MEMORANDUM OF UNDERSTANDINGS
THIS MEMORANDUM OF UNDERSTANDINGS (this "Agreement") is made and entered
into as of September 3, 2006, by and between ISAN Holdings Ltd., an Israeli
company, whose address is 51 Xxxxx Xxxxxx street, Haifa ("ISAN"), and Euroweb RE
Corp., a Nevada corporation, whose address is 1061 (1)/2 N Xxxxxxxxx, Xxxx
Xxxxxxxxx, XX 00000 ("ERC").
WHEREAS: ISAN, a company wholly-owned by the Franco family, is engaged in the
business of real estate development and promotion and management of
real estate projects;
WHEREAS: ERC, a wholly-owned subsidiary of Euroweb International Corp., a
Delaware corporation ("Euroweb"), is engaged in the business of real
estate development and has available access to funds which could be
invested to advance real estate projects;
WHEREAS: the parties hereto seek to form a joint venture to advance the real
estate development project entitled "Hayarkon Project" (as such
project is generally described in Exhibit A hereto) (the "Project");
and
WHEREAS: the parties desire to enter into a written agreement governing the
affairs of the company to be established for carrying on the joint
venture and the conduct of its business;
NOW, THEREFORE, for and in consideration of the premises and the covenants
set forth herein, and for other good and valuable consideration, the adequacy,
receipt and sufficiency of which are hereby acknowledged, the parties hereby
agree as follows:
I. The Company
1. Formation. Upon entering into this Agreement, the parties organize a
special purpose entity in the form of an Israeli company (the
"Company").
2. Purpose and Scope of Business. The business purpose of the Company
shall be to engage solely in the following activities, all in
accordance with this Agreement: (i) purchasing, financing,
developing, marketing and selling the Project and the real estate
subject thereof, (ii) performing its obligations under agreements,
instruments or other documents to which it is a party, including any
purchase agreement, loan agreement, and agreements with contractors
and consultants in connection with the Project, and (iii) engaging
in those activities, including execution of agreements, that are
necessary or desirable to accomplish the foregoing or are incidental
thereto.
3. Ownership. The Company shall be owned in equal parts by ISAN and
ERC. Upon its formation, the Company shall issue each of ISAN and
ERC 50% of the Company's shares. The Company shall not issue any
equity interests or other securities to any third party without the
written consent of each of ISAN and ERC.
4. Shareholders Action. A quorum for any meeting of the shareholders of
the Company (which may be held in person or telephonically) shall
require the participation of both ISAN and ERC. Any action of the
shareholders of the Company (which may also be taken by written
consent) shall require the consent of both ISAN and ERC.
5. Board of Directors. The Board of Directors of the Company (the
"Board of Directors") shall be initially comprised of two members,
one to be appointed by ISAN (the "ISAN Director") and one to be
appointed by ERC (the "ERC Director"). Each shareholder shall have
the right to remove the director appointed by it and fill any
vacancy resulting from such removal or the resignation of such
director, by appointing a new director who shall be acceptable by
both parties . A quorum for any meeting of the Board of Directors
(which may be held in person or telephonically) shall require the
participation of both the ISAN Director and the ERC Director. Any
action of the Board of Directors (which may also be taken by written
consent) shall require the consent of both the ISAN Director and the
ERC Director.
6. Management. The management and conduct of the day-to-day business
and affairs of the Company shall be vested to begin with in ISAN who
shall be appointed as the general manager of the Company. ISAN shall
have the right to take all actions on behalf of the Company and to
do all things in connection with managing the Company as it may
reasonably deem necessary or desirable for the best interest of the
Project and the Company (other than decisions with material
financial implications not previously agreed to by the parties,
which shall be brought before the Board of Directors. As such
agreements are generally described in Exhibit B added to the
establishment documents of the company).
7. Deadlock. In the event that the Board of Directors or the
shareholders cannot reach a decision on a certain fundamental
business or financial matter (to the extent a board or shareholder
action is required for such matter under applicable law or this
Agreement), each party shall have the right to cause such dispute to
be conclusively determined by a third party individual who shall be
selected by the mutual agreement of the parties (the "Deadlock
Determining Party"). If the parties cannot come to an agreement on
the identity of the Determining Party, then the provisions of
Section 24 below shall apply with respect to such dispute. The
expenses of the Deadlock Determining Party shall be borne by the
Company.
8. Transfer Restrictions. Neither party shall be permitted to sell,
transfer or otherwise dispose of its interest in the Company, other
than to its wholly-owned subsidiary or to an entity which is
wholly-owned by its current shareholders (in each case, which shall
remain so wholly-owned at all times it holds such interest), it is
being clarified that nothing herein shall prevent ERC or Euroweb
from doing any transactions whatsoever in the share capital of ERC
(including IPO, spin-off and the like).
9. Distributions. Subject to restrictions set forth in any financing
document entered into by the Company in connection with the Project,
upon completion of the Project and repayment of the Shareholder's
Loan (as defined below), the Company shall distribute its available
cash (net cash generated from sale of the Project units less
disbursements and appropriate reserves) to ISAN and ERC based on
their relative equity interest in the Company.
10. Indemnification. The Company shall indemnify and hold harmless its
directors, officers and representatives to the fullest extent
permitted by law, from and against any and all liabilities and
damages (including legal expenses) imposed on or incurred by them in
any way relating to or arising out of their services to the Company.
The Company shall purchase an insurance policy providing directors'
and officers' liability insurance.
II. The Project
11. Financing.
a. ERC shall provide the financing for the entire Project
(subject to Section 11d) (the "Financing"). The Financing
shall include (but shall not be limited to) the cost of the
real estate of the Project and any improvements, cost of
development and construction of the Project, fees of
subcontractors of all kinds (including architects,
contractors, sales and marketing personnel, appraisers,
lawyers and accountants) and costs of any other consultants
that may be engaged to work on the Project.
b. As part of the Financing, ERC shall provide the Company, upon
its request, with a shareholder's loan (which shall be
subordinated only to a bank which will provide construction
and development loan to the Company) in an amount of US
$4,000,000 or such higher amount agreed to by the parties (the
"Shareholder's Loan"). The Shareholder's Loan shall (i) bear
interest in an annual rate of 9% and (ii) be repaid, together
with any interest accrued thereon, only upon the completion of
the Project (following the repayment of any third party debt)
or such earlier time as may be decided by the Company subject
to any restrictions in the Company's financing documents.
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c. As part of the Financing, ERC shall provide such securities
and financial guarantees as may be required by the financing
bank or the seller of the real estate of the Project.
d. It is hereby agreed that ERC's obligation to provide the
Financing (including the Shareholder's Loan) to the Company
shall be subject to the Company's reaching an agreement in
principle with a bank for the financing by such bank of the
Project (through a construction loan, a credit arrangement for
the purchase of the real estate whereby each of the Company
and the bank shall provide half of the purchase price, or any
other manner which is agreed to by the parties).
12. Management Services.
a. The management of the Project until its completion shall be
conducted by ISAN. The management of the Project shall include
(but shall not be limited to) negotiation and execution of a
purchase agreement for the real estate of the Project,
negotiation and execution of bank financing, hiring
subcontractors of all kinds (including architects,
contractors, sales and marketing personal, appraisers,
lawyers, accountants and other consultants), supervising and
managing the construction process and marketing and sales of
the Project (collectively, the "Management Services").
b. It is hereby agreed that any decisions with material financial
implications not previously agreed to by the parties(as such
agreements are generally described in Exhibit B added to the
establishment documents of the company) shall be brought
before the Board of Directors of the Company.
c. ERC shall evaluate from time to time the performance of the
Management Services by ISAN and if, at any time, ERC shall
reasonably determine in good faith that the Management
Services are not satisfactory to it (based on ISAN's not
meeting customary professional standards), it shall have the
right to appoint a co-manager to the Project who shall have
proven experience and knowledge in the construction and
development business in Israel and who shall be acceptable to
both parties and cooperate in good faith with ISAN. Any
dispute between ISAN and such co-manager with respect to the
management of the Project shall be brought before the Board of
Directors.
d. In consideration for its Management Services supervising, the
Company shall pay ISAN a total amount of US $396,000 divided
into 24 equal monthly payments starting the first day of
construction, it being clarified that no other fee is or will
be paid to ISAN as a "contractor profit" or for its knowledge
or connections.
e. It is hereby agreed that in no event ISAN or any of its
officers, directors, representatives or affiliates shall be
(or requested to be) held financially responsible for any part
of the Financing or liabilities of the Company or required to
provide personal guarantees in connection with the Project or
the Company.
III. Representations and Warranties of the Parties.
13. Representations and Warranties of ISAN. ISAN hereby represents and
warrants that: (i) this Agreement has been duly authorized by all
necessary corporate action and constitutes a valid and binding
agreement enforceable against ISAN in accordance with its terms;
(ii) ISAN is a company duly organized, validly existing and in good
standing under the laws of the State of Israel, and has the
requisite corporate power to enter into and perform this Agreement;
(iii) neither the execution and delivery of this Agreement nor the
consummation of the transactions contemplated hereby will violate or
result in any violation of or be in conflict with or constitute a
default under any term of the organizational documents of ISAN, or
be a violation of any law, rules or regulations applicable to ISAN,
and will not breach any agreement or undertaking to which ISAN is a
party; and (iv) ISAN shall use its reasonable best efforts to
complete the Project in a timely, cost effective, and economically
efficient manner. ISAN shall use its reasonable best efforts to
assure that the Project in managed and completed in compliance in
all material respects with all applicable laws and regulations.
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14. Representations and Warranties of ERC. ERC hereby represents and
warrants that: (i) this Agreement has been duly authorized by all
necessary corporate action and constitutes a valid and binding
agreement enforceable against ERC in accordance with its terms; (ii)
ERC is a company duly organized, validly existing and in good
standing under the laws of the State of Nevada, and has the
requisite corporate power to enter into and perform this Agreement;
(iii) neither the execution and delivery of this Agreement nor the
consummation of the transactions contemplated hereby will violate or
result in any violation of or be in conflict with or constitute a
default under any term of the organizational documents of ERC, or be
a violation of any law, rules or regulations applicable to ERC, and
will not breach any agreement or undertaking to which ERC is a
party; (iv) ERC has sufficient funds to provide the Financing and
such Financing is not subject to conditions not provided herein; and
(v) ERC has obtained the consent of Euroweb, its parent company, to
this Agreement.
15. Nature of Transaction. ERC hereby acknowledges and agrees that (i)
the Project and the Financing involve a substantial risk, (ii) it
has experience as investor in such projects and is capable of
evaluating the merits and risks of its investment in the Company and
the Project, (iii) it has conducted to its satisfaction an
independent investigation of the Project (including through outside
consultants) and in making its determination to invest in the
Company and the Project it has relied solely on the results of such
independent investigation and evaluation. Neither party shall have
(and each party hereby irrevocably waives) any claim against the
other party or any of its directors, officers, representatives or
affiliates in connection with the Project (including its financial
success and the benefits derived, or expected to be derived,
therefrom or from its investment in the Company).
16. Exhibit A. The parties hereby agree and acknowledge that Exhibit A
hereto reflects their current plans, estimates and projections
regarding the Project and there is no guarantee that such plans,
estimates and projections shall materialize, in whole or in part.
ERC agrees that any development plans, cost estimates or forecasts
that have been provided with respect to the Project (including as
included in Exhibit A) shall not be deemed representations or
warranties of ISAN or its directors, officers, representatives or
affiliates.
IV. Miscellaneous
17. Detailed Agreement. A detailed agreement shall be signed between the
parties based upon this Agreement (the "Detailed Agreement") and the
parties shall use their respective reasonable efforts to execute
such Detailed Agreement following the execution hereof. For the
avoidance of doubt, it is hereby acknowledged and agreed by the
parties that, until its substitution by the Detailed Agreement, this
Agreement shall be binding on all parties for any and all purposes
and shall be considered a full and binding agreement with respect to
the subject matter hereof .
18. Termination. This Agreement shall terminate and be of no further
force and effect, with no liability of any party towards the other,
upon the mutual consent of all of the parties hereto or at such
earlier time as (i) the parties execute and deliver the Detailed
Agreement or (ii) a final binding purchase agreement for the
property that is the subject matter of the Project is entered into
with any purchaser that is not the Company.
19. Integration. This Agreement contains the entire agreement and
understanding between the parties with respect to the subject matter
hereof and incorporates and supersedes any and all prior or
contemporaneous oral or written negotiations, understandings and
documents with respect thereto.
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20. Binding Nature of Agreement; No Third Party Beneficiaries. This
Agreement shall be binding upon and inure to the benefit of and be
enforceable by the parties hereto or their successors in interest,
except as expressly otherwise provided herein. Nothing in this
Agreement shall convey any rights upon any person or entity which is
not a party or an assignee of a party to this Agreement.
21. Exclusivity. ISAN shall not initiate or carry on negotiations for
the acquisition, management, development or operation of the Project
with any party other than ERC prior to the termination of this
Agreement in accordance with its terms.
22. Assignment. This Agreement may not be assigned by any party hereto
without the prior written consent of the other party, other than to
its wholly-owned subsidiary or to an entity which is wholly-owned by
its current shareholders (in each case, which shall remain so
wholly-owned until this Agreement is terminated in accordance with
its terms), it is being clarified that nothing herein shall prevent
ERC or Euroweb from doing any transactions whatsoever in the share
capital of ERC (including IPO, spin-off and the like).
23. Governing Law. This Agreement shall be governed by and construed in
accordance with the laws of the State of Israel.
24. Negotiation; Arbitration. In the event of any dispute, claim,
question, or disagreement arising from or relating to this Agreement
(including the Project) or the breach thereof, the parties hereto (a
"Dispute") shall use their best efforts to settle the dispute,
claim, question, or disagreement. To this effect, they shall consult
and negotiate with each other in good faith and, recognizing their
mutual interests and interests of the Company, attempt to reach a
just and equitable solution satisfactory to both parties. If they do
not reach such solution within a period of thirty (30) days, then,
upon notice by either party to the other, all Disputes shall be
finally settled by arbitration (i) administered by an arbitrator
selected by the Head of the Israeli Bar Association (ii) in
accordance with the Israeli Arbitration Law and (iii) held in
Israel. Judgment on the award rendered by the arbitrator may be
entered in any court having jurisdiction thereof. The expenses of
the arbitrator shall be initially borne by the Company and then
repaid to it upon final settlement of the Dispute by the party so
determined by the arbitrator.
25. Jurisdiction. ERC hereby submits to the exclusive jurisdiction of
the courts located in Tel-Aviv, Israel, for purposes of issuing any
pre-arbitral injunction or other preliminary relief, an order to
compel arbitration or other order in aid of arbitration proceedings
(collectively, "Relief Order"). ISAN shall have the right to
commence any proceeding for purposes of issuing any Relief Order in
any court of competent jurisdiction in Israel or the US. The parties
hereby irrevocably waive any objection which they may have to the
courts being nominated as the forum to hear and determine such
matters and agree not to claim that any such court is not a
convenient or appropriate forum.
26. Service of Process. ERC agrees that the process by which any
arbitration or court proceedings are begun may be served on it by
being delivered in connection therewith in Israel to X. Xxxxxxxx &
Co., 00 Xxxx Xxxx Xxxxxx, Xxx-Xxxx 00000. Nothing herein shall
affect the right to serve process in any other manner permitted by
law.
27. Amendments. This Agreement may not be amended, modified or
supplemented except with the written approval of each of ISAN and
ERC.
28. Notices. Any notice or consent required or permitted by this
Agreement shall be in writing and sent by registered airmail or
delivered by hand to the other party at its address specified on the
first page of this Agreement, or to such other address as such party
may designate by notice given in accordance herewith. Any such
communications shall be deemed given five (5) business days after
mailed as aforesaid and immediately upon receipt by messenger.
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29. Further Actions. Each party undertakes to execute, acknowledge and
deliver all such other acts, deeds, documents and assurances as may
be reasonably requested to effect and consummate the transactions
contemplated hereby. The parties shall cooperate in good faith in
structuring the transactions contemplated hereby in the most
tax-efficient manner for the benefit of both parties.
IN WITNESS HEREOF, the parties have caused this Agreement to be executed and
delivered as of the date first above written.
ISAN HOLDINGS LTD.
By: /s/ Abbot Franco
Name: Abbot Franco
Title: CEO
EUROWEB RE CORP.
By: /s/ Xxxxx Xxxxx
Name: Xxxxx Xxxxx
Title: CEO
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