ADDENDUM
This Addendum is made as of 16 June, 2003 (the "Addendum"), by and among (i)
Xxxxxx Armament Development Authority Ltd. ("Xxxxxx"), (ii) Galram Technologies
Industries Ltd. ("Galram"),), (iii) DEP Technologies Holdings Limited ("DEP"),
and (iv) RDC Xxxxxx Development Corporation Ltd. ("RDC"), to amend Section 7.1
of the Joint Venture Agreement dated July 1993 by and among the parties hereto
(the "Joint Venture Agreement).
1. Unless otherwise set forth herein, all capitalized terms shall have the
meaning ascribed to them in the Joint Venture Agreement.
2. Definitions. For the purpose of this Addendum:
2.1. "Affiliate" shall mean with respect to any entity or person, any other
entity or person controlling, controlled by or under common control
with such entity or person.
2.2. "Company's Value" shall mean, in connection with either public or
private offering of the securities of any NewCo, as defined hereunder:
(A) the aggregate number of shares of NewCo on a fully diluted basis
immediately prior to the consummation of the said offering, after
giving effect to the conversion of all convertible securities and the
exercise of all securities exercisable into the shares of NewCo (the
"Securities"), multiplied by (B) the price per share set under the
proposed offering.
2.3. "Exit" shall mean, with respect to any NewCo, the earlier to occur of
(i) the initial public offering of the Securities of NewCo ("IPO");
(ii) the sale of at least 80% of NewCo's Securities held by RDC; (iii)
the sale of all or substantially all of the assets or shares of NewCo;
or (iv) the merger of NewCo with another entity, where NewCo is not
the surviving entity.
2.4. "Exit Consideration" shall mean the following consideration to be
received by RDC pursuant to an Exit:
2.4.1. If the Exit is pursuant to an IPO, then (A) the aggregate
number of shares of NewCo held by RDC immediately prior to the
IPO, multiplied by (B) the price per shares set under the IPO;
and otherwise
2.4.2. In all other Exit events, the fair market value of the
consideration actually received by RDC pursuant to or in
connection with an Exit, whether in cash, assets and/or
securities.
2.5. "NewCo" shall have the same meaning as defined under Section 3 below.
2.6. "Xxxxxx Management" shall mean for the purpose of this Agreement (i)
the management of Xxxxxx, which generally includes the CEO, the vice
president for finance and control and the General Counsel of Xxxxxx,
or (ii) in the event that the organization described above is not
functioning, the CEO of Xxxxxx.
3. Amendment to Section 7.1.2. Subject to the provisions of Section 8 below,
Section 7.1.2 of the Joint Venture Agreement is hereby replaced in its
entirety with the following:
"(A) In the event that RDC shall identify Other Technologies which it
wishes to exploit commercially, it shall advise Xxxxxx in writing of
its wish to obtain license to exploit such Technologies in the
non-military market. The notice by RDC shall specify the Technologies
in question, and the plan of RDC for its development and exploitation.
(B) Following the said notice, RDC shall incorporate a new entity
("NewCo"), and Xxxxxx shall xxxxx NewCo a world-wide, exclusive,
royalty-free transferable (subject to the restrictions below) and
perpetual field-of-use license to use and commercially exploit the
relevant Other Technologies in the non-military field of use (the
"Other Technologies License"). Notwithstanding the foregoing, Xxxxxx
may rescind the Other Technology License in the event of a material
breach of its terms on behalf of NewCo, including without limitations,
if NewCo shall use such license outside its field of use. The transfer
of the Other Technology License shall be subject to Rafael's prior
approval, which shall not be withheld other than for (i) military
defense restrictions or due to Israel's security considerations, or
(ii) if the transferee is an entity which, at the time of such
assignment, directly competes with Xxxxxx in the military market.
(C) In consideration for the Other Technologies License, RDC shall grant
Galram an option (the "Option") to receive from RDC shares of NewCo,
constituting up to 3% of all of NewCo's outstanding share capital on a
fully diluted basis as of the date of the grant of the Option, subject
to the Anti-Dilution Protection and adjustments to be made in
accordance with the provisions of section (E) below, including all
outstanding warrants, options, options to employees under approved
option plan, etc. (the "Option Shares"), for the exercise price equal
to the par value of the share per each such Option Share (the
"Exercise Price") . For the avoidance of any doubt, the grant of the
Option and the transfer of the Option Shares shall not be subject to
any first-refusal and/or any similar rights of the other shareholders
of NewCo. For the avoidance of any doubt, the Option (provided granted
prior to the termination hereof) shall survive the termination of this
Addendum, and shall only be terminated in accordance with the
provision hereof.
(D) The number of Option Shares to which the Option shall be exercisable
into will be increased upon each issuance of new Securities by NewCo,
so that the Option Shares will continue to constitute 3% of NewCo's
share capital as set forth above following such issuance (the
"Anti-Dilution Protection"), all of which exercisable for the
respective Exercise Price, until the earlier to occur of the following
events:
(i) The end of a 4 (four) years period commencing as of the
incorporation of NewCo, provided however, that if an offer or a
transaction for the
issuance of shares or any other Securities is outstanding or under
negotiations or discussions, then only at such time when such proposed
transaction is consummated or no longer in effect;
(ii) The raising of funds by NewCo from non-Affiliated investors
through either public or private offering of NewCo's Securities,
provided however that the pre-money Company's Value of NewCo, in
connection with the proposed offering, shall be valued at not less
than US$66,000,000.
(iii) Immediately prior to the expiration of the Option pursuant to
the provisions of Sub-Section (F) below.
(E) In the event of a stock split, stock reverse split, issuance of bonus
shares, or any other reorganization or recapitalization of the share
capital of NewCo, the number of Option Shares and the Exercise Price
shall be accordingly adjusted to reflect such recapitalization;
provided however that such adjustment shall be made only to the extent
not already covered under the Anti Dilution Protection hereunder.
(F) The Option shall expire immediately prior to the consummation of an
Exit or the winding up, liquidation or dissolution of NewCo, whichever
occurs earlier."
4. Amendment to Section 7.1.3. Subject to the provisions of Section 8 below,
Section 7.1.3 of the Joint Venture Agreement is hereby replaced in its
entirety with the following:
"(A) In the event that Xxxxxx and/or Galram identify Other Technologies and
wish, on their own initiative, to cooperate with a third party in the
commercial exploitation of such technologies in the non-military
market through a jointly held, directly or indirectly, vehicle (the
"Vehicle") or to sell or license any Other Technologies, they will
serve RDC a business plan prepared by a "Big 5" firm of Independent
Certified Public Accountants, describing the features of the Other
Technologies in question and setting out the major elements and terms
of the venture as contemplated by Xxxxxx and/or Galram (the
"Venture"), including description of intellectual property aspects,
market definition, relevant financial projections and such other
similar matters, all in accordance with high professional standards
(the "Business Plan").
(B) RDC shall then have the right to notify Xxxxxx in writing within the
next 30 days, whether or not it is interested in the Venture. Xxxxxx
and/or Galram shall make their best reasonable efforts to provide RDC
with any additional information available to Xxxxxx it shall require
in this respect.
(C) If RDC shall not notify Xxxxxx that it is interested in the Venture as
aforesaid, then Xxxxxx Management shall be at liberty to approve the
further development and research of, and/or the search for third-party
partners for such Venture (the "Management Approval"). In such event,
Xxxxxx shall so
notify RDC in writing and RDC shall have the right to notify Xxxxxx in
writing within the next 30 days after receipt of a written notice
regarding such Management Approval, that it is interested in the
Venture.
(D) If RDC shall not notify Xxxxxx that it is interested in the Venture as
aforesaid following the Management Approval, then Xxxxxx and/or Galram
shall be at liberty to approach any third party, and to negotiate and
consummate a respective agreement therewith. In such event RDC shall
be subject to customary confidentiality undertakings with respect to
the Business Plan and will not be entitled to make any use whatsoever
of the data disclosed to it thereunder.
(E) If RDC notifies Xxxxxx and/or Galram that it is interested in the
Venture in accordance with the provisions of either sub-section (B) or
(C) above, then the provisions of sub-sections 7.1.2 (B)-(F) shall
apply, mutatis mutandis. In such event RDC shall reimburse Xxxxxx
and/or Galram for their reasonable direct costs and expenses to third
parties incurred in connection with the preparation of the Business
Plan."
5. Amendment to Section 7.1.4. Subject to the provisions of Section 8 below,
Section 7.1.4 of the Joint Venture Agreement is hereby replaced in its
entirety with the following:
"(A) In the event that Xxxxxx and/or Galram are approached by a third party
(the "Proposing Party") which proposes to cooperate with Xxxxxx and/or
Galram in the development and in the commercial exploitation in the
non-military market of Other Technologies through a Vehicle, they
shall give written notice of such proposal to RDC and provide RDC with
a Business Plan prepared in accordance with the provisions of
Sub-Section 7.1.3 (A) above.
(B) RDC shall then have the right to notify Xxxxxx and/or Galram in
writing within the next 30 days whether it is interested to acquire
Rafael's and/or Galram's proposed participation in the Vehicle (the
"Assignment").
(C) If RDC shall not notify Xxxxxx that it is interested in the Venture as
aforesaid, then Xxxxxx Management shall be at liberty to approve the
further development and research of, and/or the search for third-party
partners for such Venture, including the Proposing Party (the
"Management Approval"). In such event, Xxxxxx shall so notify RDC in
writing and RDC shall have the right to notify Xxxxxx in writing
within the next 30 days after receipt of a written notice regarding
such Management Approval, that it is interested in the Venture.
(D) If RDC shall not notify Xxxxxx and/or Galram that it is interested in
the Venture as aforesaid following the Management Approval, then
Xxxxxx and/or Galram shall be at liberty to negotiate and consummate a
respective agreement with the Proposing Party. In such event, RDC
shall be subject to customary non-confidentiality undertakings with
respect to the Business
Plan and will not be entitled to make any use whatsoever in the data
disclosed to it thereunder.
(E) If RDC shall notify Xxxxxx and/or Galram that it is interested in the
Venture in accordance with the provisions of either sub-section (B) or
(C) above, RDC shall conduct the negotiations with the Proposing
Party, and a representative of Xxxxxx and/or Galram shall be allowed
to attend such negotiations. Upon execution and delivery by RDC and
the Proposing Party of a term sheet or any other form of agreement
concerning the Venture (the "Agreement"), RDC shall so notify Xxxxxx.
The provisions of Section 7.1.2 (B)-(F) shall apply, mutatis mutandis,
with respect to any entity to be incorporated pursuant to the said
Agreement between RDC and the Proposing Party (including, without
limitation, Rafael's undertaking to grant the Other Technologies
License to such NewCo). In addition, RDC shall reimburse Xxxxxx and/or
Galram for their reasonable direct costs and expenses to third
parties, if any, incurred in connection with the preparation of the
Business Plan.
(F) If an Agreement is not executed between RDC and the Proposing Party
within 90 days as of RDC's notice to Xxxxxx that it is interested in
the Venture, then Xxxxxx and/or Galram shall be at liberty to
negotiate and consummate an agreement with such Proposing Party,
provided however, that the terms and conditions thereunder are not
less favorable to such Proposing Party than the terms and conditions
earlier proposed by RDC. RDC shall be entitled to be notified of the
consummation and of the relevant terms and conditions of such
agreement, and shall be subject to similar non-disclosure undertaking
as set under Sub-Section (D) above."
6. Survival of Provisions.
6.1. The provisions of sub-sections 7.1.1, 7.1.5 and 7.1.6, and all other
provisions of the Joint Venture Agreement shall remain as set forth
under the Joint Venture Agreement effective immediately prior to the
execution hereof.
6.2. Notwithstanding any of the foregoing, the provision of this Addendum
shall not apply to the microelectronics project, known as the "TARASH"
project.
7. Management Services.
7.1. During the term of this Addendum, as defined under Section 8 below,
DEP shall provide or cause any entity wholly-owned by DEP or which
wholly owns DEP to provide to any NewCo incorporated by RDC pursuant
to the provisions of this Addendum (including without limitation,
pursuant to any Venture with third parties, other than Xxxxxx)
management services (the "Services"), from time to time.
7.2. In consideration for the Services, DEP shall be entitled to receive
from RDC with respect to each such NewCo, irrespective of the amount
or extent of
Services provided, subject to the consummation of an Exit with respect
to such NewCo, a management fee as follows (the "Management Fee"):
7.2.1. The Management Fee shall be calculated as 3.5% of the positive
balance, if any, between (A) the value of the Exit Consideration,
minus (B) US$50,000,000, provided however that in no event shall
the Management Fee exceed the amount of US$2,310,000 with respect
to any single NewCo.
7.2.2. The payment of the Management Fee to DEP shall be in the same
means as the payment of the Exit Consideration (for example, if
the Exit Consideration shall be paid to RDC in stock or debt,
then the Management Fee to be paid by RDC to DEP shall be in the
same kind of stock or debt, etc.). Upon the written consent of
RDC and DEP, the Management Fee payable pursuant to an IPO will
be payable in securities, rather than cash.
7.2.3. The Management Fee to DEP shall be payable immediately after
the consummation of an Exit, except as set forth below:
(i) If the Exit Consideration is received in connection with an
IPO, the Management Fee will be payable only when RDC shall have
actually sold shares of NewCo pursuant to such IPO. If RDC will
elect to sell such shares of NewCo in several portions, it will
be entitled to pay DEP only up to one third (1/3) of the
consideration received pursuant to each such sale on the account
of the Management Fee, until such Management Fee is paid in full.
(ii) If the Exit Consideration is received in securities of
another company which are not publicly traded, or are subject to
any lock-up or similar restriction ("Restricted Securities"),
then such Management Fee shall be payable to DEP only upon the
earlier of the following: (A) such Restricted Securities will be
sold in consideration for cash or asset or securities other than
Restricted Securities, or (B) RDC shall have first sold such
Restricted Securities pursuant to a public offering, or (C) the
lock-up or similar restrictions applicable to such Restricted
Securities shall have expired.
For the avoidance of any doubt, the Management Fee shall be
calculated according to the value of the original Exit
Consideration and will not be affected from the deferred payment
hereunder.
7.2.4. RDC's undertaking hereunder to pay DEP the Management Fee for
Services rendered during the term of this Addendum shall survive
the termination hereof for a period of additional 24 months, with
respect to each New Company to which DEP has provided such
Services for an aggregate period of at least 24 months.
8. Term and Termination. This Addendum shall be effective as of the execution
hereof and for a period of 3 (three) years thereafter (the "Original
Term"), and shall be automatically renewed for additional 3 (three) year
periods (each an "Additional Term") upon the termination of the Original
Term and each Additional Term, respectively; all unless terminated by a
written notice to be sent by either party to all other parties at least 6
months prior to the end of the Original Term or any Additional Term,
respectively.
Upon the termination hereof according to the provisions of this Section 8,
the provisions of the Joint Venture Agreement effective immediately prior
to the execution hereof shall apply and shall remain in full force and
effect. The provisions of Sections 9 and 10 hereof shall survive the
termination of this Addendum.
9. Assignment of Rights. The parties hereby agree and acknowledge that
pursuant to the transformation of Xxxxxx Armament Development Authority
("Xxxxxx Authority") into an entity incorporated under the Israeli law
under the name of Xxxxxx Armament Development Authority Ltd., all of the
rights and obligations of Xxxxxx Authority under the Joint Venture
Agreement have been assigned to Xxxxxx on January 1, 2002, and Xxxxxx
hereby accepts and assumes all such rights and obligations and acknowledges
the rights and obligations of the other parties under the Joint Venture
Agreement, to the extent exist, including without limitations all rights
and obligations of RDC; all with effect as of the date of the said
assignment. Xxxxxx represents and warrants that the said assignment has not
and will not constitute a default under, or breach of any agreement or law
or any other instrument to which Xxxxxx is a party or by which it is bound,
and does not require the consent of any person or entity.
10. DEP Share Purchase. Xxxxxx acknowledges that it is aware of the proposed
purchase by Elron Electronics Industries Ltd. ("Elron") of all shares and
capital notes held by Discount Investment Corporation Ltd ("DIC") in DEP,
and of the proposed assignment to Elron of all the loans made by DIC to
RDC, and agrees that such purchase and assignment shall not in any manner
affect DEP's rights and obligations under the Joint Venture Agreement and
this Addendum, provided however that the said purchase and assignment will
not constitute a default under, or breach of any agreement or law or any
other instrument to which either DEP, DIC or Elron are a party or by which
they are bound, and will not require the consent of any person or entity
(unless such consents shall be duly obtained).
[SIGNATURE PAGE NEXT]
IN WITNESS HEREOF, the parties hereto have executed this amendment as of the
date first above written:
XXXXXX ARMAMENT DEP TECHNOLOGIES HOLDINGS
DEVELOPMENT AUTHORITY LTD. LIMITED
By: /s/ Xxxxx Xxxxxx /s/ Xxxxxxx Xxxxxx By: /s/Xxxx Xxxxxxxx /s/ Xxxxx Xxxxxx
------------------------------------ ----------------------------------
GALRAM TECHNOLOGIES
INDUSTRIES LTD.
By: /s/ Xxxxxxx Xxxx /s/ Xxxxxxx Xxxxxx
------------------------------------
RDC XXXXXX DEVELOPMENT CORPORATION LTD.
By: /s/ Xxxxxx Xxxxx /s/ Xxxxxxx Xxxx
------------------------------------
DIC Acknowledgement. DIC hereby acknowledges that this Addendum does not affect
in any manner whatsoever any obligation or liability of DIC, to the extent
applicable, under the Joint Venture Agreement and the Assignment of Rights dated
July 3, 1993, between DIC, PEC Israel Economic Corporation and DEP.
DISCOUNT INVESTMENT
CORPORATION LTD.
By: /s/ Xxxxxx Xxxxx /s/ Xxxxxx Xxxxx
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