Exhibit 2.1
SHARE PURCHASE AGREEMENT
SHARE PURCHASE AGREEMENT (this "Agreement") made as of the ___ day of January,
2004 (the "Effective Date"), by and between ▇▇▇▇ ▇▇▇▇▇ (the "Founder") and ▇▇▇▇▇
▇▇▇▇▇, residing at ▇▇ ▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇ ▇▇▇▇▇, Israel (the
"Sellers"), Epsilor Electronic Industries Ltd., an Israeli company having its
principal executive offices in the ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇
("Epsilor"), and Electric Fuel (E.F.L.) Ltd., an Israeli company having its
principal executive offices at One ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇,
▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇ (the "Purchaser," which term shall include any
successors to the Purchaser under Section 8.2 of this Agreement).
W I T N E S S E T H :
WHEREAS, the Sellers are the owners of all of the issued and outstanding
share capital of Epsilor (the "Shares"); and
WHEREAS, the Founder has acquired intangible assets relating to Epsilor
including expertise, goodwill, know-how and other intangible assets with regard
to clientele, plans and developments of potential projects, market trends, etc.;
and
WHEREAS, the Purchaser wishes to purchase the Shares upon the terms and
conditions set forth in this Agreement; and
WHEREAS, further to the sale of the Shares, the Founder shall have
undertaken not to compete with Epsilor for the duration of a management
agreement to be signed on the date hereof with respect to the rendering of the
management services to Epsilor (the "Management Agreement") and for an
additional three year period.
NOW, THEREFORE, in consideration of the mutual promises and covenants set
forth herein, the parties agree as follows:
1. The Transaction.
1.1 Purchase and Sale of the Shares. Upon the terms and subject to the
conditions set forth in this Agreement, the Purchaser and the Sellers
agree that in consideration of an aggregate purchase price of US
$10,000,000 (the "Purchase Price"):
1.1.1 the Sellers shall sell to the Purchaser, at the Closing (as defined
in Section 2.1), an aggregate of 2,168,897 Ordinary Shares of
Epsilor, nominal value NIS 1.00 per share ("Ordinary Shares"), and
100 Management Shares of Epsilor, nominal value NIS 1.00 per share
("Management Shares") (together, the "Shares"), which constitute,
and will immediately subsequent to the Closing constitute, 100% of
Epsilor's issued and outstanding capital stock.
1.1.2 The Founder shall not provide services to any entities competing
with Epsilor, including providing management services, advice,
training or information to any entity that is, or is likely to
become a competitor of Epsilor or who has a business similar in
essence to the business in which Epsilor currently engages in, or
shall engage, during the term of the Management Agreement and for an
additional three years thereafter (the "Non Compete Obligation").
The purchase of the Shares and the undertaking by the Founder
of the Non Compete Obligation pursuant to this Agreement shall
hereinafter be referred to as the "Transaction".
1.2 Payment of the Purchase Price. At the Closing (as defined in Section 2
below), the Purchaser will deliver, as payment for the Shares and the
performance of the Non Compete Obligation, the Purchase Price as follows:
(a) US $7,000,000, by bank draft, or wire transfer to the Sellers that
is accompanied by bank confirmation that the bank will honor such
transfer and waives any right it may otherwise have had to withdraw
such sum in whole or in part for any reason whatsoever; and
(b) three irrevocable and unconditional bank guarantees in favor of the
Founder (the "Bank Guarantees") each for an amount of US $1,000,000
in NIS (linked to the representative rate of the United States
dollar as published by the Bank of Israel immediately prior to
payment of the relevant Bank Guarantee), substantially in the form
attached as Exhibit 1.2 hereto. The first, second and third Bank
Guarantees shall be valid as of the Closing Date (as defined below)
for a period of 15 months, 27 months and 39 months respectively. The
Bank Guarantees shall be held on trust by H.Y.D Trustees (1991) Ltd.
the trust company of Haim Samet, Steinmetz, ▇▇▇▇▇▇ & Co. (the
"Trustee") in favor of the Founder. The Bank Guarantees shall be
released as follows:
(i) The Founder shall approach the Trustee (in writing by
registered mail and by e-mail care of Adv. ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇ of
Haim Samet, Steinmetz, ▇▇▇▇▇▇ & Co., with a copy to the
Purchaser) no earlier than 25th November 2004 and no later
than 5th December 2004, with a request to receive the first
Bank Guarantee.
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(ii) The Trustee shall thereafter, but not later than 10th December
2004, notify the Purchaser of its intention to release the
first Bank Guarantee at least 14 days after delivery of such
notification.
(iii) The first Bank Guarantee shall be so released unless within
the 14 days set forth in subsection (ii) above, the Trustee
receives:
(a) An affidavit sworn by the CEO or CFO of the Purchaser,
declaring that he has filed a detailed request with the
Arbitrator (as identified below) alleging that the first
Bank Guarantee should not be realized, in whole or in
part, due to the failure of the Founder having availed
himself for the hours required in accordance with
Section 1.2(c) below; and
(b) A copy of the request to the Arbitrator.
(iv) In the event that the Trustee receives all of the afore-listed
documents, it shall withhold the first Bank Guarantee until
the earlier of:
(a) 25th February 2005 (unless such term shall be extended
by the Arbitrator in accordance with Section 1.2(b)(v)
below, in which case the Purchaser shall be required to
extend the first Bank Guarantee until 30 days following
of the expiration of the extended period), in which case
the Trustee shall release the first Bank Guarantee to
the Founder; or
(b) a final decision by the Arbitrator (a copy of which
shall be delivered to the Trustee), in which case the
Founder shall only be entitled to such sum (if any)
adjudicated by the Arbitrator, whereupon the Purchaser
shall pay any sums determined by the Arbitrator to be
owed or owing to the Founder by a new bank guarantee or
new bank guarantees, in amounts to be determined by the
Arbitrator ("the New Bank Guarantees") to be deposited
on trust with the Trustee within 7 days of the final
decision, against release to EFL of the Bank Guarantees.
The Trustee shall deliver the first New Bank Guarantee
to the Founder within 5 days of its deposit. Should the
Purchaser fail to deposit the New Bank Guarantees within
7 days of the final decision, then the Founder shall be
entitled to realize the first Bank Guarantee which shall
be released by the Trustee upon first demand of the
Founder; in such case the Founder shall be required to
return the excess amount to the Purchaser,
(v) Notwithstanding, should the Arbitrator determine that he
requires further time to reach a final decision, but in no
event shall such time exceed 25th April 2005 and provided that
the expiration date of the first Bank Guarantee was extended
as set forth in Section 1.2.(iv)(a) above, the Trustee shall
not release the first Bank Guarantee until the earlier of the
expiration of such term or in accordance with the final
decision of the Arbitrator.
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(vi) In the event that the first Bank Guarantee is paid, in whole
or in part, the Trustee, unless the Arbitrator determines
otherwise, shall automatically release the second and third
Bank Guarantees (or New Bank Guarantees) to the Founder within
7 days of its receipt of a request from the Founder; such
request shall not be earlier than 10th December 2005 and 2006
respectively. In the event that pursuant to the Arbitrator's
decision, the Founder is not entitled at all to the Bank
Guarantees, then the Trustee shall release the Bank Guarantees
to the Purchaser and Purchaser may cancel such Guarantees, in
accordance with the decision of the Arbitrator.
(c) The Payments set forth in Section 1.2 (b) above, will be conditional
on the Founder, having availed himself to Epsilor as may be
requested by Epsilor, upon reasonable notice, during the 12 month
period following the Closing Date (the "Initial Period") for an
average of up to 100 hours per month for the purpose of providing
consulting services on matters for which he was responsible as CEO
of Epsilor until the Closing Date (the "Required Hours"), unless his
failure to do so was a result of his death, disability or vacation
not in excess of six [6] weeks in the Initial Period.
The Required Hours shall be verified as follows:
(i) The Founder shall notify Epsilor, at least 14 days in advance,
prior to any vacation of a week or more that he wishes to take
during the Initial Period. For the purpose of verifying the
100 hours, the presence of the Founder at the offices of
Epsilor shall be recorded on weekly basis by e-mail or by any
other means acceptable to the parties hereto, and hours
availed by the Founder to Epsilor outside of its offices shall
be documented by means of transmission of e-mails on a weekly
basis. Any and all travel undertaken by the Founder in
connection with Epsilor shall be included in the calculation
of the aforesaid availed hours.
(ii) Epsilor shall confirm the details contained in each such
e-mail report by e-mail, which shall be sent to the Founder no
later than Monday of the following week. In the event that the
Purchaser contests any such report, in whole or in part, it
shall promptly notify the Founder of such contention by e-mail
and registered mail, with a copy to Adv. ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇ of
Haim Samet, Steinmetz, ▇▇▇▇▇▇ & Co.
(iii) The Founder shall be entitled to complete any hours which he
was unable to avail during any given month - the following
month, whereby the Founder shall be deemed to have completed
the required hours during the previous month. In case of
disagreement with regard the number of hours the Founder
availed himself to Epsilor in any given month during the
Initial Period, it shall be referred to arbitration in
accordance with this Agreement. For the removal of doubt, the
Founder shall not be required to make up any hours lacking due
to illness or vacation (not in excess of six weeks per year).
(d) In the event that the Epsilor claims that the Founder failed to
avail himself for the Required Hours during the Initial Term and
such failure was not due to disability, death or vacation and to the
extent that the Founder has been given the opportunity to complete
the Required Hours in accordance with section 1.2 (c) (iii) and did
not complete such Required Hours in accordance with the above, and
provided that Epsilor has fulfilled its obligations in accordance
with section 1.2 (c) (ii), then in case the parties do not agree on
the mechanism set forth below, Epsilor shall be obliged to address
the arbitrator as set forth in Section 1.2.3 (b) (iii) above. If the
Arbitrator determines that the Founder did not avail the Required
Hours, then unless otherwise determined by the Arbitrator the amount
payable to the Sellers under the Bank Guarantee shall be reduced pro
rata the actual amount of time he availed himself as follows: If the
Founder has availed himself for less than an average of two thirds
of the Required Hours during the Initial Period, then the Founder
shall not be entitled to the Bank Guarantees. If the Founder has
availed himself for more than two thirds of the Required Hours
during the Initial Period but less than the full time, he shall
receive a pro rata portion of each Bank Guarantee, such that if he
had availed himself for an average of sixty-eight hours per month,
he would receive $2,040,000 (68% of $3 million) and so on and so
forth. It is hereby clarified and agreed that the reduction of the
Bank Guarantees in accordance with the above shall be the only
remedy available to the Purchaser in the event that the Founder
fails to avail the Required Hours.
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(e) Notwithstanding anything in this Agreement the condition set forth
in Section 1.2 (c) above shall not apply should the Founder die or
becomes disabled in a manner which would prevent him from being
employed in an employment position substantially similar to the one
the Founder held prior to the Closing Date, then, and in such event
any and all of the Bank Guarantees not yet realized, shall become
immediately due and payable to the Founder or, on his death, to his
wife.
2. Closing.
2.1 The Closing. The closing (the "Closing") shall take place simultaneously
with the signing of this agreement at the offices of Bank Hapoalim, Branch
684 (Amishav - Givatayim), Givatayim, Israel, on the date hereof (the
"Closing Date").
2.2 Transactions on the Closing Date. On the Closing Date, the Sellers shall
deliver to the Purchaser the following documents:
(a) An executed Deed of Stock Transfer from each of the Sellers,
transferring its portion of the Shares to the Purchaser, together
with a duly completed and executed notice of such transfer to the
Israeli Registrar of Companies, all of the foregoing in form and
substance acceptable for filing with the Israeli Registrar of
Companies;
(b) Copies of letters sent by Epsilor to the Investment Center of the
Ministry of Industry and Trade, giving notice of the transfer to the
Purchaser of the Shares, and copies of its approvals in principle of
this transaction; and
(c) An opinion of counsel to the Sellers, attached as Exhibit 2.2(c) to
this Agreement.
2.3 Payment of Purchase Price; Transfer of Shares. On the Closing Date, the
Purchaser shall (i) pay the amount set-forth in section 1.2 (a) above to
the Sellers by wire transfer of immediately available funds to the
Sellers' bank account, at Bank Hapoalim, Branch 684 (Amishav - Givatayim),
Acct No. 127288, and (ii) deliver the Bank Guarantees set forth in section
1.2(b) above to the Trustee, and the transfer of the Shares from the
Sellers to the Purchaser shall come into effect.
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3. Representations and Warranties of the Sellers. The Sellers hereby jointly
and severally represent and warrant to the Purchaser, and acknowledge that
the Purchaser is entering into this Agreement in reliance thereon, as
follows:
3.1 Organization. Epsilor is a corporation duly organized and validly existing
under the laws of the State of Israel. Epsilor has no subsidiaries.
3.2 Capitalization.
(a) The registered share capital of Epsilor immediately prior to the
Closing shall be NIS 4,001,101 which registered share capital is
divided into 4,001,001 Ordinary Shares of nominal value NIS 1 each
and 100 Management Shares of nominal value NIS 1 each, of which
2,168,897 Ordinary Shares of NIS 1 each and 100 Management Shares
are issued and outstanding. There are no outstanding options or
warrants (including employee and/or consultant options) to purchase
Ordinary Shares or Management Shares, and there are no agreements to
issue Ordinary Shares or Management Shares.
(b) All of the Shares are duly authorized, validly issued, fully paid
and nonassessable, are not subject to call, forfeiture or preemptive
rights, and shall be delivered free and clear of all liens and
encumbrances.
3.3 Enforceability and Authority. This Agreement and each of the other
agreements, certificates or other instruments required to be delivered
hereunder have been duly and validly authorized by all necessary corporate
action of Epsilor. This Agreement has been duly executed and delivered by
the Sellers and, assuming the due authorization, execution and delivery by
the Purchaser, constitutes a legal, valid and binding obligation of the
Sellers, enforceable in accordance with its terms.
3.4 No Conflict. The execution and delivery of this Agreement by the Sellers
do not, with or without the giving of notice or the lapse of time or both,
result in any breach of or constitute a default under, or give to others
any rights of termination, amendment, acceleration or cancellation of, any
agreement, or result in the creation of any encumbrance on the properties
or assets of Epsilor pursuant to, any instrument or obligation to which
either of the Sellers is a party or by which either of the Sellers is
bound or affected.
3.5 Financial Statements.
The financial statements of Epsilor for the year ended December 31, 2002
is attached as Exhibit 3.5 hereto (the "Financial Statements").
As noted in the auditor's opinion attached to the Financial Statements of
the Company (the "Auditor's Opinion"), such statements were prepared in
nominal values, so that the implications of any changes in the purchase
value of the Israeli currency are not reflected in the Financial
Statements.
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Subject to the Auditors Opinion, the Financial Statements, together with
all notes and schedules included therein, represent fairly, in all
material respects, the financial status of Epsilor as of the respective
dates thereof.
There were no claims (including warranty claims), debts or liabilities,
either accrued or contingent, relating to the year ended 2002 or earlier,
that were not adequately reflected in the Financial Statements.
As of the date of this Agreement, (i) Epsilor's sales for the year 2003
are on track to exceed NIS 22,000,000, (ii) Epsilor's pre-tax profits for
the year 2003 are on track to exceed NIS 7,500,000, (iii) Epsilor's
audited sales for the year 2002 were at least NIS 22,000,000, and profits
were at least NIS 7,500,000, pre-tax. It is hereby clarified that the 2003
numbers set forth in this Section 3.5, are based upon the assumption that
the accounting principles used in 2002, shall apply.
3.6 Operations in the Ordinary Course. Except as disclosed in writing to the
Purchaser on Schedule 3.6 hereto, between December 31, 2002 and the date
of this Agreement, Epsilor has operated its business in the usual and
ordinary course consistent with past practices and has not suffered any
Material Adverse Effect.
The term "Material Adverse Effect" means any material adverse effect on
the business (as now conducted or as proposed to be conducted by Epsilor
at the date hereof), assets or condition (financial or otherwise),
liabilities, operations or prospects of Epsilor.
3.7 Intellectual Property. Except as expressly set forth in Schedule 3.7
hereto, and except for products or intellectual property rights which are
available in the market on commercially reasonable terms, to the best of
the Sellers' actual knowledge, Epsilor owns and has good and valid title
to or have a right to use, free and clear of any encumbrances, all
intellectual property that is material to the conduct of the business of
Epsilor as now conducted or as proposed to be conducted by Epsilor as of
the date hereof.
3.8 Agreements. Schedule 3.8 lists all of Epsilor's material agreements.
3.9 Environmental Matters. Prior to the Closing Date, Epsilor has not received
any written warning from the Israel Ministry of Environment claiming that
Epsilor is in breach of any applicable law and/or regulation.
3.10 Taxes. Except as disclosed in writing to the Purchaser on Schedule 3.10
hereto, the Sellers are not aware of any tax liability, with respect to
the period ended December 31, 2002, for the payment of any taxes other
than as reflected in the Financial Statements. Epsilor is not aware of any
circumstances which will or may, whether by lapse of time or the issue of
any notice of assessment or otherwise, give rise to any dispute with any
relevant taxation authority in relation to its liability or accountability
for taxation, any claim made by it, any relief, deduction, or allowance
afforded to it, or in relation to the status or character of Epsilor under
or for the purpose of any provision of any legislation relating to
taxation.
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3.11 No Finders Fee. No person or firm has any right, interest or valid claim
against Epsilor or against the Purchaser for any commission, fee or other
compensation as a finder or broker or in any similar capacity, with
respect to any of the transactions contemplated under this Agreement.
3.12 Representations Complete. None of the representations or warranties made
by either of the Sellers herein and none of the written documentation duly
signed by Epsilor and delivered to Purchaser in connection with the
Transaction contains any untrue statement of a material fact, or omits to
state any material fact necessary in order to make the statements
contained herein or therein, in the light of the circumstances under which
they were made, not misleading.
4. Representations and Warranties of the Purchaser. The Purchaser hereby
represents and warrants to the Sellers as follows:
4.1 Organization. The Purchaser is an entity duly organized, validly existing
and in good standing under the laws of the State of Delaware, and has all
requisite power and authority to carry out the transactions contemplated
hereby, and the execution, delivery, and performance of the obligations of
the Purchaser hereunder have been duly authorized by all necessary
corporate action.
4.2 Enforceability and Authority. This Agreement has been duly executed and
delivered by the Purchaser and, assuming the due authorization, execution
and delivery by each of the Sellers, constitutes a legal, valid and
binding obligation of the Purchaser, enforceable in accordance with its
terms. The execution and delivery of this Agreement by the Purchaser and
the consummation by the Purchaser of the transactions contemplated hereby
have been duly and validly authorized by all necessary corporate action.
4.3 No Conflict. The execution and delivery of this Agreement and the
consummation of the transactions herein contemplated by the Purchaser do
not, with or without the giving of notice or the lapse of time or both,
result in any breach of, or constitute a default under any agreement,
permit or other instrument or obligation to which the Purchaser is a party
or is bound or affected.
4.4 No Finders Fee. No person or firm has, or will have, as a result of any
act or omission by the Purchaser or anyone acting on its behalf, any
right, interest or valid claim against Epsilor or against either of the
Sellers for any commission, fee or other compensation as a finder or
broker or in any similar capacity, with respect to any of the transactions
contemplated under this Agreement.
4.5 Due Diligence. It has conducted and completed, prior to the Closing Date,
a thorough Due Diligence of Epsilor, its premises, assets and liabilities,
and had access to all documents, agreements, information and data
requested by it. The Purchaser acknowledges and is aware that the premises
of Epsilor were built using the "Pal-Kal" technique. The Purchaser
confirms that it is fully satisfied with the results of the Due Diligence
and it is hereby agreed that the Sellers has not made nor make any
representations or warranties, either express or implied, other than set
forth in Section 3 above, and subject to section 7.2 below - hereby
irrevocably renounces and waives any claims and/or demands relating to (i)
the Transaction and (ii) the financial, accounting, business and legal
status of the Company, its rights and liabilities.
4.6 Representations Complete. None of the representations or warranties made
by the Purchaser herein contain any untrue statement of a material fact,
or omit to state any material fact necessary in order to make the
statements contained herein or therein, in the light of the circumstances
under which they were made, not misleading.
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5. Covenants of the Parties.
5.1 Covenant of the Purchaser. The Purchaser will make available a pool of
Arotech Corporations's common stock options $0.01 par value per share
("ARTX") (in amounts to be agreed between the Purchaser and the Founder,
and with recipients to be designated by the Founder in consultation with
the CEO of the Purchaser) for issuance to key Epsilor employees.
5.2 Best Efforts; Further Assurances. Subject to the terms and conditions
herein, each of the parties hereto shall use its best efforts to take, or
cause to be taken, all action, and to do, or cause to be done, all things
reasonably necessary, proper or advisable under applicable laws and
regulations to consummate and make effective the transactions contemplated
by this Agreement. Each of the parties hereto shall perform such further
acts and execute such further documents as may reasonably be necessary to
carry out and give full effect to the provisions of this Agreement and the
intentions of the parties as reflected thereby.
6. Confidentiality.
6.1 Non-Disclosure. The Sellers agree that any Confidential Information
(defined below) relating to Epsilor, will not be disclosed without the
prior written consent of Epsilor.
Definition. For the purposes of this Agreement, "Confidential Information"
shall mean all information, including, but not limited to, financial
information, business plans, budgets, customer lists, computer software,
source codes, plans, drawings, technical specifications, patents,
copyrights, and other intellectual property rights, in any form (paper,
disk, or other), relating to the business of Epsilor. However,
Confidential Information shall not include information which (a) was in
the Sellers' possession prior to its disclosure, as shown by prior written
records; (b) is or becomes available to the public through no fault of the
Sellers; (c) was disclosed to the public by operation of law; or (d) is
rightfully received by the Sellers from a third party without a duty of
confidentiality.
6.2 The parties agree that they will not disclose any information relating to
the transaction contemplated herein and/or the respective rights and
liabilities of the parties hereunder, except with the prior written
consent of all parties hereto. However, such obligation shall not apply to
information that (a) was in the disclosing party's possession prior to its
disclosure, as shown by prior written records; (b) is or becomes available
to the public through no fault of the disclosing party (c) was disclosed
or is required to be disclosed to the public by operation of law,
including without limitation United States securities laws applicable to
the Purchaser; or (d) is rightfully received by the disclosing party from
a third party without a duty of confidentiality
7. Indemnification; Remedies.
7.1 Survival. All representations, warranties, covenants and obligations in
this Agreement, the Exhibits and Schedules to this Agreement, the
certificates delivered pursuant to Section 2.2 and any other certificate
or document delivered pursuant to this Agreement shall be valid on the
Closing.
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7.2 Indemnification of the Purchaser by Sellers. Subject to Section 7.4
hereof, Sellers shall indemnify and hold the Purchaser harmless from and
against any and all loss, howsoever incurred, which arises out of or
results from:
(a) any breach by the Sellers of any representation or warranty of the
Sellers set forth in this Agreement;
(b) the material failure by the Sellers to perform any covenant of
Sellers contained herein; or
(c) based on completion of the audit of Epsilor's 2003 financial
statements, the failure of Epsilor to have had audited net worth
(shareholders' equity) of at least the audited net worth of December
31, 2002 plus profit before tax of 2003 minus NIS 7,500,000 less
Company Tax. It is hereby clarified that the 2003 numbers set forth
in this Section 7.2, are based upon the assumption that the
accounting principles used in 2002, shall apply.
7.3 Indemnification of Sellers by the Purchaser. Subject to Section 7.4
hereof, the Purchaser shall indemnify and hold the Sellers harmless from
and against any and all loss, howsoever incurred, which arises out of or
results from:
(a) any breach by Purchaser of any representation or warranty of the
Purchaser set forth in this Agreement; or
(b) the material failure by the Purchaser to perform any covenant of
Purchaser contained herein.
7.4 Other Provisions Regarding Indemnification Obligations.
(a) Notwithstanding the provisions of Sections 7.2 and 7.3 hereof, a
party shall not be entitled to receive indemnification payments with
respect to any loss under Section 7.2 or 7.3 unless and until the
aggregate amount of losses incurred by such party to which it would
otherwise be entitled to indemnification under Section 7.2 or 7.3
exceeds $1,000,000 (the "Minimum Amount"), in accordance with a
definite judgment or a settlement which was approved, in advance, by
the indemnifying party, at which point the indemnified party shall
be entitled to recover the cumulative amount due to it under any
such definite judgment or settlement minus the Minimum Amount. For
the removal of doubt, any losses in excess of US $3,000,000 prior to
the deduction of the Minimum Amount shall not be recoverable.
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(b) In case any event shall occur which would otherwise entitle either
party to assert a claim for indemnification hereunder, no loss shall
be deemed to have been sustained by such party to the extent of (i)
any tax savings realized by such party with respect thereto, or (ii)
any proceeds received by such party from any third-party, including
but not limited to any insurance carrier. In the event of a dispute
between Sellers and Purchaser regarding the amount of any tax
savings realized as described in the foregoing sentence, the parties
shall resolve their dispute by arbitration.
(c) No claim for indemnification for a loss arising under Section 7.2 or
Section 7.3 shall be made after expiration of a period of three (3)
years commencing on the Closing Date (the "Indemnification Period").
7.5 Notice of Claim; Defense of Action. With respect to third party claims,
promptly after receipt by an indemnified party of notice of the
commencement of any action or the presentation or other assertion of any
claim which could result in any indemnification claim pursuant to Section
7.2 or 7.3 hereof, such indemnified party shall give prompt notice thereof
to the indemnifying party (although failure or delay to give such notice
shall not mitigate the indemnification obligation unless the indemnifying
party is prejudiced by such failure or delay), and the indemnifying party
shall be entitled to participate therein or, to the extent that it shall
wish, assume the defense thereof with its own counsel. If the indemnifying
party elects to assume the defense of any such action or claim, the
indemnifying party shall not be liable to the indemnified party for any
fees of other counsel or any other expenses, in each case incurred by such
indemnified party in connection with the defense thereof, unless
representation of both parties by the same counsel would be prohibited
under the applicable canon of legal ethics. The indemnifying party shall
be authorized, without consent of the indemnified party being required, to
settle or compromise any such action or claim, provided that such
settlement or compromise includes an unconditional release of the
indemnified party from all liability arising out of such action or claim.
Whether or not an indemnifying party elects to assume the defense of any
action or claim, the indemnifying party shall not be liable for any
compromise or settlement of any such action or claim effected without its
consent. The parties agree to cooperate to the fullest extent possible in
connection with any claim for which indemnification is or may be sought
under this Agreement.
8. Miscellaneous.
8.1 Governing Law; Dispute Resolution. This Agreement shall be governed by and
construed according to the laws of the State of Israel, without regard to
the conflict of laws provisions thereof. Any claim under or in connection
with this Agreement shall be resolved exclusively through binding
arbitration by an independent arbitrator selected as follows: (i) as to
all financial or accounting issues, an independent arbitrator selected by
▇▇▇▇▇▇ ▇▇▇▇▇, C.P.A., of the accounting firm of ▇▇▇▇, ▇▇▇▇▇ & ▇▇▇▇▇▇ or
its successor firm (or the managing partner of such firm if ▇▇. ▇▇▇▇▇ is
no longer with such firm), and (ii) as to all other matters (including
issues relating to Section 1.2(b) above), an independent arbitrator who
shall be the honorable Yishayahu ▇▇▇▇▇▇, who is a retired judge of the Tel
Aviv District Court. If ▇▇. ▇▇▇▇▇▇ is unwilling or unable to act as
arbitrator then the arbitrator shall be honorable ▇▇. ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇,
who is a retired judge of the Tel Aviv District Court. Should ▇▇. ▇▇▇▇▇▇▇▇
be unwilling or unable to act as arbitrator then the honorable ▇▇. ▇▇▇▇
▇▇▇▇▇▇, a former judge shall act as arbitrator. If ▇▇. ▇▇▇▇ ▇▇▇▇▇▇ is
unwilling or unable to act as arbitrator then the arbitrator shall be Mr.
Michael ▇▇▇-▇▇▇▇, former Attorney General to the government of Israel. The
Arbitrator shall be subject to the material Israeli law but shall not be
subject not to the rules of proceedings or evidence. The Arbitrator shall
be required to make his final judgment within 3 months from the date on
which he was first approached by any of the parties hereto. The Arbitrator
shall be required to give detailed reasons for his decision.
-11-
8.2 Successors and Assigns; Assignment. Except as otherwise expressly stated
to the contrary herein, the provisions hereof shall inure to the benefit
of, and be binding upon, the successors, assigns under law, heirs,
executors, and administrators of the parties hereto. Other than with
respect to such assignment by operation of law, no assignment of this
Agreement or of any rights or obligations hereunder may be made by any
party without the prior written consent of the other and any attempted
assignment without the required consent shall be void, except that
Purchaser, at any time prior to, simultaneously with or after the Closing,
may assign its rights hereunder to any company that is controlled by,
controlling or under common control with Purchaser, , which assignee shall
be considered the sole Purchaser for all purposes of this Agreement
provided that such assignment shall not derogate from Arotech
Corporation's guarantee set forth below, and may also assign the benefit
of its rights hereunder as security to its lenders, without the consent of
Sellers.
8.3 Entire Agreement; Amendment and Waiver. This Agreement and the Exhibits
and Schedules hereto constitute the full and entire understanding and
agreement between the parties with regard to the subject matters hereof
and thereof. All prior understandings and agreements among the parties,
including any term sheets exchanged by the parties, are void and of no
further effect. Any term of this Agreement may be amended, waived, or
discharged (either prospectively or retroactively, and either generally or
in a particular instance), by a written instrument signed by all the
parties to this Agreement.
8.4 Notices, etc. All notices and other communications required or permitted
hereunder to be given to a party to this Agreement shall be in writing and
shall be telecopied or mailed by registered or certified mail, postage
prepaid, or otherwise delivered by hand, by messenger or by e-mail (return
receipt requested), addressed to such party's address as set forth below
or at such other address as the party shall have furnished to each other
party in writing in accordance with this provision:
If to the Sellers: Hezy and ▇▇▇▇▇ ▇▇▇▇▇
▇▇ ▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇ ▇▇▇ ▇▇▇▇▇, Israel
Facsimile: ▇▇▇▇-▇-▇▇▇-▇▇▇▇
E-mail: ▇▇▇▇▇@▇▇▇▇▇▇▇.▇▇▇
With a copy to: ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇, Adv.
Haim Samet, Steinmetz, ▇▇▇▇▇▇ & Co.
▇▇ ▇▇▇▇▇ ▇▇▇▇
▇▇▇-▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇
Facsimile: ▇▇▇▇-▇-▇-▇▇▇-▇▇▇▇
E-mail: ▇▇▇▇▇@▇▇▇▇▇▇▇▇.▇▇.▇▇
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If to the Purchaser: Electric Fuel (E.F.L.) Ltd.
▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇
▇.▇. ▇▇▇ ▇▇▇
▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇
Attention: Vice President and
General Counsel
Facsimile: ▇▇▇▇-▇-▇▇▇-▇▇▇▇
E-mail: ▇▇▇▇▇▇▇@▇▇▇▇▇▇▇.▇▇▇
With a copy to: Arotech Corporation
▇▇▇ ▇▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Attention: Chief Executive Officer
Facsimile: ▇▇-▇▇▇-▇▇▇-▇▇▇▇
E-mail: ▇▇▇▇▇▇▇@▇▇▇▇▇▇▇.▇▇▇
or such other address with respect to a party as such party shall
notify each other party in writing as above provided. Such notice
shall be deemed to have been duly given for all purposes (a) when
received or seven (7) business days after it is mailed by prepaid
registered mail, (b) upon the transmittal thereof by facsimile, with
confirmation of the transmission or (c) upon the manual delivery
thereof, to the respective addressee of fax numbers set forth above
or to such other address of which notice as aforesaid is actually
received.
8.5 Delays or Omissions. No delay or omission to exercise any right, power, or
remedy accruing to any party upon any breach or default under this
Agreement, shall be deemed a waiver of any other breach or default
therefore or thereafter occurring. Any waiver, permit, consent, or
approval of any kind or character on the part of any party of any breach
or default under this Agreement, or any waiver on the part of any party of
any provisions or conditions of this Agreement, must be in writing and
shall be effective only to the extent specifically set forth in such
writing. All remedies, either under this Agreement, or by law, or
otherwise afforded to any of the parties, shall be cumulative and not
alternative.
8.6 Severability. If any provision of this Agreement is held by a court of
competent jurisdiction to be unenforceable under applicable law, then such
provision shall be excluded from this Agreement and the remainder of this
Agreement shall be interpreted as if such provision were so excluded and
shall be enforceable in accordance with its terms; provided, however, that
in such event this Agreement shall be interpreted so as to give effect, to
the greatest extent consistent with and permitted by applicable law, to
the meaning and intention of the excluded provision as determined by such
court of competent jurisdiction.
8.7 Counterparts. This Agreement may be executed in any number of
counterparts, each of which shall be deemed an original and enforceable
against the parties actually executing such counterpart, and all of which
together shall constitute one and the same instrument.
-13-
8.8 Heading, Preamble, and Exhibits. The titles and subtitles used in this
Agreement are used for convenience only and are not to be considered in
construing or interpreting this Agreement. The Preamble and Exhibits are
an integral and inseparable part of this Agreement.
8.9. Expenses. Each party hereto shall pay its own expenses in connection with
the negotiation and preparation of this Agreement and the related
agreements and the consummation of the transactions contemplated hereby
and thereby.
IN WITNESS WHEREOF the parties have signed this Agreement as of the date
first hereinabove set forth.
----------------------------------- ----------------------------------------
ELECTRIC FUEL (E.F.L.) LTD. ▇▇▇▇ ▇▇▇▇▇
By: ▇▇▇▇ ▇▇▇▇▇▇, CEO
-----------------------------------
▇▇▇▇▇ ▇▇▇▇▇
We, the undersigned, Arotech Corporation, hereby represent, warrant and agree as
follows:
1. We irrevocably and unconditionally guarantee the obligations and
undertakings of the Purchaser pursuant to the above Agreement.
2. Our guarantee shall not be adversely affected in the event that the
Purchaser assigns its rights and obligations as set forth under
Section 8.2 of the above Agreement.
3. Our guarantee shall not be affected by (i) the winding-up,
receivership, dissolution, administration or re-organization of the
Purchaser, or any change in its status, function, control or
ownership; or by (ii) any act, event or omission which but for this
paragraph 3 might operate to discharge, impair or otherwise affect
any of our obligations herein contained or any of the rights, powers
or remedies conferred upon the Sellers by the above Agreement or by
law.
4. Our guarantee shall be subject to Israeli law and shall be
exclusively resolved in accordance with the governing law and
arbitration provisions set forth in Section 8.1 of the above
Agreement:
-----------------------------------
AROTECH CORPORATION
By: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, CEO
Date: ___ January 2004
-14-
We, Arotech Corporation, of ▇▇▇ ▇▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇,
▇▇▇▇▇▇ ▇▇▇▇▇▇ of America, hereby acknowledge and confirm that the Agreement
executed between Electric Fuel (E.F.L.) Ltd, Epsilor Ltd. and Hezy and ▇▇▇▇▇
▇▇▇▇▇, cancels the Term Sheet signed on September 22, 2003, with respect to the
sale of the shares in Epsilor, that shall be of no further effect and we waive
any rights we may otherwise have had pursuant to the Term Sheet or any other
document, agreement or understanding with respect the subject matter thereof.
-----------------------------------
AROTECH CORPORATION
By: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, CEO
Date: ___ January 2004
I, the undersigned, Office Line Ltd., hereby confirm that I have received all
sums that are, will become, or may be due to me in connection with my past
services to Epsilor, including without limitation and hereby irrevocably
renounce and waive any claims and/or demands relating to my former engagement
with Epsilor until the date hereof.
OFFICE LINE LTD.
By:
--------------------------------
Name and title:
--------------------
I, ▇▇▇▇ ▇▇▇▇▇, hereby agree that in the event of any claim and/or demand being
asserted by Office Line Ltd. regarding any amounts arising from its engagement
with Epsilor until the date hereof, the provisions of Section 7.2 of the above
Agreement shall apply as if such claim was a breach of a representation made
pursuant to the above Agreement. In addition, I hereby declare that no statutory
severance, unpaid vacation pay, unpaid recuperation pay, unpaid managers'
insurance payments, and all other amounts, is due to me or to Office Line Ltd.
with respect to the services rendered by Office Line Ltd. to Epsilor until the
Closing Date.
-----------------------------------
▇▇▇▇ ▇▇▇▇▇
-15-
LIST OF SCHEDULES, EXHIBITS AND CLOSING DOCUMENTS
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Schedules
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Schedule 3.6 Operations not in the Ordinary Course of Business
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Schedule 3.7 Intellectual Property - Exceptions to Good Title
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Schedule 3.8 List of Material Agreements
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Schedule 3.10 Taxes
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Exhibits
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Exhibit 1.2 Form of Bank Guarantee
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Exhibit 2.2(c) Form of Epsilor Counsel Opinion
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Exhibit 3.5 Financial Statements
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Closing Documents
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Section 1.2 Three Bank Guarantees
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Section 2.2(a) Deed of Stock Transfer and Notice of Transfer
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Section 2.2(b) Copies of Investment Center Letters
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Section 2.2(c) Epsilor Counsel Opinion
--------------------------------------------------------------------------------