Exhibit 10.1
MEMORANDUM OF UNDERSTANDING ("MOU")
Made and entered in ______________ on _____July 2003 ("Effective Date")
Between:
Netafim (A.C.S.) Ltd., a cooperative society incorporated under the laws of the
State of Israel and having its registered address at 000 Xxxxxxxxx Xxxxxx,
Xxx-Xxxx, Xxxxxx ("Netafim"); and between:
OrganiTECH U.S.A. Inc., a public company incorporated under the laws of Deleware
and having its registered address at X.X.Xxx 000, Xxxxxx 00000 ("OTUS"); and
between:
Organitech Ltd., a private limited company incorporated under the laws of the
State of Israel, and having its registered address at X.X.Xxx 000, Xxxxxx 00000
("OTI");
Preamble
Whereas Netafim is engaged in the business of manufacturing, developing,
marketing, distributing and selling worldwide irrigation products
and advanced agricultural solutions inter alia for greenhouses; and
Whereas OTUS is an American Company, duly registered in the state of
Delaware, U.S.A., that fully owns Organitech Ltd. (the "OTI"), and
Whereas OTI is an Israeli private limited company that holds and possesses
IP and know how in a range of agricultural technologies, including
automated machines for growing leafy vegetables and other growths
using hydrophonics method; and
Whereas OTUS, OTI and Netafim wish to collaborate together in relation to
their respective greenhouse technologies and to that end OTUS and
OTI are interested that Netafim will provide OTI certain products
and services, including without limitation, R&D, agronomic support,
manufacturing, marketing and distribution services ("Services"), and
Netafim is willing to provide such Services to OTI, all in
accordance with the terms and conditions of this MOU; and
Whereas OTI has encountered financial difficulties and require intermediate
funding, and Netafim wishes to provide OTI with such funding against
receipt of shares in OTI, all in accordance with the provisions of
this MOU.
Now therefore, the parties agree as follows:
First Period - from execution of Agreement(s) and not later than 31 December
2003
Funding
1. Netafim will finance the activities of OTI in the amount of $100,000
by not later than 31 December 2003, according to an agreed business
plan, detailed working plan and budget (the "Netafim's Capital"),
which shall be annexed to this MOU as Annex A, within 30 days from
the Effective Date. Netafim's Capital will be used only for OTI's
operations and will not serve to pay any debts or liabilities of
OTUS.
Services
2. Upon execution of this MOU and until 31 December 2003, Netafim will
also provide the Services to OTI at an agreed upon cost based on
Fair Market Value to be determined in accordance with Netafim's
prices to other affiliates.
Consideration
3. In consideration for Netafim's Capital as well as the cost of the
Services, OTI shall issue shares to Netafim, at a price per share
based on the post-money valuation of $1,176,471 ("Share Price") by
not later than December 31, 2003 ("First Period Shares"). Netafim
will have full-ratchet anti-dilution protection if OTI issues any
shares or convertible securities at a price lower than the Share
Price.
Loan
4. Notwithstanding any other provisions set forth herein, it is hereby
agreed between the Parties that in the event that: (i) this MOU
terminates pursuant to the provisions of Section 16 hereto prior to
the execution of the Agreement(s); or (ii) Netafim chooses not to
exercise its right with respect to the Second Period Shares, any and
all Netafim's Capital as well as Services invested in OTI up to such
time shall be considered to constitute a shareholder's loan to be
returned by OTI to Netafim (the "Loan"), as follows:
(a) The Loan shall be repaid to Netafim in six monthly equal
installments, the first of which shall be paid within 30 days
from the date of occurrence of any of the foregoing. Each
payment shall include principal + corresponding portion of
interest.
(b) The Loan, or any part thereof, shall bear interest at an
annual rate of 5%.
(c) The Loan shall be linked to the exchange rate of US Dollar.
Second Period - from end of First Period and until holding by Netafim of 51% of
issued and outstanding shares of OTI
Controlling Interest
5. At the election of Netafim, OTI shall issue shares to Netafim such
that after such transfer or issue respectively, together with the
shares received or issued in the First Period as specified in
paragraph 3 above, Netafim shall hold 51% of the issued and
outstanding shares of OTI, on a fully diluted basis, all subject to
the provisions specified in paragraph 5 below ("Second Period
Shares"). Netafim's said right may be exercised at any time prior to
December 31, 2003 at a price per Second Period Share(s) equal to the
Share Price. The Share Price will be subject to anti-dilution
adjustment so that the price to be paid (cost of the Services) by
Netafim will not exceed the share price of the most recent
investment in OTI.
6. The Second Period Shares will be held in escrow by Netafim's
independent lawyer(s) ("Escrow Agent") to secure full payment of the
price, which will not bear interest. The price will not be paid in
cash but rather Netafim will provide Services to OTI in an aggregate
amount of $500,000 (including the cost of the Services provided by
Netafim during the First Period) by no later than 31 December 2006,
all as described in Annex B to this MOU. Each month, a corresponding
proportion of the Second Period Shares will be released to Netafim
by the Escrow Agent. Notwithstanding the foregoing, Netafim will
have full voting control of the Second Period Shares, as long as
Netafim does not default on the supply of the Services.
Management Fees
7. Upon the approval of the financial reports of OTI for year 2004, OTI
shall pay OTUS management fees in a conclusive and final amount
representing 10% of the net revenues received in effect by OTI for
the sale of OTI Products only as shall be determined in the
Agreement.
Special Provisions
8. Netafim will at all times have a right of first refusal to purchase
any shares of OTI sold or otherwise transferred by OTUS. OTI shares
shall have "tag-along" and/or "bring-along" rights attached to them,
and said may be exercised in the event that Netafim chooses not to
exercise its right of first refusal.
9. After exercise of Netafim's right with respect to the Second Period
Shares, Netafim shall have the right to appoint a majority of the
directors of OTI as well as the management of OTI and its auditors
and legal counsel.
10. In the event that the operations of OTI will require funding
additional to Netafim's Capital ("Working Capital"), the Parties
will contribute the Working Capital pro-rata to their holdings, and
any such contribution shall constitute a shareholders loan. A Party
that fails to provide its pro-rata additional contribution within 6
months from the call date, shall have its holdings diluted.
11. From the date of the Agreement until December 31, 2003 OTI will
operate in the ordinary course of business and any material action
or resolution will require the prior written consent of Netafim.
12. From the date of the Agreement until December 31, 2003, OTI will
allow Netafim to conduct an extensive due diligence of all aspects
of OTI and will allow Netafim and its representatives full access to
its premises, employees, suppliers and customers for this purpose.
Furthermore, during this period Netafim will have the right to
receive all documents and information provided to directors of OTI
and OTUS.
13. Following exercise of Netafim's right with respect to the Second
Period Shares, Netafim will have the right to continue to supply
Services to OTI at a pre-determined cost as set out in the
Agreement.
14. Netafim will continue to employ the senior personnel of OTI (CEO,
Marketing Manager and Secretary) for a period of at least 12 months
from the date of the Agreement.
Prerequisite Conditions
15. It is agreed that this MOU and Netafim's obligations hereunder,
shall come into force subject to and provided that all the following
prerequisites were met by OTUS and OTI:
(a) That OTUS and/or OTI shall immediately upon the execution of
this MOU terminate the following agreements: (i) the
distribution agreement with Agronaut Pte Ltd. of 27 August
2002; and (ii) the services agreement with Bio-B S'de Eliyahu
Ltd. of 3 December 2002; and (iii) the securities
purchase agreement with B.L.M. N.V. of 16 June 2002, and
provide Netafim with written confirmations from all concerned
parties to the effect that said do not have any claims and/or
demands and/or actions against OTUS and/or OTI.
(b) That OTUS and/or OTI terminate the foundation agreement with
Zion Levy and Ziv Electronics Systems Ltd. of 5 December 2002,
and take all necessary actions required for the dissolution of
the joint company formed thereunder (Xxxxx Hayarden Spices
Ltd.), and provide Netafim with written confirmation from all
concerned parties to the effect that said do not have any
claims and/or demands and/or actions against OTUS and/or OTI.
(c) That OTUS and/or OTI cause and take all actions required in
order to allow Netafim to fully enjoy all its rights as
provided hereunder.
(d) That no changes of material effect shall be made in the
operation of OTI from the date of execution of this MOU and
until the date of execution of the Agreement(s), without
Netafim's prior consent.
Term
16. This MOU shall expire after 2 (two) months from the date of
execution or any other extended date as mutually agreed in writing
between the parties ("Expiration Date"), all subject to the
fulfillment of the Prerequisite Conditions specified herein,.
17. Upon execution of this MOU, Netafim shall conduct a due diligence
investigation, which it deems necessary in order to enter into the
Agreement(s), including without limitation: Services Supply
Agreement; and Share Purchase Agreement. Subject to the results of
this due diligence review to Netafim's satisfaction, the
Agreement(s) shall be executed no later than the Expiration Date,
unless such date is extended in writing signed by both parties. In
the event that the parties do not sign an Agreement(s) as of such
date or such extended date, the parties shall have no obligations or
claims vis-a-vis each other, and the expressions of the parties as
set forth in this MOU shall terminate as of such date, except that
the provisions of paragraph 4 shall survive the expiration and/or
termination of this MOU.
Confidentiality
18. During the term of this MOU and thereafter, each Party hereto agrees
to and agrees to cause its directors, its officers, employees and
consultants or anyone receiving Confidential Information from it to
undertake in writing to: (i) hold in confidence; and (ii) not
reveal, report, publish, disclose or transfer, directly or
indirectly, any of the disclosing party's (the "Disclosing Party")
Confidential Information to any third party or to use any of the
Disclosing Party's Confidential Information for any purpose at any
time except as necessary to further the
business transactions contemplated in this MOU. All confidential
information shall remain the sole property of the Disclosing Party.
The party receiving the Confidential Information ("the Recipient")
shall return all confidential information to the Disclosing Party
within ten (10) days of the termination or expiration of this MOU
unless such termination is due to the parties having executed and
delivered the Agreement(s). For purposes of this MOU, "Confidential
Information" shall mean any information or materials which have been
previously disclosed or may hereafter be disclosed, whether in
writing, verbally or by any other means and whether directly or
indirectly, by the Disclosing Party to the Recipient, relating to
the financial, technological and business information of the
Disclosing Party.
Without derogating from the above, the parties will hold in
confidence unless required to disclose by judicial or administrative
process or, in the opinion of its counsel, by applicable securities
laws or regulations, all documents and information which:
(a) any other Party furnished to it or its representatives in
connection with the transactions contemplated by this
Agreement; or
(b) concern the Company, its operations or proposed operations or
financial performance (including but not limited to the
financial statements of The Company)
(except in each case to the extent that such information (x) is at the
time of disclosure known to the Party to which it was furnished as
evidenced by written documents, (y) is or becomes in the public domain
through no fault of such Party, or (z) is later lawfully acquired from
other sources by the Party to which it was furnished (as evidenced by
written documents), and each Party will not release or disclose such
information to any other person, except its auditors, attorneys, financial
advisors and other consultants and advisors in connection with this
Agreement and shall not use such information other than in connection with
this Agreement or the transactions contemplated hereby.
Approval
19. The Parties agree that this MOU as well as the business plan,
detailed working plan and budget, are all subject to the approvals
of: (i) the Board of Directors of Netafim; and (ii) the Board of
Directors of OTUS, which shall be provided not later than 7 days
from the Effective Date.
No Shop
20. Throughout the duration of this MOU, OTUS and OTI hereby undertake
to refrain from negotiating and/or discussing any investment in OTI
with any third party, without the prior consent of Netafim.
Governing Law
21. It is agreed between the parties that this MOU shall be governed by
and construed in accordance with the laws of the State of Israel
without giving effect to its provisions regarding conflict of laws.
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Netafim (A.C.S.) Ltd. OrganiTECH U.S.A. Inc.
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Organitech Ltd.
