Agreement
Made and entered into on the 22 day of July, 1997;
By and Between: Ofek Le-Oleh Foundation
X.X.X. 00, Xxxxxx X-Xxxx 00000
Tel: 000-00000000 Fax: 000-00000000
First Party
and: Name: X'Xxxxx
I.D. No.: 310895602
Address: Aluma Xx. 00#0, Xxxxxx, 00000
Tel: 00-0000000
Fax:
(hereinafter "The Initiator")
Eurotech, Ltd. Second Party
and: Name: Xxxx Xxxxxxxx
I.D. No.: 1670949-5
Address: 16 Bnei Brit. St. Haifa
Tel: 00-0000000
Fax: 00-0000000
(hereinafter "The Investor")
Third Party
Whereas the Initiator has declared that he invented the
invention in the field of ______ in respect whereof he has
applied for patent rights (patent application No. )
and wishes to conduct research and development in
respect thereof in accordance with the program
approved by the Chief Scientist under project No.
(hereinafter "the project") copy whereof is hereto
annexed marked "A";
And Whereas the Initiator has declared that he is the sole and exclusive
owner of the invention and of all the right, title and
interest thereto and that he has the necessary knowledge
qualification and experience for the research and development
of the project;
And Whereas the Foundation has declared that it is a legal body approved
by the Chief Scientist of the Ministry of Commerce and
Technology and the Steering Committee of the Center for
Technological Initiative and any other related body and/or
authorized institution under the Law for the Support of
Research and Development in Industry, 1984 (hereinafter "the
RDL") for the purposes of the Chief Scientist's R & D program
in Technological Initiatives;
And Whereas the Initiator has declared that he has filed a proposal with
the Foundation for the execution of the project in the
Foundation's framework in accordance with and subject to the
Chief Scientist's program which has been approved by the
Foundation's projects committee;
And Whereas the Investor has undertaken to obtain supplementary finance
for the project as hereunder defined as also to promote the
project subject to the terms of this agreement;
And Whereas the Initiator has declared that he has disclosed to the
parties hereto all the information at his disposal relating to
the project and that he is not under any restriction, whether
by contract or in law, prohibiting him from entering into this
contract or carrying out his obligations hereunder;
And Whereas the parties are desirous of regulating their respective rights
and obligations for the execution of the project in the
framework of the Foundation as set out in this agreement;
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Now Therefore the parties do hereby declare and agree as follows:
1. Preamble and Definitions
a) The preamble and annexures to this agreement form and integral part
thereof.
b) The terms specified herein shall have the following definitions:
i) Holding Company - Ha-Xxxx Initiatives Incubator LTD (Co No
51-183764-3) a company wholly controlled by the Foundation
which manages and operates the Incubator for the Foundation.
It is hereby agreed that the Foundation is entitled take all
necessary steps and decisions to exercise all its rights in
terms of this agreement by way of and through the holding
company;
ii) The development period - the period during which the
Foundation and/or the holding company receives financial
assistance from the State for the project and/or for the
period during which the project is within the Foundation's
framework, control and/or responsibility.
2. RDL Approval
a) This agreement is subject to the RDL and regulations, the Chief
Scientist's instructions, directives and procedures as also to the
terms and conditions of the Chief Scientist's program as also to the
various agreements between the Chief Scientist, the State and the
Foundation.
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b) This agreement is subject to the granting of all the necessary
approvals in terms of the law and the Chief Scientist's program as
also to the Chief Scientist's approval.
3. Formation of company for the implementation of the project
a) During the first year of the development of the project a limited
private company shall be formed for the implementation of the
project (hereinafter "the company"). The memorandum and objects of
the company shall be formulated in terms of this agreement or any
agreement that may replace this agreement.
b) Upon registration of the company the parties shall immediately take
the necessary steps for the approval of this agreement by the
company and for the signature of an agreement between the company
and the Foundation and/or the holding company, ratifying this
agreement. Such agreement shall in no way diminish the Initiator's
obligations under this agreement.
4. Company structure and decisions:
a) Shares: Class and distribution:
The company shall have two classes of shares:
i) Ordinary shares granting the shareholder dividend rights and a
share in any residue upon Liquidation of the company.
ii) Shares granting the holder voting rights at the general
meeting and the right to be elected to the directorate of the
company.
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b) Both the ordinary and voting shares shall be issued as follows:
The Initiator: 50%.
EMPLOYEES: (excluding the Initiator): 10%.
During the development period the employees shares shall
be held in trust by the Foundation. Upon termination of the
development period, the Foundation shall transfer such shares to the
employees entitled thereto subject to the directives of the Chief
Scientist and in the Foundation's discretion. Should any of such
shares remain, they shall be allocated to the parties to this
agreement in accordance with the proportion of each party under this
agreement.
The Foundation: 20%.
The Investor: 20%.
c) Issue and/or allocation of further shares
Should a general meeting of the company decide to issue and/or
allocate further shares whether of one or both of the classes
defined above, such decision shall require a majority vote of 80%.
d) Board of Directors:
i) There shall not be less then 4 directors and until decided
otherwise by the unanimous vote of the general meeting of the
company, there shall not be more than ten directors.
ii) Notwithstanding clause (d)(i) above, during the development
period, the Board of Directors shall be as follows:
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The manager of the Foundation and a further representative of
the Foundation, the Initiator or his representative and the
Investor's representative. The manager or his representative
of the Foundation shall be the chairman of the
Board.
iii) Upon termination of the development period, the directors
shall be appointed by the shareholders, that is, each
shareholder of 20% of the shares shall be entitled to appoint
one director but subject to each party to this agreement being
entitled to appoint at least one director and subject to such
party owning at least 12% of the issued shares.
e) Board meetings and Decisions:
i) During the development period, the legal forum for Board
meetings and Board decisions, shall be not less than 3
directors, at least one director representing each party to
this agreement.
ii) Decisions shall be by majority vote of these present.
iii) Notwithstanding clause (e)(ii) above, during the development
period, the chairman shall have the deciding vote in regard to
differences of opinion that may arise relating to the
Foundation's duties, management of the company and project and
to carry out the provisions of the RDL, agreements between the
Chief Scientist and the Foundation and the instructions,
regulations and directives of the
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Chief included in the Board's meeting agenda falls within the
ambit of his deciding vote, shall be binding upon the parties
to this agreement.
f) General meeting decisions during the development period:
During the development period the parties hereto shall endeavor to
co-ordinate their voting rights at the general meeting of the
company in order to give full support to the Foundation's stand in
matters relating to the Foundation's duties and management of the
company according to the RDL, the agreements between the Foundation
and the Chief Scientist and the Chief Scientist's directives and
regulations from time to time.
g) Authorized signatories:
i) During the development period the signatures of two directors,
namely the Foundation's manager or representative or the
representative of the holding company and the signature of
either the Initiator or the investor, shall bind the company
and/or the project in every respect.
Notwithstanding the above, during the development period, the
following shall apply:
(1) Payments in excess of 20,000 NIS shall be made only
after prior arrangement with the Investor or his
representative.
(2) Orders in respect of the project by third parties shall
require written confirmation signed by two signatories,
namely, the Foundation's
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manager or his representative and the
project manager.
ii) Upon termination of the development period, the authorized
signatories shall be appointed by the unanimous vote of the
Board of directors. Until such appointment clause (g)(i) above
shall apply.
5. Company operations
a) All company operations shall be subject to the RDL its laws and
regulations, the instructions and directives of the Chief Scientist,
programs prepared by him and to all agreements that may be entered
into from time to time between the Foundation and the Chief
Scientist.
b) All right, title and interest in and to the knowledge, know-how and
expertise, the patents manufacturer's rights and every right of
ownership in the project, as also every product and document
relating to the execution of the project, in the Foundation's
framework, including all research by the company in regard to the
project, shall vest exclusively in the project and upon registration
of the company, in the company. The Initiator hereby cedes and
transfers all his rights as set out above, free of consideration, to
the project and to the company aforesaid.
c) The Foundation and/or the holding company shall make suitable
accommodation available to the company for the purposes of the
project, subject to the terms, conditions and reasonable payment as
stipulated by the Foundation and/ or holding company. The foundation
and/or holding company shall in addition provide various services to
the
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company upon such terms to be agreed upon between the Foundation
and/or holding company and the company. The project and/or the
company shall pay a proportionate share of the Insurance premiums in
respect of the accommodation aforesaid. All the aforesaid services
and costs in respect thereof shall be determined according to the
project budget.
d) The company shall keep proper accounting records as is required by
law and accepted in similar ventures, and shall furnish reports from
time to time to the Foundation and to the Chief Scientist as
requested by them.
e) The company shall carry out and comply with all its representations,
obligations and time schedules in terms of and as represented to the
Foundation and the Chief Scientist in order to obtain the necessary
consent for carrying out the project, and as confirmed by them,
and/or as may be presented and/or confirmed by them during the
execution of the project.
f) At least 50% of all employees shall be new immigrants. Professional
employees shall be appointed during the development period by the
Initiator with the approval of the Foundation's manager.
The rest of the employees and the Initiator shall be employed in
terms of the Foundation's standard personal employment agreement.
g) The company shall conduct its business in accordance with the
approved and/or to be approved budgets for the project by the
Foundation and/or the holding company and the Chief Scientist.
The project and/or company shall be obliged to operate strictly
within the framework of the said budget and any
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deviation therefrom shall not be recognized or allowed by the
Foundation and/or Chief Scientist.
The budget shall be provided by means of the financial assistance of
the Chief Scientist as allocated to the project and by the
supplementary finance of the Investor as hereinafter set forth.
h) The Investor hereby undertakes to provide the sum of US$ 60,000 for
the purpose of financing portion of the budget of the project,
specifically excluding employees salaries, (hereinafter "the
supplementary finance"). Such sum of US$ 60,000 shall not be
returned or repaid to the Investor. The supplementary finance
aforesaid shall be made available to the company and/or project as
follows:
4 payments of US$ each, in NIS according to the known dollar
exchange rate on the date of each payment:
The first payment of US$ 21,000 shall be made on August 1, 1997.
The second payment of US$ 13,000 shall be made on the 1st day of
February 1998.
The third payment of US$ 13,000 shall be made on the 1st day of
August 1998.
The final payment of US$ 13,000 shall be made on the 1st day of
February 1999.
i) It is hereby agreed that in the event of the project and/or company
requiring further finance in addition to the supplementary finance
as set out above, the parties hereto shall be entitled to
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introduce an additional investor to this agreement subject to the
Investor (the third party to this agreement as set out in the
preamble) having the first right of refusal to invest such further
finance as is required.
j) The Initiator shall present both the Foundation and the Investor
with a bi-annual technical report. The Foundation shall be entitled
to demand additional technical reports during the development
period. The Initiator shall provide and furnish, both during and
after the development period, all such information as may be
required, to the Foundation and/or the holding company in order to
fulfil their obligations to the Chief Scientist and to third
parties.
k) The Initiator shall maintain a full and detailed written record of
each and every stage of the research and development carried out by
him and furnish copies thereof to the Foundation, the company and
the Investor as requested from time to time.
l) Upon registration of the company, the company shall register an
overall first covering lien in respect of all of its assets as also
a permanent First lien over its equipment and fixed assets, in favor
of the Foundation and/or holding company in order to secure its
obligations as hereunder set forth in clause 6.
m) Property and equipment purchased with the finance of the Chief
Scientist and/or with his assistance, shall represent security for
the repayment of the State's investment in the project and/or
company. Until registration of the aforesaid liens, neither the
parties
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nor the company shall be entitled to in any manner dispose of or
cede any rights in and to the assets and property of the project
and/or company which were acquired with the Chief Scientist's
finance.
n) The Initiator and Investor hereby declare and confirm that they are
aware of the fact that the Foundation and the holding company have
no personal obligation in regard to financing the project. In order
to avoid any misunderstanding, the Foundation hereby undertakes to
hand over to the project and/or company all sums received from the
Chief Scientist and in accordance with the Chief Scientist's
directions.
o) The Initiator and Investor hereby confirm that they are aware of the
fact that the Chief Scientist's approval for the project is for a
period of one financial year only and the continuation of the
project thereafter is subject to renewal of such approval by the
Chief Scientist.
p) The Initiator and Investor shall take all such steps as are
necessary for the commercialization and/or application of the
results of the project in the framework of the company. The
Foundation shall give all possible assistance in this respect to the
Initiator, Investor and the company.
q) The Initiator shall work in the project and/or company on a
full-time basis and he shall not be entitled to work in any other
manner of employment unless he receives the prior written consent of
the Foundation and the Investor and subject to their conditions.
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6. Completion of the project:
Upon completion of the development period, the parties shall act as
follows:
a) The company shall pay the Chief Scientist royalties derived from the
consideration received from sales of the product and/or know-how
developed by the company, until the full repayment of the real value
of the sum paid by the Chief Scientist in respect of the project,
such royalties to be paid in terms of the Chief Scientist's
instructions.
The parties declare that they know that as at the date hereof the
Chief Scientist's regulations in respect of royalties, provide for
the company to pay the Chief Scientist and/or the Foundation for
transfer to the Chief Scientist, royalties at the rate of 3% of the
total annual sales of the company in respect of the project during
the first three years;
4% for the following three years and 5% for the seventh year until
the full repayment of all monies received from the Chief Scientist
according to their real value - such monies to be repaid shall be
linked to the U.S. dollar in this respect.
The above directives may be changed from time to time by the Chief
Scientist.
In regard to the above, sales shall be deemed to be and shall
include all income derived from products of the project and/or that
have been developed, or relating to their sale and/or the sale of
any rights thereto, including the obligation to provide services,
all the above subject to the Chief Scientist's directives.
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b) Without detracting from its obligations as set out in clause (a)
above, the company and/or its shareholders, according to the
circumstances, shall pay the Chief Scientist or the Foundation for
transfer, to the Chief Scientist, 25% of the value received for the
sale of shares to a non-shareholder, and which value has not been
invested in the company within three months of such sale. Such
repayment shall be limited to the aforesaid true value of the amount
financed by the Chief Scientist .
c) The company with the Initiator's assistance shall file a bi-annual
report with the Foundation approved a Certified Accountant in
relation to the sales of the company as set out above, until such
time as all the royalties have been paid in terms of clause (a)
above.
d) All the books of account and documents relating to the project of
the company and/or project shall be open to the inspection of the
Foundation until the final payment as set out in clause (a) above.
e) Upon completion of the final payment aforesaid, the liens shall be
canceled.
f) The company and its employees shall vacate the Foundation's premises
occupied by it.
g) The company shall present final financial and technical reports in
respect of the project within three months of the termination of the
development period.
h) The Foundation shall not be obliged to invest any monies in the
future in the company, nor to sign security for the obligations of
the company nor to provide security to
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enable the company to obtain finance or credit. The company shall
not be entitled to make any such demands of the Foundation.
i) The products developed in the project shall be manufactured in
Israel alone, unless the Chief Scientist has given contrary
permission.
7. The Investor's right to acquire the Foundation's shares
a) The Foundation hereby grants the Investor an option to purchase its
shares upon termination of the development period. Such option shall
be exercised by the Investor in writing to the Foundation within 90
days of the termination of the development period.
b) In consideration for acquiring the shares and rights of
the Foundation in the company, the Investor shall pay the
Foundation the sum of US$ ........ in NIS in one of the
following methods:
[INTENTIONALLY OMITTED]
Alternatively:
(ii) Payment of the sum of US$ ........ in NIS within 7 days of
exercising the option. In such event transfer of the shares
and rights by the Foundation to the Investor shall be made
forthwith upon payment in terms of this clause.
c) Until payment of all the royalties the company shall allow the
Foundation the right to examine its books of account and shall
furnish the Foundation with a bi-annual report of all sales duly
confirmed by a Certified Accountant.
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8. Confidentiality
The parties hereto undertake to maintain strict confidentiality and
secrecy in regard to all the present and future knowledge and information
relating to the project, whether of the Foundation that is divulged to the
Initiator or knowledge and information acquired and/or accumulated by the
company, including all proprietary knowledge and/or secrets of the company
and/or the Foundation and/or of the project, that may be divulged to one
or more of the parties.
9. Non-Competition
a) The Initiator and Investor undertake not to directly or indirectly
compete with the business of the project and/or company and/or
Foundation. Such prohibition and undertaking shall remain in force
while the said Initiator and Investor are shareholders of the
company, and should they cease to be shareholders, in any event, for
a period of three years after they cease to be employed by the
company - such prohibition and undertaking aforesaid remaining in
effect until the later of such two eventualities, namely: date of
ceasing to be shareholder or 3 years after ceasing to be employed as
aforesaid.
Such prohibition and undertaking shall include direct or indirect
dealings in the development and/or manufacture and/or sale and/or
marketing of products of the project and/or the use in any manner
whatsoever of the knowledge and information and/or being connected
directly or indirectly in any manner whatsoever in the present or
future, in the field of the project and/or company, which may
compete with their business-or occupations.
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b) The Initiator undertakes to co-ordinate the activities of the
project and/or company in respect of the fields relating to them,
whether directly or indirectly. He furthermore undertakes not to
copy and/or to make use of knowledge and/or information in regard to
the products to be developed by the company or project, in any
manner whatsoever which is contrary to the framework of the project
and/or company, nor to receive any profit and/or benefits therefrom
contrary to this agreement.
c) The present and future knowledge and information relating to the
project and/or the rights thereto, shall not be ceded in any manner
whatsoever, directly or indirectly, unless the Chief Scientist has
given written permission so to do.
10. This agreement in general and clauses 9 and 11 in particular shall in no
way prohibit the Investor from engaging in the development of products and
using such information that is public knowledge, including the knowledge
that was available to him prior to the execution of this agreement and/or
information obtained by him which is not related to nor as a result of
this agreement.
11. Cession of rights
a) During the development period neither the Initiator nor the Investor
shall be entitled to transfer and/or cede any of their rights or
obligations in terms of this agreement to another nor to transfer
their shares in any manner without the specific written consent of
the Foundation.
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b) The parties hereto acknowledge that the transfer of 25% or more of
the rights in the project and/or company requires the Chief
Scientist's prior approval.
In this respect, rights in the company and/or project, are in effect
shares and/or the holding of one or more of the following methods of
control:
Voting rights at company meetings. The right to elect directors of
the company. The right to participate in the profits and/or income
of the company.
c) Transfer and cession of one or more of such controlling rights to a
foreign resident or foreign company, requires the prior written
consent of the Research Committee of the Chief Scientist.
d) The Initiator and the Investor hereby acknowledge and consent to the
Foundation having the right to transfer its rights and obligations
under this agreement to the holding company and/or to carry out any
obligation, to exercise any authority, right and/or discretion by
means of the holding company.
12. Termination and cancellation of this agreement and their consequences
a) The Initiator and the Investor hereby declare that they
are aware of the fact that the Chief Scientist and/or the
State is entitled to withdraw from any agreement to which
they are a party in regard to the project, for
governmental reasons, and in such event, every agreement
between the Initiator and/or the Investor and/or the
company with the Foundation and/or the holding company
shall be canceled.
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b) The Initiator and the Investor acknowledge that during the
development period, the Foundation shall be entitled to cancel this
agreement by prior written notice of 14 days in the event of one or
more of the following occurring:-
i) The Chief Scientist has withdrawn his support of the project.
ii) The State has withdrawn its support of the Foundation.
iii) The Foundation has decided to terminate the agreement on the
grounds that the desired results were not achieved or that
continuation of the agreement would demand and entail
substantial costs not covered by the budget or that the
Foundation deems to be unjustified, and that the Chief
Scientist has consented to the termination of the program.
c) In the event of the cancellation of this agreement as set
out in (a) or (b) above, and/or in the event that the
Chief Scientist refuses to consent to the continuance of
the project in terms of his program, the parties hereto
shall be absolved of all their financial obligations in
terms of this agreement as also for the payment of any
damages resulting from loss and/or damage to any of the
parties. In such event all the assets, rights,
equipment, knowledge and information, both present and
accumulated (hereinafter the assets") in the project
and/or company, shall remain with the Foundation until
such time as the amount owing to the Chief Scientist has
been repaid and if necessary, such assets, in part or
all, shall be realized to repay such debt.
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Upon payment in full to the Chief Scientist, the liens shall be
canceled and the remaining assets shall be divided between the
Initiator, the Foundation and the Investor according to their
respective shares in the company and/or project.
i) Breach of a basic condition of this agreement by one of the
other parties, which breach has not been rectified within a
period of 30 days from receiving notice so to do.
ii) In the event of insolvency or liquidation proceedings being
instituted against one of the parties or should a receiver be
appointed in relation to his property subject to prior notice
of 30 days grace during which period the said proceedings have
not been canceled or the receiver released from his
appointment.
iii) In the event of a party being convicted of a criminal offence
involving dishonesty.
b) In the event of termination of this agreement as set out in (a)
above, the following shall apply:
i) The assets of the project and/or company shall be utilized as
far as is necessary in order to repay the Chief Scientist in
full.
ii) Upon repayment of the amount owing to the Chief Scientist the
liens shall be canceled.
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iii) The balance of monies received from the realization of the
project and the remaining assets, shall be divided between the
Initiator, the Foundation and the Investor according to their
respective shares in the company and/or project.
14. Arbitration
a) Any dispute whatsoever between the parties arising our of or
relating to this agreement, shall be settled by arbitration by a
single Arbitrator, appointed by the mutual consent of the parties.
b) In the event of the parties failing to agree upon the Arbitrator
within 14 days of a party requesting Arbitration, such Arbitrator
shall be appointed by the Chief Scientist or his representative.
c) The substantive law shall apply to the Arbitration, but not the laws
of evidence nor the civil law regulations. The Arbitrator shall be
obliged to give his reasons for his judgment.
d) The Arbitrator shall be entitled to give such relief, decision or
judgment, whether temporary or final, according to his sole
discretion.
e) The provisions of this clause shall be an integral part of the
provisions of the Arbitration agreement between the parties, in
terms of the Arbitration Act of 1968.
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15. General Conditions
The entire agreement between the parties with respect to the subject
matter hereof is stated herein and this agreement cancels any other verbal
or written agreements between the parties and may be amended only in
writing signed by the duly authorized representatives of the parties.
16. This agreement shall also apply to the State of Israel insofar as is
provided in the contract law (general law).
17. Wherever there appears in this agreement the obligation of the company,
such obligation shall be deemed to be that of each of the parties hereto
to carry out all such steps as are necessary for the company to fulfil its
obligations hereunder.
18. The Law Courts at Afula and Nazareth shall have the sole and exclusive
jurisdiction in all matters relating to this agreement.
19. The cost and stamp duty relating to this agreement shall be paid by the
project.
20. a) The Foundation shall be entitled to deduct any monies due to the
Foundation from monies payable to the project and/or company and/or
Initiator.
b) The Foundation shall be entitled to require payment of linkage and
interest on all amounts owing to the Foundation by the project
and/or company and/or Initiator.
21. The addresses of the parties are as set out in the preamble above.
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Any notice or letter sent by one of the parties to another party hereto,
shall be deemed to have been received within 3 working days from the date
of dispatch thereof by registered mail.
In Witness whereof, the parties hereto, each by its duly authorized signatory,
have set their hands on the date aforesaid.
/s/ Xxxxx /s/ X. Xxxxxxxx
------------------------ ------------------------ ------------------------
The Foundation The Initiator The Investor
Eurotech Ltd
By Xxxx Xxxxxxxx
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