan which bears Interest on a Bond Rate Basis ,upon giving in each
case at least 30 (thirty) days prior written notice to the Bank (which shall be
irrevocable and shall constitute the Borrower’s undertaking to prepay
accordingly), prepay the principal amount of the Loan, in whole or from time to
time in part, (being in each instance not less than the equivalent of US$
1,000,000.- (One Million U.S.Dollars) subject always to all the terms and
conditions hereinafter detailed. 
Amounts prepaid pursuant to this Clause may not be reborrowed hereunder.

 

Upon
prepayment the Borrower shall also pay to the Bank all Interest which has
accrued on the prepaid amount up to date of payment and any amount prepaid
linked to the Index, in accordance with the provisions of Clause 4.

 

In
case the amount prepaid is in NIS and the loan prepaid bears Interest on the
Fixed Linked Rate basis or which bears Interest on the Bond Rate Basis and not
prepaid in a Computation Date ,then together with the prepaid amount on account
of the principal amount of the Loan, the Borrower shall pay to the Bank an
amount equal to the loss of profit caused to the Bank by reason of such
prepayment (hereinafter: “the Loss of Profit”).

 

For
the purposes hereof, the Loss of Profit shall mean the difference between (i)
the whole of the amounts which the Bank would have earned on the prepaid
amounts (had such prepayment not have been effected) by way of linkage to the
Index and interest in accordance with the provisions hereof from the date of
prepayment and until the agreed date of repayment as stipulated in Clause 6.01
and (ii) the Bond Rate relevant on the date of such prepayment.  The Bank shall calculate the amount of the
Loss of Profit and shall give the Borrower notice of such amount not later than
7 (seven) days before the date of prepayment The amount so calculated by the
Bank and informed to the Borrower shall be deemed the actual Loss of Profit and
shall be binding on the Borrower, except only for manifest error.

 

If
the Bank shall determine that there is no such Loss of Profit or that the Bank
shall actually gain from any such prepayment, then the Borrower shall not be
required to pay any such additional amount for Loss of profit and shall not be
entitled to receive any amount from the Bank.

 

12

 

9. 2.        If the Borrower notifies the Bank of its intention to p repay any
amount under the provisions of this Agreement but in fact does not pay in
accordance with such notification then the Borrower shall indemnify the Bank
against and on demand pay to the Bank the full amount of any loss or expenses
which the Bank shall certify as sustained or incurred by its as a consequence
of not having been prepaid in accordance with such notification.

 

9. 3.        The Borrower may not prepay the Loan or any part thereof save as
expressly provided in this Agreement.

 

10.          TIME, PLACE AND MANNER OF
PAYMENT -

 

10. 1.      All payments to be paid by the Borrower hereunder shall be made to the
Bank free of any Taxes and without set-off or counterclaim, (without derogating
from the Borrower’s rights to counterclaim), in funds available to the Bank at
its Central Branch or at any other place in Israel nominated by the Bank and
not prohibited for that purpose by any applicable law , provided that 7 ( seven ) days prior
notice thereof shall have been given to the Borrower by the Bank.

 

10. 2.      In the event that the Borrower is required under the laws of the State
of Israel to deduct or withhold any amount in respect of income-tax on payments
of interest payable hereunder, then the Borrower shall be entitled to make such
deduction or withholding; provided always that in any such case the Borrower
shall furnish to the Bank forthwith adequate tax receipts in respect of any
such deduction or withholding, in form and substance acceptable to the income
tax authorities, duly completed and signed as required by said authorities, for
the purpose of treating same as a payment on account of income tax payable by
the Bank.

 

In
the event that the Borrower shall not furnish to the Bank tax receipt as
aforementioned and/or that the income tax authorities will not treat any such
deduction or withholding as a payment on account of the Bank’s income tax
and/or if the Borrower is required to make any other deduction or withholding
in respect of Taxes, then the payment of interest under this Agreement shall be
increased to such amount as is necessary to yield and remit to the Bank the
principal amount of the Loan and Interest at the rate specified in this
Agreement after provision for payment of such Tax.  The Borrower shall at the request of the Bank execute and deliver
to the Bank such instruments as may be necessary or desirable to give full
force and effect to such increase in the rate of Interest.

 

13

 

10. 3.      All payments to be paid by the Borrower to the Bank hereunder shall be
made only on a Banking Day, as defined herein. 
If any payment is due on a day which is not a Banking Day, such payment
shall be made on the next succeeding Banking Day unless it would thereby be
made in the next calendar month, in which case such payment will be made on the
immediately preceding Banking Day.

 

10. 4.      If any sum to be paid hereunder shall be paid by the Borrower on a day
other than a Banking Day it shall be considered as having been paid on the next
succeeding Banking Day.

 

11.          COLLATERALS -

 

To
secure the full and punctual payment of all sums now or hereafter to become due
and payable to the Bank from the Borrower hereunder this Agreement the
following collaterals will be given and/or created by the Borrower and/or its
behalf:

 

11. 1.      A first ranking fixed charge over the Shares in the form attached
hereto as Annex B.

 

11. 2.      The Bank hereby gives the Borrower its consent to create the
abovementioned collateral to another banking institution which will participate
in financing the acquisition of the Shares provided that such financial
institution will not realise such collateral without the Bank’s consent (
without such consent being required from such financial institution if the Bank
realises such collateral) and provided that such financial institution shall
sign an agreement with the Bank in form and substance satisfactory to the Bank
according to which the Bank shall be entitled to 40% of the proceeds which will
be received from the realisation of the collaterals , if they will be realised.

 

11. 3.      Mr. Abraham Wolfson, Mr. Morris Wolfson and Mr. Aharon Wolfson will
execute a guarantee in the Bank favour in the sum of $1,600,000.-(Two Million
and Four Hundred Thousand Dollars) in the form attached hereto as Annex C.

 

11. 4.      The Borrower hereby undertakes to cause the above collaterals to be registered with the Registrar of Companies in
Jerusalem and in any other Registrar office where such pledges are to be
registered according to the applicable law and to submit to the Bank confirmation
of said Registrar that such registration has been effected within 14 (fourteen)
days from the Disbursement Date.  The
Borrower shall receive copy of the Security Documents after they were duly
executed.

 

14

 

11. 5.      Any and all dividends and other distributions and payments of cash made
by the Company in respect of the Shares or to any shareholder of the Borrower
who is also a shareholder in the Company except for regular salaries paid to
Company’s employees who are shareholders as aforesaid, after deduction of
Israeli income tax, if any, (hereinafter collectively referred as “Payments of
Cash”) will also be pledged and charged in favour of the Bank as required by
the Bank to secure any and all of the obligations of the Borrower hereunder, it
is agreed that all such Payments of Cash shall be held by the Bank until
applied in satisfaction of amounts due from the Borrower hereunder when and as
such amounts become due or such Payment in Cash may be deposited by the
Borrower in other financial institution provided such Payment of Cash has been
charged and pledged in favour of the Bank to its full satisfaction.  Until so applied such Payments of Cash shall
earn interest if held at the Bank at a rate normally applied by the Bank at
such time and from time to time on deposits of similar amounts and for similar
periods.

 

11. 6.      Promptly after the Borrower shall have repaid the Loan in full and
shall have paid and repaid to the Bank any all of the sums due to the Bank hereunder
and under all other Security Documents, the Bank shall release all pledges
created according to this section

 

12.          CONDITIONS PRECEDENT -

 

The
obligation of the Bank to make the Loan available to the Borrower shall be
subject to the condition that no Event of Default and/or any event which but
for the giving of notice or the lapse of time would constitute such an event
has occurred or be continuing and that on or before the Closing Date the
Borrower shall have delivered to the Bank the documents set out in this
Agreement,, and shall have completed all the actions listed hereunder to the
full satisfaction of the Bank:

 

12. 1.      Certified true copies of the resolutions of the Board of Directors of
the Borrower authorising the borrowing under this Agreement, and providing for
the persons authorised to sign this Agreement and any document or instrument
hereunder in the name and on behalf of the Borrower, as per the enclosed form.

 

12. 2.      The Security Documents have been duly executed by the Borrower.

 

12. 3.      The Borrower shall have established a bank account or accounts with the
Central Branch of the Bank and have submitted to the Bank all of the
documentation required in connection therewith.

 

15

 

12. 4.      The Borrower shall have received capital contribution in an amount of $
13,000,000 ( Thirteen Million Dollars ) and shall have submitted to the Bank a
certificate of a Director of the Borrower confirming same.

 

12. 5.      The Bank will be given an option in the form attached as Annex D .

 

13.          REPRESENTATIONS AND WARRANTIES -

 

The
Borrower represents and warrants to the Bank in relation to the Borrower that:

 

13. 1.      the Borrower is a private limited company duly incorporated and validly
existing under the laws of the State of Israel and has the full power,
authority and legal right to own its assets and conduct its business as it is
now being conducted.

 

13. 2.      the Borrower has the full power, authority and legal right to enter
into, exercise its rights and perform its obligations under this Agreement;

 

13. 3.      all necessary consents and authorities for the Borrower to enter into
and perform its obligations under this Agreement have been obtained and no
further consents or authorities are necessary;

 

13. 4.      the obligations of the Borrower under this Agreement are, and the
obligation of the Borrower under all of the other Security Documents will when
executed by the Borrower be, legal, valid, binding and enforceable against the
Borrower in accordance with their terms,

 

13. 5.      the execution, delivery and performance by the Borrower of the
obligations under this Agreement will not (i) contravene any existing law,
regulation or authorisation to which the Borrower is subject, (ii) result in
any breach of or default under any agreement or other instrument to which the
Borrower is a party or is subject or (iii) contravene any provision of the
Borrower’s Memorandum and Articles of Association or other constituting
documents;

 

13. 6.      the
Borrower is not in breach of or in default under any other agreement binding on
it or permit granted to it, which breach or default could have a material
adverse effect on its ability to perform its obligations under this Agreement;

 

16

 

13. 7.      no action, litigation, arbitration or administrative proceeding is
current, pending or threatened against the Borrower which could have a material
adverse effect on its ability to perform its obligations under this Agreement;

 

13. 8.      no event has occurred, and is continuing that constitutes, or that the
giving of notice or the lapse of time or both, would constitute an Event of
Default.

 

13. 9.      no Encumbrance exists over all or any part of the present or future
assets or revenues of the Borrower, except for encumbrances permitted hereunder
or on assets sold by the Borrower prior to the date hereof.

 

13. 10.    The Borrower has obtained all consents, authorisation, licences or
approval of, and has effected all registration with or declaration to,
governmental or public bodies or authorities or courts in connection with the
acquisition of the Shares,

 

14.          UNDERTAKINGS -

 

14. 1.      The Borrower undertakes with the Bank that so long as any moneys are
owing under this Agreement it will:

 

14. 1. l.   obtain or cause to be obtained, maintain in full force and effect and
comply or cause to be complied in all material respects with the conditions and
restrictions (if any) imposed in, or in connection with, every consent,
authorisation, licence or approval of governmental or public bodies or
authorities or courts and do, or cause to be done, all other acts and this,
which may from time to time be necessary or desirable under applicable law for
the continued due performance of all its obligations under this Agreement;

 

14. 1. 2.  prepare financial statements of the Borrower in accordance with
generally accepted accounting principals and practices in Israel consistently
applied in respect and to deliver a copy of each of same within 30 ( thirty )
days from the date the Company has published its financial annual reports.  If the Company will cease to publish
financial reports according to the rules applied to companies whose shares are
traded in the Tel Aviv Stock Exchange ( the “Rules”) then the Borrower shall
furnish the Bank such financial reports according to such Rules.

 

14. 1. 3.  provide the Bank with such financial and other information concerning
the Borrower, and its affairs, as the Bank may from time to time require.

 

17

 

14. 1. 4.  it will use its best efforts as shareholder in the Company that the
Company will declare dividends at such times and in such amounts which shall be
sufficient to cover the current financial obligations of the Borrower in
respect of the Loan.

 

14. 2.      The Borrower undertakes with the Bank that, from the date of this
Agreement and so long as any moneys are owing under this Agreement, without the
prior written consent of the Bank:-

 

14. 2. 1.  it will not create, permit or suffer any Encumbrance over all or any part
of its present or future undertakings, assets, rights or revenues except for
Encumbrance created over a specific asset in order to secure only the financing
granted to purchase same.

 

14. 2. 2.  it will not merge or consolidate with any other entity.

 

14. 2. 3.  it will not disburse any monies to its shareholders on account of
dividend, management fees, grants and/or any other nature.

 

14. 2. 4.  the Company will retain in its financial statements the financial
ratios as stated herein:

 

14. 2. 4. l.       Minimum amount of Shareholders Equity will be NIS 70,000,000 ( Seventy
Million New Israeli Shekel )

 

14. 2. 4. 2.      The ratio of Shareholders Equity to the Balance Sheet will not be less
than 30%.

 

14. 2. 4. 3.      The EBITDA will equal not less than NIS 28,000,000.-per annum.

 

14. 2. 4. 4.      The ratio of the EBITDA to the Revenues will not be less than 9.5.%.

 

For
the Purpose hereof, “EBITDA’ shall mean, for any calendar year, the net income,
less interest income and profits/losses of an extraordinary nature, plus the sum
of interest expenses, taxes, depreciation, charges of any extraordinary nature,
amortisation and all other non-cash charges as evidenced by the audited
financial statement of the Borrower for such calendar year.

 

18

 

14. 2. 5.          So long as Loan B is not repaid in full - Cash and Short Term
Investments will be not less than $ 18,000,000 ( Eighteen Million Dollars)
provided however, that in the event the Company shall take an action or be
subject to an action in its ordinary course of business, the result of which
its Cash and Short Term Investments be less than $ 18,000,000 but more than $
15,000,000 ( in this Section 5, the “Shortage”) and such Shortage shall
continue for a period of up to three consecutive months , the parties agree,
and Borrower is hereby committed as of the termination of such three months
period, to replace the Shortage with an additional collateral to the full
satisfaction of the Bank.

 

All
terms used in this Section shall be interpreted according to generally
accepted accounting principles in practice in the State of Israel from time to
time.

 

All
sums denominated in NIS are linked to the Consumer Price Index which basic rate
is the Index published for the month of December 1998.

 

15.          EVENTS OF DEFAULT -

 

15. 1.      There shall be an Event of Default if:

 

15. 1. l.   The Borrower fails to pay any sum due from it under this Agreement at
the time, and in the manner stipulated in this Agreement and such failure is
not remedied until 14 (fourteen) days from the due date of the respective sum.

 

15. 1. 2.  the Borrower commits any breach of or omits to observe any of the
obligations or undertakings expressed to be assumed by it under this Agreement
which the Bank in its own discretion deems material (other than failure to pay
any sum when due).

 

However,
if the breach or failure is capable of being cured, the Borrower shall have
cured such breach or failure within 30 ( thirty ) days .

 

19

 

15. 1. 3.  any representation or warranty made or deems to be made or repeated
pursuant to this Agreement, by or in respect of the Borrower, or in any
application, request, notice, certificate or statement referred to in or
delivered under this Agreement is or proves to have been incorrect in any
material respect; Provided however, that if the circumstances to which such
representation or warranty relate can be corrected, so that such representation
or warranty shall become correct again and further provided that such circumstances
shall not affect validity, legality or enforceability of this Agreement, such
event shall not be deemed an Event of Default, if the circumstances shall have
been corrected with 7 (seven) days from the Bank’s notice, but in any event not
later than within 7 (seven) days from the days upon the Borrower has become
aware thereof: as

 

15. 1. 4.  a creditor attaches or takes possession of, or a distress, execution,
sequestration or other process is levied, or enforced upon or sued out against
any material property of the Borrower, or against a material part of the
undertakings, assets, rights or revenues of the Borrower and is not discharges
within 45 (forty five) days; or

 

15. 1. 5.  the Borrower suspends payment of its debts, or is unable or admits
inability to pay its debts as they fall due, or commences negotiations with one
or more of its creditors with a view to readjustment or rescheduling of all or
part of its indebtedness, or proposes or enters into any composition or other
arrangement for the benefit of its creditors generally or any class of
creditors, or proceedings are commenced in relation to the Borrower (and if
commenced by third party, are not discharges within 60 (sixty) days ) under any
law, regulation or procedure relating to reconstruction or readjustment of
debts; or

 

15. 1. 6.  the Borrower takes any action or any legal proceedings are started or
other steps taken for (and if initiated by third party, are not discharged
within 60 (sixty) days provided that in that time no legal resolution
concerning the assets of the Borrower was adopted) (i) the Borrower to be
adjudicated or found bankrupt or insolvent (ii) the winding-up or dissolution
of the Borrower or (iii) the appointment of a liquidator whether provisional or
otherwise, administrator, trustee, receiver or similar officer in respect of
the Borrower, and/or in respect of the whole or any material part of its
undertakings, assets rights or revenues; or

 

20

 

15. 1. 7.  all or a material part of the undertakings, assets, rights or revenues
of, or shares or other ownership interests in, the Borrower are seized,
nationalised, expropriated or compulsorily acquired by or under the authority
of any government; or

 

15. 1. 8.  it becomes unlawful at any time for the Borrower to perform all or any
material obligations under this Agreement; or

 

15. 1. 9.     if the Borrower has and/or shall have committed a breach of any of its
undertakings and/or obligations under the Purchase Agreement, and/or any of the
appendices thereto and the Bank in its reasonable discretion shall determine
that such breach may have a material adverse effect on the condition of the
Borrower (including in particular any such effect on the right and title to the
Shares), and/or on the rights of the Bank pursuant hereto and/or under any
other Security Documents.

 

15. 1. 10. Mr. Abraham Wolfson, and/or Mr. Morris
Wolfson and/or Mr. Aharon Wolfson directly and\or indirectly cease to have
control over the Borrower.  For this
purpose “control” means 51% of the voting power in the General Meeting of the
Borrower shareholders.

 

15. 1. 11. If the Borrower does not furnish the Bank
with periodic financial statements, books of account and other authorities and
materials in relation to the state of its affairs, within 30 (thirty) days from
the date provided for in Clause 13 hereof or if it is requested to do so and
does not comply with any such request within a period of 30 (thirty) days from
such request; or

 

15. 1. 12. If an Event of Default exists or occurs under
any other agreement for the extension of credit by the Bank to the Borrower
(after giving effect to any applicable grace period under any such agreement.)

 

15. 2.      The Bank may, without prejudice to any of its other rights, at any time
after the happening of an Event of Default, so long as the same is continuing,
by notice to the Borrower declare that:

 

15. 2. 1.  the Loan and all interest accrued and all other sums payable under this
Agreement have become due and payable whereupon the same shall, immediately or
in accordance with such notice, become due and payable; and/or

 

21

 

15. 2. 2.  the Loan and all other sums payable under this Agreement shall bear
interest at the rate specified in Clause 6 as if such sums had not been paid on
due date, whereupon interest shall, immediately or in accordance with the terms
of such notice, become due and payable.

 

15. 3.      Without prejudice to any of its other rights upon the happening of an
Event of Default, the Bank shall have a lien on all monies, securities, claims,
goods and other property, assets or rights of the Borrower held by the Bank,
until payment in full of the Loan and all other amounts owing to the Bank
hereunder.

 

15. 4.      Notwithstanding anything to the contrary in this Agreement, upon an
Event of Default or any event that may raise a cause of action to the Bank
under this Agreement, the Bank shall have no cause of action whatsoever against
any of the individuals listed in Section 11.03 herein in their capacity as
guarantors other than as provided in Annex C.

 

16.          UNLAWFULNESS, SUBSTITUTE BASIS -

 

16. 1.      This Agreement has been made in accordance with legal, regulatory,
fiscal and monetary measures currently in force and in accordance with current
market conditions.  If the making or the
continuation of the Loan by the Bank has become impracticable or unlawful or
the Bank is required to reduce the volume of its loans due to any change, after
the date of this Agreement, in any applicable law or governmental regulation or
order or in any requirement of any monetary authority, or in the interpretation
of any of the same, then and in any such event the Bank may give notice to the
Borrower and the Borrower agrees to prepay the full amount then outstanding as
well as interest accrued thereon with 30 (thirty) days or at the expire of the
then current Interest Period whichever comes first.

 

16. 2.

16. 2. l.   If at any time by reason of changes affecting the Eurodollar Interbank
Market, the Bank is unable, due to circumstances beyond its control, to
determine the Libor, or there shall be no objective possibility for the Bank to
refinance itself in United States Dollars in respect of the then outstanding
balance of the principal amount of the Loan, then and in any such event the
Bank shall give notice to the Borrower to that effect.

 

22

 

16. 2. 2.  The Bank shall then offer the Borrower an alternative basis (the
“Substitute Basis”) for the continuation of the Loan.  The Substitute Basis may include alternative interest periods,
alternative currencies or alternative rates of interest taking into account the
outstanding balance of the principal amount of the Loan.  The Substitute Basis shall be binding upon
the Borrower and shall take effect in accordance with its terms from the date
specified in the Bank’s notice.

 

16. 2. 3.  If the Borrower determines that it does not with to continue to borrow
the Loan or under the Substitute Basis it shall so notify the Bank within 10
days of receipt of the Bank’s notice specifying such Substitute Basis whereupon
the outstanding balance of the principal amount of the Loan coupled with
interest accrued and accruing thereon at a rate prevailing during the last
Interest Period in respect of which the Libor and the rate of the Interest has
been determined shall thereupon become immediately due owing and payable.

 

17.          SET-OFF AND APPLICATION OF PAYMENTS -

 

17. 1.      The Borrower hereby irrevocably authorises the Bank to apply any moneys
standing to the credit of any account of the Borrower with the Bank at any of
its branches (including such accounts held by the Borrower jointly or severally
with other parties) in or towards satisfaction of any sum not paid on its due
date by the Borrower to the Bank under this Agreement.

 

For
this purpose the Bank is authorised to purchase with the moneys standing to the
credit of such account such other currencies as may be necessary to effect such
application.  The Bank shall not be
obliged to exercise any right given to it by this Clause.  The Bank shall notify the Borrower forthwith
upon the exercise or purported exercise of any right of set-off giving full
details in relation thereto.

 

17. 2.      All moneys held or received by the Bank for or on account of the
Borrower, whether hereunder, pursuant to any of the Security Documents or
otherwise, notwithstanding that such monies may have been intended by the
Borrower or any third party to be appropriated for or on account of any other
amount, may be applied by the Bank to any amount owed by the Borrower under
this Agreement, and if so applied, shall be applied in the following manner:

 

(i)            first,
in payment to the Bank of all costs, charges or expenses, inter alia, those
incurred by the Bank in enforcing its rights hereunder or under any of the
Security Documents;

 

23

 

(ii)           secondly,
in or towards Interest/Default Interest owing in respect of the Loan;

 

(iii)          thirdly,
to prepayment of instalments of principal on account of the Loan in the inverse
order of their maturity;

 

18.          THE BORROWER’S DUTY TO NOTIFY -

 

The
Borrower hereby undertakes to notify the Bank immediately:

 

18. 1.      of any claim of right to any security given or which may be given to
the Bank pursuant hereto or in connection herewith.

 

18. 2.      of any of the events enumerated in Clause 15 above.

 

18. 3.      of any change of address.

 

19.          COMPENSATION FOR BROKEN FUNDING -

 

If
the Loan or any part thereof or any interest thereon is for any reason
whatsoever repaid, paid or recovered by the Bank under any security or
otherwise, on any day other than the agreed date of payment, the Borrower shall
upon demand pay to the Bank such amount or amounts as may be necessary to
compensate the Bank for any actual loss incurred by it on account of funds
borrowed in order to make, fund or maintain the Loan with respect to which
repayment, payment or recovery is made and or any loss of profit caused
thereby.

 

20.          REMEDIES AND WAIVERS -

 

20. 1.      No delay or omission of the Bank in exercising any right, power,
privilege or remedy pursuant to this Agreement or any Security Document shall
impair such right, power, privilege or remedy or be construed as a waiver
thereof nor shall any single or partial exercise of any such right, power, privilege
or remedy preclude any other or further exercise thereof or the exercise of any
other power, right or remedy.

 

20. 2.      The rights and remedies of the Bank provided in the Agreement and each
Security Document are cumulative and not exclusive of any rights or remedies
provided by law.

 

24

 

21.          ASSIGNMENT -

 

The
Bank may at any time at its own discretion and without the Borrower’s consent
being required, assign its rights in relation to the Loan and/or arising from
this Agreement, including the Securitiy Documents, to any assignee, and any
such assignee may also reassign the said right as aforesaid to any other
assignee without any further consent being required from the Borrower.  Such assignment may be effected in any way
which the Bank or any subsequent assignor deems fit all provided the Borrower’s
rights under this Agreement shall not be prejudiced as a consequence of such
assignment.

 

The
Borrower may not assign or transfer any of its rights or obligations under this
Agreement without the prior written consent of the Bank.

 

22.          ADMINISTRATION OF THE LOAN -

 

The
Bank may administer the Loan or any part thereof by booking same with any of
its branches, whether in Israel or abroad. 
The Bank may at any time and from time to time at its own discretion and
without any consent being required from the Borrower, transfer the
administration of the Loan or any part thereof from one branch of the Bank to
another, whether in Israel or abroad without prejudice to the Borrower as a
consequence of such transfer.

 

23.          DISCLOSURE OF INFORMATION -

 

Any
branch of the Bank administering the Loan may disclose to the Head Office of
the Bank, to any participants or to a potential participant, to any assignee or
to any other entity who may propose entering into contractual relations with
the Bank in respect of the Loan or any part thereof, or to the Bank of Israel,
the Examiner of Bank, the Controller of Foreign Exchange or any person acting
under their authority or to any other regulatory authority having jurisdiction
over the Bank or over the Head Office of the Bank or to the Head Office of the
Bank for delivery by the latter to any such regulatory authorities, such
information about the Borrower, or the Loan as may be required by such
regulatory authorities or as the branch or the Head Office of the Bank may deem
appropriate in accordance with lawful requirements and subject to
confidentiality

 

25

 

24.          EXPENSES -

 

All
of the expenses in stamping this Agreement, (including any interest
and/or fines for late stamping), the registration of the Security Documents and
all and any expenses involved in the enforcement thereof or in the realisation
of the collaterals for the enforcement thereof, if interference by court is
needed, including fees of the Bank’s advocates, shall be paid by the Borrower
to the Bank upon the Bank’s first demand, together with interest at the maximum
rate prevailing at the Bank from the day of the Bank’s first demand and until
payment in full.  Until payment in full
the aforesaid expenses together with the interest thereon, shall be secured by
the collaterals mention in Clause 10 hereof.

 

25.          ADDITIONAL PROVISIONS -

 

25. 1.      The Borrower hereby confirms that the Bank’s books, accounts and entries
shall be prima facie evidence against the Borrower in all their particulars.

 

25. 2.      The Borrower hereby confirms receipt of the Bank’s notification that
according to the Protection of Privacy Law, 5741-1981:

 

25. 2. 1.  All the particulars furnished or which may be furnished by the Borrower
to the Bank may be used by the Bank in the normal course of its operations at
its own discretion;

 

25. 2. 2.  All the particulars furnished or which may be furnished by the Borrower
to the Bank shall be stored in keeping with the Bank’s requirements from time
to time in data bases of the Bank and/or of suppliers to the Bank from time to
time of computer and data processing and warehousing services;

 

and
the Borrower hereby confirms its agreement thereto.

 

25. 3.      From time to time, as required by the Bank, the Borrower shall allow a
representative of the Bank to peruse during usual working hours, all balance
sheets, books of account, card indexes, ledgers and other papers and documents
in relation to the state of the Borrower’s financial affairs.

 

26

 

26.          NOTICES -

 

26. 1.      Each communication to be made under this agreement shall be made in
writing and, unless otherwise stated, may be made also by telex or facsimile
transmission.

 

26. 2.      Each communication or document to be made or delivered by one person to
another pursuant to this Agreement shall (unless that other party has by
fifteen (15) days’ written notice specified another address) be made or
delivered to that party, addressed as follows:

 

(i)            if to the Borrower at:-

Tel
Aviv, Israel

Fax
No:

 

(ii)           if to the Bank at:-

ISRAEL
DISCOUNT BANK LTD

Tel-Aviv
Banking Facilities

Fax
no. 03-5145210

Att:
Rina Doupler

 

and
shall be deemed to have been made or delivered the next Banking Day after
dispatch (in the case of any communication made by telex or any form of
facsimile transmission) or (in the case of any communication made by letter)
the next Banking Day after being physically left at that address.

 

27

 

27.          GOVERNING LAW AND JURISDICTION -

 

27. 1.      This Agreement shall be governed by and construed in accordance with
the laws of the State of Israel.

 

27. 2.      For the purpose of this Agreement the Exclusive place of Jurisdiction
shall be the competent courts of law in Tel Aviv-Jaffa.  The Borrower hereby irrevocably submits to
the jurisdiction of courts.

 

28.          CURRENCY INDEMNITY -

 

The
Borrower agrees to indemnify the Bank against any loss incurred by it as a
result of any judgement or order being given or made for the payment of any
amount due under this Agreement and of such judgement or order being expressed
in a currency other than the currency in which such amount is payable and as a
result of any variation having occurred in the rates of exchange between the
date on which any such amount becomes due under this Agreement and the date of
actual payment thereof.  The foregoing
indemnity shall constitute a separate and independent obligation of the Borrower
and shall apply irrespective of any indulgence granted to the Borrower from
time to time and shall continue in full force and effect notwithstanding any
such judgement or order.

 

29.          SEVERABILITY-

 

If
at any time any provision of this Agreement is or becomes invalid, illegal or
unenforceable in any respect under the laws of the State of Israel neither the
legality, validity or the enforceability of the remaining provisions hereof
shall in any way be affected or impaired thereby.

 

IN WITNESS WHEREOF THE BORROWER AND THE BANK HAVE CAUSED THIS
AGREEMENT TO DULY  EXECUTED
AND  DELIVERED IN TEL AVIV. AS OF

 

	
   

  	
  /s/ Shlomo Ariel

  	
   

  
	
   

  	
  NESSTECH ADVANCED TECHNOLOGIES (1999) LTD.

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  /s/ Rina Dopler, /s/ Zahala Caspi

  	
   

  
	
   

  	
  ISRAEL DISCOUNT BANK LTD

  	
   

  
	
   

  
	
  At:

  	
  At:

  
	
   

  	
   

  
	
  By:

  	
  By:

  
				

 

28

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