Agreement - Interad (1995) Ltd., Nirbarkat Holdings Ltd., Elibarkat Holdings Ltd., Yuval 63 Holdings (1995) Ltd., Lier Nasa and Iftah Sneh
AGREEMENT
made and executed in Jerusalem on __________________, 1995
between: INTERAD (1995) LTD.
of 5 Kiryst Mada Street, Mar Notevim, Jerusalem
("INTERAD")
of the first part;
and: NIRBARKAT HOLDINGS LTD.
..............................
("Nir")
ELIBARKAT HOLDINGS LTD.
..............................
("Eli")
YUVAL 63 HOLDINGS (1995) LTD.
..............................
("Yuval")
(Nir, Eli and Yuval are collectively referred
to in this agreement as "BRB")
of the second part;
and Lier Nasa
..............................
("Lior")
of the third part;
and Iftah Sneh
..............................
("Iftah")
of the fourth part.
WHEREAS the parties to this Agreement wish to cooperate for the purpose of
carrying out projects, research and development relating to the field
of utilizing the Internet and similar media for broadcasting
information such as advertising to clients (the "Field"); and
WHEREAS the parties wish to carry out this cooperation through INTERAD, which
will conduct the research and development in the Field and will
<PAGE> 2
thereafter seek commercially to exploit the results of the projects;
and
WHEREAS the parties wish to formalize the terms and conditions with respect to
their investments in INTERAD, their duties and the relationship among
themselves concerning the management of INTERAD;
THE PARTIES THEREFORE AGREE, REPRESENT
AND COVENANT AS FOLLOWS:
1. Preamble and Exhibits
1.1 The preamble to this Agreement constitutes an integral part hereof
and forms part of its conditions.
1.2 All of the exhibits that are appended to this Agreement constitute an
integral part hereof.
2. Representatives and Covenants of Lior and Iftah
Each of Lior and Iftah represents, warrants and covenants as to himself as
follows:
2.1 He possesses know-how, experience, ability and expertise in the
Field, and he further possesses appropriate know-how and talent to
attain the objective of INTERAD, as specified in this Agreement.
2.2 The title to every intellectual property and other right held by him
in the Field will be fully conveyed to INTERAD, and no third party
has any claim or contention with respect to any such right.
2.3 To the best of his knowledge (i) there is no provision of law or
contract that prevents his from entering into this Agreement and
performing his obligations hereunder, and (ii) no third party has any
claim or contention against him with respect to his activities in the
Field.
2.4 He will dedicate all of his time and effort to fulfilling his
responsibilities with INTERAD,
2
<PAGE> 3
and he will not engage in any other work so long as he is employed by
INTERAD.
2.5 Any invention or development by him anywhere in the world, in the
Field, for so long as he is a shareholder or employee of INTERAD and
for a period of two years after he ceases to be a shareholder or
employee (whichever is the latter to occur), shall be the property of
INTERAD.
2.6 He shall not be entitled to any royalty or income for any of his
inventions or developments in the Field, which he invents or develops
during the period that he is a shareholder or employee of INTERAD and
for a period of two years after he ceases to be a shareholder or
employee (whichever is the latter to occur), and any royalty or
income to which he would otherwise be entitled shall be the property
of INTERAD.
3. Representations and Covenants of BRB
Each of Nir, Eli and Yuval represents, warrants and covenants, jointly and
severally, as follows:
3.1 The officers of BRB have know-how and talent with respect to the
development of software products and the formation of contacts with
suitable marketing entities, and consequently BRB has the ability to
perform its obligations under this Agreement.
3.2 To the best of its knowledge (i) there is no provision of law or
contract that prevents any member of BRB from entering into this
Agreement and performing its obligations hereunder, and (ii) no third
party has any claim or contention against any of them with respect to
their activities in the Field.
3.3 They will dedicate appropriate time, effort, talent and contacts to
advance the interests or INTERAD.
3.4 Any invention or development of any member of BRB anywhere in the
world, in the Field, shall be the property of INTERAD. This section
shall not include any prior inventions or
3
<PAGE> 4
developments used in connection with other products marketed or
owned by BRB, BRM Technologies Ltd. ("BRM") or any entity
affiliated with them.
4. Objective of INTERAD
The objective of INTERAD shall be to engage in research and
development projects in the Field and their commercial exploitation.
INTERAD shall also engage in any other activity approved at a general
assembly of shareholders by the vote of the holders of 75% of
INTERAD's shares.
5. Documents of Incorporation
In any case of conflict between the documents of incorporation of
INTERAD and the provisions of this Agreement, the provisions of this
Agreement shall govern.
7. Capitalization of INTERDAD
7.1 Immediately after the execution of this Agreement, the shares of
INTERAD will be allotted to the parties to this Agreement in the
following manner:
624,800 Preferred Shares of NIS 0.01 nominal value each
shall be allotted Nir against payment of their nominal
value.
624,800 Preferred Shares of NIS 0.01 nominal value each
shall be allotted Eli, against Payment of their nominal
value.
624,800 Preferred Shares of NIS 0.01 nominal value each
shall be allotted Yuval, against payment of their nominal
value.
192,00 Ordinary Shares of NIS 0.01 nominal value shall be
allotted to Lior, against payment of their nominal value.
192,000 Ordinary shares of NIS 0.01 nominal value each shall
be allotted to Iftah, against payment of their nominal
value.
4
<PAGE> 5
In addition, BRB will have the exclusive discretion to instruct
INTERAD to allot Ordinary Shares of INTERAD and options to
purchase Ordinary Shares of INTERAD to any person whatsoever.
Such allotments will not cumulatively exceed ____________
Ordinary Shares (including options to purchase Ordinary Shares).
7.2 Upon a resolution approved by the holders of at least 75% of
INTERAD's shares, a number of Ordinary Shares of NIS 0.01 nominal
value each accounting to no more than ___________, shall be
allotted to additional key employees of INTERAD, upon such
employees' agreeing to be bound by all of the terms of this
Agreement. The allotments described in the preceding sentence and
every allotment thereafter will dilute the parties' shareholdings
in INTERAD on a pro rata basis.
7.3 The rights, preferences, privileges, and restrictions granted to
and imposed on the Preferred and Ordinary Shares of INTERAD, are
as set forth in the Articles of Association of INTERAD.
7.4 The Shares to be allotted to Lior and Iftah pursuant to Section
7.1 shall be deposited in trust with ________ (the "Trustee")
together with stock transfer deeds, executed in blank by each of
Lior and Iftah with respect to the shares allotted to him. The
following vesting provisions shall apply to each of Lior and
Iftah (an "Eligible Employee") with respect to the shares
allotted to him:
7.4.1 If an Eligible Employee is employed by INTERAD on the
date that is six months following the commencement of
his employment with INTERAD, the Trustee shall deliver
to such Eligible Employee a number of Ordinary Shares
equal to 25% of the Ordinary Shares allotted to him
pursuant to Section 7.1 above. In the event that an
Eligible Employee is not still employed by INTERAD on
such date, than all of the shares that were allotted
5
<PAGE> 6
to him pursuant to Section 7.1 above shall be converted into
deferred shares.
7.4.2 If an Eligible Employee is employed with INTERAD on or subsequent
to the first anniversary of his employment with INTERAD, the
Trustee shall deliver to such Eligible Employee an additional
number of Ordinary Shares equal to 25% of the Ordinary Shares
allotted to him pursuant to Section 7.1 above. In the event that
an Eligible Employee is employed by INTERAD on or subsequent to
the date that is six months following the commencement of his
employment with INTERAD but not on the first anniversary of his
employment with INTERAD, then:
(A) the Trustee shall deliver to him a number of Ordinary Shares
equal to (x) the number of whole months, if any, that he was
employed by INTERAD after the date that is six months
following the commencement of his employment with INTERAD,
multiplied by (y) 4.16% of the Ordinary Shares allotted to
him pursuant to Section 7.1 above; and
(B) the balance of the Ordinary Shares allotted to him pursuant
to Section 7.1 above but not previously delivered to him
shall be converted into deferred shares.
7.4.3 After the first anniversary of his employment, en Eligible
Employee shall have the right, at any time, to receive a number
of Ordinary Shares equal to (x) the number of whole months, if
any, that the Eligible Employee was employed by INTERAD after the
first anniversary of his employment with INTERAD, multiplied by
(y) 4.16% of the Ordinary Shares allotted to him pursuant to
Section 7.1 above subject to the service of a
6
<PAGE> 7
written notice signed by him to this effect. The trustee shall
deliver the shares to the Eligible Employee within 14 days from
the date of receipt such notice.
Subject to subsection 7.4.4 below, if an Eligible Employee's
employment is terminated before the second anniversary of his
employment, the Eligible Employee will be entitled to shares
under subsection 7.4.3 above only, and any outstanding Shares
allocated to him pursuant to Section 7.1 above shall be converted
into deferred shares.
7.4.4 Notwithstanding the provisions of Sections 7.4.2 and 7.4.3 above,
if an Eligible Employee is terminated for cause (defined as a
material breach by the Eligible Employee of his obligations to
INTERAD; the failure or refusal of the Eligible Employee
satisfactorily to perform any of his duties to INTERAD; willful
selfessance or gross negligence by the Eligible Employee in the
performance of his duties to INTERAD; the commission by the
Eligible Employee of a felony; or the perpetration by the
Eligible Employee of a dishonest act against INTERAD or any
subsidiary or affiliated company of INTERAD), any of his Ordinary
Shares then held by the Trustee shall immediately be converted
into deferred shares and his entitlement to such shares shall
automatically cease.
Until the shares allotted to an Eligible Employee pursuant to
section 7.1 above are released from trust, an Eligible Employee
will have the right to instruct the Trustee to exercise the
rights annexed to such shares in his sole discretion.
7
<PAGE> 8
7.5 INTERAD shall not issue shares otherwise than with the consent of
the holders of at least 75% of the shares of INTERAD.
8. Transfer of Shares
8.1 For a period of three years following the execution of this Agreement
or until the full repayment of the BRB loan pursuant to Section 13
below, whichever is earlier, the parties shall not be entitled to
transfer their shares in INTERAD.
8.2 Subject to the provisions of Section 8.1, if a shareholder wishes to
sell or otherwise transfer any or all of his shares in INTERAD (the
"Selling Party") he shall be required to offer the shares that he
wishes to transfer (the "Offered Shares") to the other shareholders
of INTERAD, pro rata to their respective interests in INTERAD. The
Selling Party shall send the other shareholders a written offer in
which he shall specify the price and payment terms that he is
proposing (the "Offer").
8.3 Any of the other shareholders who wishes to purchase the Offered
Shares shall notify the Selling Party of his agreement to purchase
all of the Offered Shares contained in the Offer within 30 days of
receipt of the Offer.
8.4 If any of the other shareholders declines to purchase the Offered
Shares, declines to purchase the Offered Shares upon the terms
specified in the Offer or does not respond to the Offer within 30
days of receipt, the Selling Party shall so notify all of the other
shareholders and they shall be entitled to purchase any remaining
shares within 7 days in accordance with the Offer, pro rata to their
respective interests in INTERAD or otherwise as may be agreed among
them. If the Offer specifies that it is contingent upon the purchase
of all of the Offered Shares, the Selling Party shall be entitled to
refuse to transfer the shares pursuant to the Offer if there is only a
partial response to the Offer.
8
<PAGE> 9
8.5 If there remain any shares that have not been acquired by the shareholders
as specified above, the Selling Party may sell such shares to a third party
on the terms of the Offer or at a price that is higher than that specified
in the Offer and on payment terms that are no more favorable to the
purchaser, within 90 days of the expiration of the period specified in
Section 8.4 above.
8.6 If the shares are sold to a third party in such manner, INTERAD shall be
required to approve the transfer of the shares, provided that the transfer
is in accordance with the terms contained in the Offer, and further
provided that the transferee of the shares is not a competitor or
potential competitor with the business of INTERAD and shall execute this
Agreement as though it were one of the original parties hereto.
8.7 If any or all of the other shareholders agree to purchase the Offered
Shares on the terms specified in the Offer, the Offered Shares shall become
the property of such other shareholders who responded to the Offer, pro
rata to their respective interests in INTERAD, against payment of the
consideration as specified in the Offer.
8.8 The provisions of subsections 8.1 through 8.7 shall not apply to transfers
of shares between Lior and Iftah; between Lior or Iftah and a company that
is wholly controlled by Lior or Iftah; among Nir, Eli and Yuval; between
Nir, Eli or Yuval and a company that is wholly controlled by any or Nir,
Eli or Yuval; between Nir, Eli or Yuval and BRM (or any wholly-controlled
subsidiary or BRM); or between BRB and any of its professional advisors. In
addition, upon the death of Lior or Iftah, any shares that have been
distributed to him by the Trustee may be transferred to his legal heirs.
Any transfer described in this section shall be permitted, provided that
every new shareholder accepts the obligations of the transferor pursuant to
this Agreement.
9
<PAGE> 10
9. Board of Directors of INTERAD
9.1 The number of members of the Board of Directors of INTERAD shall be
determined by an ordinary resolution of the general assembly of the
shareholders of INTERAD.
9.2 The directors of INTERAD shall be appointed and not elected. The
holder or holders of each 10% of the Shares of INTERAD will have the
right to appoint one-tenth of the number of Directors of INTERAD (but
in any event at least one director), to dismiss him and to appoint a
replacement. The appointment or dismissal of a director shall be by
means of the delivery of a written notice to the registered office of
INTERAD.
9.3 A director appointed by BRB shall be appointed the Chairman of the
Board of Directors. The Chairman of the Board of Directors shall not
have an additional or casting vote on the Board.
9.4 The day to day management of INTERAD shall be the responsibility of
the General Manager of INTERAD, who shall be appointed to his
position for a term of one year. The appointment shall be made by the
Board of Directors of INTERAD. ___ shall be appointed as the first
General Manager of INTERAD.
The authority of the General Manager, his role, his responsibility
and the terms of his employment shall be determined by the Board of
Directors of INTERAD.
9.5 In each case of a tie vote on the Board of Directors of INTERAD, the
matter as to which no decision was reached shall be brought for
debate to a general assembly of the shareholders of INTERAD.
10. Registered Office
INTERAD's registered office and place of business shall be located in care
of BRM Technologies Ltd., Kiryst Mada, Mar Notavim, Jerusalem, unless and
until Lior, Iftah and the other employees hired
10
<PAGE> 11
pursuant to Section 7.2 determine to move the location of INTERAD to the
Tel-Aviv area.
11. Signature Rights
The signature of an executive officer of INTERAD together with the
signature of any one of the individuals designated by BRB, and together
with the corporate stamp or next to the printed name of INTERAD, shall
bind INTERAD in all respects.
12. Expenses of the Registration of INTERAD
The expenses of the registration of INTERAD shall be deemed BRB loans to
INTERAD; BRB shall be entitled to the repayment of such loans on such
terms as they shall determine.
13. Financing and Investments
13.1 BRB undertakes that, after the incorporation of INTERAD, BRB shall
make available to INTERAD, by means of shareholder loans or any other
means chosen by BRB in its sole discretion, including by means of
providing security for loans to be taken by INTERAD, financing in New
Israeli Shekels that is equivalent to up to US$500,000 (not including
the amounts specified in Section 16.2), based on the representative
rate of exchange of the United States dollar as published by the Bank
of Israel at the time of each funding. The amount shall be paid
within one year of the execution of this Agreement, at such times as
shall be agreed between the parties.
13.2 The parties agree that beginning at such time as INTERAD shall have
cumulative revenues of $5 million, the BRB shareholder's loan shall
be repaid at the rate of 2.5% of each subsequent dollar of revenue
and any security that BRB may have provided shall be released at such
rate.
The repayment of the shareholder loans shall be made together with
the addition of linkage differentials based on the difference in the
consumer price index from the date of the making of the loan until
its repayment (based on the index known at the time of the making
11
<PAGE> 12
of the loan or any portion thereof, as the case may be, and the
index at the time of repayment of the loan or any portion thereof,
as the case may be), without interest.
13.3 To the extent that INTERAD requires minimum capital for purposes of
Approved Enterprise status, an appropriate amount of the loan shall
be converted to equity capital.
13.4 BRB are hereby granted an option, exercisable in whole or in part
at any time within one year of the date of this Agreement, to invest
an additional amount in New Israeli Shekels that is equivalent to up
to US$500,000 pro rata to their respective holdings in INTERAD,
based on the representative rate of exchange of the United States
dollar as published by the Bank of Israel at the time of each
funding. The number of Preferred Shares to be issued to BRB upon the
exercise of such option shall be based upon a pre-money valuation of
INTERAD equal to US$2 million. In the event that BRB exercises such
option, each of Lior and Iftah shall have an option, exercisable for
a period of 45 days following the exercise of the BRB option, to
purchase Preferred Shares by allotment, in such number as shall
maintain his percentage holding in INTERAD and at the same per share
price paid by BRB.
14. Raising Equity Capital from the Public
The parties agree that in the event INTERAD determines in the future to
raise equity capital from the public by means of a public offering or by
means of a private placement, all of the provisions in this Agreement or
in INTERAD's Articles of Association shall be canceled to the extent that
they conflict with such intention. Similarly, any provision that restricts
the ability to perform any legal act with respect to a share shall be
canceled.
15. United States Operations
The parties expect that it will be necessary to establish a United States
headquarters operation to exploit the products to be developed by INTERAD.
The parties shall issue options to the key employees
12
<PAGE> 13
of the United States operations, in such amounts and on such terms as the
Board of Directors of INTERAD may determine.
16. Reimbursement of Expenses and Wages
16.1 Each of Lior and Iftah will be employed by INTERAD on a full-time
basis in accordance with the respective employment agreements that
are appended hereto as Exhibit B. Lior's employment will commence on
November 26, 1995 and Iftah's employment will commence on January 1,
1996. Lior and Iftah will receive a gross salary of NIS 17,000 until
the repayment of the loan in accordance with Section 13 above or
until such other time as shall be agreed between the parties. In
addition, so long as Lior, Iftah and the other employees hired
pursuant to Section 7.1 work in Jerusalem, INTERAD will make one car
available for their use.
16.2 BRB shall provide INTERAD with professional services. In
consideration of the services to be provided by BRB to INTERAD,
INTERAD shall pay BRB a monthly amount of NIS 17,000 and INTERAD
shall bear the expenses incurred by BRB in providing the services.
Until INTERAD raises capital through a public offering or private
placement of securities to a party other than BRB, the payments to
BRB pursuant to this section will accrue and shall be deemed part of
BRB's shareholders loan under Section 13.1 above, to be repaid to
BRB as specified in Section 13.2 above; thereafter, such amounts
shall be paid on a current basis.
If, pursuant to a resolution of the Board of Directors of INTERAD,
any of the officers of BRB take an operative role in the day-to-day
business of INTERAD, his remuneration will be determined by a
special resolution of the shareholders of INTERAD.
16.3 BRB shall use its best efforts to cause BRM to provide
administrative and financial services, and to the extent feasible
research and development services, to INTERAD. INTERAD shall
reimburse BRM for such services on the basis of cost plus 15%.
13
<PAGE> 14
17. Non-competition; Confidentiality
The parties covenant not to engage in the Field otherwise than through
INTERAD, directly or indirectly, themselves or through others, whether
self-employed or as employees, including through a partnership or by
holding, themselves or through others, shares or rights to control any
legal entity. Moreover, the parties covenant not to disclose and shall not
in any way transfer to any person or entity any information in their
possession on or concerning the affairs of INTERAD - so long as they are
shareholders or employees of INTERAD and for a period of two years
thereafter.
18. Accountant
Kost Levary & Forar, certified public accountants, shall be appointed as
the accountants of INTERAD.
19. Assignment
BRB shall have the right at any time to assign this Agreement to a company
that is wholly controlled by BRB, to BRM or to any wholly-controlled
subsidiary of BRM, but in any such case BRB shall remain liable for the
obligations of the assignee under this Agreement.
20. Notices
A notice that is sent to the addresses of the parties specified in the
preamble to this Agreement shall be deemed to have reached the addressee
and to have been brought to his attention within 5 days from the date of
its mailing by registered mail or at the time of deliver if hand delivered.
IN WITNESS WHEREOF the parties have signed this Agreement at the place and time
noted above.
NIRBARKAT HOLDINGS LTD. LIOR HASS
[SIG] [SIG]
ELIBARKAT HOLDINGS LTD. IFTAH SNEH
[SIG] [SIG]
YUVAL 63 HOLDINGS (1995) LTD.
[SIG]
14