DATED 19 December, 2001
FRAPORT AG
CIVAS GMBH
ICTS INTERNATIONAL N.V.
AND
ICTS EUROPE HOLDINGS B.V.
ADDENDUM TO THE
SHARE PURCHASE AGREEMENT
DATED 5TH OCTOBER, 2000
RELATING TO ICTS EUROPE HOLDINGS B.V.
This Addendum (the "Addendum") is entered into on December, 2001 by
and between:
(1) FRAPORT AG a company with registered office at 60547 Frankfurt am Main,
Germany ("Fraport");
(2) CIVAS GmbH (formerly CIVAS Civil Aviation Security Services GmbH), a company
with registered office at Triforum Xxxxxxx X0, Xxxxxxxxxxx Xxxxxxx 000,00000
Xxx-Xxxxxxxx, Germany (and whose former registered office was at Frankfurt
Airport Center, Xxxx-Xxxxxx-Xxxx, 00000 Xxxxxxxxx xx Xxxx, Xxxxxxx), a company
duly incorporated and organised under the laws of Germany under registered
number HRB 11929 with the Commercial Register of the Lower Court of Offenbach am
Main (and which was previously registered under number HRB 40322 with the
Commercial Register of the Lower Court of Frankfurt am Main) ("CIVAS");
(3) ICTS International N.V., a company with registered office at Xxxxxxxxx 000,
0000 XX Xxxxxxxxxx, Xxx Xxxxxxxxxxx, a company duly incorporated and organised
under the laws of The Netherlands, under registered no. 33279300 with the
Commercial Register of the Chamber of Commerce of Amsterdam ("ICTS"); and
(4) ICTS Europe Holdings B.V., a company incorporated in the Netherlands with
registered address Xxxxxxxxx 000, 0000 XX Xxxxxxxxxx, xxx Xxxxxxxxxxx ("ICTS
Europe").
WHEREAS:
(A) Pursuant to a share purchase agreement dated 5th October, 2000 (the
"Share Purchase Agreement"), ICTS sold 45 per cent. of the issued share
capital of ICTS Europe to CIVAS effective on 1st January, 2001 and also
agreed to sell the remaining 55 per cent. of the issued share capital
of ICTS Europe to CIVAS on 31st December, 2003.
(B) Subsequent to the execution of the Share Purchase Agreement, the
parties have agreed that the acquisition of ICTS' remaining 55 per
cent. of the share capital of ICTS Europe shall be accelerated to take
effect on 1st January, 2002. The parties have further agreed that
Fraport shall purchase ICTS' remaining 55 per cent. of the issued share
capital of ICTS Europe in place of its wholly owned subsidiary CIVAS.
(C) The parties have agreed to enter into this Addendum to amend the terms
of the Share Purchase Agreement and the other documents referred to in
this Addendum.
(D) Terms defined or referred to in the Share Purchase Agreement shall have
the same meaning in this Addendum where the context allows and where
such term is not specifically defined in this Addendum.
NOW, THEREFORE, in consideration of the mutual covenants and undertakings set
forth herein, IT IS AGREED as follows:
1. definitions
In this Addendum,
"Conditions Precedent" shall have the meaning set out in clause 2 of
this Addendum.
"Key Personnel 2001" means the persons listed in Part A of Appendix 3.
"Questionnaire" means the Questionnaire prepared by Fraport and
answered by the managing director of ICTS Europe and each of its
Subsidiaries in relation to the 2003 Reserved Matters as set out in
Appendix 4.
"2003 Reserved Matters" means those matters which, had they been
undertaken by ICTS Europe or its subsidiaries in 2003, would have
constituted Reserved Matters for the purposes of the Shareholders'
Agreement (as amended by the addendum to the Shareholders' Agreement
dated 23rd May, 2001) and, for these purposes, the reference made in
clause 6 subclause (2) (7) of the addendum to the Shareholder Agreement
dated 23rd May, 2001 to 1st January, 2004 shall be replaced by 1st
January, 2002.
"Final Completion Date" means 3rd January, 2002 or if later, the third
Business Day of the week following the date on which the Seller is
notified in writing by Fraport that all the Conditions Precedent have
been satisfied or, where permitted, waived or such other date agreed in
writing by the Parties.
2. Conditions to this Addendum
2.1 The terms of this Addendum are subject to the satisfaction or waiver
(where applicable) of the following conditions precedent (the
"Conditions Precedent"):
(a) the assignment of all the Frame Agreements by the Seller to ICTS
Europe; and
(b) each of the individuals listed in Part B of Appendix 3 having
agreed with ICTS Europe to the extension of the term of their
existing employment arrangements with relevant members of the
ICTS Europe Group for a fixed term expiring on 31st December,
2003.
(c) All relevant merger control clearances or deemed clearances in
Portugal and Spain having been obtained, to the extent
determined by Fraport and the Seller to be necessary, in
connection with the acquisition of the Remaining Shares by
Fraport.
2.2 Fraport shall be entitled to waive condition 2.1(b) in whole or in part
in its absolute discretion by notice in writing to the Seller. Subject
to clause 2.4 below, Fraport shall only be entitled to waive condition
2.1(a) with the prior written consent of the Seller.
2.3 The Seller and ICTS Europe shall provide to Fraport and each other
copies of all assignment documentation executed between it, ICTS Europe
and the counterparties to the Frame Agreements as soon as possible
following receipt and, to the extent it is required to be a party,
Fraport shall provide the Seller with copies of all assignment
documentation executed between it, the Seller, ICTS Europe and the
counterparties to the Frame Agreements as soon as possible following
receipt.
2.4 If the assignment of all the Frame Agreements by the Seller to ICTS
Europe has not been effected by 00xx Xxxxxxx, 0000, Xxxxxxx may at its
option elect to waive condition 2.1(a) above without the consent of the
Seller provided that ICTS Europe first undertakes to the Seller in
writing with the written consent of Fraport as follows:-
(a) With effect from the Final Completion Date, ICTS Europe shall:
(i) use all reasonable endeavours to procure that the counterparties to the
Frame Agreements enter into new contractual arrangements with ICTS Europe in
place of the Seller;
(ii) procure that ICTS Europe and/or its subsidiaries
carry out, perform and discharge all the obligations
and liabilities of the Seller created by or arising
under the Frame Agreements other than with respect to
Russia and other successor states (including the
Baltic States) of the former Soviet Union provided
that this obligation shall not apply to any
obligations and liabilities incurred by the Seller
after Final Completion without the consent of ICTS
Europe; and
(iii) indemnify the Seller against all actions,
proceedings, costs, damages, claims and demands in
respect of the Frame Agreements, whatsoever provided
that this indemnity shall not apply to any acts
carried out by the Seller after Final Completion
without the consent of ICTS Europe.
(b) Insofar as the benefit or burden of any of the Frame
Agreements cannot effectively be assigned by the Seller to
ICTS Europe except by an agreement or novation with or consent
to the assignment from the person, firm or company concerned:
(i) the Seller shall at Fraport's request use all reasonable endeavours with the
co-operation of Fraport to procure such novation or assignment to ICTS Europe;
(ii) until the agreement is novated or assigned to ICTS Europe the Seller shall
hold it in trust for ICTS Europe absolutely and Fraport shall procure that ICTS
Europe shall (if such sub-contracting is permissible and lawful under the Frame
Agreement), as the Seller's sub-contractor, perform all the obligations of the
Seller under the Frame Agreement to be discharged after Completion and Fraport
shall indemnify the Seller against all actions, proceedings, costs, damages,
claims and demands in respect of any failure on the part of ICTS Europe to
perform those obligations; and
(iii) until the Frame Agreement is novated or assigned the Seller shall (so far
as it lawfully may) give all reasonable assistance to ICTS Europe (at Fraport's
request and expense) to enable ICTS Europe to enforce the rights of the Seller
under the Frame Agreement.
2.5 If any of the Conditions Precedent have not been satisfied or where
permitted waived by 28th February, 2002, all provisions of this
Addendum shall automatically cease to have effect and none of the
parties shall have any rights or obligations under this Addendum. In
such event, the terms and conditions of the Share Purchase Agreement
shall continue to have effect without any of the variations
contemplated by this Addendum.
3. Warranties
The Seller represents and warrants to Fraport at the date of this
Addendum that:
(a) The Frame Agreements set out in Schedule 8 of the Share
Purchase Agreement are complete and accurate copies of the
only documented agreements entered into between the Seller and
an airline customer relating to the supply of airline security
services and other aviation-related services in Europe;
(b) Part A of Appendix 3 contains a complete and accurate list of the Key
Personnel 2001;
(c) Save as disclosed in writing to Fraport in the Questionnaire or in Appendix
3 Part A or as contemplated by clause 2.1(b) of this Addendum, to the best
knowledge of the managing directors of ICTS Europe and each of its Subsidiaries,
since 1st January, 2001:
(i) no acts, measures, declarations or agreements have been undertaken by ICTS
Europe or any of its Subsidiaries which would constitute 2003 Reserved Matters;
(ii) no application for the appointment of a receiver or administrator over ICTS
Europe's or a Subsidiary's assets has been made;
(iii) no Subsidiary has entered into any agreement and arrangement or concerted
practice of whatever nature with any of the managing directors of any Subsidiary
or any other Key Personnel 2001 and, or any material amendment of those
contracts or material deviation from these arrangements and practice; and
(iv) for the avoidance of doubt, "Significant Asset" in question number 20 of
the Questionnaire shall mean "Significant Investment".
(d) ICTS Europe or one of its Subsidiaries is the legal and beneficial owner of
all shares in the Companies to the extent set out in the Whereas Clause of the
Share Purchase Agreement and, save as disclosed in the Questionnaire, no changes
have been made to the persons legally or beneficially entitled to such shares in
the Companies from that disclosed to CIVAS in the Share Purchase Agreement. All
shares in the Companies are free from any encumbrances, liens, charges or other
rights for the benefit of third parties except for those as listed in the
Whereas Clause of the Share Purchase Agreement.
4. covenant
The Seller covenants with Fraport that it will procure that no member
of the ICTS Europe Group will undertake any act, measure, declaration
or agreement which would constitute a 2003 Reserved Matter from the
date of this Addendum until the Final Completion Date without the prior
written consent of Fraport other than as expressly provided for in this
Addendum. The Seller covenants with Fraport to procure that ICTS Europe
shall not draw any new credit under any Credit Facilities without the
consent of Fraport.
5. AMENDMENTS TO THE SHARE PURCHASE AGREEMENT
5.1 The Share Purchase Agreement shall be amended so that:
(a) the Share Purchase Agreement shall be deemed to be between the
Seller, the Purchaser and Fraport. The words "3. XXXXXXX XX,
00000 Xxxxxxxxx xx Xxxx, Xxxxxxx (registered in the Commercial
Register of the Lower Court of Frankfurt am Main under HRB
7042) ("Fraport")" shall be inserted on the first page of the
Share Purchase Agreement between "(the "Purchaser")" and the
Whereas clause.
(b) in Article 1:
(i) the definition of "Final Completion" shall be deleted
in its entirety and shall be replaced by "Final
Completion" means the execution of the Final
Completion Notarial Deed set out in Schedule 7 and
the execution of the Final Completion Arrangements,
all executed on or prior to the Final Completion
Date";
(ii) the definition of "Final Completion Date" shall be
deleted in its entirety and shall be replaced by
""Final Completion Date" means 3rd January, 2002 or
if later the third Business Day of the week following
the date on which the Seller is notified by Fraport
in writing that all of the Conditions Precedent have
been satisfied or where permitted, waived or such
other date as agreed by the Parties in writing";
(iii) a new definition comprising the words ""Final
Completion Notarial Deed" means the notarial deed in
the Agreed Form attached hereto as Schedule 7" shall
be inserted;
(iv) a new definition comprising the words ""Final
Completion Escrow Agreement" means the escrow
agreement between Fraport, the Seller and the Notary
in the Agreed Form" shall be inserted; and
(v) a new definition comprising the words ""Key Personnel
2001" means the persons as listed in Part A of
Appendix 3 to the Addendum to this Agreement" shall
be inserted after the definition of "Key Personnel";
(c) in Article 3:
(i) the words "(the "Credit Facilities Guarantee") up to
a maximum aggregate amount of US$4 million to be
translated into EURO at the Exchange Rate existing at
the date of this Agreement" commencing on the 6th
line of clause (7.1) shall be deleted and shall be
replaced by the words "(the "Credit Facilities
Guarantees") up to a maximum aggregate amount of
US$4,000,000 and Euro 2,500,000 comprising one
facility up to a maximum amount of US$4,000,000 and
another facility up to a maximum amount of Euro
2,500,000";
(ii) clause (7.2) shall be deleted in its entirety and
replaced by the following sentence "The Seller owes
to CIVAS on the Final Completion Date a fixed amount
of Euro 55,800 as a lump sum payment representing
reimbursement for interest paid to banks under the
Credit Facilities prior to the Final Completion Date.
CIVAS assigns to Fraport the benefit of this
receivable, to be accounted for, as between Fraport
and CIVAS, as a loan by CIVAS to Fraport of Euro
55,800"; and
(ii) each reference to "the Purchaser" in clause (7.3) shall be replaced with
the word "Fraport";
(d) in Article 5:
(i) the words "to indemnify Fraport in connection with"
shall be inserted between the words "and" and
"Article 12" in the 3rd line of clause (9) and the
words "or Fraport (as the case may be)" between the
words "the Purchaser" and "shall be entitled" in the
4th line of clause (9).
(e) Article 12 shall be deleted in its entirety and shall be replaced by the
wording set out in Appendix 1 to this Agreement;
(f) in Article 13:
(i) The words "and to Fraport" shall be inserted between the words "to the
Purchaser" and " for a period of 3" in the 1st line of clause (1);
(ii) Clause (2) shall be amended by adding, at the end of the clause, the
following sentence "The provisions of this sub-clause 3.2 shall apply with
respect to the Key Personnel 2001 as obligations of the Seller towards Fraport,
mutatis mutandis."
(iii) In clause (5) the word " ,Fraport" shall be inserted
between the words "The Seller" and "and the
Purchaser" in the 1st line and between the words "by
the Seller" and "or the Purchaser or through" in the
3rd line.
(iv) The words 'and Fraport' shall be inserted between the
words "the Purchaser" and "are entitled" in the 1st
line of clause (5) sub-clause (a).
(v) The word 'Fraport', shall be inserted between the
words "the Seller", and "the Purchaser" in the 1st
line of clause (5) sub-clause (c).
(g) in Article 14:
(i) the words "Fraport, " shall be inserted between the words " or Seller's
Group from" and "the Purchaser or" in the 2nd line of clause (1);
(ii) the words "and Fraport" shall be inserted between the words "undertakes to
Purchaser" and "for a period of" in the 1st line of clause (4), between the
words "shall provide Purchaser" and "with prompt written" in the 5th line of
clause (6) and between the words "so that the Purchaser" in the 5th line and
"may seek a" in the 6th line of clause (6);
(h) Schedule 7 shall be deleted in its entirety and shall be replaced by the
wording set out in Appendix 2 to this Agreement;
(i) Schedules 13 and 15 shall be deleted in their entirety; and
(j) Schedule 14 shall be deleted in its entirety and shall be replaced by the
wording set out in Appendix 5 to this Addendum.
6. AMENDMENTS TO THE KNOW HOW LICENCE
The Know How Licence shall be amended so that in Clause 8:
(1) the words "1st January, 2004" in subclause b(ii) shall be deleted and shall
be replaced with the words "1st January, 2002"; and
(2) the words "1st January, 2004" in the first line of subclause (c) shall be
deleted and shall be replaced with the words "1st January, 2002".
7. CO-OPERATION
(1) The Seller agrees to make available to Fraport the services of Mr
Zouker and Xx Xxxxx, in each case for so long as Xx Xxxxx remains a
director of ICTS Europe, to assist with the continuity of employment of
the Key Employees 2001 and the continuity of business with key accounts
of the ICTS Europe Group handled by either of them in the past. Such
services shall be provided by Mr Zouker and Xx Xxxxx at the request of
Fraport on reasonable notice and at reasonable times having regard to
their other responsibilities as directors and officers of the Seller.
(2) Fraport agrees to reimburse to the Seller for any costs incurred by Xx Xxxxx
or Mr Zouker in providing such assistance.
8. GENERAL
(1) This Addendum shall be considered as constituting an integral part of
the Share Purchase Agreement, and the Know How Licence respectively and
save as expressly provided in this Addendum, all other terms and
provisions of the Shareholders' Agreement and the Know How Licence
shall remain in full force and effect as agreed upon.
(2) Each of the parties acknowledges that pursuant to clause 14 of the
Shareholders' Agreement, the Shareholders' Agreement shall terminate
with effect from Final Completion as defined in the Share Purchase
Agreement (as amended pursuant to clause 5.1above).
(3) Each of the parties agrees subject to this Addendum becoming wholly
unconditional that the provisions of the Escrow Agreement (being the
existing agreement dated 5th October, 2000 between CIVAS, the Seller
and the Notary) shall cease on the Final Completion Date.
9. termination of rights of civas
Subject to the satisfaction or waiver of the Conditions Precedent,
ICTS, Fraport and CIVAS hereby agree to the variation of the Share
Purchase Agreement to permit Fraport to purchase the Remaining Shares
from ICTS in place of CIVAS and all obligations of the Seller and CIVAS
in this regard shall terminate on the Final Completion Date.
10. effect
Clauses 5-9 (inclusive) of this Addendum shall take effect on and from
the Final Completion Date. All other clauses of the Addendum shall have
immediate effect subject to clause 2.5 of this Addendum.
11. GOVERNING LAW
This Addendum shall be governed by and construed in accordance with the
Laws of the Netherlands. In the event of any dispute between any of the
parties to this Addendum arising out of or in connection with this
Addendum, the parties to this Addendum agree on Amsterdam as exclusive
venue.
12. COUNTERPARTS
This Addendum may be executed in any number of counterparts, all of
which taken together shall constitute one and the same agreement, and
any party may enter into this Addendum by executing a counterpart.
13. SEVERABILITY
The provisions contained in this Addendum shall be enforceable
independently of each of the others and its validity shall not be
affected if any of the others is invalid. If any of those provisions is
void but would be valid if some part of the provisions were deleted the
provision in question shall apply without such modification as may be
necessary to make it valid.
IN WITNESS HEREOF, Fraport, CIVAS, ICTS and ICTS Europe have executed this
Addendum on the date first above written.
APPENDIX 1
ARTICLE 12
Sale and Purchase of Remaining Shares
(1.1) The Seller hereby sells and Fraport hereby purchases with effect from
1st January, 2002 the remaining Shares of ICTS Europe, held by Seller,
being 1,100 Shares of ICTS Europe (the "Remaining Shares"), including
all and any ancillary rights; in particular its entitlement to all
accrued but unpaid dividends to which the Seller would otherwise be
entitled on or before Final Completion, in particular but not limited
to the dividends payable to the Seller in respect of the financial year
of ICTS Europe ending on 31st December 2001.
(1.2) The Seller shall fully indemnify Fraport and shall hold Fraport
harmless against any and all liabilities, obligations, claims, costs,
expenses, losses, damages and other financial disadvantages incurred by
Fraport due to the fact that (i) the Seller is not on the Final
Completion Date the legal and beneficial owner of the Remaining Shares
(ii) the Remaining Shares are not on the Final Completion Date free
from any encumbrances, liens, charges or any other rights for the
benefit of third parties, (iii) the Seller has not the right and the
power to freely dispose of the Remaining Shares without requiring the
consent of any third party for such disposal or without that such
disposal violates the right of any third party (iv) the contribution of
the Remaining Shares due and payable pursuant to Dutch law and ICTS
Europe's articles of association is not fully paid up and (v) a
repayment of such contribution has - wholly or partly - been made,
either openly or concealed subject to the provisions of clause 1
subclause (f) of Schedule 1.
(2.1) The purchase price for the Remaining Shares shall be the Final
Consideration being the Estimated Final Consideration as adjusted
pursuant to clause (3.3)(c).
(2.2) (a) At Final Completion, Fraport, on behalf of ICTS Europe, shall repay to
Pictet & Cie Banquiers all sums then outstanding owing to it by the ICTS Europe
Group up to a maximum of US$4,000,000 and Euro 2,500,000 thereon together with
accrued interest thereon up to the Final Completion Date, comprising the
aggregate Credit Facility made available to the ICTS Europe Group by Pictet &
Cie Banquiers up to the Final Completion Date which have been secured by the
Credit Facilities Guarantees. As between Fraport and ICTS Europe, the aggregate
amount of the Credit Facilities repaid by Fraport shall be accounted for as a
shareholders loan.
(b) In satisfaction of its obligations under clause 2.2(a), Fraport, on behalf
of ICTS Europe, shall pay to the Notary's Account at Final Completion equal to
all sums then outstanding up to a maximum of US$4,000,000 and Euro 2,500,000
together with accrued interest up to the Final Completion Date comprising the
aggregate Credit Facilities made available to the ICTS Europe Group by Pictet &
Cie Banquiers, such aggregate sums to be as notified to it by the Seller not
less than two Business Days prior to the Final Completion Date ("the Credit
Facilities Repayment Amount").
(3.1) (a) Final Completion shall take place at the offices of the Notary on the
Final Completion Date at 10 a.m. (local time) or such other time as the parties
shall agree.
Final Completion is subject to Fraport having paid into the Notary's Account:
(i) Euro 62,098,353 being 90 per cent of the amount of the Estimated Final
Consideration (Euro 62,154,153) less Euro 55,800 being the amount payable by the
Seller to Fraport following the assignment by CIVAS to Fraport of this amount
pursuant to Article 3 clause (7.2);
(ii) the Credit Facilities Repayment Amount; and
(iii) Euro 6,906,017 being 10 per cent. of the Estimated Final Consideration to
be held by the Notary in accordance with the Final Completion Escrow Agreement.
(b) At Final Completion the transfer of the legal title in the Remaining Shares
shall be effected by means of the Final Completion Notarial Deed which shall be
executed by the Notary. Fraport, the Seller and the Notary shall also enter into
the Final Completion Escrow Agreement. CIVAS approves, in accordance with the
share transfer restrictions of the Articles of Association of ICTS Europe, the
transfer of legal title in the Remaining Shares by the Seller to Fraport.
(c) Upon the Final Completion, the Seller and CIVAS shall procure the passing of
and delivery to Fraport of a shareholders' resolution of ICTS Europe in which it
is resolved that the transfer of the shares in the Companies which are held by
third parties as nominees, trustees or otherwise for ICTS Europe or another
Company as beneficial owner to such other persons as named by Fraport to hold
such shares as new nominees, trustees or otherwise for ICTS Europe or another
Company as beneficial shareholder and to the termination of the corresponding
agreements with the persons who formerly held the shares concerned be approved
(to the extent not previously effected).
(d) Upon Final Completion the Seller shall procure the delivery to Fraport of:
(i) a letter from Mr. Lior Zouker resigning as a member of ICTS Europe's
supervisory board with effect from the Final Completion Date;
(ii) a letter from Xx. Xxxx Xxxxx resigning as chairman with the agreement of
the Seller (but remaining as a member) of ICTS Europe's supervisory board with
effect from the Final Completion Date;
(iii) the original shareholders' register of ICTS Europe, in which the transfer
of the Remaining Shares by the Seller to Fraport has been registered;
(iv) a letter from the current auditors to Fraport agreeing upon Fraport's
request delivered after the signature of the audited consolidated financial
statements of ICTS Europe for the year ending 31st December, 2001 to resign as
auditors of the Companies with immediate effect;
(v) all corporate documents, books and records of the Companies or copies
thereof to the extent they are not yet at the Companies' offices; and
(vi) the termination agreements effective at Final Completion executed as
appropriate under applicable law regarding the nomineeship, trusteeship, share
loans or other applicable agreements between ICTS Europe and the persons holding
shares in the Companies for ICTS Europe or one of the Companies as beneficial
shareholders as well as irrevocable offers of such persons executed as
appropriate under applicable law to assign to other persons nominated by Fraport
to become the persons to hold the share concerned by the offering nominees.
(e) Upon the prior occurrence of the conditions set out in subclause (a), and
against delivery of the documents referred to in subclauses (c) and (d) above
and upon execution of the Final Completion Notarial Deed and the Final
Completion Escrow Agreement, Fraport shall instruct the Notary to hold:
(i) such amount of the 90% of the Estimated Final Consideration as shall be
specified by the Seller and Bank Hapoalim to Fraport not less than two Business
Days prior to Final Completion for Bank Hapoalim B.M. ("Bank Hapoalim") in
respect of those amount outstanding to Bank Hapoalim under the letter of credit
dated 22nd October, 2001 between the Seller and Bank Hapoalim and to immediately
transfer such amount to the Seller's bank account no. 377494 with Bank Hapoalim,
Xxxxx Hamelekh Branch;
(ii) the Credit Facilities Repayment Amount for the Seller and to immediately
transfer such amount to Pictet & Cie Banquiers on behalf of ICTS Europe in
repayment of the Credit Facilities;
(iii) the balance of 90% of the Estimated Final Consideration for the Seller
after deduction (a) of the amount as set forth under sub-clause (i) and (b) the
sum of Euro 55,800 being the amount payable by the Seller to Fraport pursuant to
Article 3 clause (7.2) and to immediately transfer such amount to the Seller's
Bank Account; and
(iv) Euro 6,906,017 being the remaining 10% of the Estimated Final Consideration
into the Notary's Account pursuant to the terms of the Final Completion Escrow
Agreement; and
(f) Upon receipt of the payment made pursuant to clause 3.1(e) (i) above which
the Seller acknowledges as being payment of a part of the Estimated Final
Consideration to the Seller, Bank Hapoalim has agreed with the Seller that it
will deliver to Fraport, the Maximum Amount Suretyship no. UR 228/2000 signed on
5th October, 2000 by Fraport (formerly known as Flughafen Frankfurt/Main AG)
(the "Suretyship") within three Banking Days of the Final Completion Date.
(3.2) For the purposes of this Agreement the "Estimated Final Consideration"
shall be Euro 69,060,170 comprising:
(a) a sum of Euro 42,868,320 in respect of 2002/2003 Net Income;
(b) a sum of Euro 6,948,600 in respect of 2002/2003 Net Profit;
(c) a sum of Euro 2,567,000 being the estimated Profit for the year ended 31st
December, 2001 ("the Estimated Profit"); and
(d) a sum of Euro 16,676,250 being the consideration payable in respect of the
financial year ended 31st December, 2001 based on estimated Net Results of the
ICTS Europe Group of Euro 10,969,000 (the "Estimated Net Results").
(3.3) (a) The draft annual consolidated accounts of ICTS Europe for the year
ended 31st December, 2001 ("the 2001 Financial Statements") shall be prepared by
management of ICTS Europe. These shall be delivered to Fraport and the Seller
immediately following preparation and in any event no later than 31st January,
2002 together with a statement in the form set out in Appendix 5 showing the Net
Results as calculated in accordance with sub-clause (b) below (the "Net Results
Statement") for that year. Representatives of the Seller and Fraport shall be
entitled to observe the preparation of the accounts and the audit of the ICTS
Europe Group and shall have reasonable access to relevant personnel and
accounting records of the ICTS Europe Group and the Auditors during normal
working hours upon reasonable notice with regard to the review, as observers of
the preparation of the audited consolidated accounts of ICTS Europe and the Net
Income Statement.
Upon receipt of the draft accounts, Fraport and the Seller
shall discuss and agree any changes to the 2001 Financial
Statements and/or the Net Income Statement with management of
ICTS Europe and the Auditors. The 2001 Financial Statements
and the Net Income Statement may not be approved by the board
of ICTS Europe or its shareholders, nor may the Auditors issue
their audit certificate on or before 15th February, 2002
without the consent of the Seller and Fraport.
Thereafter the Seller (if Final Completion has not yet
occurred) or Fraport (if Final Completion has occurred) shall
be entitled to permit the Board of ICTS Europe, its
shareholders and the Auditors to approve and complete the
audit of the 2001 Financial Statements (as the case may be)
and approve the Net Results Statement and for the avoidance of
doubt any obligation of the Seller or any member of the ICTS
Europe Group to obtain the prior consent of Fraport pursuant
to clause 4 of the Addendum to this Agreement shall not apply.
In addition, neither the Seller (after Final Completion) nor
Fraport (before Final Completion) shall have the right to
prevent the 2001 Financial Statements being closed or the
audit completed and the Auditors issue their audit certificate
or the Net Results Statement being finalised after 15th
February, 2002. For the avoidance of doubt, any permit in this
regard shall not constitute a waiver of any party's rights
under sub-clause (i) below regarding the procedure by which
the audited consolidated accounts and the Net Results
Statement become binding.
Upon the finalisation of the Net Income Statement and the
approval and audit of the 2001 Financial Statements, the 2001
Financial Statements and the Net Income Statement shall be
delivered to the Seller and Fraport by ICTS Europe.
(b) For the purposes of this agreement, "Net Results"
means: the Consolidated Net Income, in Euros, of the
ICTS Europe Group as shown in the consolidated
statement of operations of ICTS Europe for the year
ending on 31 December, 2001 after making the following
adjustments:-
(i) adding back or deducting interest
expenses/interest income (excluding
financing costs of new acquisitions made by
the ICTS Europe Group subsequent to
September 30, 2000) and gains/loss from
traded securities as appropriate;
(ii) adding back or deducting income tax
expenses/income tax credits and
refunds as appropriate;
(iii) adding back Pushdown Expenses;
(iv) adding back or deducting all items booked as
an expense or as income as a result of a
change in accounting principles, policies or
standards from those applied in the
preparation of the Annual Statement;
(v) deducting imputed interest on the portion of
any purchase price for new acquisitions made
by the ICTS Europe Group which do not give
rise to direct financing costs;
(vi) adding back or deducting any unusual,
one-off or extraordinary cost or income
items (each of them on a pre-tax basis),
provided that each of such items exceeds US
$ 50,000; and
(vii) deducting the earning impact of any release
of accruals, which have been made in the
Interim Statement, which have been
subsequently released pursuant to and in
accordance with US GAAP.
In addition in calculating the Net Results any start-up costs
incurred by the ICTS Europe Group during 2001 shall be treated
in the same manner as such costs were treated prior to the
adoption of SoP 98-5 and accordingly, such costs shall be
capitalised and amortised over the expected life of the
contract for which they were incurred using the straight line
method. Start-up costs shall include any costs incurred for
start-up activities as defined in SoP 98-5 as "those one time
activities related to opening a new facility introducing a new
product or service, conducting business in a new territory,
conducting business with a new class of customer or
beneficiary, initiating a new process in an existing facility,
or commencing some new operation.
Earnings in the Net Results which arise from the release of
accruals for taxes and receivables made in the Interim
Statement made pursuant to and in accordance with US GAAP
shall be exclusively for the account of the Seller and shall,
to the extent not already paid to the Seller, be paid to the
Seller on the same date as the other payments referred to in
paragraph (g) below.
(c) Upon the Net Results being final and binding on the Seller and
Fraport in accordance with the provisions of sub-clause (i)
below, the Estimated Final Consideration shall be adjusted (A)
if the Net Results are more than 5% in excess of or less than
the Estimated Net Results and/or (B) the Adjusted Profit (as
defined below) is in excess of or less than the Estimated
Profit in accordance with the following provisions:-
(i) No adjustment shall be made to the Estimated Net
Results if the Net Results are no less than Euro
10,421,550 and no more than Euro 11,517,450.
(ii) If the Net Results are less than Euro 10,421,550 or
greater than Euro 11,517,450 the amount by which the
Net Results are less than or greater than the
Estimated Results (the "Deviation") shall be
multiplied by 1.52 16,676,250 divided by 10,969,000.
The amount so calculated shall be (aa) deducted from
the Estimated Final Consideration if the Net Results
are less than the Estimated Net Results or (bb) added
to the Estimated Final Consideration in case the Net
Results are greater than the Estimated Net Results.
(iii) The Estimated Profit shall be adjusted (the "Adjusted
Profit") in accordance with the following formula:
Adjusted = Net Results (Euro) X Euro 2,567,000
Profit Estimated Net Results (Euro 10,969,000)
The difference between the Adjusted Profit and the
Estimated Profit shall be added to the Estimated
Final Consideration if the Adjusted Profit is greater
than the Estimated Profit and deducted from the
Estimated Final Consideration if the Adjusted Profit
is less than the Estimated Profit.
(d) The Final Consideration shall be the Estimated Final
Consideration as adjusted in accordance with subclause
(c) above.
(e) If the Final Consideration is greater than or equal to the
Estimated Final Consideration, (A) Fraport and the Seller
shall jointly instruct the Notary to pay to the Seller all
accounts held in the Notary Account together with accrued
interest thereon and (B) Fraport shall pay to the Seller an
amount equal to the difference between (i) the Estimated Final
Consideration and (ii) the Final Consideration together with
interest on the amount of the difference from 31 December 2001
to the due date for payment under sub-clause (g) below at the
rate of 8% per annum.
(f) If the Final Consideration is less than the Estimated Final Consideration
then the Seller and Fraport shall jointly instruct the Notary to pay to Fraport
the amount of the difference from the Notary's Account together with accrued
interest thereon, and if the amount in the Notary Account is insufficient, the
Seller shall pay the balance direct to Fraport together with interest on the
balance due to Fraport from 31 December 2001 to the due date for payment under
sub-clause (g) below at the rate of 8% per annum. If, following payment of sums
due to Fraport under this provision, any amount remains in the Notary Account,
the Seller and Fraport shall jointly instruct the Notary to pay such sum
together with accrued interest thereon to the Seller.
(g) Any payment made pursuant to clause 3.3(e) and (f) shall be made by
telegraphic transfer in cleared funds within 10 Business Days after the annual
consolidated accounts of ICTS Europe for the fiscal period ending on 31st
December, 2001 become final and binding on the Seller and Fraport according to
the provisions of sub-clause (i) below into an account to be nominated by the
Seller and if a payment under this subclause (g) is not made when due, the
payment amount shall bear interest as of due date until actual payment at an
interest rate of 12%p.a.
(h) The audited consolidated accounts for the year ended 31st December, 2001
shall be prepared by management of the ICTS Europe Group on the same basis and
contain the same qualifications as those used in the preparation of the Annual
Statement and in accordance with US GAAP as applied on a consistent basis
vis-a-vis the 1999 Annual Statement. Management shall apply the same principles
of valuation and estimation, observe the principle of balance sheet consistency
and shall exercise their discretion with regard to valuation and estimation in
the same manner as exercised for the Annual Statement. For the avoidance of
doubt, such accounts shall eliminate in accordance with previous practice
goodwill and amortisation of goodwill and Know-how and amortisation of Know-how
(with the exception of the effect of any tax deduction resulting from
depreciation of Know-how for tax purposes).
(i) The audited consolidated accounts for ICTS Europe for the accounting period
ended on 31st December, 2001 and the Net Results Statement for that year shall
become binding as between the Seller and Fraport unless within seventy five days
following receipt by Fraport of the audited consolidated accounts of ICTS Europe
and the Net Results Statement, Fraport provides the Seller or the Seller
provides Fraport with both (i) a written statement that the audited consolidated
accounts of ICTS Europe and/or the Net Results Statement received are not
prepared in accordance with the provisions of this Agreement and (ii) revised
consolidated accounts of ICTS Europe on a draft basis and/or the Net Results
Statement. For the avoidance of doubt, any actions taken under this sub-clause
(i) shall only be made for the purposes of determining the adjustment of the
Estimated Final Consideration and shall not prevent the Auditors from formally
finalising their audit of the annual accounts of the ICTS Europe Group for the
year ending 31st December, 2001 to enable the Seller and Fraport to consolidate
their respective interests in ICTS Europe in their own consolidated annual
accounts for the fiscal year 2001.
Unless the Seller or Fraport within 1 month following receipt
of the others' written statement and the revised audited
consolidated accounts of ICTS Europe and/or the Net Results
Statement for the accounting period (the "Reaction Period")
provides Fraport or the Seller (as the case may be) with a
written objection to the revised audited consolidated accounts
of ICTS Europe and/or the related Net Results Statement for
the relevant accounting period, such revised audited
consolidated accounts of ICTS Europe and/or the related Net
Results Statement for the relevant accounting period as
prepared by Fraport or the Seller (as the case may be) shall
become binding between the Seller and Fraport. If the Seller
provides Fraport or Fraport provides the Seller with such
written objection within the Reaction Period, each of the
Seller and Fraport has the right to call for appointment of
Ernst & Young or failing that firm, Deloitte & Touche
(excluding their Israel offices) (the "Final Auditor") to
determine the audited consolidated accounts of ICTS Europe
and/or the Net Results Statement for the 2001 accounting
period by way of binding advice acting as expert.
The determination of the audited consolidated accounts of ICTS
Europe for the year ending 31st December, 2001 and based
thereupon the Net Results Statement by the Final Auditor shall
be delivered to Seller and Fraport in writing and, if
possible, within a period of 1 month from the date of
appointment. The determination of the audited consolidated
accounts of ICTS Europe, and the Net Results Statement by the
Final Auditor shall be final and binding on the Seller and
Fraport.
Each party shall have the right to make written
representations to the Final Auditor regarding the audited
consolidated accounts of ICTS Europe and the Net Results
Statement no later than 14 Business Days following the
appointment of the Final Auditor.
The Final Auditor shall determine the proportion of its costs
to be borne by the Seller and by Fraport.
The Seller and Fraport shall procure that (i) representatives
of the Final Auditor and (ii) representatives of Fraport
and/or the Seller and of the auditors appointed by Fraport
and/or the Seller to verify and determine the audited
consolidated accounts of ICTS Europe, and the Net Results
Statement shall have access to the offices of the Companies
and to their books and records as well as, subject to
agreement with the Auditors to the working papers of the
Auditors for the purposes of determining the audited
consolidated accounts of ICTS Europe and the Net Results
Statement and that reasonable access to relevant management
and personnel of the Seller, Fraport and the Companies as well
as personnel of the Auditors and the auditors of the
Companies, if any, shall be available during normal working
hours upon reasonable notice for the support of such
representatives with respect to the determination of the
audited consolidated accounts of ICTS Europe and the Net
Results Statement. The Seller and Fraport shall take all
reasonable endeavours to procure that the Auditors agree to
grant such access to their own audit papers on terms
satisfactory to the Auditors and Fraport.
(4) Until Final Completion, ICTS shall be entitled to exercise all voting
and other rights attached to the Remaining Shares but not entitled to
any dividends in respect of the year ended 31st December, 2001.
(5) The costs of auditing the consolidated accounts of ICTS Europe for each
year ending 31st December, 2000 and 31st December, 2001, shall be borne
by ICTS Europe.
The costs of preparation of the Net Results Statement for the financial
year 2001 together with the costs of Fraport's and the Seller's
accountants in connection with any determination by the Final Auditors
shall be borne as to 45% by Fraport and as to 55% by the Seller.
The principal service Company provides to its airline clients is the
implementation of Risk Analysis through Profiling System ("RAPS"), a set of
sophisticated procedures which seek to identify a potential threat, before it
materializes, through methodology of risk evaluation and classification of
passengers. The risk evaluation and classification techniques include comparing
characteristics of a specific passenger to a preset standard of characteristics
of a potential aggressor by means of interviewing, document verification and
behavior analysis. The vast majority of passengers fall into the low risk
category, thereby enabling more scrutiny to be focused on higher risk
passengers. Since RAPS entails the identification of potential threats through
recognizable patterns, the Company believes that it provides a better and more
practical response to such threats than certain other alternatives available,
such as simple guard positioning or a complete body and baggage search of each
passenger. In addition, by focusing on the primary risks, the Company considers
RAPS to be more cost-effective and passenger-friendly than other alternatives
available.
The concept of risk analysis through passenger screening utilizing a
set criteria has been in use in various forms by certain U.S. carriers since
1986. In 1995, the FAA mandated that all U.S. carriers adopt a uniform
methodology of risk analysis through advanced passenger screening at all of the
"high-risk" airports. Previously, security authorities in the Netherlands had
adopted such methodology as the standard for enhanced flight-related security
for airlines subject to their authority. In April 1996, the United States
enacted an anti-terrorism law which mandates that foreign airlines flying to and
from airports in the United States adhere to security measures identical to
those required of U.S. airlines serving the same airports. In July 1996, as an
initial response to the explosion of TWA Flight 800, the FAA issued a "security
directive," applicable to all international flights originating in the United
States, which requires the implementation of certain passenger and cargo
classification and verification procedures similar to some of the RAPS
procedures.
The Company believes it enjoys a certain recognition for its expertise
with respect both to the methodology and implementation of RAPS. Although
competitors implement procedures similar to those of RAPS, the Company believes
that it has a greater expertise with respect to screening procedures than its
competitors. The Company's expertise enable the Company to: (i) adapt and
customize the methodology for each specific client and the criteria of various
authorities;(ii) effectively train personnel in the procedures and requirements
associated with RAPS; and (iii) supervise the proper implementation by such
personnel.
