UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 20-F
o
REGISTRATION STATEMENT PURSUANT TO SECTION 12(b) OR (g)
OF THE SECURITIES EXCHANGE ACT OF 1934
OR
x
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 2005
OR
o
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from ____________ to ______________
OR
o
SHELL COMPANY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
Date of event requiring this shell company report ________
Commission File No.
0-29256
G. WILLI-FOOD
INTERNATIONAL LTD.
(Exact name of Registrant as specified in its charter
and translation of Registrant’s name into English)
Israel
(Jurisdiction of incorporation or organization)
3 Nahal Snir St.,
Northern Industrial Zone, Yavne, 81224, Israel
(Address of principal executive offices)
Securities registered or
to be registered pursuant to Section 12(b) of the Act:
None
Securities registered or to
be registered pursuant to Section 12(g) of the Act:
Ordinary Shares,
NIS 0.10 par value per share
(Title of Class)
Securities for which
there is a reporting obligation pursuant
to Section 15(d) of
the Act:
None
Indicate
the number of outstanding shares of each of the issuer’s classes of capital or
common stock as of the close of the period covered by the Annual Report:
The
registrant had 8,615,000 outstanding ordinary shares, NIS 0.10 nominal value per
share as of December 31, 2005.
Indicate
by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405
of the Securities Act.
Yes
o
No
x
If
this report is an annual or transition report, indicate by check mark if the registrant
is not required to file reports pursuant to Section 13 or 15(d) of the Securities
Exchange Act 1934.
Yes
o
No
x
Indicate
by check mark whether the registrant (1) has filed all reports required to be filed by
Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months
(or for such shorter period that the registrant was required to file such reports), and
(2) has been subject to such filing requirements for the past 90 days:
Yes
x
No
o
Indicate
by check mark whether the registrant is a large accelerated filer, an accelerated filer,
or a non-accelerated filer. See definition of “accelerated filer and large
accelerated filer” in Rule 12b-2 of the Exchange Act. (Check one):
Large Accelerated filer
o
Accelerated filer
o
Non-accelerated filer
x
Indicate
by check mark which financial statement item the Registrant has elected to follow:
Item 17
o
Item 18
x
If
this is an annual report, indicate by check mark whether the registrant is a shell
company (as defined in Rule 12b-2 of the Exchange Act).
Yes
o
No
x
TABLE OF CONTENTS
PRESENTATION OF
INFORMATION
In this Annual Report, references
to the “Company”, “we” and “us” refer to G. Willi-Food International Ltd. and its
consolidated subsidiaries.
The Company presents its consolidated
financial statements in New Israeli Shekels, the currency of the State of Israel. Unless
otherwise specified or the context otherwise requires, references to “$",
“US$", “Dollars”, “USD” and “U.S. Dollars” are to
the United States Dollars and references to NIS are to New Israeli Shekels.
Solely for the convenience of the
reader, this Annual Report contains translations of certain NIS amounts into U.S. Dollars
at specified rates. These translations should not be construed as representations that the
translated amounts actually represent such dollar or NIS amounts, as the case may be, or
could be converted into U.S. Dollars or NIS as the case may be, at the rates indicated or
at any other rate. Therefore, unless otherwise stated, the translations of NIS into U.S.
Dollars have been made at the rate of NIS 4.603 = $ 1.00, the representative exchange rate
on December 31, 2005.
CAUTIONARY STATEMENT
WITH RESPECT TO FORWARD-LOOKING STATEMENTS
Certain of the statements contained
in this Annual Report that are not historical facts, including, without limitation,
certain statements made in the sections hereof entitled “Information on the
Company,” “Dividends,” “Operating and Financial Review and
Prospects,” and “Quantitative and Qualitative Disclosures about Market
Risk” are statements of future expectations and other forward-looking statements that
are based on management’s current views and assumptions and involve known and unknown
risks and uncertainties that could cause actual results, performance or events to differ
materially from those expressed or implied in such statements. Actual results, performance
or events may differ materially from those in such statements due to, without limitation:
|
—
|
changes
affecting currency exchange rates, including the NIS/U.S. Dollar exchange rate,
|
|
—
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payment
default by any of our major clients,
|
|
—
|
the
loss of one of more of our key personnel,
|
|
—
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changes
in laws and regulations, including those relating to the food distribution industry, and
inability to meet and maintain regulatory qualifications and approvals for our products,
|
|
—
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termination
of arrangements with our suppliers, in particular Arla Foods amba,
|
|
—
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loss
of one or more of our principal clients,
|
|
—
|
increasing
levels of competition in Israel and other markets in which we do business,
|
|
—
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changes
in economic conditions in Israel, including in particular economic conditions in the
Company's core markets,
|
|
—
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our
inability to accurately predict consumption of our products,
|
|
—
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product
liability claims,
|
|
—
|
our
inability to continue to meet the Nasdaq listing requirements.
|
The Company is under no obligation to
publicly update or revise any forward-looking statements, whether as a result of new
information or for any other reason. See Item 3: “Key Information-Risk Factors”
and Item 5: “Operating and Financial Review and Prospects – Results of
Operations”.
Page 1
PART I
|
ITEM 1.
|
|
IDENTITY OF DIRECTORS, SENIOR MANAGEMENT AND ADVISORS
|
Not
applicable.
|
ITEM 2.
|
|
OFFER STATISTICS AND EXPECTED TIME TABLE
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Not
applicable.
|
|
A.
|
SELECTED
FINANCIAL DATA
|
The
following selected consolidated financial data should be read together with Item 5:
“Operating and Financial Review and Prospects” and our audited consolidated
financial statements and related notes included elsewhere in this annual report. The
selected consolidated balance sheet data as of December 31, 2005 and 2004 and the
selected consolidated statements of operations data for each of the three years in the
period ended December 31, 2005, 2004 and 2003 have been derived from our audited
consolidated financial statements included elsewhere in this Form 20-F, which have been
prepared in accordance with generally accepted accounting principles in Israel
(“Israeli GAAP”). Israeli GAAP, as applicable to the financial statements are,
in all material respects, substantially identical to generally accepted accounting
principles in the United States (“U.S. GAAP”), except for the accounting
recognition of the effects of inflation on the financial statements, which was applicable
until December 2003 (see Note 2C of the Notes of the Company’s consolidated financial
statements), and except for presentation of cash flows. Reference is made to Notes 2 and
14 of the Notes of the Company’s consolidated financial statements for a description
of the significant differences between Israeli GAAP and U.S. GAAP.
The
selected consolidated balance sheet data as of December 31, 2005 and 2004 and the
selected consolidated statements of operations data for each of the three years in the
period ended December 31, 2005, 2004 and 2003 have been audited by Brightman Almagor &
Co., an independent registered public accounting firm, and a Member Firm of Deloitte
Touche Tohmatsu. Their report appears in Item 18 in this Form 20-F. The selected
consolidated balance sheet data as of December 31, 2003, 2002 and 2001 and the
selected consolidated statements of operations data for the years ended December 31, 2002
and 2001 have been derived from our audited consolidated financial statements which are
not included in this Form 20-F. Historical financial results may not be indicative of our
future performance and interim results may not be reflective of the results for the fiscal
year.
The
Company maintains its accounts and presents its financial statements in New Israeli
Shekels, by reported amounts which, until December 31, 2003, were adjusted to the Israeli
Consumer Price Index (“CPI”) and, based on accounting standard No. 12
(“Cessation of Financial Statement Adjustment”) which went into effect on
January 1, 2004, the Company ceased to adjust its financial statements based on the
changes in the general purchasing power of the Israeli currency commencing January 1,
2004. As such, starting in 2004 the Company’s financial statements are prepared in
“reported amounts”. The data included in the financial statements relating to
dates and periods up to, and including, December 31, 2003, are stated in adjusted amounts.
The
reported and/or adjusted amounts of non-monetary items reflect their cost in terms of
reported amounts or the cost adjusted to the changes in the CPI up to December 2003 and do
not necessarily reflect their market value or value to the business. The method for
determining reported amounts in the 2005 annual financial statements and in the 2004
annual financial statements for the balance sheet and the statement of operations is
included in the consolidated financial statements (see Note 2 of the Notes of the
Company’s consolidated financial statements).
Page 2
Recent Exchange Rates of
NIS to one U.S. Dollar
The table shows the high and low
exchange rate of NIS per one U.S. Dollars for the last six months:
|
|
High
|
Low
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 2005
|
|
|
|
4.662
|
|
|
4.579
|
|
|
January 2006
|
|
|
|
4.637
|
|
|
4.577
|
|
|
February 2006
|
|
|
|
4.719
|
|
|
4.664
|
|
|
March 2006
|
|
|
|
4.717
|
|
|
4.658
|
|
|
April 2006
|
|
|
|
4.671
|
|
|
4.503
|
|
|
May 2006 (through May 30, 2006)
|
|
|
|
4.522
|
|
|
4.428
|
|
The
representative exchange rate for NIS on December 31, 2005 was NIS 4.603 = $1.00 and the
representative exchange rate for NIS on May 30, 2006 was NIS 4.517 = $1.00.
The
average exchange rate of NIS 4.489 = USD 1.00 was for the year ended December 31, 2005,
4.482 for the year ended December 31, 2004, 4.548 for the year ended December 31, 2003,
4.738 for the year ended December 31, 2002 and 4.206 for the year ended December 31, 2001.
CONSOLIDATED STATEMENT
OF OPERATIONS
(In thousands except
per share data)
(NIS)
|
|
Years ended December 31
|
|
|
2005
|
2004
|
2003
|
2002
|
2001
|
|
|
NIS
|
USD
|
NIS
|
USD
|
NIS
|
USD
|
NIS
|
USD
|
NIS
|
USD
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Sales
|
|
|
|
166,282
|
|
|
36,125
|
|
|
170,982
|
|
|
37,146
|
|
|
137,385
|
|
|
29,847
|
|
|
128,870
|
|
|
27,997
|
|
|
133,021
|
|
|
28,899
|
|
|
Cost of Sales
|
|
|
|
128,215
|
|
|
27,855
|
|
|
130,292
|
|
|
28,306
|
|
|
110,160
|
|
|
23,932
|
|
|
101,126
|
|
|
21,970
|
|
|
102,955
|
|
|
22,367
|
|
|
Gross Profit
|
|
|
|
38,067
|
|
|
8,270
|
|
|
40,690
|
|
|
8,840
|
|
|
27,225
|
|
|
5,915
|
|
|
27,744
|
|
|
6,027
|
|
|
30,066
|
|
|
6,532
|
|
|
Sales and Marketing
|
|
|
|
15,771
|
|
|
3,426
|
|
|
15,632
|
|
|
3,396
|
|
|
11,662
|
|
|
2,533
|
|
|
10,024
|
|
|
2,178
|
|
|
10,000
|
|
|
2,172
|
|
|
General and Administrative
|
|
|
|
10,044
|
|
|
2,182
|
|
|
9,134
|
|
|
1,984
|
|
|
8,335
|
|
|
1,811
|
|
|
8,199
|
|
|
1,781
|
|
|
9,054
|
|
|
1,967
|
|
|
Bad Debt - Club Market
|
|
|
|
3,500
|
|
|
761
|
|
|
--
|
|
|
--
|
|
|
--
|
|
|
--
|
|
|
--
|
|
|
--
|
|
|
--
|
|
|
--
|
|
|
Total Operating Expenses
|
|
|
|
29,315
|
|
|
6,369
|
|
|
24,766
|
|
|
5,380
|
|
|
19,997
|
|
|
4,344
|
|
|
18,223
|
|
|
3,959
|
|
|
19,054
|
|
|
4,139
|
|
|
Operating Income
|
|
|
|
8,752
|
|
|
1,901
|
|
|
15,924
|
|
|
3,460
|
|
|
7,228
|
|
|
1,571
|
|
|
9,521
|
|
|
2,068
|
|
|
11,012
|
|
|
2,393
|
|
|
Financial Income
|
|
|
|
(Expenses), Net
|
|
|
|
2,501
|
|
|
543
|
|
|
1,121
|
|
|
244
|
|
|
4,336
|
|
|
942
|
|
|
(239
|
)
|
|
(52
|
)
|
|
1,802
|
|
|
391
|
|
|
Other Income, Net
|
|
|
|
35
|
|
|
8
|
|
|
34
|
|
|
7
|
|
|
101
|
|
|
22
|
|
|
29
|
|
|
6
|
|
|
--
|
|
|
--
|
|
|
Pre Tax Income
|
|
|
|
11,288
|
|
|
2,452
|
|
|
17,079
|
|
|
3,711
|
|
|
11,665
|
|
|
2,535
|
|
|
9,311
|
|
|
2,022
|
|
|
12,814
|
|
|
2,784
|
|
|
Income Taxes
|
|
|
|
3,563
|
|
|
774
|
|
|
5,886
|
|
|
1,279
|
|
|
2,889
|
|
|
628
|
|
|
2,254
|
|
|
489
|
|
|
4,183
|
|
|
909
|
|
|
Net Income
|
|
|
|
7,725
|
|
|
1,678
|
|
|
11,193
|
|
|
2,432
|
|
|
8,776
|
|
|
1,907
|
|
|
7,057
|
|
|
1,533
|
|
|
8,631
|
|
|
1,875
|
|
|
Earnings per Share Basic
|
|
|
|
0.90
|
|
|
0.19
|
|
|
1.30
|
|
|
0.28
|
|
|
1.03
|
|
|
0.22
|
|
|
0.82
|
|
|
0.18
|
|
|
1.01
|
|
|
0.22
|
|
|
Shares Used in Computing
|
|
|
|
Earnings per Share
|
|
|
|
8,615,000
|
|
|
8,615,000
|
|
|
8,600,000
|
|
|
8,600,000
|
|
|
8,555,000
|
|
|
8,555,000
|
|
|
8,555,000
|
|
|
8,555,000
|
|
|
8,555,000
|
|
|
8,555,000
|
|
Page 3
BALANCE SHEET DATA
(In thousands)
(NIS)
|
|
As of December 31
|
|
|
2005
|
2004
|
2003
|
2002
|
2001
|
|
|
NIS
|
USD
|
NIS
|
USD
|
NIS
|
USD
|
NIS
|
USD
|
NIS
|
USD
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Working capital
|
|
|
|
85,423
|
|
|
18,557
|
|
|
95,986
|
|
|
20,853
|
|
|
83,861
|
|
|
18,219
|
|
|
75,732
|
|
|
16,453
|
|
|
68,614
|
|
|
14,906
|
|
|
|
|
|
|
Total assets
|
|
|
|
137,274
|
|
|
29,823
|
|
|
129,861
|
|
|
28,212
|
|
|
109,619
|
|
|
23,815
|
|
|
94,741
|
|
|
20,582
|
|
|
92,460
|
|
|
20,087
|
|
|
|
|
|
|
Short-term bank debt
|
|
|
|
--
|
|
|
--
|
|
|
2,489
|
|
|
541
|
|
|
45
|
|
|
10
|
|
|
1,052
|
|
|
229
|
|
|
2,251
|
|
|
489
|
|
|
|
|
|
|
Shareholders' equity
|
|
|
|
101,871
|
|
|
22,132
|
|
|
98,900
|
|
|
21,486
|
|
|
87,150
|
|
|
18,933
|
|
|
78,374
|
|
|
17,027
|
|
|
71,306
|
|
|
15,491
|
|
|
|
B.
|
CAPITALIZATION
AND INDEBTEDNESS
|
Not
applicable.
|
|
C.
|
REASONS
FOR THE OFFER AND USE OF PROCEEDS
|
Not
applicable.
Our results of operations may be
impacted by monetary risk. Our portfolio of marketable securities is subject to various
market risks.
We
are exposed to fluctuations in the rate of the United States Dollar and Euro versus the
NIS. Most of our income is in NIS, whereas most of our purchases are in United States
Dollars and in Euros. In addition, a significant portion of our short term bank
borrowings, when needed, are in United States Dollars and/or in Euros. A significant
depreciation in the United States Dollar and/or Euro value of the NIS could have a
material adverse effect on our results of operations and financial condition.
We
strive to minimize market risks arising from exchange rate fluctuations and the cost of
imported goods, especially by opening wide documentary credits for suppliers abroad,
holding foreign currency reserves and initiating forward transactions and foreign currency
options.
As
a method of investing cash reserves, we hold from time to time a portfolio of marketable
securities traded on the Tel Aviv Stock Exchange as well as other stock exchanges and
certain bonds traded abroad. This portfolio of marketable securities is subject to various
market risks resulting from fluctuations in interest rates and foreign currency, exchange
rates, price fluctuations and other market risks in Israel and abroad. We do not utilize
derivative securities for trading purposes, enter into swap arrangements or otherwise
hedge our currency in a manner that we believe could expose us to significant market risk
The
financial instruments of the Company consist mainly of cash and cash equivalents, current
accounts receivable, short-term borrowings, accounts payable and accruals. In view of
their nature, the fair value of the financial instruments, included in working capital, is
usually identical or close to their book value.
Page 4
Our business may be materially
affected if any of our major clients defaults on its payment to us.
Financial
instruments that potentially subject us to concentrations of credit risk consist
principally of trade receivables. Despite our large number of clients (over 1,000 in
Israel), a major and significant part of our sales are made to a limited number of
customers (mainly the organized market). We generally do not require and do not receive
collateral from those customers, although we do require and receive collateral from most
of the remainder of its clients to ensure security of collecting payments. We maintain an
allowance for doubtful debts based upon factors surrounding the credit risk of specific
customers, historical trends and other information which our management believes
adequately covers all anticipated losses in respect of trade receivables. There can be no
assurance that this allowance will be adequate. In the event that any of our major clients
defaults on its payment obligations to us (such as Club Market – see “Item 4.
Information on the Company – B. Business Overview – Customers”), we will
not possess sufficient security to collect the entire debt.
We are dependent on our key
personnel. The loss of any of our key personnel could have a material effect on our
business.
We
depend on a small number of technical staff, managers and Directors, including managing
services provided to us by interest holders via companies they control, such as Zvi
Williger and Joseph Williger, each of whom holds senior management positions with us. The
loss of one or more of them could have a material adverse effect on our business and
operations.
We are subject to regulations and
other policies of the Israeli government and of other countries into which we import. If
we are unable to obtain and maintain regulatory qualifications or approvals for our
products, our business may be adversely affected.
Regulatory, licensing and quotas
: The import, storage, marketing, distribution and
labeling of food products are subject to extensive regulation and licensing by various
Israeli government and municipal agencies, principally the Ministry of Health, the
Ministry of Trade and Industry, the Ministry of Agriculture and the Ministry of Finance.
To the extent that the Company has imported, or will import, food products outside of
Israel, we may be subject to quotas and other import laws and regulations which may limit
our ability to sell certain of our food products into these countries. We are required to
maintain our distribution processes in conformity with all applicable laws and
regulations. In the event that such laws and regulations change, or we fail to comply with
such laws and regulations, we may be prevented from trading within Israel or another part
of the world.
Tariffs
:
The Ministry of Finance and the Ministry of Trade and Industry of the State of Israel may
increase the levels of tariffs on importing goods. This would have a direct impact on us
and our financial performance by increasing our costs which we may not be able to pass on
to our customers.
Kosher
Licences
: Under kosher regulations, we are required to ascertain that the foodstuffs
which we offer for sale bear kosher certification approved by certain authorities such as
the Chief Rabbinate of Israel. There is a risk that the relevant authorities in Israel or
other areas of the world responsible for issuing kosher licences may change the criteria
for obtaining such licences. In such circumstances, we may be prohibited from obtaining
kosher licences for various products that we sell into the various kosher markets. Failure
to comply with such applicable laws and regulations in relation to kosher licences could
subject us to civil sanctions, including fines, injunctions, recalls or seizures, as well
as potential criminal sanctions, any of which could have a material adverse effect on us
and our financial performance.
Page 5
We are dependent on Arla Foods
amba, or Arla, and we also work with a limited number of other key suppliers. If these
suppliers raise prices or terminate their engagement with us, our operating results could
be adversely affected.
We are dependent on Arla, which
supplies a high percentage of our dairy and dairy substitute products, although we are not
dependent on any single supplier in respect of a majority of our products. Terminating the
engagement with any supplier, in particular Arla, or a material change in the engagement
terms for purchasing products from those suppliers may have an adverse affect on the
Company’s results of operations. We have a distribution agreement with Arla pursuant
to which the Company serves as Arla’s sole agent and distributor in Israel of certain
products for a five-year period beginning in March 2005. See “Item 4. Information on
the Company – B. Business Overview – Suppliers”. We believe that there are
alternative suppliers for purchasing our products; however, we cannot assure that the
products of the alternative suppliers will become immediately available and that the terms
of purchase will be similar to the current ones.
We depend on a small number of
principal clients who have in the past bought our products in large volumes. We cannot
assure that these clients or any other client will continue to buy our products in the
same volumes, on the same terms or at all.
Despite
our wide dispersion of clients, we have two major clients as described in “Item 4.
Information on the Company – B. Business Overview – Customers”. We do not
have long term purchase contracts with our clients, and our sales arrangements with our
clients do not have minimum purchase requirements. We cannot assure that our major clients
will continue to buy our products at all or in the same volumes or on the same terms as
they have in the past. Their failure to do so may significantly reduce our sales. Losing
one or more of them may adversely affect our business results. In addition, we cannot
assure that we will be able to attract new customers.
We may not be able to successfully
compete with larger competitors who have greater operations, financial, marketing, human
and other resources than we have.
The
food distribution business in Israel is highly competitive. We face competition from
existing competitors in respect of imported as well as locally manufactured food products.
Local producers are not subject to the financial risks of importing food products or to
governmental policies regarding taxation of imported food products to which we are
subject. We believe that we may also face competition from potential newcomers to the food
business as well as from existing importers and/or manufacturers not currently involved in
the same lines of products as us. In addition, in the event we further expand our
activity in the international food markets, we will face also competition from
manufacturers and/or distributors from the locations in which we expand our activity.
Certain of our current and potential competitors are substantially more
established, benefit from substantially greater market recognition and have greater
financial, marketing, human and other resources, than us. If any of our competitors
materially reduces prices, we may be required to reduce our prices in order to remain
competitive. Such reductions, if effected, could have a material adverse effect on our
financial condition and results of operations.
Economic conditions in
Israel affect our financial performance.
Substantially
all of our sales are made in Israel, and consequently our financial performance is
dependent to a significant extent on the economy of Israel. A deterioration of the
economic situation in Israel may erode the real wages and lower the buying power of our
potential customers. This in turn may adversely affect our activities and business
results.
Page 6
We may be affected by political,
economic and military conditions in Israel and the Middle East.
Political,
economic and military conditions in Israel have a direct influence on us because our
operations are located there. Any major hostilities involving Israel or the interruption
or curtailment of trade between Israel and its present trading partners could materially
and adversely affect our operations. We cannot assure that ongoing or revived hostilities
related to Israel will not have a material adverse effect on our business and on our share
price. Several Arab countries still restrict business with Israeli companies and these
restrictions may have an adverse impact on our operating results, financial condition or
the expansion of our business. We could be adversely affected by restrictive laws or
policies directed towards Israel and Israeli businesses. Despite the progress towards
peace between Israel and its Arab neighbors prior to 2000, the future of these peace
efforts is uncertain. Since October 2000, there has been a significant deterioration in
Israel’s relationship with the Palestinian Authority, and a series of armed clashes
between Israel and the armed forces of the Palestinian Authority. These events have at
times caused considerable damage to the Israeli economy. As a result of the political and
military situation, Israel’s economy has suffered considerably and unemployment was
high. Although we have recently seen encouraging signs of an improved economy, we cannot
guarantee that such improved economic environment will continue.
Generally,
all male adult citizens and permanent residents of Israel under the age of 45 are, unless
exempt, obligated to perform up to 36 days of military reserve duty annually.
Additionally, all Israeli residents of this age are subject to being called to active duty
at any time under emergency circumstances. Many of our officers and employees are
currently obligated to perform annual reserve duty. Although the Company has operated
effectively under these requirements since it began operations, management cannot assess
the full impact of these requirements on its workforce or business if political and
military conditions should change, and management cannot predict the effect on it of any
expansion or reduction of these obligations.
Our results of operations may be
adversely affected if we do not accurately predict the rate of consumption of our
products.
We
hold inventory of basic food stuffs (such as preserved food, oils and rice) and other food
products, and we accumulate inventories of these products based on our prediction of the
consumption of these products. If actual consumption does not meet the prediction, and the
shelf life of such products expire or we cannot otherwise sell such products, this may
materially and adversely affect our financial condition and results of operations. On the
other hand, to the extent we do not have adequate inventory of these critical products
(due, for example, to an emergency situation), we will not be able to meet the needs of
our customers and our revenues may be adversely affected.
We may be adversely affected by
any interruption to our storage facility.
We
store most of our products in a single location, save for products being distributed to
customers. Any interruption to this storage facility whether by power failure, flooding or
other event would have a material impact on our ability to trade in the ordinary course.
Our insurance coverage may not be
sufficient to cover our losses in the event our products are subject to product liability
claims or our products are subject to recall. In such event, it would have a material
adverse effect on us.
Our
products may become the subject of product liability claims, and there can be no assurance
that our property insurance coverage limits will be adequate or that all such claims will
be covered by insurance. A product recall or a successful product liability claim or other
judgment against us in excess of our insurance coverage could have a material adverse
effect on us and our reputation.
Our operating results may be
subject to variations from quarter to quarter.
Our
operating results may be subject to variations from quarter to quarter depending on, among
other things, the timing of sales campaigns and special events initiated by both the
Company and its customers, the major Jewish holidays (such as the Jewish New Year and
Passover), our ability to manage future inventory levels in line with business
opportunities and anticipated customers’ demand, competitive developments in the
market, changes in the rates of inflation in Israel and fluctuations in NIS/Dollar
exchange rates. There can be no assurance that our sales or net income (if any) in any
particular quarter will not be lower than the preceding and/or comparable quarter or that
its sales or net income (if any) in a particular quarter will be indicative of our results
of operations for the entire year. The trading prices of the Ordinary Shares may fluctuate
significantly in response to variations in our operating results.
Page 7
If we are unable to protect our
intellectual property rights, our competitive position could be compromised.
We
market certain products under the trademarks “Willi-Food”, “Pizza
Top”, “Gold Food”, “Donna Rozza” and “Gold Frost”.
Although we have registered trademarks for these brands, we cannot assure that the degree
of protection these and other trademarks offer will be sufficient to protect our rights in
these marks.
Initiation and
Enforcement of Legal Action in Israel.
We
are organized under the laws of the State of Israel. All of our executive officers and
Directors and some of the experts named in this annual report are nonresidents of the
United States, and a substantial portion of the Company’s assets and the assets of
these persons are located outside the United States. Therefore, it may be difficult to
enforce a judgment obtained in the United States against us or any of those persons. It
may also be difficult to enforce civil liabilities under United States federal securities
laws in actions initiated in Israel.
If our ordinary shares are
de-listed from Nasdaq, the liquidity and price of our ordinary shares and our ability to
issue additional securities may be significantly reduced.
We
may in the future fail to comply with the Nasdaq Capital Market (formerly the Nasdaq Small
Cap Market) regulations and listing requirements as to minimum net income, minimum number
of shareholders and public float and other requirements, Nasdaq may initiate procedures to
de-list the Company’s ordinary shares from the Nasdaq Capital Market. Any such
de-listing may severely complicate trading of the Company’s shares by its
shareholders, or prevent them from re-selling their shares at/or above the price they
paid. Furthermore, our relatively low trading volumes may make it difficult for
shareholders to trade shares or initiate any other transactions. De-listing may also make
it more difficult for us to issue additional securities or secure additional financing.
In
July 2003 and in November 2004, we received letters from the Nasdaq Stock Market informing
us that we had failed to meet a continued listing requirement, that we have 500,000
publicly held shares, and that our ordinary shares were therefore subject to de-listing
from the Nasdaq Capital Market, unless a proper plan for complying with the requirement
was presented. Following the receipt of the November 2004 letter, Willi Food Investments
Ltd. and Mr. Joseph Williger sold 75,000 of our shares to the public and at the same time
we distributed a one to one stock dividend to our shareholders. As a result of these
actions, we then complied with the abovementioned listing requirements and the threat of
de-listing was removed.
Page 8
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ITEM 4.
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INFORMATION ON THE COMPANY
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A.
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HISTORY
AND DEVELOPMENT OF THE COMPANY
|
G.
Willi-Food International Ltd. was incorporated in Israel in January 1994 under
the name G. Willi-Food Ltd. and commenced operations in February 1994. It
changed its name to G. Willi-Food International Ltd. in June 1996.
In
May 1997, the Company completed an initial offering to the public in the United States
(hereinafter the “Initial Public Offering”) of 1,397,500 units, each unit
consisting of one ordinary share and one redeemable ordinary share purchase warrant, under
the NASDAQ ticker symbol “WILCF”.
In
May 2001, the Company acquired all the shares of Gold Frost Ltd., which we refer to herein
as Gold Frost, for NIS 336 thousand (USD 73 thousand). Gold Frost, which was
registered in 1977 in Israel, is engaged in designing, developing and distributing frozen
and chilled food products.
In
December 2004, the Company declared a stock dividend of 1 ordinary share for each
outstanding ordinary share (an aggregate of 4,307,500 ordinary shares). All shares and per
share amounts set forth in this Annual Report have been retroactively restated to reflect
the aforementioned share dividend for all periods presented.
On
November 21, 2005, the Company declared its first cash dividend of $0.12 per share, or an
aggregate of $1.03 million, which was paid to shareholders on January 25, 2006.
On
March 9, 2006, the Company’s subsidiary, Gold Frost, completed an initial issuance to
the public on the London AIM market which yielded gross proceeds of NIS 36.5 million (USD
7.9 million). Following this issuance, as of May 30, 2006, the Company held approximately
75.7% of Gold Frost’s share capital. Under a lock-in agreement signed by the Company,
the Company is restricted from selling its shares in Gold Frost for a period of 12 months
commencing March 9, 2006, and after that the Company is subject to controlled selling
restrictions for an additional period of 12 months. See “Item 10. Additional
Information – 10C. “Material Contracts”.
On
March 15, 2006 the Company announced that it had changed its NASDAQ ticker symbol for the
Company’s ordinary shares to “WILC”.
The
Company’s principal executive offices are situated at 3 Nahal Snir St., Northern
Industrial Zone, Yavne, 81224 Israel. The Company’s telephone number is
972-8-9322233, its fax number is 972-8-9322299, its e-mail address for communications is
willi@willi-food.co.il
and its Web site is
www.willi-food.co.il
.
Overview
The
Company is an Israeli-based company engaged, directly and through subsidiaries, in the
design, import, marketing and distribution in Israel of a wide variety of over 400 food
products. The Company sells products with widespread demand in the Israeli marketplace, as
well as products which cater to more select groups. The Company distributes certain of its
products on an exclusive basis. Some products are currently also sold in insubstantial
volumes in the areas administered by the Palestinian Authority. The Company has
occasionally sold, in insubstantial volumes, to importers in the U.S. and in Europe
(mainly, France). The Company intends to continue its marketing efforts outside of Israel
– mainly in the U.S. and Europe – and is seeking additional distribution
channels and other ways in order to sell products into these markets.
Page 9
The
Company purchases food products from over 100 suppliers located around the world,
including from the Far East (China, India, the Philippines and Thailand), Eastern Europe
(Hungary, Poland and Bulgaria), South America (Argentina, Ecuador and Costa Rica), the
United States, Western and Northern Europe (The Netherlands, Belgium, Germany, Sweden,
Denmark and France) and Southern Europe (Spain, Portugal, Italy, Turkey, Greece and
Cyprus).
The
products imported by the Company are marketed and sold to over 1,000 customers, including
supermarket chains, wholesalers and institutional consumers. The Company markets most of
the products under the brand name “Willi-Food” and some of the chilled and
frozen products under the brand name “Gold Frost”. Certain products are marketed
under brand names of the manufacturers or under other brand names.
The
Company is re-evaluating its strategic position and considering other business
opportunities, including acquisitions by and mergers of the Company. As part of this
re-evaluation, the Company is also considering forming strategic alliances with or
entering into different lines of business. The Company has not made any definitive plans
or reached any definitive conclusions on these matters. There can be no assurances that
the Company will form any such alliances or enter into any other line of business.
The
Company’s principal shareholder, Willi-Food Investments Ltd., which we refer to as
Willi Food, as of May 30, 2006, held approximately 73.98% of the Company’s
outstanding share capital. The primary assets of Willi Food are the Company’s
ordinary shares. See “Item 7. Major Shareholders and Related Party
Transactions”. Willi Food’s securities are traded on the Tel Aviv Stock
Exchange.
Business Strategy
The
Company's business strategy is:
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—
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to
promoted the “Willi-Food” brand name and to increase market penetration of
products that are currently sold by the Company through, among other things, marketing
efforts and advertising campaigns;
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—
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to expand
its current food product lines and diversify into additional product lines, as well as
responding to market demand; and
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—
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to
expand the Company's activity in the international food markets, mainly in the U.S. and
Europe.
|
Utilizing
management’s expertise in identifying market demand and preferences, as well as its
sourcing abilities, the Company intends:
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—
|
to
continue to locate, develop and distribute additional food products, some of
which may be new to Israeli consumers;
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—
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to
increase its inventory levels from time to time both to achieve economies of scale on its
purchases from suppliers and to more fully meet its customers’ demands;
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—
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to
expand its logistical capability within Israel;
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—
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to
penetrate the international food markets, mainly in the U.S. and Europe, by
purchasing food distribution companies or/and increasing
cooperation with local existing distributors or/and exporting products
directly to the customer; and
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Page 10
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—
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to
penetrate new markets within the Middle East through the establishment of business
relationships and cooperation with representatives in such markets subject to a positive
political climate.
|
The
Company has developed certain trade relationships locally, as well as in areas
administered by the Palestinian Authority, although current sales volumes to the
Palestinian administered areas are low.
In
addition, the Company has:
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—
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promoted
the value of the “Willi-Food” brand and introduced additional food products to
the Israeli marketplace under the brand name “Willi-Food”.
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—
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initiated
sales in the U.S. and Europe;
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—
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entered
into arrangements with recognized manufacturers to market their products under their
respective brand names, in addition to brand names under which the Company currently
markets its products; and
|
On
June 20, 2005, a wholly-owned subsidiary of the Company executed definitive agreement
regarding the acquisition of Vitarroz Corp., a New Jersey-based distributor of food
products for the Hispanic market in the United States (“Vitarroz”). Consummation
of the Vitarroz transaction was contingent upon, among other things, completion of final
due diligence, Board of Directors approval and approval of regulatory bodies (if
necessary), as well as the satisfactory resolution of any issues that arose during the
acquisition process. On September 27, 2005, the Company announced that it had elected not
to complete the purchase of Vitarroz. See “Item 8. Financial Information – Legal
Proceedings”.
Products
The Company imports, markets and
distributes two kinds of line products: preserved products and non-preserved products.
Preserved
Products
The
Company imports, markets and distributes a broad variety of over 160 preserved food
products, most of which enjoy a long shelf life (mostly between two to four years). Sales
of preserved products accounted for approximately 44% of the Company’s sales in 2005.
These products are sold principally in tin cans and glass jars in a variety of sizes and
are intended for use by the individual consumer as well as by the institutional consumer
food markets.
The
Company aims at broadening the variety of the preserved products it distributes. Due to
commercial considerations, the Company occasionally stops importing certain preserved
products.
The
main principal products in the preserved product line are as follows:
Canned
Vegetables and Pickles
: including okra, mushrooms (whole and sliced) and terfess,
artichoke (hearts and bottoms), beans, asparagus, capers, corn kernels, baby corn, palm
hearts, bamboo shoots, vine leaves (including vine leaves stuffed with rice), sour
pickles, mixed pickled vegetables, pickled peppers, an assortment of black and green
olives, sun dried tomatoes, edamame soybeans and antipasti. These products are primarily
imported from China, Spain, Greece, Thailand, South America, Turkey, France, India,
Poland, Morocco and The Netherlands.
Canned
Fish
: including tuna (in oil or in water), sardines, anchovies, smoked and pressed cod
liver, herring, fish paste and salmon. These products are primarily imported from the
Philippines, Thailand, Portugal, Canada, Spain, Greece and Sweden.
Page 11
Canned
Fruit
: including pineapple (sliced or pieces), peaches, apricot, pears, cherries,
mangos, lychees and fruit cocktail. These products are primarily imported from the
Philippines, Thailand, Greece and Europe.
Non-Preserved
Products
The
Company imports, markets and distributes a broad variety of over 260 non-preserved food
products, most of which enjoy a relatively long shelf life (mostly between ten months and
two years). Sales of non-preserved products accounted for approximately 56% of the
Company’s sales in 2005. These products are sold in a variety of sizes and types of
receptacles, such as glass jars, plastic and glass bottles and containers and sealed
plastic vacuum packages, and are intended for use by the individual consumer as well as by
the institutional consumer food markets.
The
Company aims at broadening the variety of the non-preserved products it distributes. Due
to commercial considerations, the Company occasionally stops importing certain
non-preserved products.
The
main principal products in the non-preserved product line are as follows:
Edible
Oils
: including olive oil, sunflower oil, soybean oil, corn oil and rapeseed oil.
These products are primarily imported from Belgium, Argentina, Turkey, Italy and Spain.
Dairy
and Dairy Substitute Products
: including hard and semi-hard cheeses (parmesan, edam,
kashkaval and emmental), molded cheeses (brie, camembert and danablu) feta, Bulgarian
cheese, butter, butter spreads, margarine, melted cheese, cheese alternatives, condensed
milk, profiteroles and others. These products are primarily imported from Greece, Denmark,
Bulgaria, Italy, The Netherlands and the United States.
Dried
Fruit, Nuts and Beans
: including figs, apricots, prunes, papaya, pineapple, raisins,
sunflower seeds, almonds, walnuts, pine nuts, cashew nuts and peanuts. These products are
primarily imported from Greece, Turkey, India, China, Thailand and the United States.
Other
Products
: including, among others, instant noodle soups, coffee creamers, fruit
juices, jams, confitures, halva, Turkish delight, tahini, cookies, vinegar, sweet pastry
and crackers, sauces, corn flour, pastes, rice, rice sticks, rice crackers, pasta,
spaghetti and noodles, ketchup, mayonnaise, sugar cubes, breakfast cereals, corn flakes,
instant coffee, white oats, rusks, coconut milk, couscous, ouzo and vodka. These products
are primarily imported from the Netherlands, Germany, Romania, Italy, Greece, Belgium, the
United States, Scandinavia, China, Thailand, Turkey, India, South America and Argentina.
Some
of the preserved and non-preserved products listed above as sold by the Company are
imported by Gold Frost. The Company imported some of these products prior to 2001, but
this was done on a small-scale basis aimed at testing the demand for such products and
their profitability. After the purchase of Gold Frost, the import of these products was
expanded by Gold Frost.
The
products (preserved and non-preserved) that generated the largest sales volume for the
year ended December 31, 2005 were canned vegetables (21% of sales), dairy and dairy
substitute products (20% of sales), canned fish (19% of sales) and edible oils (11% of
sales).
The
products (preserved and non-preserved) that generated the largest sales volume for the
year ended December 31, 2004 were canned vegetables (23% of sales), canned fish (21% of
sales), dairy and dairy substitute products (17% of sales) and edible oils (10% of sales).
The
products (preserved and non-preserved) that generated the largest sales volume for the
year ended December 31, 2003 were canned fish (22% of sales), canned vegetables (19% of
sales), edible oils (16% of sales) and dairy and dairy substitute products (14% of sales).
Page 12
Most
of the products that the Company imports and markets are approved as Kosher by, and/or
under the supervision of, various supervisory institutions including the Chief Rabbinate
of Israel, Chug Chatam Sofer, certain Jewish organizations administering Kashrut
procedures and certifications (such as the Union of the Orthodox Jewish Congregation of
America (UO), Badatz Igud Harabanim Manchester, OK, Circle K and Triangle K) and rabbis of
local Jewish congregations abroad. See ” – Government Regulation”.
The
Company’s products are packaged by various manufacturers and suppliers abroad and
labeled with Hebrew, English and, in certain cases, Arabic and Russian labels, in
accordance with the Company’s instructions and requirements and in accordance with
applicable law. See ” – Government Regulation”.
Suppliers
The
Company is not a manufacturer of preserved food products or non-preserved food products
and therefore purchases final products only. The Company purchases preserved food products
from over 35 suppliers worldwide, including suppliers located in the Far East (China,
India, the Philippines and Thailand), Eastern Europe (Poland), South America (Ecuador and
Costa Rica), Canada and Western, Northern and Southern Europe (Sweden, Greece, The
Netherlands, Portugal, Spain, France and Turkey). The Company purchases non preserved food
products from over 65 suppliers, including suppliers located in the Far East (China,
India, the Philippines and Thailand), Eastern Europe (Bulgaria and Latvia), South America
(Argentina), the United States and Western, Northern and Southern Europe (Sweden, Denmark,
Greece, The Netherlands, Italy, Portugal, Spain, Belgium, Germany, France, Turkey and
Cyprus).
In
addition, the Company actively maintains contact with approximately 150 suppliers
worldwide through which it assesses on an on-going basis world market trends, fluctuations
in prices and terms internationally available and other issues relevant to its business.
The Company’s management and personnel visit food trade fairs worldwide on a regular
basis and endeavor to create new business relationships with potential suppliers on an
ongoing basis.
The
following table represents the percentage of purchases of preserved products by the
Company from suppliers who accounted for more than 10% of the total purchases in the years
2005, 2004 and 2003:
Supplier
|
2005
|
2004
|
2003
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Supplier A
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15.7
|
%
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*
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10.8
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%
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|
Supplier B
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|
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*
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13.2
|
%
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*
|
|
The
following table represents the percentage of purchases of non-preserved products by the
Company from suppliers who accounted for more than 10% of the total purchases in the years
2005, 2004 and 2003:
Supplier
|
2005
|
2004
|
2003
|
|
|
|
|
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|
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|
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Arla
|
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15.4
|
%
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|
10.7
|
%
|
|
*
|
|
The Company is not dependent on any
given supplier for the supply of a majority of its products. We purchase most of our
products from several suppliers. We are dependent on one source of supply – Arla from
Denmark – in respect of a large part of our dairy and dairy substitute products. A
distribution agreement between the Company and Arla grants the Company exclusive and
non-transferable right to market and distribute cheese and butter products manufactured by
Arla and its affiliated companies in Israel. The exclusivity for the Company is subject to
the purchase by the Company of certain minimum quotas of products. The agreement is for a
five year term commencing in March 2005 and is renewable automatically for a further
period of five years, unless notice of termination is provided by either party. Arla has
the right to terminate the agreement on three months notice in certain circumstances,
including in the case of the death or permanent incapacity of Zvi Williger or his ceasing
to be involved in the Company’s business or if the Company fails to satisfy its
minimum purchase requirements under the agreement. It should be noted that the Company has
obtained key man insurance in respect of Zvi Williger for the sum of NIS 6 million. Up
until March 2005, Arla was a supplier of the Company and no such agreement existed.
Page 13
Although
the Company is not dependent on any one supplier with respect to most of its products,
termination of the Company’s business relationships with certain suppliers and/or a
material adverse change in the terms at which the Company purchases such products from
such suppliers could have a material adverse effect on the Company’s financial
results. There can be no assurance that alternative sources for such products, if
required, will be readily available nor can we assure the terms of purchase of such
products from such alternative sources.
The
Company does not generally enter into written agency or other agreements with its
suppliers. However, the Company has written agreements with two foreign suppliers of
preserved products and six foreign suppliers of non preserved products that confirm the
exclusive appointment of the Company as the sole agent and/or distributor of such
suppliers either with respect to a specific product or with respect to a line of products,
within the State of Israel. These exclusivity rights have generally been granted for a
period of 12-24 months and are automatically extendable unless terminated by either party
upon notice, and in certain cases are conditioned upon the Company’s compliance with
certain minimum purchase requirements.
The suppliers from which the Company
received such letters of confirmation accounted for approximately 25%, 23%, and 23% of the
Company’s purchases in 2005, 2004 and 2003, respectively. In a few instances, the
Company did not fulfill its commitment to the minimum purchase requirements, but since the
onset of its activities no supplier has terminated its agreement with the Company due to
the Company’s failure to comply with the minimum purchase requirements. The
Company’s purchases are not motivated by a desire to meet minimum purchase
requirements, and the considerations in purchasing products from these suppliers are
identical to those for purchasing from other suppliers.
Certain
of the preserved products imported by the Company are seasonal agricultural products, such
as artichokes, cherries, mushrooms and peaches. In order to assure itself a continued
supply of these seasonal items, the Company generally makes arrangements with the
producers of such products at the beginning of the season for the terms of purchase of
such items for the upcoming year.
A
substantial portion of the Company’s purchases from suppliers is made in USD (such as
purchases from the Far East, the United States, South America and certain European
countries) with the remaining purchases usually made in Euros and other foreign currencies
(e.g., Swedish Kronas). Supply is generally made to the Company against letters of credit
for a period of up to 90 days. See Item 5: “Operating And Financial Review and
Prospects – B. Liquidity and Capital Resources – Impact of Inflation and
Devaluation on Results of Operations, Liabilities and Assets”.
The
average volume of Company’s credit balance with its suppliers amounted in 2005 to NIS
17.8 million (USD 3.9 million) consisting 52 days of suppliers credit on average, in 2004
to NIS 17.5 million (USD 3.8 million) consisting of 49 days of suppliers credit on
average, and in 2003 to NIS 14.3 million (USD 3.1 million) consisting of 56 days of
suppliers credit on average.
Customers
The
Company’s products (preserved and non-preserved) are marketed and sold to over 1,000
customers throughout Israel (including customers in the areas administered by the
Palestinian Authority). The Company has occasionally sold to importers from Europe and the
U.S. During 2001-2005, the Company sold a variety of its products to importers from
France, UK and the U.S. (mainly tuna fish, baby corn, corn, asparagus, sugar cubes,
noodles, rice and pickles).
Page 14
Customers
of the Company typically purchase both preserved and non preserved products from the
Company. The number of clients who purchase products from only one of these categories is
not material.
The
Company’s customers generally fall within one of the following two groups:
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large
retail supermarket chains in the organized market, and
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—
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private
supermarket chains, mini-markets, wholesalers, manufactures, institutional customers and
the customers in the Palestinian Authority (“private sector”).
|
The
first major group includes the largest Israeli supermarket chains in the organized market
in Israel, including: (i) Supersol Ltd. (including the chains: Supersol Deal, Supersol
Big, Supersol Sheli, Supersol, the Hyperneto, Cosmos, Mahsanei Mazon, Zol Lemehadrin,
Birkat Rachel and Hutzot Lahav, and also includes, from 2006, Club Market Marketing Chains
Ltd. (including the chains: Club Market, Hatzi Kupa, Zol Po and Imperia)); (ii) the Co-op
Blue Square Cooperative Society Ltd. (which also includes the SuperCenter, SuperCenter
City, Mega and Shefa Shuk); and (iii) Co-Op Jerusalem (Co-Op Jerusalem, Mister Zol, Pasut
Zol, Ish Efrat and Metro Market). The Company contracts with the supermarket chains in the
organized market through the buyers in the head office of the supermarket chain, and then
the Company receives orders from the logistic center or directly from their stores.
Merchandise is then delivered directly to each branch or to the supermarket’s chain
distribution center.
The
second major group includes private supermarket chains, mini-markets, wholesalers, food
manufacturers, institutional consumers, such as catering halls, hotels, hospitals and food
service companies and food producers, and customers in the Palestinian Authority.
The
Company’s sales, by customer group, for the years ended December 31, 2005, 2004, 2003
and 2002 are as follows:
|
|
Percentage of Total Sales
Year Ended December 31
|
Customer Groups
|
2005
|
2004
|
2003
|
2002
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Supermarket Chains in the organized market
|
|
|
|
41
|
%
|
|
41
|
%
|
|
42
|
%
|
|
41
|
%
|
|
Private Supermarket Chains, mini-markets,
|
|
|
|
wholesalers, manufacturers, institutional
|
|
|
|
consumers and the customers in the Palestinian
|
|
|
|
Authority
|
|
|
|
59
|
%
|
|
59
|
%
|
|
58
|
%
|
|
59
|
%
|
|
|
|
|
|
100
|
%
|
|
100
|
%
|
|
100
|
%
|
|
100
|
%
|
For
the years ended December 31, 2005, 2004 and 2003, sales to each of the Company’s
three largest customers (all of which are supermarket chains in the organized market)
generated in excess of 10% of the Company’s sales, and together aggregated
approximately 39% of the Company’s sales during each of such periods. The largest
customer accounted for 19% of the Company’s sales in 2005, compared with 22% of the
Company’s sales in 2004 and 18% of the Company’s sales in 2003. The second
largest customer accounted for 12% of the Company’s sales in 2005, compared with 14%
of the Company’s sales in 2003 (in 2004 sales to this client were less than 10%). The
third largest customer accounted for 11% of the Company’s sales in 2004 (in 2003 and
2005 sales to this client were less than 10%).
Page 15
The
loss of any of these major customers would have a material adverse effect on the
Company’s financial condition and results of operations. The Company is seeking to
expand its operations in other areas so as to reduce its dependence on any single
significant customer.
The
Company has agreed to pay the large supermarket retail chains in the organized market
incentives based on the increase in volume of sales to such customers in excess of a
certain agreed amount, or an incentives calculated as a fixed percentage of the annual
sales to such customer. Other incentives include penetration discounts for sales of new
Company products, limited discounts for opening of new branches that sell Company products
and payments for participation in Company’s product advertisements. The above
mentioned incentives vary among customers and are usually awarded as part of a written
annual framework agreement.
These
incentives typically range from 5% to 7.5% of the annual sales of the Company to such
customers and are generally paid at the beginning of each year with respect to the
previous year’s sales. These arrangements also generally include specific exclusions,
such as direct or joint importing of products that are not considered for purposes of such
incentives. Certain of these commitments are not evidenced in written agreements. For the
years ended December 31, 2005, 2004 and 2003, the Company paid and/or is obligated to pay
approximately NIS 3,080 thousand (USD 669 thousand), NIS 3,870 thousand (USD 841 thousand)
and NIS 3,380 thousand (USD 734 thousand), respectively, in respect of such incentives.
Our
engagement with private sector customers is not subject to any exclusivity provisions or
framework agreement, and they have no specific term. Prior to any engagement with a
potential customer, the Company examines the financial stability of the potential customer
and determines the extent of the credit and period for which credit would be granted. Most
of the customers are required to deposit securities as collateral (personal and/or bank
guarantees as well as post-dated checks). Some of the customers of this sector (mainly
private supermarket chains and wholesalers) are also awarded incentives, as mentioned
above. The extent of such incentives varies between 1%-3% of the annual sales turnover of
each relevant customer.
The
average volume of the customers of the Company debit balance with the Company amounted in
2005 to NIS 41.6 million (USD 9.0 million) and the average time period within which our
accounts receivable were paid was 93 days, in 2004 the average customer debit balance was
NIS 41.1 million (USD 8.9 million) and the average time period within which our accounts
receivable were paid was 85 days and in 2003 the average customer debit balance was NIS
32.6 million (USD 7.1 million) and the average time period within which our accounts
receivable were paid was 84 days. The increase in 2005 to the average time period within
which our accounts receivable were paid was mainly due to the collapse of the Club Market
supermarket chain and insolvency of a number of major wholesalers in the Israeli food
industry.
In
the event that a client does not respect its financial commitments, the Company may elect
to foreclose on the collateral or the promissory note given by customers in the private
sector. In 2003-2005, no significant use of this means was implemented.
The
Company strives to minimize its credit risks by constantly reviewing the credit it extends
to customers versus the security it receives. As a result, the Company has ceased selling
products to certain customers and considerably reduced sales to other customers, and may
continue to do so.
Page 16
In
July 13, 2005, Club Market Marketing Chains Ltd., one of the three largest food chains in
Israel, owner of 114 stores and a major customer of the Company, encountered major
financial difficulties, announcing that it could not pay its debts to its creditors. The
District Court of Tel Aviv accepted Club Market’s petition for a stay of procedures
against it and appointed receivers for Club Market. On August 28, 2005, the court allowed
the Club Market court-appointed receivers to sell Club Market to Supersol, subject to
several conditions. The court also ratified the creditors’ arrangement presented by
the receivers. As of September 1, 2005, Club Market’s activities were substantially
transferred to Supersol. This merger of two of the three largest food chains in Israel is
expected to strengthen Supersol’s buying power with local food suppliers (such as the
Company) and it is expected that the dependency of local food suppliers on Supersol will
grow.
The
Company submitted a claim of debt with the receivers with respect to Club Market’s
debt to the Company, amounting to NIS 6.5 million (USD 1.4 million), including VAT (NIS
5.5 million net of VAT (USD 1.2 million)), as of July 13, 2005. In view of this claim and
the ratification of the creditors’ arrangement by the court on December 12, 2005, the
Company is expected to receive a proportional share of its claim of debt. The Club Market
receivers estimate the rate of payment to be approximately 51% of the total debts,
although this is subject to the examination by the receivers and their approval of the
Company’s claim of debt. There is no assurance as to the portion of the debt owed by
Club Market that will actually be paid to the Company. During 2005, the Company wrote off
the sum of NIS 3.5 million (USD 0.76 million) as a bad debt due to the abovementioned Club
Market debt.
The
volume of customer bad debt of the Company in the years ended December 31, 2005, 2004, and
2003 amounted to NIS 3,826 thousand (USD 837 thousand), which includes Club Market’s
bad debt, NIS 167 thousand (USD 39 thousand), and NIS 0 thousand, respectively.
Distribution, Marketing
and Sales
The
Company principally distributes and markets its products on its own. The Company markets
its products via internal sales agents, apart from sales of certain products to clients
situated in Beer Sheva and elsewhere in the South of Israel, where it distributes products
through an external distributor, with whom the Company does not have an exclusivity
agreement. The sales of this distributor are not significant.
The
Company generally has no written agreements with its customers, nor are its arrangements
with its customers on an exclusive or binding basis. The Company generally extends its
customers approximately 60-90 days credit beginning at the end of the month in which the
sale took place. The supermarket chains in the organized market generally effect payment
by wire transfers or cash payments on the due date, while other customers are generally
required to provide post-dated promissory notes at least one month prior to the date of
the expected payment. The Company generally does not require the supermarket chains in the
organized market to provide any kind of security for payments; however, other customers
may be required to provide security, including personal guarantees.
Sales
are made by the placement of customers’ orders (except for part of the dairy and
dairy substitute products), which are directed to the Company’s regional office and
placed by the sales personnel or directly by the customers. Orders are transferred to the
Company’s logistic center in Yavne for preparation and delivery by the Company’s
transport network (including 14 refrigeration trucks and seven regular trucks) and by
independent transporters. In certain cases, the Company transports products directly from
port to customers, utilizing the services of independent transporters. In some instances,
the Company transfers the merchandise to the logistic centers of the supermarket chains,
and the supermarket chains themselves are responsible for the distribution of the
merchandise to their chain stores for a commission charged to the Company.
The
sale of part of the dairy and dairy substitute products is performed by “van
sale” sales agents using small terminals. The sales agents supply these products
immediately from the stock of products in the refrigeration trucks in which they travel.
Page 17
Some
of the marketing and distribution to institutional clients in the private sector (such as
hotels, police, prisons, the Ministry of Defense and “Kibbutz” collective
settlements) is done by winning tenders or direct distribution or by wholesalers.
The
Company generally holds an inventory of products which the Company believes to be
sufficient to meet market requirements for a period of up to 80 days. Occasionally, the
Company may take advantage of low priced merchandise and purchase larger amounts than
usual of a product with long shelf life. In those cases, the inventory quantities may be
even higher then 80 days. Products ordered by customers in full container loads are
generally forwarded directly to the customers’ facilities without being stored in the
Company’s facilities. The Company does not regularly maintain significant backlog of
orders from customers; orders received by customers are generally filled within one week.
The
Company’s inventory as of December 31, 2005 amounted to NIS 30.8 million (USD 6.7
million), compared with NIS 27.1 million (USD 5.9 million) as of December 31, 2004 and NIS
18.8 million (USD 4.1 million) as of December 31, 2003.
The
Company undertakes advertising campaigns. In 2004 and the first quarter of 2006, it
initiated an extensive advertising campaign in the electronic media and in the newspapers
under the brand name “Willi-Food” in order to promote the awareness to the
“Willi-Food” brand name.
The
Company also participates in various sales campaigns within the supermarket chains that
are intended to stimulate sales volume. Among such campaigns are food festivals initiated
by the supermarket chains and certain importers, including the Company, in which the
import and marketing of products from a specific country or region are celebrated and
promoted. Since 2002, the Company has participated in various festivals for certain
products imported from Italy, The Netherlands, Turkey and Greece, including the Ethnic
Festival and the Mediterranean Festival. Such festivals typically involve increased
display space as well as enhanced promotional activities, both with respect to the
festival itself and the products. Such activities are sponsored by the supermarkets in
collaboration with the importers participating in the festival. Within the framework of
these festivals, the Company imports a wide variety of products which include pastries,
vegetables, jams, cheese, fish, and dairy products, as well as certain articles typical to
the culture and/or cuisine of each specific festival.
The
Company maintains close contact with its consumer markets in an effort to be attentive to
market needs, market trends, demand for certain products and their value to the market.
The Company also regularly gathers information on new products manufactured worldwide,
including by attending food exhibitions and maintaining close relations with manufacturers
and suppliers worldwide.
The
Company is responsible for the products it markets under the Israeli Law of Defective
Products, 1980, and it has also purchased an insurance policy for product liability.
Seasonality
Each
year as the Passover and Rosh Hashana festivals approach, the Company usually increases
its inventories in order to provide a fast response to the market’s demand. Usually
there is an increase in the Company’s sales prior to the Rosh Hashanah holiday
(celebrated in September-October) and the Pesach (Passover) holiday (celebrated in
March-April). Despite the impact of the holiday season on the Company’s activities,
the Company’s quarterly sales are not materially affected as result of these holiday
seasons.
Competition
The
food distribution business in Israel is highly competitive with respect to imported, as
well as locally manufactured, food products. The Company believes that it presently faces
direct competition from both local manufacturers, as well as from a number of importers of
food products. The food market in Israel is very price sensitive.
Page 18
For
each of the categories of products distributed by the Company, there exists competition by
dozens of local manufacturers as well as from other importers. The barriers to entry in
the food market are low, and new potential competitors are constantly joining the market.
The Company believes that it may also face competition from potential new-comers to the
food business, as well as from existing importers and/or manufacturers currently not
involved in the same lines of products as the Company.
For
example, certain of the products imported by the Company such as canned fish, corn, edible
oils, certain pickles, olives, pasta, cereal, sweet pastry and crackers and certain dairy
products are also produced by local manufacturers in Israel. Local producers are not
subject to the financial risks of importing food products or to governmental policies
regarding taxation of imported food products to which the Company is subject.
To
the Company’s knowledge, several of its competitors (Shemen, Tet-Bet and Solbar with
respect to edible oils, Fodor (Starkist and Yona), Posidon and Williger of the Neto Group,
Filtuna and Shastowits with respect to fish products, Pri HaGalil-Vita, Yachin-Zan laKol,
Williger of the Neto Group, Alaska and Johnson with respect to canned vegetable and canned
fruits products, Osem, Barila, Pri HaGalil-Vita, Williger of the Neto Group and Tomer with
respect to pasta products, Tnuva, Tara, Strauss, Siman, Machlvot Gad and Meshek Zuriel
with respect to dairy and dairy substitute products, for example) are substantially more
established, have greater market recognition and have greater financial, marketing, human
and other resources than those of the Company. If any of the Company’s major
competitors materially reduces prices, the Company would experience significantly more
competitive pressure and a decrease in profitability. The Company cannot predict whether
it could successfully compete with these pressures and, if it were unable to do so, the
Company’s business would suffer.
The
Company’s management does not have precise information regarding the extent of the
import of food products to Israel. However, it believes it is one of the leading companies
in Israel in its line of products.
The
Company endeavors to compete by following the availability of products, their prices,
offers for performing transactions and business opportunities while diversifying sources
of supply as well as following the selling prices of competing products and setting
product prices according to changing market prices.
Intellectual Property
Rights
The
Company markets certain products under the trademark “Willi-Food,” which was
approved for registration in Israel in May 1997 for certain uses relating to the food
industry. In 2001, the trademark’s validity was extended for an additional fourteen
years (until 2015). The Company also markets certain products under the trademark
“Gold-Frost,” which was registered in Israel in February 2002.
The
Company also markets cheeses and cheese substitute for pizza under the trademark
“Pizza Top” which was registered in Israel in September 2002. On February 16,
2006, the Company entered an agreement with Gold Frost under which the Company assigned to
Gold Frost all its rights, title and interest in and to the trademark “Pizza
Top”.
The
Company also markets certain products under the trademark “Gold Food” which was
registered in Israel in November 2002 for different uses in the food industry.
Page 19
The
Company also markets pasta and sauces under the trademark “Donna Rozza” which
was registered in Israel in August 2005 for different uses in the food industry. Other
products marketed by the Company under their original brand name are “Completa”,
“Raskas”, “Puck”, “Nobeleza Gaucha”, “Hazer Baba”,
“Arla” and “Lurpak”. The Company imports several products for the
Supersol chain under the brand name “Superclass,” which is the chain’s
brand name. This brand name has recently been changed to “Supersol”.
There
can be no assurances as to the degree of protection registration of the Company’s
trademarks will afford. In 2004 and 2005 the Company petitioned for six new trademarks.
There is no certainty that these trademarks will be registered as the Company requested.
Regarding one of these names, objections on behalf of third parties have been submitted.
The
Company also owns three trademarks which are not currently used. The Company’s
investment in registering these trademarks was insignificant.
Employees
As
of December 31, 2005, the Company, including its subsidiaries, employed a total of 80
persons, six of whom were in management, 11 of whom were in accounting and importing
positions, 28 of whom were involved in the Company’s sales and marketing departments,
and 35 of whom were employed in logistics networks (warehousing and transportation). This
compares with 70 employees as of December 31, 2004, six of whom were in management, 11 of
whom were in accounting and importing positions, 23 of whom were involved in the
Company’s sales and marketing departments, 30 of whom were employed in logistics
networks (warehousing and transportation). As of December 31, 2003, the Company, including
its subsidiaries, employed a total of 60 persons, five of whom were in management, 12 in
accounting and importing positions, 20 involved in the Company’s sales and marketing
departments and 23 in logistics networks (warehousing and transportation).
As
of December 31, 2005, 28 additional employees (stewards and sales people) were engaged on
an hourly basis. On December 31, 2004 the number was 36 and on December 31, 2003 the
number was 18. Other employees were supplied by temporary manpower companies.
During
the past two years, there has been an increase in the number of employees in the sales and
marketing departments as well as in the logistics department due to the increase in sales
and due to the Company’s anticipation for further revenue growth and customer
diversification.
The
Company’s employees are party to written employment contracts. Regarding the
Company’s management services agreements with companies controlled by Messrs. Joseph
and Zvi Williger, see “Item 6. Directors, Senior Management and Employees-
Compensation”.
The
Company believes that its working relations with its employees are satisfactory. Israeli
labor laws are applicable to all of the Company’s employees, as are certain
provisions of the collective bargaining agreements between the Histadrut (General
Federation of Labor in Israel) and the Coordination Bureau of Economic Organizations
(including the Industrialists Association), by order of the Israeli Ministry of Labor.
These provisions principally concern the length of the work day, minimum daily wages for
professional workers, paid annual sick leave, discrimination, insurance for work-related
accidents, social security, procedures for dismissing employees, determination of
severance pay and other conditions of employment.
In
addition, Israeli employers, including the Company, are required to provide certain
escalations in wages in relation to the increase in the Israeli consumer Price Index
(“CPI”). The specific formula for such escalation varies according to agreements
between the Government of Israel, the Manufacturers’ Association and the Histadrut.
Page 20
A
general practice in Israel followed by the Company, although not legally required, is the
contribution of funds on behalf of its senior employees to a fund known as
“Manager’s Insurance”. This fund provides a combination of savings plan,
insurance and severance pay benefits to participating employees, giving these employees a
lump sum payment upon retirement and securing their right to receive severance pay, if
legally entitled, upon termination of employment. The employee contributes an amount equal
to 5%-5.5% of his wages and the Company contributes an additional 13.3%-15.8%. In
addition, Israeli law generally requires severance pay upon the retirement or death of an
employee or termination of employment without due cause. Furthermore, Israeli employees
and employers are required to pay predetermined sums to the National Insurance Institute
(which is similar, to some extent, to the United States Social Security Administration).
The payments thereto amount to approximately 11% of wages; the employee’s share being
4.5-9% (depending on the marginal level of wages) and the employer’s share is
approximately 5%.
On
February 16, 2006, the Company entered an agreement (“Transfer Agreement”) with
Gold Frost, pursuant to which 16 of the Company’s employees became employees of Gold
Frost as of January 1, 2006. The Transfer Agreement specifies that the employees’
rights (including pension funds and insurance policies, tenure, etc.) will be fully
maintained by Gold Frost despite the change in the employer’s identity. It was
further agreed that the Company would pay to Gold Frost the sum of NIS 47,972 (USD 10,422)
which covers the Company’s obligations for unused vacation time and convalescence pay
owing to those employees who were transferred. See “Item 7. Major Shareholders and
Related Party Transactions – 10B. Related Party Transactions – Transfer
Agreement”.
The
abovementioned transfer was implemented in order to allow Gold Frost to market its
products on its own accord.
Government Regulation
The
import, storage, distribution, marketing and labeling of food products is subject to
extensive regulation and licensing by various Israeli government and municipal agencies,
principally the Ministry of Health, the Ministry of Finance and the Ministry of Trade and
Industry. We are required to maintain our distribution processes, as well as the products
imported by us, in conformity with all applicable laws and regulations. Failure to comply
with these applicable laws and regulations could subject us to civil sanctions, including
fines, injunctions, recalls or seizures, as well as potential criminal sanctions, any of
which could have a material adverse effect on us. We believe that we comply in all
material respects with the above-mentioned requirements. To the extent that the Company
has imported, or will import, food products outside of Israel, we may be subject to quotas
and other import laws and regulations which may limit our ability to sell certain of our
food products into these countries.
In
1978, the Israeli government issued the free import decree, which exempts the import of
most food products from the requirement to acquire a license. However, preliminary permits
from the Ministry of Health or the Ministry of Agriculture are still required. These
preliminary permits are granted based on laboratory analysis reports and other data.
Customs
duties and charges are levied on a portion of the Company’s products. Israeli
government policy in favor of exposing the local market to certain imported products has
directly impacted the Company’s operations since September 1991, when certain customs
duties levied by category, formerly levied on products, including those imported by the
Company, were canceled.
The
Company is required to obtain import licenses for the import of certain food products from
the Ministry of Trade and Industry of the State of Israel. The Company has obtained the
necessary import licenses for the products imported by it as required by the import
authorities. The Company has also obtained the necessary authorization required by the
Ministry of Health (Food Authority) for the import of all of its food products to Israel.
The Company’s products are packaged by various manufacturers and suppliers abroad and
labeled in Hebrew, English and, in certain cases, Arabic and Russian, according to the
Company’s instructions and the requirements of the Israeli authorities. Since the
beginning of the Company’s activities, the Company has been found to have mislabeled
packages four times, as a result of which the Company was required to pay an immaterial
amount of fines.
Page 21
On
January 5, 2005, the Israeli Antitrust Authority announced its policy regarding commercial
practices between suppliers and retail chains. It determined that several existing
arrangements of this sort were indeed “tying arrangements” (an agreement
requiring that as a precondition of purchasing or obtaining services, that other services
must be purchased through the seller) which are prohibited. This opinion is applicable to
“dominant suppliers”, which for purposes of this policy was defined as suppliers
who control a very significant portion of the market in which they operate –
i.e.
, over 50%, such that they are a monopoly, or control close to 50% of the market
in which they operate and is not a monopoly. The Company, however, is of the opinion that
it is not one of the “dominant suppliers” and that the implementation of this
policy may weaken the power of the Company’s larger competitors and reduce their
ability to compete with smaller competitors, such as the Company.
Most
of the products which the Company imports and markets are approved as Kosher by and/or
under the supervision of various supervisory institutions including, the Chief Rabbinate
of Israel, Chug Chatam Sofer, certain Jewish organizations administering Kashrut
procedures and certifications (such as the Union of the Orthodox Jewish Congregation of
America (UO), Badatz Igud Harabanim Manchester, OK, Circle K, Triangle K, etc.) and rabbis
of local Jewish congregations abroad. Such procedures include, in certain cases, personal
supervision by a Kashrut supervisor sent by such institutions to the manufacturing
facilities from which the Company purchases products, who is present at the plant during
the processing of the product. Under Israeli law, the Company is required to ascertain
that the kosher foodstuffs which it offers for sale bear kosher certification approved by
certain authorities, such as the Chief Rabbinate of Israel, and also bear the name of the
individual authorized to certify such product. Not all products marketed by the Company
have been so certified, although they do bear certain kosher certification from other
certification bodies. The expenses for obtaining the Kashrut approval are relatively low.
|
|
C.
|
ORGANIZATIONAL
STRUCTURE
|
The
Company’s principal shareholder, Willi Food, as of May 30, 2006, held approximately
73.98% of the Company’s outstanding share capital. The primary assets of Willi Food
are the Company’s ordinary shares. Willi Food was established on November 27, 1992
and its securities have been traded on the Tel Aviv Stock Exchange since January 1993.
The
Company, as on December 31, 2005, had two active wholly owned subsidiaries organized in
Israel, Gold Frost and W.F.D. (Import, Marketing and Trading) Ltd., which we refer to
herein as W.F.D. The offices of the Company’s subsidiaries are located in the Yavne,
Israel, at the office of the Company.
The
Company has one inactive subsidiary in the United States – Willi USA Holdings, Inc.,
a Delaware corporation.
Gold
Frost
In
May 2001, the Company acquired all the shares of Gold Frost for NIS 336 thousand (USD
73 thousand). Gold Frost, which was registered in 1977 in Israel, is engaged in designing,
developing and distributing frozen and chilled food products. The Company purchased Gold
Frost in order to take advantage of Gold Frost’s know-how in importing frozen and
chilled products as well as of its well known brand name in the Israeli market. Gold Frost
distributes over 60 products, usually packed for private consumers (in cans, jars,
containers and plastic sealed and vacuumed packages), but also for institutional consumers
and labeled in Hebrew, English, and in certain cases, Arabic and Russian. Gold Frost
markets certain products under the trademarks “Gold Frost” and “Willi
Food” which are registered in Israel. Gold Frost is working towards broadening the
variety of products that it develops and distributes. The mission of Gold Frost is to
develop low fat, low cholesterol dairy chilled and frozen products aimed at the kosher and
health conscious consumer market.
Page 22
On
March 9, 2006, Gold Frost completed an initial issuance to the public on the London AIM
market which yielded gross proceeds of NIS 36.5 million (USD 7.9 million). Following the
issuance, as of May 30, 2006, the Company held approximately 75.7% of Gold Frost’s
share capital.
On
February 28, 2006, a relationship agreement between Gold Frost, the Company and others was
signed, defining the relationship between the two companies. See “Item 10.
“Additional Information – 10C. Material Contracts”.
W.F.D.
In
November 1995, the Company also incorporated a wholly-owned subsidiary, W.F.D. The Company
occasionally imports certain products through this subsidiary, which then sells these
products to the Company. W.F.D. has no assets, facilities or obligations, other than those
amounts owed to suppliers overseas with respect to products purchased from them. W.F.D.
had no sales for each of the last five years.
|
|
D.
|
PROPERTY,
PLANTS AND EQUIPMENT
|
The
Company’s principal executive offices are situated at a leased facility in the
northern industrial zone of Yavne, at 3 Nahal Snir St., Israel, 35 km south of Tel-Aviv.
These premises serve as the Company’s logistic center for warehousing and
distribution of food products as well. The Yavne facility is leased by the Company from
Titanic Food Ltd. (“Titanic”), a private Israeli company controlled by Messrs.
Joseph Williger, the Company’s Chief Executive Officer and a director, and Zvi
Williger, the Company’s Chief Operating Officer and Chairman of the Board. The lease,
which was signed on November 29, 1998, was for an initial term of two years with an option
for three additional terms of two years each. The lease will expire on January 14, 2007.
This
facility consists of approximately 5,387 square meters (approximately 48,500 square feet)
(a four-story building plus a basement). The monthly rental fee (excluding VAT) for this
facility is USD 35,886 starting January 2005, the last option period. The rent is payable
in advance on a quarterly basis. The Company believes that the terms of the
above-mentioned lease are no less favorable to it than could be obtained from an
unaffiliated third party. The amounts paid by the Company as rental fees in the years
ended December 31, 2005, 2004 and 2003 were NIS 1,918 thousand (USD 417 thousand), NIS
1,833 thousand (USD 398 thousand) and NIS 1,837 thousand (USD 399 thousand), respectively.
Since March 27, 2000, the Company has been operating the Yavne facility under a municipal
business license as required under Israeli law. The license has been granted permanently.
The
Company also utilizes free warehouse services in the area of the Ashdod seaport. The
Company is charged only for storage per container (
i.e
., there is no charge for
rental while the Company does not use the free warehouse services). The payment for these
services for the years ended December 31, 2005, 2004 and 2003 was NIS 1,361 thousand (USD
296 thousand), NIS 1,400 thousand (USD 304 thousand) and NIS 822 thousand (USD 179
thousand), respectively.
As
of December 31, 2005, the Company owned fourteen refrigeration trucks (each with capacity
of 6.5 to 19 tons) and seven regular trucks (each with capacity of 15-27 tons). Pursuant
to the Transfer Agreement with Gold Frost 11 of the abovementioned trucks and a private
car were sold as of January 1, 2006 from the Company to Gold Frost. See Item 7.
“Major Shareholders and Related party transactions – 10B. Related Party
Transactions – Transfer Agreement”. The abovementioned transfer was implemented
in order to allow Gold Frost to market its products on its own accord.
Page 23
In
August 2005, the Company purchased from Titanic a plot of 19,000 square meters
(approximately 171,000 square feet) for the construction of a new logistic center of 8,600
square meters (approximately 77,400 square feet). This transaction was approved by the
Company’s Board of Directors, Audit Committee of the Board of Directors and
shareholders. The plot is situated in the northern industrial zone of Yavne. The new
logistic center will replace the Company’s current logistic center (which the Company
leases from Titanic), and will spare the Company the expense of using storage services in
warehouses at the Ashdod seaport far from the current logistic center. The new logistic
center is expected to become operational in November 2006, and the Company is expected to
evacuate the current logistic center and return it to Titanic when the new logistics
center becomes operational.
The
lease for the present logistics center (the “Current Lease”) ends in January
2007. If the new logistics center becomes operational before the expiration of the Current
Lease, Titanic has agreed to shorten the term of the Current Lease accordingly, without
receiving any additional compensation for shortening the Current Lease term.
Alternatively, if the new logistics center becomes operational after the expiration of the
Current Lease, Titanic has agreed that the Current Lease will be extended until completion
of the construction of the new logistics center under the same terms that the present
logistics center is being rented today (USD 35,886 a month).
The
total investment in the new logistics center until December 31, 2005 amounted to NIS
12,886 thousand (USD 2,799 thousand).
|
ITEM 4A.
|
–
|
UNRESOLVED STAFF COMMENTS
|
Not
applicable.
Page 24
|
ITEM 5.
|
|
OPERATING AND FINANCIAL REVIEW AND PROSPECTS
|
Overview
The
following discussion and analysis should be read in conjunction with the consolidated
financial statements of the Company and the related Notes thereto which appear in this
Annual Report. The consolidated financial statements have been prepared in accordance with
Israeli GAAP, which differs in certain significant respects from U.S. GAAP. Reference is
made to Notes 2 and 14 of Notes to the consolidated financial statements for a description
of the significant differences between Israeli GAAP and U.S. GAAP. Unless otherwise
indicated, financial information for the Company included herein is presented on a
consolidated basis under Israeli GAAP.
The
Company is engaged in the design, import, marketing and distribution of a broad range of
food products purchased from over 100 suppliers worldwide and marketed throughout Israel,
and to a much lesser extent, the areas administered by the Palestinian Authority. The
products imported by the Company are marketed in Israel and sold to over 1,000 customers,
including supermarket chains in the organized market, private supermarket chains,
mini-markets, wholesalers, manufacturers and institutional consumers. The Company was
incorporated in Israel in January 1994 and commenced operations in February 1994.
During
recent years, there has been an increase in the number of small private supermarket stores
that have opened in Israel, which has resulted in greater price competition in the stores
and in our business. The increased price competition resulted in an increase in our cost
of sales as a percentage of total sales and a decrease in our gross profit in 2005 from
2004. In an effort to reduce our operating costs and increase our logistical efficiency,
we are constructing a new logistics center to replace the numerous external warehouse
facilities that we currently use. This new logistics center, which is expected to be
operational in November 2006, will also include a dedicated automatic packing line. We
believe the new facility will enable us to take fuller advantage of the sales channels
available to us. The new facility will also allow us to consider adding new sources of
products in Israel to provide further products to meet consumer demand.
We
also intend to continue to seek to grow our market share in Israel through the
introduction of additional innovative niche products to give the customer more choice,
healthier and/or less expensive products and, where permitted, by expanding our
relationships with our suppliers. We also intend to increase expenditures on marketing and
sales activities to increase the market penetration of the products that we currently sell
in Israel.
Currently,
almost all of our sales are in Israel. We believe that there is potential for significant
expansion of the business outside of Israel, and in particular, in the U.S. and Europe. We
have a number of different opportunities in these regions, but we believe it important to
secure control of distribution of our products in these regions as well. Currently, we are
considering different approaches to secure these means of distribution, although we cannot
guarantee that we will be successful. These approaches include:
|
|
—
|
Entering
into joint venture arrangements with, or acquiring a controlling stake or absolute
control of a distributor in a region outside of Israel; and
|
|
|
—
|
Selling
kosher product direct to supermarket chains outside of Israel.
|
For
convenience purposes, the financial data for the years ended December 31, 2005, 2004,
2003, 2002 and 2001 has been translated into U.S. Dollars using the representative
exchange rate. This rate as of December 31, 2005 was NIS 4.603 = USD 1.00.
Page 25
The
Company is not involved in any off balance sheet transactions or long-term contractual
obligations.
Critical Accounting
Policies
Management’s
discussion and analysis is based upon the consolidated financial statements, which have
been prepared in accordance with accounting principles generally accepted in Israel and
adapted to the generally accepted accounting principles accepted in the United States. The
use of these generally accepted accounting principles requires the management to make
estimates and assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial statements
and the reported amounts of revenues and expenses during the reporting accounting periods
presented. These estimates include, among other things, assessing the collectibility of
accounts receivable and the use of recoverability of inventory. Actual results could
differ from those estimates. The markets of the Company’s products are characterized
by intense competition and a rapid turnover of products and frequent new introductions of
products, all of which may impact future ability to value the Company’s assets.
The
following critical accounting policies may affect significant judgments and estimates used
in the preparation of the consolidated financial statements.
|
1.
|
Revenue
Recognition – revenue from product sales is recognized upon the shipment
to the consumers, when the title and risk of loss have been transferred to the
consumer, price and terms are agreed and when no significant vendor obligations
exist and collection of the resulting receivable is reasonably assured.
Incentive to certain customers – the Company is obligated to pay
incentives to certain customers in relation to the volume of sales. The
incentive is calculated as a percentage of the annual sales to the customer. In
accordance with EITF 01/9 the Company presents revenue net of such incentives.
The Company grants to certain customers the right to return the products. A
provision for customers’ return is recorded for the estimated future
products return, based on the Company’s experience. This policy is
significant because the revenue is a key component of the Company’s
operations, as well as the fact that the revenue recognition determines the
timing of certain expenses. Revenue results are difficult to predict and any
shortfall in revenue or delay in recognizing revenue could cause the operating
results to vary from quarter to quarter and may result in operating losses.
|
|
2.
|
Inventories
– are stated at the lower of cost or market value. Cost is determined by
the FIFO (first in first out) method. Inventory’s values and quantities
review cause the Company to write down the difference between the cost and the
estimated market value upon assumption about future demand and market
conditions. If the inventory is determined to be undervalued, the Company may
have to recognize additional operating income at the time of sale. Any
significant unanticipated change in demand or expiration of product life could
have a significant impact on the value of the inventory.
|
Recently Issued
Accounting Pronouncements
U.S. GAAP:
In
December 2004, the Financial Accounting Standards Board (FASB) issued SFAS No. 123(R).
SFAS No. 123(R) requires employee share-based equity awards to be accounted for under the
fair value method and eliminates the ability to account for these instruments under the
intrinsic value method prescribed by APB Opinion No. 25 and allowed under the original
provisions of SFAS No. 123. SFAS No. 123(R) requires the use of an option pricing model
for estimating fair value, which is then amortized to expense over the service periods.
Had the Company adopted SFAS 123(R) in prior periods, the impact of that standard would
have approximated the impact of SFAS 123 as described in the disclosure of pro forma net
income and income per share in Note 2 (O) of the Notes to the consolidated financial
statements. SFAS No. 123(R) allows for either prospective recognition of compensation
expense or retrospective recognition. In January 2005, the SEC issued SAB No. 107, which
provides supplemental implementation guidance for SFAS No. 123(R). In the first quarter of
2006, the Company began to apply the prospective recognition method and implemented the
provisions of SFAS No. 123(R). The Company does not expect the adoption of SFAS No. 123(R)
to have a material impact on its consolidated financial statements.
Page 26
In
May 2005, the FASB issued SFAS No. 154, “Accounting Changes and Error
Corrections.” SFAS No. 154 replaces APB Opinion No. 20, “Accounting
Changes” and SFAS No. 3, “Reporting Accounting Changes in Interim Financial
Statements.” SFAS No. 154 requires retrospective application to prior periods’
financial statements of changes in accounting principle, unless it is impracticable to
determine either the period-specific effects or the cumulative effect of the change. The
Company does not expect the adoption of SFAS No. 154 will have a material impact on its
consolidated financial statements.
Israeli GAAP:
Accounting
Standard No. 24 “Stock-Based Compensation”
In
September 2005, the Israeli Accounting Standards Board published Accounting Standard No.
24 “Share-Based Payment” (the “Standard”), which calls for the
recognition in the financial statements of share-based payment transactions. Such
transactions include transactions with employees and related parties to be settled by
cash, by other assets, or by equity instruments. Consequently, amongst other matters,
costs associated with grants of shares and options to employees will be expensed over the
vesting period of each grant. These costs will be determined based on the fair value of
the awards at each grant date. The Standard establishes guidelines for measuring each
award based on the settlement terms (either by cash or equity instrument). The Standard
also establishes certain disclosure requirements relating to share-based payment.
The
Standard is effective for financial statements for periods commencing January 1, 2006 or
thereafter (initial adoption is recommended). The application of the Standard is not
expected to materially affect the Company’s financial position and results of
operations.
Accounting
Standard No. 21 “Earnings Per Share”
In
February 2006, the Israeli Accounting Standards Board approved for publication Accounting
Standard No. 21, “Earnings Per Share” (the “Standard”). With the
initial adoption of the Standard, Opinion No. 55 of the Institute of Certified Public
Accountants in Israel – Earnings per share will be cancelled. The Standard prescribes
that an entity shall calculate basic earnings per share amounts for profit or loss
attributable to ordinary equity holders of the parent entity and, if presented, profit or
loss from continuing operations attributable to those equity holders. The basic earnings
per share shall be calculated by dividing profit or loss attributable to ordinary equity
holders of the parent entity (the numerator) by the weighted average number of ordinary
shares outstanding (the denominator) during the reported period. For the purpose of
calculating diluted earnings per share, an entity shall adjust profit or loss attributable
to ordinary equity holders of the parent entity, and the weighted average number of shares
outstanding, for the effects of all dilutive potential ordinary shares.
The
Standard is effective for financial statements for periods commencing January 1, 2006 or
thereafter. The initial adoption of the Standard will be accounted for retrospectively and
comparative Earnings per share data for prior periods shall be adjusted. The application
of the Standard is not expected to materially affect the Company’s Earnings per share
data.
Page 27
Accounting
Standard No. 25 “Revenues”
In
February 2006, the Israeli Accounting Standards Board approved for publication
Accounting Standard No. 25, "Revenues" (the "Standard").
This
Standard establishes the requirements for recognition criteria, measurement, disclosure
and presentation of revenues arising from sale of goods, rendering of services and from
the use by others of entity assets yielding interest, royalties and dividends. This
Standard prescribes that revenue shall be measured at the fair value of the consideration
received or receivable. The Standard is effective for financial statements for periods
commencing January 1, 2006 or thereafter.
Assets
and liabilities included in the financial statements as of December 31, 2005 in different
amounts from those that would have been presented if the standard’s requirements were
applied will be adjusted on January 1, 2006 to the amounts to be recognized in accordance
with the Standard’s guidelines. The results of the initial adoption of the Standard
as at January 1, 2006 shall be accounted for by the cumulative effect of a change in
accounting method. The application of the Standard is not expected to materially affect
the Company’s financial position and results of operations.
The
following table sets forth for the periods indicated, the correlation (in percentages)
between items from the Company’s statements of operations to its total sales for such
periods:
|
|
Year Ended
December 31, 2005
|
Year Ended
December 31, 2004
|
Year Ended
December 31, 2003
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Sales
|
|
|
|
100
|
%
|
|
100
|
%
|
|
100
|
%
|
|
Cost of Sales
|
|
|
|
77.11
|
%
|
|
76.20
|
%
|
|
80.17
|
%
|
|
Gross Profit
|
|
|
|
22.89
|
%
|
|
23.80
|
%
|
|
19.83
|
%
|
|
Sales and Marketing Expenses
|
|
|
|
9.48
|
%
|
|
9.14
|
%
|
|
8.49
|
%
|
|
General and Administrative Expenses
|
|
|
|
6.04
|
%
|
|
5.34
|
%
|
|
6.07
|
%
|
|
Bad Debt - Club Market
|
|
|
|
2.10
|
%
|
|
-
|
|
|
-
|
|
|
Operating Income
|
|
|
|
5.27
|
%
|
|
9.32
|
%
|
|
5.27
|
%
|
|
Financial Income, Net
|
|
|
|
1.50
|
%
|
|
0.66
|
%
|
|
3.16
|
%
|
|
Pre Tax Income
|
|
|
|
6.79
|
%
|
|
9.99
|
%
|
|
8.49
|
%
|
|
Income Taxes
|
|
|
|
2.14
|
%
|
|
3.44
|
%
|
|
2.10
|
%
|
|
Net Income
|
|
|
|
4.65
|
%
|
|
6.55
|
%
|
|
6.39
|
%
|
|
|
|
|
|
|
|
|
Year Ended
December 31, 2005 Compared With Year Ended December 31, 2004
Sales.
Sales
for the year ended December 31, 2005 decreased by approximately NIS 4,700
thousand (USD 1,021 thousand), or 2.75%, to approximately NIS 166,282 thousand
(USD 36,125 thousand) from NIS 170,982 thousand (USD 37,146 thousand) for the
year ended December 31, 2004. This decrease in sales was mainly due to
Company’s policy in the first half of the year 2005, following the
insolvency of a number of major wholesalers in the Israeli food industry, to
stop selling to some customers and/or to reduce its sales to other customers
due to credit review. Our emphasis on credit review of customers in 2006 is
expected to continue.
Page 28
Cost
of Sales
. Cost of sales for the year ended December 31, 2005 decreased to
approximately NIS 128,215 thousand (USD 27,855 thousand), or 77.1% of sales, from
approximately NIS 130,292 thousand (USD 28,306 thousand), or 76.2% of sales, for the
year ended December 31, 2004. This decrease in cost of sales reflected our reduced
sales in 2005 as compared to 2004. As a percentage of sales, our cost of sales slightly
increased due to increased price competition.
Gross
Profit
. The results of sales and cost of sales, as mentioned above, created a gross
profit of approximately NIS 38,067 thousand (USD 8,270 thousand), equal to 22.9 % of the
sales in the year ended December 31, 2005, reflecting a decrease of 6.4% as compared to a
gross profit of approximately NIS 40,690 thousand (USD 8,840 thousand), equal to 23.8% of
the sales in the year ended December 31, 2004.
Sales
and Marketing Expenses
. Sales and marketing expenses for the year ended
December 31, 2005 increased to approximately NIS 15,771 thousand (USD 3,426
thousand), or 9.5% of sales, from approximately NIS 15,632 thousand (USD 3,396
thousand), or 9.1% of sales, for the year ended December 31, 2004. This increase in
sales and marketing expenses was mainly attributable to increased payroll expenses
(recruitment of additional sales agents and logistics network employees) and increased
transportation costs to customers offset by a decline in advertising and sales promotion
expenses. The increase of payroll expenses in 2005 in the amount of NIS 534 thousand (USD
116 thousand), as compared to 2004, was due to the employment of an average of ten
additional employees in 2005 (a 20% increase as compared to 2004) in anticipation of
further revenue growth and customer diversification, and the increase in the cost of
maintaining vehicles, transport and maintenance of NIS 657 thousand (USD 143 thousand) in
2005 corresponded to the increase in the number of employees and the increase in the
vehicle and truck fleet. However, there was a decline of NIS 1,142 thousand (USD 248
thousand) in advertising expenses due to the absence of massive advertising campaign held
by the Company.
General
and Administrative Expenses
. General and administrative expenses for the year ended
December 31, 2005 increased to approximately NIS 10,044 thousand (USD 2,182
thousand), or 6.0% of sales, from approximately NIS 9,134 thousand (USD 1,984
thousand), or 5.3% of sales, for the year ended December 31, 2004.
In 2005
there was an increase in professional service expenses of NIS 1,320 thousand (USD 287
thousand) deriving from an increase of legal, audit and IR costs, offset by a decline of
NIS 436 thousand (USD 95 thousand) in the payroll and accompanying expenses, primarily as
a result of a decline in the management bonus due to the Management Services Agreements
that is calculated as a percentage of the consolidated profit before tax.
Bad
Debt – Club Market
. On July 13, 2005, Club Market Marketing Chains Ltd. one of
the three largest food chains in Israel, announced that it could not pay its debts to the
creditors. The District Court of Tel Aviv accepted Club Market’s petition for a stay
of proceedings. Club Market’s debt to the Company as of July 13, 2005 was NIS 6,500
thousand (USD 1,412 thousand), including VAT (approximately NIS 5,550 thousand net of VAT
(USD 1,207 thousand)). The Company submitted a claim of debt. During 2005, the Company
wrote off as a bad debt the sum of NIS 3,500 thousand (USD 760 thousand), or 2.1% of
sales, due to the abovementioned debt.
Operating
Income
. Operating income for the year ended December 31, 2005 decreased by
approximately NIS 7,172 thousand (USD 1,558 thousand), or by 45%, to approximately
NIS 8,752 thousand (USD 1,901 thousand), or 5.3% of sales, from approximately
NIS 15,924 thousand (USD 3,459 thousand), or 9.32% of sales, for the year ended
December 31, 2004.
PAge 29
Financial
Income, Net
. Financial income, net, for the year ended December 31, 2005 was
approximately NIS 2,501 thousand (USD 543 thousand) compared with approximately
NIS 1,121 thousand (USD 243 thousand) for the year ended December 31, 2004. The
increase in financial income was due to an increase in the profit from marketable
securities of NIS 315 thousand (USD 68 thousand), an increase in the interest income on
short term deposits of NIS 197 thousand (USD 43 thousand), income from future transactions
of NIS 184 thousand (USD 40 thousand), and a decline, compare to 2004, in bank
commissions, and a difference in exchange rates and interest on short term credit of NIS
380 thousand (USD 83 thousand).
Pre-tax
Income.
Income before taxes for the year ended December 31, 2005 decreased by
approximately NIS 5,791 thousand (USD 1,258 thousand), or by 34%, to approximately
NIS 11,288 thousand (USD 2,452 thousand) from NIS 17,079 thousand (USD 3,710
thousand) for the year ended December 31, 2004.
Taxes
on Income
. Taxes on income for the year ended December 31, 2005 decreased to
approximately NIS 3,563 thousand (USD 774 thousand) from approximately NIS 5,886
thousand (USD 1,279 thousand) in the year ended December 31, 2004. The decrease in
taxes on income in 2005 in compare to 2004 was attributable to the decrease in Income
before taxes.
Net
Income
. Net income for the year ended December 31, 2005 decreased by
approximately NIS 3,468 thousand (USD 753 thousand), or 31%, to approximately NIS 7,725
thousand (USD 1,678 thousand), or 4.65% of sales, from approximately NIS 11,193
thousand (USD 2,432 thousand), equal to 6.55 % of sales for the year ended
December 31, 2004.
Year Ended
December 31, 2004 Compared With Year Ended December 31, 2003
Sales.
Sales
for the year ended December 31, 2004, increased by approximately NIS 33,597
thousand (USD 7,299 thousand), or 24.5%, to approximately NIS 170,982 thousand
(USD 37,146 thousand) from NIS 137,385 thousand (USD 29,847 thousand) for the
year ended December 31, 2003. The growth of sales for the year ended
December 31, 2004 compared with the year ended December 31, 2003 is a result of
marketing efforts taken by the Company including an extensive advertising
campaign in the electronic media under the brand name “Willi-Food” followed
by increased sales of new products. The Company continued to expand its
activities and its penetration into new fields, mainly frozen and chilled
products.
Cost
of Sales
. Cost of sales for the year ended December 31, 2004, increased, to
approximately NIS 130,292 thousand (USD 28,306 thousand) or 76.20% of sales, from
approximately NIS 110,160 thousand (USD 23,932 thousand) or 80.17% of sales, for the
year ended December 31, 2003. The sharp decrease in cost of sales as a percentage
from the total sales for the year ended December 31, 2004 compared to the same period in
2003 derives from a change in Company’s products mix, as well as an improvement of
trade terms mainly by achieving lower purchasing prices from Company’s suppliers.
Gross
Profit.
The results of sales and cost of sales, as mentioned above, created a gross
profit of approximately NIS 40,690 thousand (USD 8,840 thousand), equal to 23.80% of the
sales in the year ended December 31, 2004, increase of 49.5% in compare to approximately
NIS 27,225 thousand (USD 5,915 thousand), equal to 19.83% in the year ended December 31,
2003. These results are due to increased sales and the efficiency in the ratio between
sales and cost of sales.
Sales
and Marketing Expenses
. Sales and marketing expenses for the year ended
December 31, 2004 increased to approximately NIS 15,632 thousand (USD 3,396
thousand) or 9.14 % of sales, from approximately NIS 11,662 thousand (USD 2,534
thousand), or 8.49 % of sales, for the year ended December 31, 2003. This increase in
sales and marketing expenses was mainly attributable to improving the selling
infrastructure, including an advertising campaign carried out in 2004 at the cost of
approximately NIS 2,000 thousand (USD 434 thousand), resulting an increase in advertising
expenses of NIS 1,578 thousand (USD 343 thousand) in compared to 2003, recruiting 10
additional experienced employees and management in the sales and marketing department and
to the logistics networks, resulting in increased payroll expenses of approximately NIS
1,233 thousand (USD 268 thousand) as compared to 2003, and an increase of NIS 1,180
thousand (USD 256 thousand) in the cost of maintaining vehicles, transport and
maintenance.
Page 30
General
and Administrative Expenses
. General and administrative expenses for the year ended
December 31, 2004 increased to approximately NIS 9,134 thousand (USD 1,984
thousand), or 5.34% of sales, from approximately NIS 8,335 thousand (USD 1,811
thousand), or 6.07% of sales, for the year ended December 31, 2003. This increase was
primarily the result of a increase of NIS 678 thousand (USD 147 thousand) in the
management bonus due to the Management Services Agreements, that is calculated as a
percentage of the consolidated profit before tax.
Operating
Income
. Operating income for the year ended December 31, 2004 increased by
approximately NIS 8,696 thousand (USD 1,889 thousand), or 120%, to approximately
NIS 15,924 thousand (USD 3,459 thousand), or 9.32% of sales, from approximately
NIS 7,228 thousand (USD 1,570 thousand), or 5.27% of sales, for the year ended
December 31, 2003.
Financial
Income, Net
. The financial income, net, for the year ended December 31, 2004 was
approximately NIS 1,121 thousand (USD 244 thousand) compared with approximately
NIS 4,336 thousand (USD 942 thousand) for the year ended December 31, 2003. The
results in 2004 were affected by an increase in value of securities and shares for trade
in 2004 in the amount of NIS 440 thousand (USD 96 thousand) that was NIS 3,106 thousand
(USD 675 thousand) lower than in 2003.
Income
before Taxes
. Income before taxes for the year ended December 31, 2004 increased
by approximately NIS 5,414 thousand (USD 1,177 thousand), or 46.5%, to approximately
NIS 17,079 thousand (USD 3,710 thousand) from NIS 11,665 thousand (USD 2,534
thousand) for the year ended December 31, 2003.
Taxes
on Income
. Taxes on income for the year ended December 31, 2004 increased to
approximately NIS 5,886 thousand (USD 1,279 thousand) from approximately
NIS 2,889 thousand (USD 628 thousand) in the year ended December 31, 2003. The
increase in taxes on income in 2004 as compared to 2003 was attributable to the increase
in income before taxes.
Net
Income
. Net income for the year ended December 31, 2004 increased by
approximately NIS 2,417 thousand (USD 525 thousand) or 27.5% to approximately NIS 11,193
thousand (USD 2,432 thousand), or 6.55% of sales, from approximately NIS 8,776
thousand (USD 1,907 thousand), equal to 6.39% of sales for the year ended
December 31, 2003.
|
|
B.
|
LIQUIDITY
AND CAPITAL RESOURCES
|
Since
its inception, the Company’s operations have been funded mainly through equity and
cash flows from operating activities, as well as by short-term indebtedness provided by
Israeli banks and loans from Willi Food, its controlling shareholder. The Company’s
bank indebtedness is secured by certain liens on its share capital, goodwill and certain
other assets.
For
the year ended December 31, 2005, cash and cash equivalents decreased from
approximately NIS 55.8 million (USD 12.1 million) at December 31, 2004 to
approximately NIS 30.4 million (USD 6.6 million) at December 31, 2005. For the year
ended December 31, 2004, cash and cash equivalents increased from approximately
NIS 12.5 million (USD 2.7 million) at December 31, 2003 to approximately
NIS 55.8 million (USD 12.1 million) at December 31, 2004.
During
that year ended December 31, 2005, marketable securities increased to NIS 3.2 million (USD
0.7 million) from NIS 1.7 million (USD 0.4 million). For the year ended December 31, 2004,
marketable securities decreased from approximately NIS 42.3 million (USD 9.2 million) at
December 31, 2003 to approximately NIS 1.7 million (USD 0.4 million) at December 31, 2004.
Page 31
For
the year ended December 31, 2005, the Company utilized a cash flow for operating
activities of approximately NIS 7.3 thousand (USD 1.6 thousand), primarily
as a result of net income of approximately NIS 7.7 million (USD
1.7 million), offset by an increase of trade accounts receivables of approximately
NIS 7.5 million (USD 1.6 million). Our trade accounts receivable increased primarily due
to (i) the increase of sales in the fourth quarter of 2005 of approximately NIS 5.4
million (USD 1.2 million) as compared to the fourth quarter of 2004 and (ii) the increase
in the average time period within which our accounts receivable were paid. We also
increased inventory during 2005 in the amount of approximately NIS 3.7 million (USD 0.8
million) due to the Company’s anticipation for further revenue growth in 2006, and we
increased our other receivables and other current assets by NIS 6.5 million (USD 1.4
million) during 2005 primarily as a result to an increase in advances to suppliers of NIS
5,833 thousands (USD 1,267 thousand).
For
the year ended December 31, 2004, the Company utilized a cash flow from operating
activities of approximately NIS 18 thousand (USD 4 thousand), primarily as
a result of net income of approximately NIS 11.1 million (USD 2.4 million)
and an increase in trade accounts payable of approximately NIS 3.0 million (USD 0.6
million). This increase in trade accounts payable resulted primarily from an increase in
the inventory. Our increase in payables and other current liabilities in 2004 in the
amount of NIS 3.7 million (USD 0.8 million) was mainly due to debt to the tax authorities
as offset by an increase of trade accounts receivables of approximately NIS 11.2 million
(USD 2.4 million) that was primarily as a result of the increase of sales in the third and
fourth quarter of 2004 in the amount of approximately NIS 15.2 million (USD 3.3 million)
as compared to the same period in 2003 and an increase in inventory of approximately NIS
8.3 million (USD 1.8 million).
During
the year ended December 31, 2005, the Company generated a cash flow of
NIS 15.6 million (USD 3.4 million) from investing activities, mainly for
additions to fixed assets of NIS 14.9 million (USD 3.2 million), consisting mostly of the
investments in the Company’s new logistic center.
During
the year ended December 31, 2004, the Company generated a cash flow of
NIS 40.4 million (USD 8.8 million) from investing activities, mainly by the
realization of marketable securities amounting to NIS 41.0 million (USD 8.9 million).
During
the year ended December 31, 2005, the Company utilized cash flow from financing activities
of NIS 2.5 million (USD 0.54 million) to repay short-term bank credit. During the year
ended December 31, 2004, the Company generated cash flow from financing activities of NIS
3.0 million (USD 0.65 million) as a result of receipt of short-term bank borrowing and
from the exercise of stock option.
The
Company’s cash requirements, net, during the years ended December 31, 2005, 2004
and 2003 were met primarily through its working capital. As of December 31, 2005, the
Company had working capital of approximately NIS 85.4 million (USD 18.5 million) compared
with NIS 96.0 million (USD 20.9 million) as of December 31, 2004, and working capital of
approximately NIS 83.9 million (USD 18.2 million) as of December 31, 2003.
The
Company’s trade receivables increased to NIS 48.4 million (USD
10.5 million) as of December 31, 2005 from NIS 40.9 million (USD
8.9 million) as of December 31, 2004 and NIS 29.7 million (USD
6.4 million) as of December 31, 2003. The average time period within which our
accounts receivable were paid was 93 days for 2005, compared with 85 days for 2004 and 84
days for 2003.
Impact of Inflation and
Devaluation on Results of Operations, Liabilities and Assets
The
rate of inflation in Israel during the last six years has been significantly reduced as
compared to previous years. The rate of devaluation, which was low until 2002, has
increased and the representative rate of the U.S. Dollar reached NIS 4.603 on December 31,
2005, compared with NIS 4.308 on December 31, 2004, 4.379 on December 31, 2003, NIS 4.737
on December 31, 2002, and 4.416 on December 31, 2001. The representative rate of the U.S.
Dollar on May 30, 2006 was NIS 4.517.
Page 32
The
annual rates of inflation in Israel during the years ended December 31, 2000, 2001,
2002, 2003, 2004 and 2005 were approximately 0%, 1.4%, 6.5%, (1.9%), 1.6% and 2.4%,
respectively, while during such periods the devaluation of the NIS against the U.S.
Dollar was approximately (2.7%), 9.3% 7.3%, (7.6%), (1.6%) and 6.8%, respectively. During
each of the years ended December 31, 2000, 2003 and 2004, the rate of inflation in
Israel exceeded the rate of devaluation of the NIS against the U.S. Dollar, while
during each of the years ended December 31, 2001, 2002 and 2005 the rate of
devaluation of the NIS against the U.S. Dollar exceeded the rate of inflation in
Israel.
The
representative rate on December 31, 2005 was NIS 4.603 per USD 1.00, equal to a
devaluation of 6.8% from the representative rate on December 31, 2004, which was
NIS 4.308 per USD 1.00. The representative rate on December 31, 2004 was NIS 4.308
per USD 1.00, equal to a revaluation of 1.6% from the representative rate on
December 31, 2003, which was NIS 4.379 per USD 1.00. The representative rate on
December 31, 2003 was NIS 4.379 per USD 1.00, equal to a revaluation of 7.6% from the
representative rate on December 31, 2002, which was NIS 4.737 per USD 1.00. The
representative rate on December 31, 2002 was NIS 4.737 per USD 1.00, equal to a
devaluation of 7.3% from the representative rate at December 31, 2001, which was
4.416 per USD 1.00.
A
devaluation of the NIS in relation to the U.S. Dollar will have the effect of
decreasing the U.S. Dollar value of any assets of the Company which consist of NIS or
receivables payable in NIS. Such a devaluation would also have the effect of reducing the
U.S. Dollar amount of any liabilities of the Company which are payable in NIS (unless
such payables are linked to the Dollar). Conversely, any increase in the value of the
NIS in relation to the U.S. Dollar will have the effect of increasing the U.S. Dollar
value of any linked assets of the Company and the U.S. Dollar amount of any linked
NIS liabilities of the Company.
The
dollar cost of the Company’s operations in Israel is influenced by the extent to
which any increase in the rate of inflation in Israel over the rate of inflation in the
United States is offset by the devaluation of the NIS in relation to the U.S. Dollar.
The
Company’s assets are not linked to the Israeli CPI or the U.S. Dollar. However, some
of the Company’s liabilities are linked to the Israeli CPI and various foreign
currencies. Consequently, inflation in Israel and currency fluctuations will have a
negative effect on the value to the Company of payments the Company receives in
NIS and on the Company’s liabilities linked to foreign currencies.
Guarantees and Pledges
Principally
in connection with letters of credit issued to the Company, the Company has issued a
debenture to each of Bank Leumi Le’Israel, Bank Mizrahi Ltd. and Bank Hapoalim Ltd.,
pursuant to which it has pledged all of its assets (including its outstanding share
capital and good will of the Company) in favor of such banks to secure its obligations or
those obligations incurred by the Company jointly with third parties, including
obligations with respect to letters of credit with the Company’s suppliers. Bank
Leumi Le’Israel, Bank Mizrahi Ltd. and Bank Hapoalim Ltd. have agreed among them that
the pledges subject to such debentures shall rank
pari
passu
. The
outstanding amount of such letters of credit as of December 31, 2005 was approximately NIS
15,904 thousand (USD 3,455 thousand)
The
Company also guarantees, without limitation as to amount and for an unlimited period of
time, the obligations of its wholly-owned subsidiary, W.F.D., to the United Mizrahi Bank
Ltd. As of December 31, 2005, W.F.D. had no obligations to United Mizrahi Bank Ltd.
Page 33
The
Company also guarantees, without limitation as to amount and for an unlimited period of
time, the obligations of its subsidiary, Gold Frost, both to Bank Leumi Le’Israel
Ltd. and to the United Mizrahi Bank Ltd. As of December 31, 2005, Gold Frost had no
obligations to such banks.
|
|
C.
|
RESEARCH
AND DEVELOPMENT, PATENTS AND LICENSES
|
Not
applicable.
During
recent years, there has been an increase in the number of small private supermarket stores
that have opened in Israel, which has resulted in greater price competition in the stores
and in our business. The increased price competition resulted in an increase in our cost
of sales as a percentage of total sales and a decrease in our gross profit in 2005 from
2004. During 2005 and 2004, the Company initiated promotion activities and advertising
campaigns to promote its brand name “Willi-Food” resulting increasing its sales,
expand the variety of customers and as a result, increasing the gross margins.
The
Company is currently constructing a new logistic center near its headquarters with the aim
of increasing the efficiency of its logistic process and reducing its operating expenses.
The Company will also work towards increasing its sales to customers outside of Israel.
In
July 2005, Club Market Marketing Chains Ltd., one of the three largest food chains in
Israel, owner of 114 stores and a major customer of the Company, encountered major
financial difficulties, announcing that it could not pay its debts to its creditors. On
August 28, 2005, the court allowed the Club Market court-appointed receivers to sell Club
Market to Supersol, subject to several conditions. Among the conditions imposed was
prohibiting the conditioning of the purchase from a supplier on that supplier’s
purchase terms with their chains, prohibiting interfering with the commercial terms
awarded to other chains and prohibiting sales by Supersol at less than cost. As of
September 1, 2005, Club Market’s activities were substantially transferred to
Supersol. This merger of two of the three largest food chains in Israel is expected to
strengthen Supersol’s buying power against local food suppliers, such as the Company,
and it is expected that the dependency of local food suppliers on Supersol is expected to
grow.
The
Company’s management is evaluating the financial stability of its customers by
entering into agreements with companies for providing business data, examining bank
accounts, investigations, and following negative publications regarding those customers or
other signs indicating financial difficulties.
According
to a recent published report, the annual Israeli kosher food market is approximately USD
13 billion, of which approximately 50% consists of sales by supermarket chains in the
organized market, 23% of sales by private supermarket chains and mini-markets and 27% is
attributable to others. Over 60% of the Israeli Jewish population maintains some degree of
kosher observance in the home. However, all products sold in the major supermarket chains
in Israel must be kosher, irrespective of the customer base.
In
the U.S., despite the declining Jewish population (due to intermarriage and lower birth
rates), a published report from 2005 concluded that global demand for kosher products is
growing because of demand for kosher products is not limited to just the Jewish
population. Kosher food now commands attention from a new crop of consumers and not just
those who follow traditional Jewish dietary laws. In a survey referred to in this report,
more than 55% of respondents who buy kosher foods felt that kosher products are safer and
healthier than non-kosher items. As increasing number of mainstream consumers are becoming
concerned about the integrity of the food they eat for ethical or health reasons, and we
believe this will provide a growth opportunity for the kosher market. The clearer labeling
practices entailed in kosher food mean that consumers who are vegetarian, food sensitive
or allergic to certain ingredients can more easily monitor their diets. According to this
published report, the increased interest in food ingredients will continue to contribute
significantly to the growth of the kosher food industry in the U.S. The report cites that
one in 25 Americans suffer from a true food allergy, but that a larger percentage of the
population is sensitive or intolerant of specific ingredients. In addition to the increase
in health-conscious consumers, other ethnic or religious groups contribute to the increase
in the kosher food market since the dietary restrictions for certain other religious
groups are met by kosher food.
Page 34
|
|
E.
|
OFF-BALANCE
SHEET ARRANGEMENTS
|
Not
applicable
|
|
F.
|
TABULAR
DISCLOSURE OF CONTRACTURAL OBLIGATIONS
|
The
following tables of the Company’s material contractual obligations as of
December 31, 2005 summarize the aggregate effect that these obligations are expected
to have on our cash flows in the periods indicated:
2005
|
|
Payments due by period
|
Contractual Obligations
|
Total
|
Less than 1 year
|
2-3 years
|
4-5 years
|
More than 5 years
|
|
|
(in thousands)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Property Leases
|
|
|
NIS 2,067
|
|
|
NIS 1,992
|
|
|
NIS 75
|
|
|
|
|
|
|
|
|
|
|
|
|
(USD 449)
|
|
|
(USD 433)
|
|
|
(USD 16)
|
|
|
--
|
|
|
--
|
|
|
|
Open purchase orders
|
|
|
NIS 15,904
|
|
|
NIS 15,904
|
|
|
--
|
|
|
--
|
|
|
--
|
|
|
|
|
|
|
(USD 3,455)
|
|
|
(USD 3,455)
|
|
|
|
Operating Leases
|
|
|
--
|
|
|
--
|
|
|
--
|
|
|
--
|
|
|
--
|
|
|
|
Total
|
|
|
NIS 17,971
|
|
|
NIS 17,896
|
|
|
NIS 75
|
|
|
--
|
|
|
--
|
|
|
|
|
|
|
(USD 3,904)
|
|
|
(USD 3,888)
|
|
|
(USD 16)
|
|
|
--
|
|
|
--
|
|
|
This
annual report contains certain forward-looking statements (as such term is defined in the
Private Securities Litigation Reform Act of 1995). When used in this report, the words
“anticipate,” “believe,” “estimate,” “expect,”
“intend” and similar expressions, as they relate to the Company or the
management of the Company, identify forward-looking statements. Such statements reflect
the current views of the Company with respect to future events, based on certain
assumptions and information currently available to management, all of which are subject to
certain risks and uncertainties including, among others, the Company’s ability to
develop and introduce new products, any significant deterioration in the Company’s
relationship with its key customers and suppliers, the Company’s ability to
successfully integrate the operations of the Company’s subsidiaries with those of the
Company, fluctuations in key currency exchange rates, changes in the political and
economic conditions in Israel, and other factors which may be beyond the Company’s
control. Should one or more of these risks or uncertainties materialize, or should
underlying assumptions prove incorrect, actual results of operations may vary materially
from those described herein as anticipated, believed, estimated, expected or intended.
Page 35
|
ITEM 6.
|
|
DIRECTORS, SENIOR MANAGEMENT AND EMPLOYEES
|
|
|
A.
|
DIRECTORS
AND SENIOR MANAGEMENT
|
The
Directors, executive officers and key employees of the Company are as follows:
Name
|
Age
|
Position with the Company
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Joseph Williger
|
49
|
Chief Executive Officer and Director
|
|
Zvi Williger
|
51
|
Chief Operating Officer and Chairman of the Board
|
|
Rachel Bar-Ilan (1)
|
48
|
Director
|
|
David Weiss (1)
|
59
|
External Director
|
|
Shai Bazak (1)
|
38
|
External Director
|
|
Gil Hochboim
|
36
|
Chief Financial Officer
|
|
|
(1)
|
Members
of the Company’s Audit Committee.
|
The
Directors are elected at the annual general meeting of shareholders and hold office until
the next annual general meeting of shareholders and until their successors have been
elected. Officers serve at the discretion of the Board, subject to the terms of any
agreement between officers and the Company.
The
business experience of each of the Directors, executive officers and key employees of the
Company is set forth below:
Joseph
Williger
has served as the Chief Executive Officer (or general manager) and a Director
of the Company since its inception in January 1994. He has also served as a Chairman of
the Company’s subsidiaries, W.F.D. and Gold Frost, since November 1996 and April
2001, respectively. Mr. Williger has also served as a director and as chairman of the
Board of Willi Food, the controlling shareholder of the Company, since December 1992
and June 1994, respectively. Mr. Williger has served as Director of Titanic, a company he
owns together with Mr. Zvi Williger, since April 1990. Mr. Williger received his academic
education in economics from Bar-Ilan University in Israel and in Business Management from
Nortrige University in Los Angeles. Mr. Williger is the brother of Zvi Williger, Chief
Operating Officer and Chairman of the Board of Directors of the Company.
Zvi
Williger
has served as the Chief Operating Officer and Chairman of the Company since
January 1997, and from inception of the Company to January 1997 as a Director and Manager
of Marketing Development of the Company. Mr. Williger has also served as a director of the
Company’s subsidiaries, W.F.D. and Gold Frost, since November 1996 and April 2001,
respectively. Mr. Williger has also served as a director of Willi Food since
December 1992. Mr. Williger served as Director of Titanic since April 1990. Mr.
Williger attended Fresno University in California. Zvi Williger is the brother of Joseph
Williger, Chief Executive Officer and a director of the Company.
Rachel
Bar-Ilan
has served as Director of the Company since May 2001. Since 2005, she has
been the general manager of ORTHOBAR Company, a privately owned company established in
2002, which provides medical services and orthopedic equipment to hospitals, institutes,
emergency medical care center and private clinics and patients. From 1999 to 2004, Ms.
Bar-Ilan managed the marketing and application of medical laboratory instrumentation in
medical laboratories of Medtechnica Ltd., a company publicly traded on the Tel Aviv Stock
Exchange. From 1994 to 1999, Ms. Bar-Ilan worked for Agentec Ltd., where she has been in
charge of the marketing and application of medical instrumentation in the chemical field.
Ms. Bar-Ilan received her degree in Medical Science (M.Sc.) from the Technion –
Israel Institute of Technology in Haifa, Israel.
Page 36
David
Weiss
is a Certified Internal Auditor from the Institute of Internal Auditors (New
York) and has served as the General Manager of Retail Initiation Forum Ltd. a company
involved in real estate project initiation, since 2002. From 1989 through 2002, he served
as vice president of administration for Club Market Marketing Chains Ltd., a large Israeli
supermarket chain. Between 1981 and 1989 he served as deputy internal auditor at Solel
Bone Ltd., an Israeli construction company, and between 1970 and 1981 he served in the
Israeli port authorities as an internal auditor. Mr. Weiss has also served in the past as
a director of Co-Op Tzafon, New-Farm Ltd., Hamashbir Mazon Ltd., Hamashbir Latcharcan Ltd.
and April Ltd., Israeli companies engaged in selling food, cloths and pharmaceuticals to
the end-user. Between 1999-2004 he served as an external director and chairman of the
Audit Committee of Kish Air Conditioning Ltd – an Israeli Company traded on the Tel
Aviv Stock Exchange. Mr. Weiss received his BA in Accounting from Haifa University,
Israel.
Shai
Bazak
has served as an external director since August 2003 and has received an MA in
Public Administration. He is a director manager of C.P.M. Israel Investment Company Ltd.,
an investment company. From 1998 through 2000, he served as the Consul General of Israel
to Florida and Puerto Rico. From 1996 through 1998, he was spokesperson and media affairs
advisor to the Prime Minister of Israel, Mr. Benjamin Netanyahu. From 1994 through 1996,
he was the spokesperson and media advisor to the Likud party chairman.
Gil
Hochboim
has served as Chief Financial Officer of the Company since August 2000.
Mr. Hochboim also provides the Company’s principal shareholder, Willi Food, with
certain financial services. Between April 1995 and February 1998, Mr. Hochboim served as
Deputy Comptroller of Dan Hotels Corp. Ltd. and between March 1998 and August 2000, he
served as deputy manager of Ha’menia Goods Transport Corp. Ltd. Mr. Hochboim is a
certified public accountant (Israel). He received his BA in Accounting and Business
Management from the College of Management, Tel-Aviv, Israel.
Compensation of
Directors and Officers
The
aggregate compensation paid by the Company to its directors and officers mentioned above
as a group for the fiscal year 2005 was approximately NIS 3.1 million (USD
0.68 million), excluding bonuses in an aggregate amount of approximately
NIS 1.25 million (USD 0.27 million) paid to Messrs. Joseph and Zvi
Williger. These amounts include all contingent or deferred compensation payable to
directors or officers during 2005. These amounts also include payments to non-executive
directors in the aggregate amount of approximately NIS 70 thousand (USD 15
thousand) during 2005.
The
foregoing does not include amounts expended by the Company for motor vehicles made
available to its officers, expenses (including business travel, professional and business
association dues and expenses) reimbursed to officers and other benefits commonly
reimbursed and paid for by companies in Israel. The Company provides motor vehicles to key
employees and certain officers, at the Company’s expense.
See
also “Item 7. Major Shareholders and Related Party Transactions – Related Party
Transactions”.
Page 37
Management Service
Agreements
As
of June 1, 1998, the Company entered into management services agreements with companies
controlled by each of Messrs. Joseph and Zvi Williger, respectively (collectively, the
“Williger Management Companies”), pursuant to which Messrs. Joseph and Zvi
Williger are to provide management services on behalf of the Williger Management Companies
to the Company (the “Management Services Agreements”).
The
Management Services Agreements were for a period of four years commencing on June 1,
1998 (the “Management Services Period”), were automatically renewed on June 1,
2002 for two years and were automatically renewed for an additional period of two years in
June 1, 2004. Under these agreements, the Company has the ability to terminate the
Management Services Agreements only upon six months notice prior to the end of the
Management Services Period or any extension thereof as the case may be. In the event the
Company terminates any of the Management Services Agreements prior to the expiration of
the Management Services Period or any extension thereof, for any reason whatsoever, it
would have been obligated to pay all amounts due under the respective Management Services
Agreements through the expiration of the Management Services Period or any extension
thereof, as the case may be
Each
of the Management Services Agreements provides for monthly service fees equal to USD
24,500 (excluding VAT) and an annual bonus at a rate of 3% of the Company’s pre-tax
consolidated annual profits, if such profits are equal to or less than
NIS 3.0 million (approximately USD 0.7 million), or at a rate of 5% if such
profits exceed such level. In the year ended December 31, 2005, the Company paid an
aggregate amount of NIS 3.9 million (approximately USD 0.85 million) pursuant to
the Management Services Agreements. The Management Services Agreements further provide
that benefits in general, including the social benefits of Messrs. Joseph or Zvi Williger,
and income tax payments, national insurance payments and other payments due by employees
in respect of their employment, are to be paid for at the sole expense of the Williger
Management Companies. The Williger Management Companies have undertaken to indemnify the
Company with respect to any claims against the Company with respect to employer/employee
relations. In addition, each of the Management Services Agreements includes
non-competition provisions for the duration of the Management Services Period as well as
confidentiality provisions.
On
May 4, 2005, the Audit Committee and the Board of Directors of the Company decided to
amend the Management Services Agreements as follows:
|
(1)
|
The
term of the Management Services Agreements were extended indefinitely, subject
to clauses (2), (5) and (6) below.
|
|
(2)
|
Each
of the parties to the Management Services Agreements may terminate the
agreement at any time, and for any reason, by prior written notice, which will
be delivered to the other party as follows:
|
|
|
—
|
The
Company may terminate the agreement at any time, and for any reason, by prior written
notice of at least 18 months.
|
|
|
—
|
Each
Williger Management Company may terminate its agreement at any time, by prior written
notice of at least 180 days.
|
|
(3)
|
The
Company may waive receiving actual management services from the Williger
Management Company during the prior notice period, but this will not eliminate
its obligation to continue paying the Williger Management Company the
management fees owed to the Williger Management Company until the termination
of the prior notice period.
|
|
(4)
|
If
a Williger Management Company terminates the Management Services Agreement, the
Williger Management Company will be entitled to receive the management fees for
a period of six (6) months, which shall begin after the prior notice period,
whether or not it provides the Company with any management services during such
six-month period.
|
|
(5)
|
In
the event the Williger Management Company provides the management services to
the Company without the presence of Messrs. Zvi Williger or Joseph Williger, as
the case may be, and/or in the case of the death and/or permanent disability of
Messrs. Zvi Williger or Joseph Williger, the Company will be entitled to
terminate the Management Services Agreement immediately.
|
Page 38
|
(6)
|
Both
Messrs. Zvi Williger and Joseph Williger have agreed with the Company that if a
liquidation order or receivership order is issued against a Williger Management
Company which prevents the Williger Management Company from continuing to
provide the management services according to the Management Services Agreement,
they will immediately commence working for the Company in return for pay and
social benefits costing the Company the same amount as the monthly management
fees that the Company paid the Williger Management Company to that date, or
alternatively, at their sole discretion, shall begin providing the Company with
management services via another company owned and controlled by them under the
conditions of the Management Services Agreement.
|
|
(7)
|
In
addition, the Management Services Agreements contain provisions regarding the
Company providing vehicles for the use of Messrs. Zvi Williger and Joseph
Williger, and regarding full reimbursement of expenses incurred by Messrs. Zvi
Williger and Joseph Williger while providing the management services to the
Company, including reasonable lodging and travel expenses in Israel and abroad,
phone expenses in their home and mobile phone expenses, including calls abroad
related to providing the management services to the Company, subject to
providing receipts.
|
The
amendments were approved unanimously by the Audit Committee and the Board of Directors on
May 4, 2005, and Messrs. Zvi Williger and Joseph Williger did not participate in the
meetings of the Audit Committee and the Board of Directors. These amendments were approved
by the Company’s shareholders on July 20, 2005.
On
February 15, 2006, in light of the decision of the Israeli Securities Authorities to limit
the duration of the aforesaid Management Services Agreements to a period of five (5)
years, the Board of Directors of the Company decided to limit the duration of the
Management Services Agreements to a period of five (5) years each, both ending five years
after the date of their approval by the General Meeting of Shareholders (
i.e.
July
19, 2010).
Under
the Transfer Agreement described in “Item 7. Major Shareholders and Related Party
Transactions – B. Related Party Transactions”, 50% of the Company’s rights
and obligations stipulated in the management agreement with Mr. Zvi Williger were
transferred to Gold Frost and 20% of the Company’s rights and obligations stipulated
in the management agreement with Mr. Joseph Williger were transferred to Gold Frost.
In
August 2000, the Company entered into an employment agreement with Mr. Gil Hochboim,
pursuant to which Mr. Hochboim agreed to serve as the Chief Financial Officer of the
Company. The agreement provides for a monthly salary of NIS 22,000 (approximately USD
4,780). In addition to this salary, Mr. Hochboim also receives the benefits customarily
provided by the Company to its senior employees, including bonuses and the use of a
vehicle.
Terms of Office
Directors
are elected by the shareholders at the annual general meeting of the shareholders, except
in certain cases where Directors (who are not External Directors) are appointed by the
Board of Directors, and their appointment is later ratified at the first meeting of the
shareholders thereafter. Except for External Directors (as discussed below), Directors
serve until the next annual general meeting of the shareholders.
Page 39
Alternate Directors
The
Articles of Association of the Company provide that any director may, by written notice to
the Company, appoint another person to serve as an alternate director. Under the Israeli
Companies Law, the directors of the Company cannot appoint an incumbent director or an
incumbent alternate director as an alternate director. The term of appointment of an
alternate director may be for a specified period, or until notice is given of the
termination of the specified period or of the appointment. A Director on a Board Committee
may appoint anyone to be his Alternate subject to the potential alternate not being a
member of such committee, and if the appointing Director is an External Director then the
alternate must be an External Director having suitable financial and accountancy expertise
or professional qualifications, as those of the appointing director. Except for the
foregoing regarding a committee of the Board of Directors, an External Director cannot
appoint an alternate director.
Audit Committee
Nasdaq
Requirements
The
Company’s Ordinary Shares are listed for quotation on the Nasdaq Capital Market, and
the Company is subject to the rules of the Nasdaq Capital Market applicable to listed
companies. Under the current Nasdaq rules, a listed company is required to have an audit
committee consisting of at least three independent directors, all of whom are financially
literate and one of whom has accounting or related financial management expertise. Rachel
Bar-Ilan, Shai Bazak and David Weiss qualify as independent directors under the current
Nasdaq requirement, and are members of the Audit Committee.
Independent Directors
The
Company is a “Controlled Company” within the meaning of the Nasdaq rules since
more than 50% of its voting power is held by Willi Food. As a Controlled Company, the
Company is exempt from certain Nasdaq independence requirements, such as the requirement
that a majority of the Board of Directors be independent and the rules relating to
independence of directors approving nominations and executive compensation.
The
responsibilities of the audit committee under the Israeli Companies Law include
identifying irregularities in the management of the company’s business and approving
related party transactions as required by law.
External Directors under the Israeli Companies Law
The
Israeli Companies Law requires that the Company have at least two external directors on
its Board of Directors. The election of an external director under the Israeli Companies
Law must be approved by a general meeting of shareholders provided that either: (a) the
majority of shares voted at the meeting, including at least one third of the shares of
non-controlling shareholders voted at the meeting, vote in favor of such arrangement or
(b) the total number of shares voted against such arrangement does not exceed one percent
of the aggregate voting rights in the company.
A
“Controlling Shareholder” is defined in the Israeli Companies Law as a
shareholder with the ability to control the actions of the company, whether by majority
ownership or otherwise, and for the purpose of transactions with related parties, it may
include a shareholder who holds at least 25% of the voting rights in the Company, provided
that there is no other Shareholder who holds more than 50% of the voting rights in the
Company.
Page 40
The
Israeli Companies Law further requires that at least one external director have financial
and accounting expertise, and that the other external director(s) have professional
competence, as determined by the company’s board of directors. Under recently enacted
regulations, a director having financial and accounting expertise is a person who, due to
his or her education, experience and talents is highly skilled in respect of, and
understands, business-accounting matters and financial reports in a manner that enables
him or her to understand in depth the company’s financial statements and to stimulate
discussion regarding the manner in which the financial data is presented. Under the
regulations, a director having professional competence is a person who has an academic
degree in either economics, business administration, accounting, law or public
administration or an academic degree in an area relevant to the company’s business,
or has at least five years experience in a senior position in the business management of a
corporation with a substantial scope of business, in a senior position in the public
service or a senior position in the field of the company’s business.
An
External Director is appointed for a period of three consecutive years and may be
re-appointed for one additional three-year period only. Under the Company’s Articles
of Association, any committee of the board of directors to which the board of directors
has delegated its powers in whole or in part, must include at least one External Director.
Under the Israeli Companies Law, the Audit Committee must include all the External
Directors.
The
External Directors of the Company are Mr. Shai Bazak, who was appointed as an External
Director in August 2003, and Mr. David Weiss, who was appointed as an External Director in
August 2004.
Fiduciary Duties of an
Officer
The
Israeli Companies Law governs the duty of care and duty of loyalty which an Officer has to
the company. An “Officer” is defined in the Israeli Companies Law as a director,
general manager, chief executive officer, executive vice president, vice president, any
other person assuming the responsibilities of any of the foregoing positions without
regard to such person’s title and other managers directly subordinate to the general
manager.
The
duty of loyalty requires the Officer to avoid any conflict of interest between the
Officer’s position in the company and personal affairs, and proscribes any
competition with the company or the exploitation of any business opportunity of the
company in order to receive personal advantages for him or herself or others. This duty
also requires him or her to reveal to the company any information or documents relating to
the company’s affairs that the Officer has received due to his or her position as an
Officer. The duty of care requires an Officer to act in a way that a reasonable Officer
would act in the same position and under the same circumstances. This includes the duty to
utilize reasonable means to obtain information regarding the advisability of a given
action submitted for his or her approval or performed by virtue of his or her position and
all other relevant information.
The
Directors of the Company are entitled to obtain all information relating to such
company’s management and assets and to receive assistance, in special cases, from
outside experts at the expense of the company. The law imposes an obligation on the
directors of the company to act to convene a meeting of a company’s board of
directors upon becoming aware of matters that suggest infringements of law, neglect of
good business practice or conduct by an Officer, which may result in a breach of duty of
such Officer.
Internal auditor
Under
the Israeli Companies Law, Israeli companies whose securities are publicly traded are also
required to appoint an internal auditor, in accordance with the proposal of the audit
committee. The role of the internal controller is to examine,
inter alia
, whether
the Company’s actions comply with the law, integrity and orderly business procedures.
Mr. Joshua Freund, CPA (Isr), has been the internal auditor of the Company since November
1997.
Page 41
Indemnification
In
accordance with the Israeli Companies Law and the Company’s Articles of Association,
the Company has undertaken to indemnify and insure its directors and senior officers,
against certain liabilities which they may incur in connection with the performance of
their duties. Under the terms of such indemnification provisions, the Company may, to the
extent permitted by law, indemnify an Officer for legal expenses incurred by him in
connection with such indemnification.
On
May 4, 2005, the Board of Directors and the Audit Committee of the Board of Directors
approved, and on July 20, 2005, the General Meeting of Shareholders approved, the complete
restatement of the Company’s Articles of Association in order to conform the
Company’s Articles of Association to the revised provisions of the Israeli Companies
Law. On May 4, 2005, the Board of Directors and Audit Committee of the Company also
approved an exemption in advance to any Director or Officer from any liability to the
Company attributed to damage or loss caused by breach of the Director’s or
Officer’s duty of care owed to the Company, except for such breach of duty of care in
distribution (as such term is defined in the Israeli Companies Law).
Also,
the Board of Directors and the Audit Committee of the Board of Directors approved an
irrevocable indemnification of the Officers by the Company with respect to any liability
or expense paid for by the Officer or that the Officer may be obligated to pay. On July
20, 2005, the aforementioned exemption and the aforementioned irrevocable indemnification
were approved by the shareholders of the Company.
Approval of Related
Party Transactions under the Israeli Companies Law
The
Israeli Companies Law requires that an Office Holder promptly disclose any direct or
indirect personal interest that he or his affiliates may have, and all related material
information known to him, in connection with any existing or proposed transaction by the
company. If the Office Holder complies with such disclosure requirements, the company may
approve the transaction in accordance with the provisions of its articles of association
and the Companies Law. Under the Companies Law, if the Office Holder has a personal
interest in the transaction, the approval must confirm that the transaction is not adverse
to the company’s interest.
In
most circumstances, the Israeli Companies Law restricts Office Holders who have a personal
interest in a matter which is considered at a meeting of the board or the audit committee
from being present at such meeting, participating in the discussions or voting on any such
matter.
Generally,
under the Israeli Companies Law the compensation of an Officer who is a director, or the
compensation of an Officer who holds a controlling interest in the company, requires the
approval of the audit committee, the Board of Directors and the general meeting of the
shareholders of the company. The Israeli Companies Law also requires that a transaction
between the company and its Officer and also a transaction between the company and another
person in which an Officer has a personal interest, requires the approval of the Board of
Directors if such transactions are not extraordinary transactions, although, as permitted
by law and subject to any relevant stock exchange rule. If such transactions are
extraordinary transactions (that is, a transaction other than in the ordinary course of
business, otherwise than on market terms, or is likely to have a material impact on the
company’s profitability, assets or liabilities), in addition to audit committee
approval, the transaction also must be approved by the Board of Directors, and, in certain
circumstances, the shareholders of the Company at a general meeting. Under the Israeli
Companies Law, an extraordinary transaction between a public company and a person having
control of the company or an extraordinary transaction between a public company and
another person, in which a controlling member has a personal interest, must be approved by
the audit committee, the Board of Directors and a meeting of the shareholders, provided
that either: (a) the majority of shares voted at the meeting, including at least one third
of the shares voted by shareholders who do not have a personal interest in the matter and
who are present at the meeting, are voted in favor of such arrangement (abstentions shall
not be included in the total of the votes) or (b) the total number of shares of the
shareholders referred to in clause (a) voting against such arrangement does not exceed one
percent of the aggregate voting rights of the company.
Page 42
Under
the Israeli Companies Law, a private placement to a shareholder becoming a Controlling
Shareholder, or a private placement to a principal shareholder (a holder of 5% or more of
a company’s issued share capital or voting rights) or due to which a shareholder will
become a principal shareholder of at least 20% of the voting rights in the Company before
such placement, is also subject to the approval of the Audit Committee, the Board of
Directors and a meeting of the shareholders, as specified above. Directors with respect to
whom the foregoing matters are brought for Board of Directors or Audit Committee approval
are not entitled to be present during discussions of, nor to participate in the vote for
approval of, such matters at Board and/or Audit Committee meetings, unless a majority of
Audit Committee or Board members, as the case may be, have a personal interest in such
matter or the matter involves non-extraordinary transactions between the company and
either a Director or a third party in which a Director has a personal interest. The
Israeli Companies Law further provides that in the event that a majority of board members
have a personal interest in such a matter, it also requires shareholder approval.
For
information regarding the Company's employees see "Item 4". "Information on the Company
- B. Business Overview -- Employees".
For
information regarding the share ownership of Directors and officers of the
Company see "Item 7. Major Shareholders and Related Party Transactions".
Options
As
of May 30, 2006, there were no outstanding options to purchase ordinary shares of the
Company.
Employee Share Option
Plan
In
May 1997, the Board of Directors of the Company adopted an employee share option plan
(“the 1997 Plan”), pursuant to which the Company granted options to
purchase 180,000 ordinary shares to employees, officers, Directors and consultants of the
Company and the subsidiary (including 160,000 options to related parties).
Of
the above, options to purchase 130,000 ordinary shares were granted to Mr. Joseph Williger
and Mr. Zvi Williger at an exercise price equal to the nominal value per share of
NIS 0.10. The options were exercisable as to 20% every six-month anniversary from the
date of grant, on a cumulative basis, during a period of five years. These options were
exercised in January 2000.
Options
to purchase 35,000 ordinary shares were held by the Company’s officers and Directors
(as a group) and options to purchase 15,000 ordinary shares were held by other employees.
The options, granted as of the effective date of the Company’s initial public
offering under the Company’s 1997 Share Option Plan, are generally exercisable during
a five-year period commencing on the 24th month anniversary from the date of grant, at an
exercise price equal to the initial public offering price per share – USD 4.10 per
share, which was equal to the fair market value of the shares on the date of the grant. On
April 2004, Zvi Williger and Joseph Williger exercised 15,000 options each at an exercise
price of USD 4.1 per share. The 1997 Plan was terminated on May 2004, and the remaining
20,000 options expired unexercised.
Page 43
|
ITEM 7.
|
|
MAJOR SHAREHOLDERS AND RELATED PARTY TRANSACTIONS
|
The
following table sets forth, as of May 30, 2006, the number of Ordinary Shares beneficially
owned by (i) each shareholder known to the Company to own more than 5% of the
Ordinary Shares and (ii) all directors and officers as a group:
Name and Address
|
Number of
Ordinary Shares
Beneficially Owned
|
Percentage of
Ordinary Shares
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Willi Food (1)
|
|
|
|
6,372,904
|
|
|
73.98
|
%
|
|
Joseph Williger (1)(2)
|
|
|
|
6,372,904
|
(2)
|
|
73.98
|
%
|
|
Zvi Williger (1)(2)
|
|
|
|
6,535,914
|
(2)
|
|
75.87
|
%
|
|
All directors and officers as a group (2 persons)
|
|
|
|
6,535,914
|
(2)
|
|
75.87
|
%
|
|
(1)
|
Willi
Food’s securities are traded on the Tel Aviv Stock Exchange. The
principal executive offices of Willi Food are located at 3 Nahal Snir St.,
Northern Industrial Zone, Yavne, 81224 Israel. The business address of
each of Messrs. Joseph Williger and Zvi Williger is c/o the Company, 3
Nahal Snir St., Northern Industrial Zone, Yavne, 81224 Israel.
|
|
(2)
|
Includes
6,372,904 Ordinary Shares owned by Willi Food. Messrs. Zvi Williger and
Joseph Williger serve as directors and executive officers of Willi Food
and of the Company. Under Israeli law, Mr. Zvi Williger is deemed to be
the controlling shareholder of Willi Food and has the ability to control
the Company’s management and policies, including matters requiring
shareholder approval such as the election of directors. Under Israeli law,
Mr. Joseph Williger, who owns approximately 17.5% of the Ordinary Shares
of Willi Food, is not deemed to be a member of a group with Mr. Zvi
Williger or a controlling shareholder of the Company.
|
All of the shareholders of the
Company (including Willi Food) have the same number of votes for each ordinary share held.
Accordingly, the major shareholders of the Company, Willi Food, do not have voting rights
that are different from those of the Company’s other shareholders. The Company
believes that 2,079,086 Ordinary Shares (approximately 24.13% of its outstanding Ordinary
Shares) are held by persons who are not officers, directors or the owners of 10% of the
Company’s outstanding Ordinary Shares. As of May 15, 2006, there were 16 holders of
Ordinary Shares of record registered with a United States mailing address, including
banks, brokers and nominees. These holders of record, including a part of the
Company’s shares held by Willi Food through brokers, represented approximately 60.5%
of the total outstanding Ordinary Shares. Because these holders of record include banks,
brokers and nominees, the beneficial owners of these Ordinary Shares may include persons
who reside outside the United States.
|
|
B.
|
RELATED
PARTY TRANSACTIONS
|
Employment Agreements;
Management Service Agreements.
In
April 1997, the Company entered into employment agreements with each of Mr. Zvi Williger
and Mr. Joseph Williger (related parties), pursuant to which Mr. Zvi Williger agrees to
serve as Chairman of the Board of Directors and Chief Operating Officer of the Company and
Mr. Joseph Williger agrees to serve as a director and Chief Executive Officer of the
Company. Pursuant to the agreements, each of the above-mentioned related parties agreed to
devote the substantial portion of his time to his work in the Company.
Page 44
The
employment agreements were for a period of four years commencing April 1997, and were
automatically renewed in April 2001 for an additional two years and were automatically
renewable for additional terms of two years each unless either party notified the other,
six months prior to the expiration of the employment period of its/his intention not to
renew the agreement. If the Company terminated the agreements prior to the expiration of
the employment period, it would have been required to pay to each of the above-mentioned
related parties all amounts due to it under the agreements through the end of the
employment period.
The
employment agreements provided for a monthly remuneration, in NIS, equal to USD 17,500 to
each of the above-mentioned related parties and an annual bonus for the 1997 fiscal year
and thereafter of 3% of the Company’s consolidated pre-tax annual profits (if such
profits are equal to or less than NIS 3 million, approximately USD 0.7 million), or
5% (if such profits exceed this level) (hereafter: the “annual bonus”). The
agreements also provided for managers’ insurance, paid annual vacation, paid annual
sick leave, social security, study fund, the use of a motor vehicle and reimbursement of
expenses. In addition, the agreements include confidentiality undertakings and
non-competition provisions.
In
June 1998, the Company entered into management service agreements with the above-mentioned
related parties through Williger Management Companies. The management service agreements
replaced the employment agreements entered into in April 1997. The management service
agreements were for a period of four years commencing June 1998, were renewed in June 2002
for two years and were automatically renewed in June 2004 for an additional period of two
years. The management fees are USD 24,500 a month (excluding VAT) paid to each of the
Williger Management Companies. In addition, according to the management service
agreements, each of the Williger Management Companies is entitled to an annual bonus as
provided in the employment agreements for the year 1998 and thereafter, as described
above. These agreements include a non-compete provision for the term of the agreement as
well as a confidentiality provision that applies during the term of the agreement and
thereafter.
On
May 4, 2005, the Audit Committee and the Board of the Company, resolved to amend the
provisions of the two above-mentioned agreements. The amendments were approved by the
shareholders of the Company at the General Meeting of Shareholders that convened on July
20, 2005. Please refer to “Item 6. Directors, Senior Management and Employees –
B. Compensation – Management Service Agreements” for more detail regarding the
amendments.
Under
the Transfer Agreement described below, 50% of the Company’s rights and obligations
stipulated in the management agreement with Mr. Zvi Williger were transferred to Gold
Frost and 20% of the Company’s rights and obligations stipulated in the management
agreement with Mr. Joseph Williger were transferred to Gold Frost.
Lease
The
Company’s principal executive offices are situated at a leased facility in the
northern industrial zone of Yavne, at 3 Nahal Snir St., Israel, 35 km south of Tel-Aviv.
These premises serve as the Company’s logistic center for warehousing and
distribution of food products as well. The Yavne facility is leased by the Company from
Titanic, a private Israeli company controlled by Messrs. Joseph Williger and Zvi Williger.
See “Item 4. Information on the Company – D. Property, Plants and
Equipment” for a description of the terms of this lease.
In
August 2005, the Company purchased from Titanic a plot of 19,000 square meters
(approximately 171,000 square feet) for the construction of a new logistic center the size
of 8,600 square meters (approximately 77,400 square feet) pursuant to the approval of the
Board of Directors, the Audit Committee of the Board of Directors and the shareholders of
the Company. The plot is situated in the northern industrial zone of Yavne, and the new
logistic center will replace the Company’s current logistic center (which the Company
leases from Titanic). See “Item 4. Information on the Company – D. Property,
Plants and Equipment” for more information.
Page 45
Services to Willi Food
The
Company has been providing certain services to Willi Food on an on-going basis since the
Company’s commencement of operations, including office space and certain management,
financial and administrative services. On April 1, 1997, the Company entered into a
service agreement with Willi Food, which become effective as of May 19, 1997, the
effective date of the Company’s initial public offering. Pursuant to this agreement,
Willi Food is entitled to manage its operations from the Company’s executive offices
in Yavne, including use of office facilities.
The
Company also agreed to provide Willi Food with accounting and secretarial services. In
consideration for the use of the Company’s facilities and such other services, Willi
Food agreed to pay the Company a monthly fee equal to NIS 5,480 (USD 1,190) plus VAT.
This fee is payable quarterly and is linked to the Israeli CPI. The agreement is for an
unlimited term, and is mutually terminable upon three months prior notice. The Company
believes that the fees for these services and the terms of such agreement are no less
favorable to it than could be obtained from an unaffiliated third party.
As
of April 1, 1997, the Company and Willi Food entered into an agreement pertaining to the
allocation of corporate opportunities which may arise from time to time. The agreement
provides that Willi Food will make available and provide a right of first refusal to the
Company with regard to any corporate opportunity offered to Willi Food, which relates to
the food business.
On
March 31, 2003, the Board of Directors of the Company authorized Willi Food to participate
in the import license lottery of the Israeli Ministry of Industry and Trade, provided that
Willi Food agreed that if it wins an import license it will: (i) coordinate with the
Company the items of merchandise to be imported using the import license; and (ii) in
consideration for the transfer of the merchandise that is imported using the import
license, the Company will sell the merchandise, retaining 20% of the selling proceeds for
itself and transferring the balance, if any, to Willi Food. The Board of Directors of the
Company determined that this arrangement is not an extraordinary transaction. In 2005, the
amount retained by the Company pursuant to this arrangement was NIS 438 thousand (USD 95
thousand).
Transfer Agreement
Pursuant
to the provisions of a Transfer Agreement, dated February 16, 2006, and effective as of
January 1, 2006, the Company and Gold Frost agree to cancel their earlier agreement dated
May 2001 (and amended in January 2002) under which the Company was to store and market the
food products imported by Gold Frost through the Company for a commission of 20% (which
changed from 15% since 2002) of the total monthly sales of Gold Frost’s products,
which were sold by the Company within that month. Because Gold Frost desired to store,
market, sell and distribute its products on its own commencing January 1, 2006, the
Company agreed to transfer to Gold Frost employees, equipment and various rights that
would allow Gold Frost to store, market, sell and distribute its products on its own. The
Company continues to provide certain services to Gold Frost, such as collection of
payments from customers and others. Effective January 1, 2006, the following were
transferred from the Company to Gold Frost:
Employees
:
Sixteen employees ceased to be employees of the Company and became employees of Gold
Frost. All the employees agreed to such transfer provided that all their rights due to
their employment period with the Company passed to Gold Frost. The Company paid to Gold
Frost the amount of NIS 47,927 (USD 10,412) in respect of sums due to the employees for
unused vacation days and accumulated recuperation pay. Because the Company had not made
all the required payments to the managers’ insurance of certain employees, the
Company agreed to pay any missing amounts to Gold Frost if and when relevant when the
employer-employee relationship between Gold Frost and the employees terminates.
Page 46
Equipment
:
The Company sold to Gold Frost the ownership in certain trucks and other machines.
Storage
:
The parties agreed that the existing lease agreement between the Company and Menrav
Tashtiot Ltd. (“Menrav”) in respect of storage facilities that are used to store
Gold Frost products would continue until its expiration in April 2006. Until such
expiration, the amounts payable by the Company to Menrav with respect to these storage
facilities were reimbursed by Gold Frost. After expiration of the agreement, the parties
would act towards the renewal of the agreement and the assignment of all the rights and
obligation of the Company’s rights under the agreement to Gold Frost.
Logistic
Center
: The parties agreed to enter into a lease agreement pursuant to which Gold
Frost would lease certain cooling chambers located in the logistic center to be
established by the Company.
Sales
Activities
: The sale personnel of Gold Frost would be responsible for the sales
activities in respect of the Gold Frost products. However, since until the date of the
agreement such sales activities were performed by the Company and in order to allow Gold
Frost to benefit from the Company’s experience and reputation among customers, sales
of Gold Frost’s products in Israel will be made through the Company. Gold
Frost’s products would be sold to the Company and then sold to customers of Gold
Frost. The Company would be responsible for billing and collecting payments from
customers, and will then transfer all collected payments to Gold Frost. Although the
Company would, in fact, purchase the products from Gold Frost, all risks connected with
the collect of payments from customers would be borne by Gold Frost.
Additional
Services
: The Company agreed to provide certain services to Gold Frost including,
among others, professional services (such as legal services, accountants and directors
insurance), communication, office maintenance (such as courier services, electricity and
others) and other. In consideration for such services, Gold Frost would pay the Company a
certain amount based on a pro-rata amount of the management and general expenses of the
Company as they appear in the audited financial statements of the Company.
The
Directors
: The Company assigned to Gold Frost 50% of its rights and obligations under
its agreement with the management agreement of Mr. Zvi Williger and 20% of its rights and
obligations under the management agreement of Mr. Joseph Williger. Consequently, the
management company of Mr. Zvi Williger would provide to Gold Frost 50% of its management
services that were previously provided to the Company, and the management company of Mr.
Joseph Williger would provide to Gold Frost 20% of its management services that were
previously provided to the Company. The parties further agreed that Gold Frost would pay
the management company the annual bonus from its pre-tax annual profits, and the Company
would pay the management company its annual bonus after deducting the annual bonus paid by
Gold Frost.
Term
and termination
: The agreement is terminable at any time by Gold Frost by a six-month
prior written notice and by the Company by a twelve-month prior written notice.
Lease agreement for
Logistics Center
The
Company and Gold Frost are parties to a lease agreement with respect to the Company’s
new logistic center established by the Company, located in Yavne, Israel. The Company
agreed to lease to Gold Frost cooling chambers of 1,445 m² located in the
aforementioned logistic center for a period of 24 years and 11 months. The lease period
may be shortened by a six-month prior notice from Gold Frost or by a twelve-month prior
notice from the Company. Gold Frost is to pay the Company rental fees in the amount of USD
18,084 + VAT per month, payable on the first day of each quarter in respect of the coming
three months, and Gold Frost will also pay all taxes usually imposed on lessees and
expenses such as electricity, water, gas, insurance and others related to its use of the
cooling chambers.
Page 47
|
|
C.
|
INTERESTS
OF EXPERTS AND COUNSEL
|
Not
applicable.
|
ITEM 8.
|
|
FINANCIAL INFORMATION
|
|
|
A.
|
CONSOLIDATED
STATEMENTS AND OTHER FINANCIAL INFORMATION
|
The
financial statements required by this item are found at the end of this report, beginning
on page F-1.
Dividend Policy
On
November 21, 2005, the Board of Director of the Company declared a cash dividend of US$
0.12 per share (USD 1,034 thousand) payable to its shareholders of record as of January
11, 2006. The cash dividend was paid on January 25, 2006. Apart from the abovementioned,
the Company has never declared or paid cash dividends on its ordinary shares. The Company
may declare cash dividends in the future, depending on its financial and operational
condition and on its expansion strategy.
Legal Proceedings
|
1.
|
A
lawsuit was filed in December 2001 against 29 importers/producers of food
products, including the Company, for an amount totaling NIS 500 million
(USD 108 million). Concurrently, the plaintiffs filed a request for an
exemption from the court fee. Following the court’s rejection of the
plaintiffs’ request for the noted fee exemption and their failure to
pay such fee, the court dismissed the case.
|
|
|
In
January 2004 the abovementioned plaintiffs filed a new lawsuit against the 29 noted
importers/producers for NIS 1 billion (USD 217 million). Again, a request was made
concurrently for an exemption from the court fee that was rejected by the court. The
Company’s legal counsel believes that the plaintiffs are unlikely to stand a
reasonable chance for prevailing, and until the fee issue is settled this matter should
not be regarded as a real claim.
|
|
2.
|
A
lawsuit was filed in June 2004 against the Company and a Company subsidiary in
respect of their marketing and distribution of products manufactured by
Arla. The plaintiffs alleged that the defendants marketed products bearing
a commercial tag in which the plaintiffs have rights. The plaintiffs
requested a court injunction prohibiting the Company and its subsidiary
from marketing these products as well as an indemnification of NIS 100
thousand. Concurrently, a counterclaim was filed by Arla against the
plaintiffs, alleging misrepresentation, breach of fiduciary duties,
exceeding authorization and breach of its rights in an intellectual
property. In March, 2005 the court decided, in a temporary order, that the
intellectual property rights of the above mentioned tags belong apparently
to Arla, forbade the marketing of products under those tags by the
plaintiff and instructed the plaintiff to collect products which were
labeled with those tags or commercial name from plaintiff’s
distributors. The Company committed itself to compensate the plaintiff for
all damages derived from the temporary order if the court ultimately
decides that the intellectual property rights of the above mentioned tags
belong to the plaintiff. The Court’s decision limits the probability
that the lawsuit will be filed against the Company. It is impossible to
quantify the damage to the plaintiffs due to the temporary order or to
evaluate the Company’s exposure, but the Company believes that it may
be insignificant.
|
Page 48
|
3.
|
On
or about October 11, 2005, Vitarroz Corp. commenced a civil action in the
Superior Court of New Jersey, Law Division, Hudson County, against Willi
USA Holdings, Inc. (an inactive subsidiary of the Company), the Company
and Zvi Williger (collectively, the “Defendants”) due to a
dispute concerning the press release announcing the termination of the
proposed acquisition of the Vitarroz business by the Company. On or about
November 14, 2005, the Company removed the matter from the Superior Court
to the United States District Court for the District of New Jersey. The
complaint was subsequently amended and, as amended, alleges breach of
contract, defamation, breach of covenants of good faith and fair dealing,
fraudulent inducement and tortuous interference with contractual relations
and prospective economic advantage. Defendants have not responded to the
allegations in the complaint. Recently, the parties agreed to submit the
claims which are the subject of the complaint to binding arbitration and,
at the same time, to also submit to arbitration (i) those claims that
Defendants have against plaintiff and related third parties, and (ii)
those claims which the Company has asserted against Vitarroz in an action
now pending in Israel regarding the breach of an agreement executed by the
Company and Vitarroz, pursuant to which Vitarroz undertook to supply its
products to the Company. Defendants believe that Vitarroz’s
allegations are without merit, and they intend to vigorously defend
against such claims. The Company also intends to aggressively pursue their
affirmative claims.
|
Other
than as stated above, there are no pending or, to the Company’s knowledge, threatened
legal proceedings, the outcome of which, in the Company’s view, would have a material
adverse affect on the Company’s consolidated financial position.
For
information concerning taxes to which stockholders in the United States may be subject,
see “Item 10.Additional Information- Taxes”.
We
are not aware of any significant changes bearing upon our financial condition since the
date of the audited consolidated financial statements included in this annual report.
Page 49
|
ITEM 9.
|
THE OFFER AND LISTING
|
|
|
A.
|
OFFER
AND LISTING DETAILS
|
Our
ordinary shares have been traded on the Nasdaq Stock Market under the symbol
“WILCF” since May 19, 1997. On March 15, 2006, the ticker symbol of our ordinary
shares was changed to “WILC”. The warrants that were issued as part of our
initial public offering in May 1997 expired in May 2000.
The
following table sets forth for the periods indicated the closing representative high and
low bid quotations of our ordinary shares as reported by Nasdaq and adjusted according to
the split by bonus share which took place on December 2004. The bid quotations are
expressed in United States Dollars and are not adjusted for retail mark-up, mark-down or
commissions and do not necessarily represent actual transactions.
Calendar Period
|
Ordinary Shares
|
|
|
High
|
Low
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2006
|
|
|
|
|
|
|
|
|
|
First Quarter
|
|
|
|
5.51
|
|
|
3.23
|
|
|
Second Quarter (through May 30, 2006)
|
|
|
|
8.04
|
|
|
5.30
|
|
|
2005
|
|
|
|
8.47
|
|
|
3.00
|
|
|
First Quarter
|
|
|
|
8.47
|
|
|
3.61
|
|
|
Second Quarter
|
|
|
|
6.10
|
|
|
4.35
|
|
|
Third Quarter
|
|
|
|
5.35
|
|
|
3.44
|
|
|
Fourth Quarter
|
|
|
|
3.99
|
|
|
3.00
|
|
|
2004
|
|
|
|
4.24
|
|
|
1.73
|
|
|
First Quarter
|
|
|
|
1.99
|
|
|
1.73
|
|
|
Second Quarter
|
|
|
|
2.60
|
|
|
1.90
|
|
|
Third Quarter
|
|
|
|
2.69
|
|
|
1.93
|
|
|
Fourth Quarter
|
|
|
|
4.24
|
|
|
2.46
|
|
|
2003
|
|
|
|
1.79
|
|
|
0.62
|
|
|
2002
|
|
|
|
2.00
|
|
|
0.94
|
|
|
2001
|
|
|
|
2.06
|
|
|
0.90
|
|
|
|
|
|
|
May 2006 (through May 30, 2006)
|
|
|
|
8.04
|
|
|
6.25
|
|
|
April 2006
|
|
|
|
6.61
|
|
|
5.30
|
|
|
March 2006
|
|
|
|
5.51
|
|
|
4.93
|
|
|
February 2006
|
|
|
|
4.95
|
|
|
3.85
|
|
|
January 2006
|
|
|
|
4.30
|
|
|
3.23
|
|
|
December 2005
|
|
|
|
3.90
|
|
|
3.10
|
|
Page 50
Not
applicable.
In
May 1997, our ordinary shares began trading on the Nasdaq Capital Market under the symbol
“WILCF”. On March 15, 2005, the Company’s NASDAQ ticker symbol was changed
to “WILC”.
Not
applicable.
Not
applicable.
Not
applicable.
Page 51
|
ITEM 10.
|
ADDITIONAL
INFORMATION
|
Not
applicable.
|
|
B.
|
MEMORANDUM
AND ARTICLES OF ASSOCIATION
|
Purposes and Objects of
the Company
We
are a public company registered under the Israeli Companies Law as G.
Willi-Food International Ltd., registration number 52-004320-9.
Pursuant
to Article 6 of our articles of association, we were formed for the purpose of importing,
exporting and marketing products and other commodities. Our Board of Directors is
empowered to embark on or withdraw from any business in which we deal. Under our articles
of association, our Board of Directors is entitled to donate reasonable amounts to worthy
causes, even if such donation is not within the framework of our business considerations.
The Powers of Directors
The
powers of a Director to vote on a proposal, arrangement or contract in which such Director
is materially interested is limited by the relevant provisions of the Israeli Companies
Law. In addition, the power of the Directors to vote compensation to themselves or any
members of their body requires the approval of the Audit Committee and the shareholders at
a general meeting, in addition to the approval of the Board of Directors. Compensation and
indemnification of expenses of External Directors must be in accordance with the
applicable provisions of the Israeli Companies Law.
The
Israeli Companies Law and our Articles of Association require that a Director or Office
Holder promptly disclose, either at a board meeting or by way of a general notice, any
personal interest that he or she may have and all related material information know to him
or her in connection with any existing or proposed transaction by the Company. In
addition, if the transaction is an extraordinary transaction (as defined in the Israeli
Companies Law), the member of the Board of Directors or Office Holder, must also disclose
any personal interest held by his or her spouse, siblings, parents, grandparents,
descendants, spouse’s descendants and the spouses of any of the foregoing.
Once
the Director or Office Holder complies with the above disclosure requirements, the Company
may approve the transaction in accordance with the provisions of the Articles of
Association. If the transaction is with a third party in which the member of the Board of
Directors or Office Holder has a potential interest, the approval must confirm that the
transaction is not adverse to the Company’s interest. Furthermore, if the transaction
is an extraordinary transaction, then, in addition to any approval stipulated by the
Articles of Association, it also must be approved by the Audit Committee and then by the
Board of Directors, and, under certain circumstances, by a meeting of the shareholders of
the Company. See “Item 6. Directors, Senior Management and Employees – 6C. Board
Practices – Approval of Related Party Transactions under the Israeli Companies
Law”.
Directors
with respect to whom the foregoing matters are brought for Board of Directors or Audit
Committee approval are not entitled to be present during discussions of, nor to
participate in the vote for approval of, such matters at Board and/or Audit Committee
meetings, unless a majority of Audit Committee or Board members, as the case may be, have
a personal interest in such matter or the matter involves non-extraordinary transactions
between the company and either a Director or a third party in which a Director has a
personal interest. The Israeli Companies Law further provides that in the event that a
majority of board members have a personal interest in such a matter, shareholder approval
is also required.
Page 52
The
Articles of Association provide that the Board of Directors, subject to the Israeli
Companies Law, may, at its discretion from time to time in accordance with the needs of
the Company, make decisions to borrow and/or obtain credit facilities in any amount and to
secure the repayment thereof either by mortgage, charge or other security on the
Company’s undertakings or on its property, in whole or in part (both existing and
future) including the share capital of the company which is, at the time, uncalled.
Subject
to applicable provisions of the Israeli Companies Law regarding matters that the Board of
Directors may not delegate to a committee, or matters for which a committee may only make
recommendation to the Board of Directors, the Board of Directors may delegate its powers
to committees consisting of at least three (3) Directors, including at least one External
Director. A resolution passed or an action taken by a directors’ committee has the
same validity as a resolution passed or an action taken by the Board of Directors, unless
otherwise specifically expressed in the resolution of the Board of Directors that
established said committee.
Rights Attached to Shares
The
Company is authorized to issue 49,893,520 Ordinary Shares, par value NIS 0.1 and 106,480
Preferred Shares, par value NIS 0.1, each ranking pari passu. The Company may alter the
share capital of the Company in accordance with the provisions of the Israeli Companies
Law and the Articles of Association. The rights attached to the Company’s Shares are
as follows:
Dividend Rights
Holders
of Ordinary Shares are entitled to participate pari passu with all other shareholders of
the Company’s Ordinary Shares in any distribution of a dividend, whether in cash,
assets, or in any other legal form, declared, as well as the right to participate pari
passu with all other holders of our Ordinary Shares in the distribution of bonus shares
resolved by the Company. The Articles of Association note that a shareholder shall not be
entitled to receive a dividend or bonus shares as above, and shall not be entitled to
exercise any right as a shareholder unless he has paid in full all notices of call
delivered to him, together with linkage differences, interest and expenses owed, as
applicable, on calls which have not been paid by him on time.
Voting Rights
Holders
of Ordinary Shares of the Company have the right to receive notices of general meetings of
the Company, to be present, and to participate and vote therein. Each holder of Ordinary
Shares in the Company has the right to one vote per share in the general meetings of the
Company on all matters submitted to a vote of shareholders. A shareholder may vote in
person, via proxy, or by means of a written form (“voting instrument”) described
in the Articles of Association. Any resolution of the Company in a general meeting shall
be deemed duly passed if passed by a simple majority of registered shareholders present
and voting, unless a different majority is required by the Israeli Companies Law or the
Articles of Association.
Page 53
Under
the Articles of Association, the Directors are elected annually by the registered
shareholders at the annual meeting. Directors hold office until the conclusion of the next
annual meeting or until their earlier removal or resignation. In addition, at least two
(2) External Directors who comply with the qualifications described in the Israeli
Companies Law must serve on the Board of Directors. External Directors are appointed by a
majority vote at a general meeting, provided that: (i) the majority vote includes at least
one-third of the total number of the voted of the non-controlling shareholders voting at
the meeting, with abstentions not taken into consideration in calculating the total number
of the non-controlling shareholders, and (ii) the total number of non-controlling
shareholders voting against the resolution appointing an External Director is not more
than 1% of the overall voting rights in the Company. External Directors are appointed for
a term of three (3) years and their office may be extended by a resolution of the general
meeting for an additional three (3) years. An External Director may be removed from office
only in accordance with the relevant provisions of the Israeli Companies Law.
If
no Directors are elected at an annual meeting, then the persons who served as Directors
immediately prior to the annual meeting will continue to serve as directors unless
otherwise determined by the annual meeting or by the Board of Directors. A Director who
has ceased to serve in office is eligible for reelection. The Board of Directors has the
power to appoint additional Directors to fill a vacancy, so long as the number of
directors will not exceed a number of Directors approved at a general meeting. Any
Director so appointed will hold office until the conclusion of the next annual meeting
unless he is removed or resigns earlier.
Rights in the
Company’s Profits
The
shareholders of the Company have the right to share in the Company’s profits
distributed as a dividend and any other permitted distribution. See “Dividend
Rights” above.
Rights in the Event of
Liquidation
Holders
of Ordinary Shares are entitled to receive any return of capital, pari passu, with all
other ordinary shareholders, upon the dissolution of the Company. Holders of Ordinary
Shares are also entitled to participate, pari passu, with all other Ordinary Shareholders
in the distribution of the surplus of the Company’s assets available for distribution
in the event of dissolution of the Company which remain after the Company has paid the
holders of Ordinary Shares all amounts payable as return of capital.
Liability to Further
Capital Calls by the Company
If
the terms of allotment of any shares of the Company do not specify a particular date for
the payment of all of the consideration which is to be paid therefore, or any part
thereof, our board of directors may, from time to time, as it deems fit, make calls on the
shareholders in respect of the amounts not yet paid for their shares, whether on account
of the par value of the shares or on the account of the premium, and each shareholder
shall be obligated to pay the Company the amount so demanded from him not later than the
date of payment set forth in the notice containing the call. Shareholders shall be given
prior notice of at least fourteen (14) days in respect of any call. In the event that
amounts set forth in the call have not been paid in whole or in part as of the date of
payment set forth in the call, the shareholders shall be obligated to pay linkage
differences or interest (or both) on the outstanding amounts, as determined by the Board
of Directors.
Changing Rights Attached
to Shares
Under
the Articles of Association, the Company may, by resolution of a general meeting, vary the
rights attached to any class of shares on the Company’s stamp or its printed name
(unless otherwise determined in the terms of issue of the shares of such class), after
obtaining the written consent of the holders of the majority of the issued shares of said
class or with the approval of a resolution duly passed at a class meeting of the holders
of such class of shares.
Page 54
Annual and Extraordinary
Meetings
The
Board of Directors must convene an annual meeting at least once every calendar year,
within fifteen months of the preceding general meeting, at a place prescribed by the board
so long as it is in the State of Israel. Per the Articles of Association and subject to
the provisions of the Israeli Companies Law, notices to shareholders regarding the
convocation of a general meeting are to be published in two daily Hebrew language
newspapers circulated in Israel. Notice need not be served to our shareholders on an
individual basis.
The
Board of Directors will convene a special, extraordinary meeting upon receipt of a written
request from either (i) two directors or 25% of the total number of directors; (ii) one or
more shareholders holding at least 5% of the issued share capital and at least 1% of the
shareholders’ voting power; or (iii) one or more shareholders holding no less than 5%
of our issued voting shares. If the Board is required to convene an extraordinary meeting,
it shall convene it at a time which is at least 21 days, but not longer than 35 days after
the date of the notice of convening such meeting. In the event that the board of directors
does not convene an extraordinary meeting within the timeframe set forth above, those that
submitted the request for such meeting, or part of them representing more than one-half of
the voting rights of all of them, may convene the extraordinary meeting themselves,
provided that such meeting is held within three months of the time when the extraordinary
meeting was requested.
Limitations on the Rights
to Own Securities
The
Articles of Association do not place limitations on the rights to own securities. Under
the Articles no limitations apply to the transfer of shares in the Company and the number
of shareholders is unlimited.
Changes in the
Company’s Capital
Changes
in the capital of the Company are subject to the approval by ordinary majority of the
shareholders at a general meeting, Shareholders may resolve to increase the authorized
share capital; consolidate our share capital and divide it into shares of greater value
than existing shares; divide existing shares into shares of lesser value; cancel any
authorized share capital which has not yet been allotted (provided there is no undertaking
to allot such share capital); or reduce the capital by way of a distribution if such
distribution has been approved by a court, in accordance with the relevant provisions of
the Israeli Companies Law. If the shareholders resolve to increase the share capital, the
new shares will be subject to the same provisions applicable to the shares of the original
capital.
Neither
the Memorandum of Association nor Articles of Association of the Company nor the laws of
the State of Israel restrict in any way the ownership or voting of ordinary shares by
non-residents of Israel, except with respect to citizens of countries which are in a state
of war with Israel.
Set
forth below are summaries of our material contracts. Because these are summaries, they are
qualified by reference to the actual agreements, which are attached as exhibits to this
Annual Report.
Placing
Agreement
. In connection with the initial issuance to the public by Gold Frost on the
London AIM market, the Company entered into a Placing Agreement, dated March 2, 2006, with
Gold Frost, certain officers of Gold Frost and Corporate Synergy, the placement agent for
the issuance, pursuant to which Corporate Synergy agreed to use its reasonable endeavors
to procure subscribers for the shares in the issuance. Gold Frost agreed to pay Corporate
Synergy a commission on the gross proceeds of the Placing and a corporate finance fee,
together in each case with any applicable VAT, as well as certain other costs and expenses
of, or incidental to, the issuance. The parties, including the Company, gave various
warranties and indemnities to Corporate Synergy as to, although the liability of the
Company was limited to £ 250,000 sterling (approximately NIS 2 million).
Page 55
Relationship
Agreement
. The Company, Gold Frost, Willi Food, Zvi Williger and Joseph Williger are
party to a Relationship Agreement, dated February 28, 2006, pursuant to which the Company,
as a controlling shareholder, and its controlling shareholders have given certain
undertakings to Gold Frost. Under the agreement, the Company undertook to Gold Frost to
exercise all voting rights and powers of control available to it in relation to Gold Frost
in order that:
(i)
Gold Frost is capable of carrying on its business independently of the Company;
(ii)
all transactions, agreements or arrangements entered into between Gold Frost,
the Company and its “associates” (as defined in the agreement) will
be made at arm’s length and on a normal commercial basis, or as otherwise
approved in accordance with Israeli law;
(iii)
no variations will be made to Gold Frost’s articles of association which
would be contrary to the maintenance of Gold Frost’s ability to carry on
its business independently of the Company;
(iv)
each proposed related party transaction between any of the Company, the
“Controlling Parties” (which consist of Willi Food, Zvi Williger and
Joseph Williger) or any of their associates, on the one hand, and Gold Frost or
any subsidiary thereof, on the other hand, will be considered on behalf of Gold
Frost by its Board of Directors as a whole (or by committee of the Board that
has at least one non-executive director present throughout) and the Company nor
any of its associates will seek to influence the consideration of such matter
by the Board (or the committee) in such a way as to further the interests which
are or are potentially in conflict with the interests of Gold Frost or any
subsidiary thereof;
(v)
in the event that a conflict of interest or potential conflict of interest
exists or is likely to arise between any of the Company, the Controlling
Parties or any of their associates, on the one hand, and Gold Frost or any
subsidiary thereof, on the other hand, disclosure of such conflict shall be
made to the board of Gold Frost and any decision by the board of Gold Frost
shall be taken by the board but excluding any director who is the Company, any
Controlling Party or any of their associates or appointed by the Company or any
Controlling Party,
(vi)
the independence of the board of Gold Frost is maintained so as to enable
independent decisions as to the enforcement of the agreement to be taken
independently of the Company, any of the Controlling Parties or any of their
associates, and
(vii)
the provisions of the agreement will be observed. The Company had also
undertaken to Gold Frost not to undertake any activity, which would conflict
with Gold Frost and would render Gold Frost incapable of carrying on its
business independently.
The
agreement will terminate if the Company ceases to hold 30% or less of the share capital of
Gold Frost.
Lock-In
Agreement
. Pursuant to the terms of a Lock In Agreement, dated March 2, 2006, between
the Company, Gold Frost, Corporate Synergy, Joseph Williger, Zvi Williger and Gil
Hochboim, the Company and the executive directors agreed not to dispose of the legal or
beneficial ownership or any interest in the Ordinary Shares held by them at admission of
the Gold Frost shares on the AIM for a period of 12 months following such admission,
subject to certain exceptions. These exceptions include (i) transfer to a connected person
of the Company, (ii) transfer to any person acting as a trustee of a trust created by the
Company, (iii) accepting a general offer made to the shareholders of Gold Frost to acquire
all the issued Ordinary Shares, and (iv) to any compromise or arrangement under section
425 of the Companies Act or to any scheme or reconstruction under section 110 of the
Insolvency Act 1986. The Company and the executive directors also undertake for a further
12 months that any disposal by them of the legal or beneficial ownership or any interest
in the Ordinary Shares held at admission would be conducted through Gold Frost’s
broker from time to time on an orderly market basis, subject to certain exceptions.
Page 56
For
information with respect to the Company’s other material contracts, see “Item 7.
Major Shareholders and Related Party Transactions – B. Related Party
Transactions.”
There
are currently no Israeli currency control restrictions on payments of dividends or other
distributions with respect to our ordinary shares or the proceeds from the sale of our
ordinary shares, except for the obligation of Israeli residents to file reports with the
Bank of Israel regarding certain transactions. However, legislation remains in effect,
pursuant to which currency controls can be imposed by administrative action at any time
and from time to time.
The
following is a summary of the material current tax laws of the State of Israel as they
relate to the Company and its shareholders. This section also contains a discussion of
some Israeli tax consequences to persons who hold or who will acquire our ordinary shares.
This summary does not discuss all the acts of Israeli tax law that may be relevant to a
particular investor in light of his or her personal investment circumstances or to some
types of investors subject to special treatment under Israeli law. Examples of this kind
of investor include banks, financial institution, insurance companies and securities
dealers, or persons that own, directly or indirectly, 10% or more of our outstanding
voting rights, or foreign company if Israeli residents hold 25% or more of their shares or
have the right to 25% or more of their income or profit, and also, all of whom are subject
to special tax regimes not covered in this discussion.
To
the extent that the following discussion describes legislation that remains subject to
judicial or administrative interpretation, there can be no assurance that the views
expressed herein will be consistent with any such interpretation in the future. This
discussion is not intended and should not be construed as legal or professional tax
advice, and does not cover all possible tax considerations.
Potential
investors and each holder of our ordinary shares is advised to consult his or her own tax
advisor with respect to the specific tax consequences to him or her of purchasing, holding
or disposing of our ordinary shares, including the applicability and effect of federal,
state, local and foreign income and other tax laws in his or her particular circumstances.
General Corporate Tax
Structure
Israeli
companies are generally subject to corporate tax at the rate of 31% of their taxable
income in 2006. The rate was 34% for 2005, and is scheduled to decline to 29% in 2007, 27%
in 2008, 26% in 2009 and 25% in 2010 and thereafter.
Special Provisions
Relating to Taxation under Inflationary Conditions
Taxation
under the Income Tax Law (Adjustment for Inflation), 1985 (the “Adjustment for
Inflation Law”) was designed to neutralize the erosion of capital investments in
businesses and to prevent tax benefits resulting from the deduction of inflationary
financial expenses. The law applies a supplementary set of inflationary adjustments to the
normal taxable profit computed according to regular historic cost principles. Generally,
the Inflationary Adjustments Law provides tax deductions and adjustments to depreciation
deductions and tax loss carry forwards to mitigate the effects resulting from an
inflationary economy.
The
Inflationary Adjustments Law is highly complex. Its principal features can be described as
follows:
Page 57
|
|
—
|
Where
a company’s equity, as calculated under the Inflationary Adjustments Law, exceeds
the depreciated cost of its fixed assets (as defined in the Inflationary Adjustments
Law), a deduction from taxable income is permitted equal to the excess multiplied by the
applicable annual rate of inflation. The maximum deduction permitted in any single tax
year is 70% of taxable income, with the unused portion permitted to be carried forward.
|
|
|
—
|
Where
a company’s depreciated cost of fixed assets exceeds its equity, then the excess
multiplied by the applicable annual rate of inflation is added to taxable income.
|
|
|
—
|
Subject
to specified limitation, depreciation deductions on fixed assets and losses carried
forward are adjusted for inflation based on the change in the consumer price index.
|
The
Israeli Income Tax Ordinance and regulations promulgated there under allow
Foreign-Invested Companies, to adjust their tax returns based on exchange rate
fluctuations of the shekel against the US Dollar rather than changes in the Israeli
Consumer Price Index or “CPI”, in lieu of the principles set forth by the
Inflationary Adjustments Law. For these purposes, a Foreign-Invested Company is a company
in which more than 25% of the share capital in terms of rights to distributions, voting
and appointment of directors, and of the combined share capital, including shareholder
loans and capital notes, is held by persons who are not residents of Israel. A company
that elects to measure its results for tax purposes based on the US Dollar exchange rate
cannot change that election for a period of three years following the election. We adjust
our tax returns based on the changes in the Israeli CPI.
Taxation of the Company
Shareholders
Dividends
|
|
—
|
Israeli
resident
– The distribution of dividend income to Israeli residents who
purchased our Shares, will generally be subject to income tax at a rate of 20% (in 2006)
for individuals (25% if the dividends receipt is a
“significant shareholder
” (inter
alia, more than 10% of our outstanding voting rights during the 12 months prior to a
dividend distribution)) and will be exempt from income tax for corporations.
|
|
|
—
|
Non
Israeli resident
– non Israeli resident (both individual and corporation) are
generally subject to Israeli income tax on the receipt of dividends paid on the ordinary
shares at the rate of 20% (25% if the dividends receipt is a “
significant
shareholder
” (see aforementioned), which tax will be withheld at source. Under
the U.S.-Israel Tax Treaty, the maximum tax on dividends paid to a holder of the ordinary
shares who is a U.S. resident is 25%.
|
Capital Gains
Israeli
law imposes a capital gains tax on the sale of capital assets, by an Israeli resident and
on the sale of capital assets located in Israel or the sale of direct or indirect rights
to assets located in Israel, including securities held by the Company and shares of the
Company sold by holders thereof. The Israeli Tax Ordinance distinguishes between the
‘Real Gain’ and the ‘Inflationary Surplus’.
Real
Gain is the excess of the total capital gain over Inflationary Surplus computed on the
basis of the increase in the Israeli CPI between the date of purchase and the date of
sale. Inflationary Surplus, that accrued after December 31, 1993, is exempt from tax.
Page 58
Capital Gains Taxes
Applicable to Israeli Shareholders
Real
Gains derived from the disposal after January 1, 2003 of an asset purchased prior to this
date will be subject to capital gains tax at a blended rate. The regular corporate tax
rate of 31% (In 2006) and a marginal tax rate of up to 49% (in 2006) for individuals will
be applied to the gain amount which bears the same ratio to the total gain realized as the
ratio which the holding period commencing at the acquisition date and terminating on
January 1, 2003 bears to the total holding period. The remainder of the gain realized will
be subject to capital gains tax at a 25% rate for corporations (31%, in 2006, if the
corporation are subject to the Inflationary Adjustments Law) and 20% for individuals (25%
if the shareholder is a “significant shareholder” (see aforementioned), or if
the shareholder claims a deduction of financing expenses).
The
Real Gain accrued at the sale of an asset purchased on or after January 1, 2003 will be
tax as follows:
|
|
—
|
20%
rate for individuals (25% if the shareholder is a "significant shareholder" (see
aforementioned), or if the shareholder claims a deduction of financing
expenses); and
|
|
|
—
|
25%
for corporations (which are not subject to the Inflationary Adjustments Law).
|
Capital Gains Taxes
Applicable to Non-Israeli Shareholders
Capital
gains from the sale of our ordinary shares by non-Israeli shareholders are exempt from
Israeli taxation. In addition, the U.S.- Israel Tax Treaty exempts U.S. residents who hold
an interest of less than 10% in an Israeli company, and who held an interest of less than
10% during the 12 months prior to a sale of their shares, from Israeli capital gains tax
in connection with such sale.
U.S. Federal Income Tax
Considerations
Subject
to the limitations described herein, the following discussion describes the material U.S.
federal income tax consequences to a U.S. holder of the purchase, ownership and
disposition of our ordinary shares where the U.S. holder will own our ordinary shares as
capital assets. A U.S. holder is a holder of our ordinary shares who is:
|
—
|
An
individual citizen or resident of the United States for U.S. federal income tax purposes;
|
|
—
|
a
corporation or partnership (or other entity taxable as a corporation or partnership
for U.S. federal tax purposes) created or organized in the United States
or under the laws of the United States or any political subdivision thereof;
|
|
—
|
an
estate, the income of which is subject to U.S. federal income tax regardless of its
source; or
|
|
—
|
a
trust (i) if, in general, a court within the United States is able to exercise primary
supervision over its administration and one or more U.S. persons have the
authority to control all of its substantial decisions, or (ii) that has in
effect a valid election under applicable U.S. Treasury regulations to be
treated as a U.S. person.
|
Material
aspects of U.S. federal income tax relevant to a holder of our ordinary shares that is not
a U.S. holder (a “non-U.S. holders”) are also discussed below. This discussion
considers only U.S. Holders that will own our ordinary shares as capital assets and is not
a comprehensive description of all of the tax considerations that may be relevant to each
person’s decision to purchase our ordinary shares.
This
discussion is based on current provisions of the Internal Revenue Code of 1986, as amended
(the “Code”), current and proposed Treasury regulations promulgated thereunder,
and administrative and judicial decisions as of the date hereof, all of which are subject
to change, possibly on a retroactive basis. This discussion does not address all aspects
of U.S. federal income taxation that may be relevant to any particular U.S. holder in
light of such holder’s individual circumstances. In particular, this discussion does
not address the potential application of the alternative minimum tax or the U.S. federal
income tax consequences to U.S. holders that are subject to special treatment, including
U.S. holders that:
|
—
|
are
broker-dealers or insurance companies;
|
|
—
|
have
elected mark-to-market accounting;
|
Page 59
|
—
|
are
tax-exempt organizations or retirement plans;
|
|
—
|
are
financial institutions or financial services entities;
|
|
—
|
hold
their shares as part of a straddle, hedge or conversion transaction with other
investments;
|
|
—
|
acquired
their shares upon the exercise of employee stock options or otherwise as compensation;
|
|
—
|
are,
or hold their shares through, partnerships or other pass-through entities;
|
|
—
|
own
directly, indirectly or by attribution at least 10% of our voting power; or
|
|
—
|
have
a functional currency that is not the dollar.
|
In
addition, this discussion does not address any aspect of state, local or non-U.S. tax laws
or the possible application of United States federal gift or estate tax.
Taxation of Dividends
Paid on Ordinary Shares
Subject
to the discussion below under “Tax Consequences if we were a Passive Foreign
Investment Company,” a U.S. holder will be required to include in gross income as
ordinary dividend income the amount of any distribution paid on our ordinary shares,
including any Israeli taxes withheld from the amount paid, to the extent the distribution
is paid out of our current or accumulated earnings and profits, as determined for U.S.
federal income tax purposes. Distributions in excess of such earnings and profits will be
applied against and will reduce the U.S. holder’s basis in our ordinary shares and,
to the extent in excess of such basis, will be treated as gain from the sale or exchange
of our ordinary shares. The dividend portion of such distribution generally will not
qualify for the dividends received deduction otherwise available to corporations.
Dividends
that are received by U.S. holders that are individuals, estates or trusts will be taxed at
the rate applicable to long-term capital gains (a maximum rate of 15%), provided that such
dividends meet the requirements of “qualified dividend income.” Dividends that
fail to meet such requirements, and dividends received by corporate U.S. holders, are
taxed at ordinary income rates. No dividend received by a U.S. holder will be a qualified
dividend (1) if the U.S. holder held the ordinary share with respect to which the
dividend was paid for less than 61 days during the 121-day period beginning on the date
that is 60 days before the ex-dividend date with respect to such dividend, excluding for
this purpose, under the rules of Code section 246(c), any period during which the
U.S. holder has an option to sell, is under a contractual obligation to sell, has made and
not closed a short sale of, is the grantor of a deep-in-the-money or otherwise
nonqualified option to buy, or has otherwise diminished its risk of loss by holding other
positions with respect to, such ordinary share (or substantially identical securities); or
(2) to the extent that the U.S. holder is under an obligation (pursuant to a short
sale or otherwise) to make related payments with respect to positions in property
substantially similar or related to the ordinary share with respect to which the dividend
is paid. If we were to be a “passive foreign investment company” (as such term
is defined in the Code) for any year, dividends paid on our ordinary shares in such year
or in the following year would not be qualified dividends. In addition, a non-corporate
U.S. holder will be able to take a qualified dividend into account in determining its
deductible investment interest (which is generally limited to its net investment income)
only if it elects to do; in such case the dividend will be taxed at ordinary income rates.
Distributions
of current or accumulated earnings and profits paid in foreign currency to a U.S. holder
(including any Israeli taxes withheld therefrom) will be includible in the income of a
U.S. holder in a dollar amount calculated by reference to the exchange rate on the date of
the distribution. A U.S. holder that receives a foreign currency distribution and converts
the foreign currency into dollars after the date of distribution will have foreign
exchange gain or loss based on any appreciation or depreciation in the value of the
foreign currency against the dollar, which will generally be U.S. source ordinary income
or loss.
Page 60
U.S.
holders will have the option of claiming the amount of any Israeli income taxes
withheld at source either as a deduction from gross income or as a
dollar-for-dollar credit against their U.S. federal income tax liability.
Individuals who do not claim itemized deductions, but instead utilize the
standard deduction, may not claim a deduction for the amount of the Israeli
income taxes withheld, but the amount may be claimed as a credit against the
individual’s U.S. federal income tax liability. The amount of foreign
income taxes that may be claimed as a credit in any year is subject to complex
limitations and restrictions, which must be determined on an individual basis
by each shareholder. These limitations include rules that limit foreign tax
credits allowable for specific classes of income to the U.S. federal income
taxes otherwise payable on each such class of income. The total amount of
allowable foreign tax credits in any year cannot exceed the pre-credit U.S. tax
liability for the year attributable to foreign source taxable income.
A
U.S. holder will be denied a foreign tax credit with respect to Israeli income tax
withheld from dividends received on the ordinary shares:
|
—
|
if
the U.S. holder has not held the ordinary shares for at least 16 days of the 31-day
period beginning on the date which is 15 days before the ex-dividend date with
respect to such dividend; or
|
|
—
|
to
the extent the U.S. holder is under an obligation to make related payments with
respect to positions in substantially similar or related property.
|
Any
days during which a U.S. holder has substantially diminished its risk of loss on the
ordinary shares are not counted toward meeting the 16-day holding period. Distributions of
current or accumulated earnings and profits will be foreign source passive income for U.S.
foreign tax credit purposes.
Taxation of the
Disposition of Ordinary Shares
Subject
to the discussion below under “Tax Consequences if we were a Passive Foreign
Investment Company,” upon the sale, exchange or other disposition of our ordinary
shares, a U.S. holder will recognize capital gain or loss in an amount equal to the
difference between the U.S. holder’s basis in the ordinary shares, which is usually
the cost to the U.S. holder of the shares, and the amount realized on the disposition. A
disposition of shares will be considered to occur on the trade date, regardless of the
holder’s method of accounting. Capital gain from the sale, exchange or other
disposition of our ordinary shares held more than one year will be long-term capital gain,
and may, in the case of individual U.S. holders, be subject to a reduced rate of taxation.
Gain or loss recognized by a U.S. holder on a sale, exchange or other disposition of
ordinary shares will be treated as U.S. source income for U.S. foreign tax credit
purposes. The deductibility of a capital loss recognized on the sale, exchange or other
disposition of ordinary shares is subject to limitations.
A
U.S. holder that uses the cash method of accounting calculates the dollar value of the
proceeds received on the sale as of the date that the sale settles. However, a U.S. holder
that uses the accrual method of accounting is required to calculate the value of the
proceeds of the sale as of the trade date and may therefore realize foreign currency gain
or loss. A U.S. holder may avoid realizing foreign currency gain or loss if he or she has
elected to use the settlement date to determine its proceeds of sale for purposes of
calculating the foreign currency gain or loss. In addition, a U.S. holder that receives
foreign currency upon disposition of ordinary shares and converts the foreign currency
into dollars after the settlement date or trade date (whichever date the U.S. holder is
required to use to calculate the value of the proceeds of sale) will have foreign exchange
gain or loss based on any appreciation or depreciation in the value of the foreign
currency against the dollar, which will generally be U.S. source ordinary income or loss.
Page 61
Tax Consequences if we
were a Passive Foreign Investment Company
If
we were a Passive Foreign Investment Company (“PFIC”), each U.S. holder
would (unless it timely made an election to be taxed currently as a “qualified
electing fund (“QEF”)) be taxable on gain recognized from the disposition of
ordinary shares (including gain deemed recognized if the ordinary shares are used as
security for a loan) and upon receipt of certain distributions with respect to ordinary
shares as if such income had been recognized ratably over the U.S. holder’s holding
period for the ordinary shares. Tax would be computed at the highest ordinary income tax
rate in effect for each other period to which income is allocated, and an interest charge
on the tax as so computed would also apply. Additionally, U.S. holders who acquire our
ordinary shares from decedents (other than nonresident aliens) dying before 2010 would be
denied the normally-available step-up in basis for such shares to fair market value at the
date of death and, instead, would have a tax basis in such shares equal to the
decedent’s basis, if lower.
Generally,
we would be a passive foreign investment company, or a “PFIC”, for a taxable
year if (taking into account certain “look-through” rules with respect to the
income and assets of our subsidiaries) either 75% or more of our gross income for such
taxable year is passive income or the average percentage (by value) of our passive assets
during such taxable year is at least 50 percent. We believe that because we are and intend
to remain an operating business for the foreseeable future, it is very unlikely that we
will be deemed a PFIC.
Tax Consequences for
Non-U.S. Holders of Ordinary Shares
Except
as described in “Information Reporting and Back-up Withholding” below, a
non-U.S. holder of ordinary shares will not be subject to U.S. federal income or
withholding tax on the payment of dividends on, and the proceeds from the disposition of,
our ordinary shares, unless:
|
—
|
the
item is effectively connected with the conduct by the non-U.S. holder of a trade or
business in the United States and, in the case of a resident of a country which has a
treaty with the United States, the item is attributable to a permanent establishment, or
in the case of an individual, a fixed place of business, in the United States;
|
|
—
|
the
non-U.S. holder is an individual who holds the ordinary shares as a capital asset and is
present in the United States for 183 days or more in the taxable year of the
disposition and does not qualify for an exemption; or
|
|
—
|
the
non-U.S. holder is subject to tax under the provisions of U.S. tax law applicable to U.S.
expatriates.
|
Information Reporting and
Back-up Withholding
U.S.
holders generally are subject to information reporting requirements with
respect to dividends paid in the United States on, or proceeds from the
disposition of, our ordinary shares. In addition, a U.S. holder may be subject,
under certain circumstances, to backup withholding at a rate of up to 28% with
respect to dividends paid on, or proceeds from the disposition of, our ordinary
shares unless the U.S. holder provides proof of an applicable exemption or
correct taxpayer identification number and otherwise complies with applicable
requirements of the backup withholding rules. A holder of our ordinary shares
who provides an incorrect taxpayer identification number may be subject to
penalties imposed by the IRS. Amounts withheld under the backup withholding
rules are not an additional tax and may be refunded or credited against the
holder’s federal income tax liability, provided the required information
is furnished to the IRS.
Non-U.S.
holders generally are not subject to information reporting or back-up
withholding with respect to dividends paid on, or proceeds from the disposition
of, our ordinary shares, provided that the non-U.S. holder provides a taxpayer
identification number, certifies to its foreign status, or establishes another
exemption to the information reporting or back-up withholding requirements.
Page 62
|
|
F.
|
DIVIDENDS
AND PAYING AGENTS
|
Not
applicable.
Not
applicable.
The
Company is subject to the informational requirements of the Securities Exchange Act of
1934, as amended, applicable to foreign private issuers and fulfills the obligation with
respect to such requirements by filing reports with the Securities and Exchange
Commission. You may read and copy any document we file with the Securities and Exchange
Commission without charge at the Securities and Exchange Commission’s public
reference room at 450 Fifth Street, N.W., Washington, D.C. 20549. Copies of such material
may be obtained by mail from the Public Reference Branch of the Securities and Exchange
Commission at such address, at prescribed rates. Please call the Securities and Exchange
Commission at l-800-SEC-0330 for further information on the public reference room.
As
a foreign private issuer, we are exempt from the rules under the Exchange Act prescribing
the furnishing and content of proxy statements, and our officers, Directors and principal
shareholders are exempt from the reporting and “short-swing” profit recovery
provisions contained in Section 16 of the Exchange Act. In addition, we are not required
under the Exchange Act to file periodic reports and financial statements with the
Securities and Exchange Commission as frequently or as promptly as United States companies
whose securities are registered under the Exchange Act.
|
|
I.
|
SUBSIDIARY
INFORMATION
|
Not
applicable.
|
ITEM 11.
|
QUANTITATIVE
AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
|
Exchange
rate risk:
The Company regularly assesses currency rate risks to minimize any adverse
effects on the Company’s business as a result of currency fluctuations.
The
Company’s foreign currency exposure gives rise to market risk associated with
exchange rate movements of the NIS, the Company functional and reporting currency, against
the USD and Euros. Most of the Company’s purchases are denominated in USD and Euros,
whereas its income and other expenses are denominated mostly in NIS. Consequently,
devaluation of the NIS against the other currencies may cause a negative impact on the
Company profit margins.
The
Company strives to minimize market risks arising from exchange rates and the cost of
imported goods, especially by opening wide documentary credits for suppliers abroad and
holding foreign currency surpluses, initiates forward transactions and foreign currency
options.
Page 63
Credit
risk:
Financial instruments that potentially subject the Company to concentrations of
credit risk consist principally of trade receivables. Despite the Company’s large
number of clients (over 1,000 in Israel), a major and significant part of its sales are
made to only a limited number of customers (mainly in the organized market). The Company
generally does not require and does not receive collateral from those major customers.
However, it does require and receive collateral from most of the remainder of its clients
to insure security of collecting payments. The Company maintains an allowance for doubtful
debts, based upon factors surrounding the credit risk of specific customers, historical
trends and other information which management believes adequately covers all anticipated
losses in respect of trade receivables. There can be no assurance that this allowance will
be adequate. In the event that any of the Company’s major clients defaults on its
payment obligations to us (such as Club Market – see “Item 4. Information on the
Company – B. Business Overview – Customers”), the Company will not possess
sufficient collateral to collect the entire debt. The Company strives to minimize the
credit risks by constantly reviewing the credit it extends to customers versus the
collateral it receives. As a result, the Company has ceased selling products to certain
customers and considerably reduced sales to other customers, and may continue to do so in
the future.
|
ITEM 12.
|
DESCRIPTION
OF SECURITIES OTHER THAN EQUITY SECURITIES
|
Not
applicable.
Page 64
PART II
|
ITEM 13.
|
DEFAULTS,
DIVIDEND ARREARAGES AND DELINQUENCIES
|
Not
applicable.
|
ITEM 14.
|
MATERIAL
MODIFICATIONS TO THE RIGHTS OF SECURITY HOLDERS AND USE OF PROCEEDS
|
Not
applicable.
|
ITEM 15.
|
CONTROLS
AND PROCEDURES
|
(a)
Disclosure Controls and Procedures
.
Our
Chief Executive Officer, or CEO, and Chief Financial Officer, or CFO, are responsible for
establishing and maintaining our disclosure controls and procedures. These controls and
procedures were designed to ensure that information required to be disclosed in the
reports that we file under the Securities Exchange Act of 1934, as amended, is recorded,
processed, summarized and reported within the time periods specified in the rules and
forms of the SEC. We evaluated these disclosure controls and procedures under the
supervision of our CEO and CFO as of December 31, 2005. Based on this evaluation, our CEO
and CFO concluded that our disclosure controls and procedures are effective in timely
alerting them to information required to be disclosed in our periodic reports to the SEC.
(b)
Management’s annual report on Internal Control Over Financial Reporting
.
Not
applicable.
(c)
Attestation report of the registered public accounting firm
.
Not
applicable.
(d)
Changes in Internal Control Over Financial Reporting
.
There
were no changes in the Company’s internal control over financial reporting that
occurred during the year ended December 31, 2005 that have materially affected, or are
reasonably likely to materially affect, our internal control over financial reporting.
|
ITEM 16A.
|
–
|
AUDIT
COMMITTEE FINANCIAL EXPERT
|
The
Company’s Board of Directors has determined that David Weiss is the “audit
committee financial expert” for the Company, as such term is defined in Item 16A of
Form 20-F. Mr. Weiss serves on the Company’s Audit Committee of the Board of
Directors. All the members of the Audit Committee are “independent directors” as
defined in the Nasdaq listing standards applicable to us.
|
ITEM 16B.
|
–
|
CODE
OF ETHICS
|
On
June 23, 2004, the Company’s Board of Directors adopted a Code of Ethics for the
Company that applies to all directors, officers and other employees of the Company. A copy
of the Code of Ethics is available for review on the Company’s website at
www.willi-food.co.il
.
Page 65
|
ITEM 16C.
|
–
|
PRINCIPAL
ACCOUNTANT FEES AND SERVICES
|
Brightman
Almagor & Co., independent certified public accountants and a Member Firm of Deloitte
Touche Tohmatsu, served as our independent public accountants for the years ended December
31, 2005 and 2004, for which audited financial statements appear in this annual report on
Form 20-F.
Brightman
Almagor & Co charged the Company NIS 256 thousand (USD 56 thousand) for audit fees in
2005, and NIS 172 thousand (USD 37 thousand) for audit fees in 2004. There were no
audit-related fees, tax fees or other fees billed to the Company by Brightman Almagor
& Co. in those years.
We
received no non-audit services from our independent public accountants, Brightman Almagor
& Co. during the last two years. To the extent that non-audit services are to be
performed by our independent public accountants in the future, these services will either
be pre-approved by the audit committee on an individual basis during the year, or our
audit committee will approve in advance the particular services or categories of services
to be provided to the Company during the following yearly period and also set forth a
specific budget for such audit and non-audit services.
|
ITEM 16D.
|
–
|
EXEMPTIONS
FROM THE LISTING STANDARDS FOR AUDIT COMMITTEES
|
Not
applicable.
|
ITEM 16E.
|
–
|
PURCHASES
OF EQUITY SECURITIES BY THE COMPANY AND AFFILIATED PURCHASERS
|
Below
is a list of purchases of the Company’s ordinary shares by affiliated purchasers
during calendar year 2005 and from January 1, 2006 to May 30, 2006. There were no
purchases by the Company of the Company’s ordinary shares during such periods.
Period
|
Total Number of
Shares Purchased
|
Average Price
Paid Per Share
|
Total Number of
Shares Purchased
as Part of
Publicly
Announced Plans
or Programs
|
Maximum Number of
Shares that May
Yet Be Purchased
Under Plans or
Programs
|
Willi Food
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Oct 26, 2005 - Oct 31, 2005
|
|
|
|
66,770
|
|
|
3.189
|
|
|
N/A
|
|
|
N/A
|
|
|
Nov 1, 2005 - Nov 29, 2005
|
|
|
|
92,454
|
|
|
3.189
|
|
|
N/A
|
|
|
N/A
|
|
Zvi Williger
|
|
Jan 3, 2006
|
|
|
|
163,010
|
|
|
3.45
|
|
|
N/A
|
|
|
N/A
|
|
Joseph Williger
|
|
Nov 2, 2005 - Nov 7, 2005
|
|
|
|
24,525
|
|
|
3.232
|
|
|
N/A
|
|
|
N/A
|
|
Page 66
PART III
|
ITEM 17.
|
FINANCIAL
STATEMENTS
|
We
have responded to Item 18 in lieu of this Item.
|
ITEM 18.
|
FINANCIAL
STATEMENTS
|
The
financial statements required by this item are found at the end of this annual report,
beginning on page F-1.
Page 67
Exhibit
Number
|
|
Description
|
|
†1.1
|
|
Memorandum
of Association of the Company, as amended (1)
|
|
1.2
|
|
Articles
of Association of the Company, as amended*
|
|
2.1
|
|
Specimen
of Certificate for ordinary shares (2)
|
|
4.1
|
|
Share
Option Plan (2)
|
|
†4.2
|
|
Management
Agreement between Registrant and Yossi Willi Management Investments Ltd., dated June 1,
1998 (3)
|
|
†4.3
|
|
Amendment
to the Management Agreement between Registrant and Yossi Willi Management Investments
Ltd., dated August 1, 2005*
|
|
†4.4
|
|
Management
Agreement between the Company and Zvi W. & Co. Ltd., dated June 1, 1998 (3)
|
|
†4.5
|
|
Amendment
to the Management Agreement between Registrant and Zvi W. & Co., Ltd., dated August 1,
2005*
|
|
†4.6
|
|
Lease
of Company's premises with Titanic Food Ltd., dated November 23, 1998 (3)
|
|
†4.7
|
|
Services
Agreement between the Company and Willi Food, dated April 1, 1997 (3)
|
|
†4.8
|
|
Transfer
Agreement between Registrant and Gold Frost dated February 16, 2006*
|
|
†4.9
|
|
Lease
agreement for Logistics Center between Registrant and Gold Frost dated February 16, 2006*
|
|
4.10
|
|
Relationship
Agreement between Registrant, Gold Frost, Willi Food, Zvi Williger and Joseph Williger
dated February 28, 2006*
|
|
4.11
|
|
Placing
Agreement between Registrant, Gold Frost, certain officers of Gold Frost and Corporate
Synergy dated March 2, 2006*
|
|
4.12
|
|
Lock
In Agreement, between Registrant, Gold Frost, Corporate Synergy and certain officers of
Gold Frost dated March 2, 2006*
|
|
8
|
|
Subsidiaries
of the Company*
|
|
12.1
|
|
Certification
of CEO of the Company pursuant to Rule 13a-14(a), as adopted pursuant to Section 302 of
the Sarbanes-Oxley Act of 2002*
|
|
12.2
|
|
Certification
of CFO of the Company pursuant to Rule 13a-14(a), as adopted pursuant to Section 302 of
the Sarbanes-Oxley Act of 2002*
|
|
13.1
|
|
Certification
of CEO of the Company pursuant to Rule 13a-14(b), as adopted pursuant to Section 906 of
the Sarbanes-Oxley Act of 2002*
|
|
13.2
|
|
Certification
of CFO of the Company pursuant to Rule 13a-14(b), as adopted pursuant to Section 906 of
the Sarbanes-Oxley Act of 2002*
|
Page 68
|
†
|
English
translations from Hebrew original.
|
|
(1)
|
Incorporated
by Reference to the Registrant’s Annual Report on Form 20-F for the
Fiscal year ended December 31, 1997.
|
|
(2)
|
Incorporated
by reference to the Company’s Registration Statement on Form F-1,
File No. 333-6314.
|
|
(3)
|
Incorporated
by reference to the Company’s Annual Report on Form 20-F for the
fiscal year ended December 31, 2001.
|
Page 69
G. WILLI-FOOD
INTERNATIONAL LTD.
CONSOLIDATED FINANCIAL
STATEMENTS
DECEMBER 31, 2005
G. WILLI-FOOD
INTERNATIONAL LTD.
Contents
REPORT OF REGISTERED
PUBLIC ACCOUNTING FIRM
TO THE SHAREHOLDERS OF G. WILLI-FOODS INTERNATIONAL LTD.
We have audited the accompanying
consolidated balance sheets of G. Willi-Food International Ltd. (“the Company”)
and its subsidiaries at December 31, 2005 and 2004 and the related consolidated statements
of operations, shareholders’ equity and cash flows for each of the three years in the
period ended December 31, 2005. These financial statements are the responsibility of the
Company’s management. Our responsibility is to express an opinion on these financial
statements based on our audits.
We conducted our audits in accordance
with the standards of the Public Company Accounting Oversight Board (United States). Those
standards require that we plan and perform the audit to obtain reasonable assurance about
whether the financial statements are free of material misstatement. The Company is not
required to have, nor were we engaged to perform, an audit of its internal control over
financial reporting. Our audit included consideration of internal control over financial
reporting as a basis for designing audit procedures that are appropriate in the
circumstances, but not for the purpose of expressing an opinion on the effectiveness of
the Company’s internal control over financial reporting. Accordingly, we express no
such opinion. An audit also includes examining, on a test basis, evidence supporting the
amounts and disclosures in the financial statements, assessing the accounting principles
used and significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the consolidated
financial statements referred to above present fairly, in all material respects, the
consolidated financial position of the Company and its subsidiaries at December 31, 2005
and 2004 and the consolidated results of their operations and their consolidated cash
flows for each of the three years in the period ended December 31, 2005, in conformity
with Israeli generally accepted accounting principles in Israel. Such accounting
principles, as applicable to these financial statements, are, in all material respects,
substantially identical to U.S. generally accepted accounting principles, except as
indicated in Note 14.
Brightman Almagor & Co.
Certified Public Accountants
A member firm of Deloitte Touche Tomhatsu
Tel-Aviv, Israel
oMarch 26, 2006
G. WILLI-FOOD
INTERNATIONAL LTD.
CONSOLIDATED BALANCE
SHEETS
|
|
|
December 31,
|
|
|
Note
|
2 0 0 5
|
2 0 0 4
|
2 0 0 5 (*)
|
|
|
|
NIS
|
US dollars
|
|
|
|
(in thousands)
|
|
|
|
|
|
|
|
ASSETS
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current assets
|
|
|
|
Cash and cash equivalents
|
|
|
|
|
|
|
30,431
|
|
|
55,831
|
|
|
6,611
|
|
|
Marketable securities
|
|
|
|
|
|
|
3,229
|
|
|
1,694
|
|
|
701
|
|
|
Trade accounts receivable
|
|
|
|
|
|
|
48,396
|
|
|
40,887
|
|
|
10,514
|
|
|
Receivables and other current assets
|
|
|
3
|
|
|
|
7,673
|
|
|
1,211
|
|
|
1,667
|
|
|
Inventories
|
|
|
|
|
|
|
30,798
|
|
|
27,139
|
|
|
6,691
|
|
|
|
|
|
|
|
|
|
|
|
Total current assets
|
|
|
|
|
|
|
120,527
|
|
|
126,762
|
|
|
26,184
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fixed assets
|
|
|
4
|
|
|
|
|
|
|
|
|
|
|
|
|
Cost
|
|
|
|
|
|
|
23,343
|
|
|
8,590
|
|
|
5,071
|
|
|
Less: accumulated depreciation and amortization
|
|
|
|
|
|
|
6,686
|
|
|
5,554
|
|
|
1,452
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
16,657
|
|
|
3,036
|
|
|
3,619
|
|
|
|
|
|
|
|
|
|
|
|
Other assets, net
|
|
|
5
|
|
|
|
90
|
|
|
63
|
|
|
20
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
137,274
|
|
|
129,861
|
|
|
29,823
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
LIABILITIES AND SHAREHOLDERS' EQUITY
|
|
|
|
|
|
|
|
Current liabilities
|
|
|
|
Short-term bank borrowings
|
|
|
|
|
|
|
-
|
|
|
2,489
|
|
|
-
|
|
|
Trade accounts payable
|
|
|
|
|
|
|
19,938
|
|
|
19,066
|
|
|
4,332
|
|
|
Due to related parties
|
|
|
|
|
|
|
2,193
|
|
|
2,557
|
|
|
477
|
|
|
Payables and other current liabilities
|
|
|
6
|
|
|
|
12,973
|
|
|
6,664
|
|
|
2,818
|
|
|
|
|
|
|
|
|
|
|
|
Total current liabilities
|
|
|
|
|
|
|
35,104
|
|
|
30,776
|
|
|
7,627
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Long-term liabilities
|
|
|
|
Accrued severance pay, net
|
|
|
7
|
|
|
|
299
|
|
|
185
|
|
|
65
|
|
|
|
|
|
|
|
|
|
|
|
Total long-term liabilities
|
|
|
|
|
|
|
299
|
|
|
185
|
|
|
65
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commitments and contingent liabilities
|
|
|
8
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Shareholders' equity
|
|
|
9
|
|
|
|
|
|
|
|
|
|
|
|
|
Share capital:
|
|
|
|
Ordinary shares NIS 0.10 par value
|
|
|
|
(authorized - 50,000,000 shares, issued
|
|
|
|
and outstanding - 8,615,000 shares)
|
|
|
|
|
|
|
948
|
|
|
948
|
|
|
326
|
|
|
Additional paid-in capital
|
|
|
|
|
|
|
20,258
|
|
|
20,258
|
|
|
4,281
|
|
|
Retained earnings
|
|
|
|
|
|
|
80,665
|
|
|
77,694
|
|
|
17,524
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
101,871
|
|
|
98,900
|
|
|
22,131
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
137,274
|
|
|
129,861
|
|
|
29,823
|
|
|
|
|
|
|
|
|
|
|
|
(*)
|
Convenience
translation into U.S. dollars.
|
The
accompanying notes are an integral part of the financial statements.
F - 3
G. WILLI-FOOD
INTERNATIONAL LTD.
CONSOLIDATED
STATEMENTS OF OPERATIONS
|
|
|
Year ended December 31,
|
|
|
Note
|
2 0 0 5
|
2 0 0 4
|
2 0 0 3
|
2 0 0 5 (*)
|
|
|
|
NIS
|
US dollars
|
|
|
|
(in thousands, except for share data)
|
|
|
|
|
|
|
|
|
Sales
|
|
|
12
|
|
|
|
166,282
|
|
|
170,982
|
|
|
137,385
|
|
|
36,125
|
|
|
|
|
|
|
Cost of sales
|
|
|
12
|
|
|
|
128,215
|
|
|
130,292
|
|
|
110,160
|
|
|
27,855
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross profit
|
|
|
|
|
|
|
38,067
|
|
|
40,690
|
|
|
27,225
|
|
|
8,270
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating expenses:
|
|
|
|
Sales and marketing
|
|
|
|
|
|
|
15,771
|
|
|
15,632
|
|
|
11,662
|
|
|
3,426
|
|
|
General and administrative
|
|
|
|
|
|
|
10,044
|
|
|
9,134
|
|
|
8,335
|
|
|
2,182
|
|
|
Bad debt -
|
|
|
12
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Club Market Marketing Chains Ltd
|
|
|
|
|
|
|
3,500
|
|
|
-
|
|
|
-
|
|
|
761
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total operating expenses
|
|
|
|
|
|
|
29,315
|
|
|
24,766
|
|
|
19,997
|
|
|
6,369
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating income
|
|
|
|
|
|
|
8,752
|
|
|
15,924
|
|
|
7,228
|
|
|
1,901
|
|
|
|
|
|
|
Financing income, net
|
|
|
12
|
|
|
|
2,501
|
|
|
1,121
|
|
|
4,336
|
|
|
543
|
|
|
|
|
|
|
Other income, net
|
|
|
|
|
|
|
35
|
|
|
34
|
|
|
101
|
|
|
8
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income before income taxes
|
|
|
|
|
|
|
11,288
|
|
|
17,079
|
|
|
11,665
|
|
|
2,452
|
|
|
|
|
|
|
Income taxes
|
|
|
10
|
|
|
|
3,563
|
|
|
5,886
|
|
|
2,889
|
|
|
774
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income
|
|
|
|
|
|
|
7,725
|
|
|
11,193
|
|
|
8,776
|
|
|
1,678
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings per share (EPS)
|
|
|
|
Basic and diluted
|
|
|
|
|
|
|
0.9
|
|
|
1.3
|
|
|
1.03
|
|
|
0.19
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Shares used in computation
|
|
|
|
of basic and diluted EPS
|
|
|
|
|
|
|
8,615,000
|
|
|
8,600,000
|
|
|
8,555,000
|
|
|
8,615,000
|
|
|
|
|
|
|
|
|
|
|
|
|
(*)
Convenience translation into U.S. dollars.
The
accompanying notes are an integral part of the financial statements.
F - 4
G. WILLI-FOOD
INTERNATIONAL LTD.
STATEMENTS OF
SHAREHOLDERS’ EQUITY
|
|
Number of
ordinary
shares
|
Share
capital
|
Additional
paid-in capital
|
Retained
earnings
|
Total
shareholders'
equity
|
|
|
|
NIS
|
|
|
|
(in thousands)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance - January 1, 2003
|
|
|
|
8,555,000
|
|
|
514
|
|
|
19,704
|
|
|
58,156
|
|
|
78,374
|
|
|
|
|
|
|
Net income for the year
|
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
8,776
|
|
|
8,776
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance - December 31, 2003
|
|
|
|
8,555,000
|
|
|
514
|
|
|
19,704
|
|
|
66,932
|
|
|
87,150
|
|
|
|
|
|
|
Exercise of stock options
|
|
|
|
60,000
|
|
|
3
|
|
|
554
|
|
|
-
|
|
|
557
|
|
|
|
|
|
|
Share dividend
|
|
|
|
-
|
|
|
431
|
|
|
-
|
|
|
(431
|
)
|
|
-
|
|
|
|
|
|
|
Net income for the year
|
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
11,193
|
|
|
11,193
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance - December 31, 2004
|
|
|
|
8,615,000
|
|
|
948
|
|
|
20,258
|
|
|
77,694
|
|
|
98,900
|
|
|
|
|
|
|
Declared dividend
|
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
(4,754
|
)
|
|
(4,754
|
)
|
|
|
|
|
|
Net income for the year
|
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
7,725
|
|
|
7,725
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance - December 31, 2005
|
|
|
|
8,615,000
|
|
|
948
|
|
|
20,258
|
|
|
80,665
|
|
|
101,871
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The
accompanying notes are an integral part of the financial statements.
F - 5
G. WILLI-FOOD
INTERNATIONAL LTD.
CONSOLIDATED
STATEMENTS OF CASH FLOWS
|
|
Year ended December 31,
|
|
|
2 0 0 5
|
2 0 0 4
|
2 0 0 3
|
2 0 0 5 (*)
|
|
|
NIS
|
US dollars
|
|
|
(in thousands)
|
|
|
|
|
|
|
|
CASH FLOWS - OPERATING ACTIVITIES
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income
|
|
|
|
7,725
|
|
|
11,193
|
|
|
8,776
|
|
|
1,678
|
|
|
|
|
|
|
Adjustments to reconcile net income to net
|
|
|
|
cash provided by operating activities:
|
|
|
|
|
|
|
|
Depreciation and amortization
|
|
|
|
1,252
|
|
|
1,056
|
|
|
956
|
|
|
272
|
|
|
Deferred income taxes
|
|
|
|
34
|
|
|
(689
|
)
|
|
355
|
|
|
7
|
|
|
Gain on disposition of fixed assets
|
|
|
|
(35
|
)
|
|
(35
|
)
|
|
(97
|
)
|
|
(8
|
)
|
|
Unrealized gain on marketable securities
|
|
|
|
(755
|
)
|
|
(440
|
)
|
|
(3,547
|
)
|
|
(164
|
)
|
|
|
|
|
|
Changes in assets and liabilities:
|
|
|
|
|
|
|
|
Decrease (Increase) in:
|
|
|
|
Trade accounts receivable
|
|
|
|
(7,509
|
)
|
|
(11,213
|
)
|
|
(5,562
|
)
|
|
(1,631
|
)
|
|
Receivables and other current assets
|
|
|
|
(6,523
|
)
|
|
1,789
|
|
|
264
|
|
|
(1,417
|
)
|
|
Inventory
|
|
|
|
(3,659
|
)
|
|
(8,316
|
)
|
|
(2,518
|
)
|
|
(795
|
)
|
|
Increase in:
|
|
|
|
Trade accounts payable
|
|
|
|
872
|
|
|
2,956
|
|
|
4,959
|
|
|
189
|
|
|
Payables and other current liabilities
|
|
|
|
1,191
|
|
|
3,666
|
|
|
1,840
|
|
|
259
|
|
|
Accrued severance pay, net
|
|
|
|
114
|
|
|
15
|
|
|
7
|
|
|
25
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash provided by (used in) operating
|
|
|
|
activities
|
|
|
|
(7,293
|
)
|
|
(18
|
)
|
|
5,433
|
|
|
(1,585
|
)
|
|
|
|
|
|
|
|
|
|
|
(*)
Convenience translation into U.S. dollars.
The
accompanying notes are an integral part of the financial statements.
F - 6
G. WILLI-FOOD
INTERNATIONAL LTD.
CONSOLIDATED
STATEMENTS OF CASH FLOWS
(Continued)
|
|
Year ended December 31,
|
|
|
2 0 0 5
|
2 0 0 4
|
2 0 0 3
|
2 0 0 5 (*)
|
|
|
NIS
|
NIS
|
NIS
|
US dollars
|
|
|
(in thousands)
|
|
|
|
|
|
|
|
CASH FLOWS - INVESTING ACTIVITIES
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Proceeds from realization (purchase) of marketable
|
|
|
|
securities, net
|
|
|
|
(780
|
)
|
|
41,044
|
|
|
(17,607
|
)
|
|
(169
|
)
|
|
Additions to fixed assets
|
|
|
|
(14,889
|
)
|
|
(694
|
)
|
|
(2,030
|
)
|
|
(3,235
|
)
|
|
Proceeds on disposition of fixed assets
|
|
|
|
51
|
|
|
35
|
|
|
573
|
|
|
11
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash provided by (used in) investing
|
|
|
|
activities
|
|
|
|
(15,618
|
)
|
|
40,385
|
|
|
(19,064
|
)
|
|
(3,393
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
CASH FLOWS - FINANCING ACTIVITIES
|
|
|
|
|
|
|
|
Repayment of loans
|
|
|
|
-
|
|
|
(45
|
)
|
|
(53
|
)
|
|
-
|
|
|
Short-term bank borrowings, net
|
|
|
|
(2,489
|
)
|
|
2,489
|
|
|
(1,008
|
)
|
|
(541
|
)
|
|
Proceeds from stock options exercise
|
|
|
|
-
|
|
|
557
|
|
|
-
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash provided by (used in)
|
|
|
|
financing activities
|
|
|
|
(2,489
|
)
|
|
3,001
|
|
|
(1,061
|
)
|
|
(541
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net change in cash and cash equivalents
|
|
|
|
(25,400
|
)
|
|
43,368
|
|
|
(14,692
|
)
|
|
(5,518
|
)
|
|
|
|
|
|
Cash and cash equivalents at beginning of year
|
|
|
|
55,831
|
|
|
12,463
|
|
|
27,155
|
|
|
12,129
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents at end of year
|
|
|
|
30,431
|
|
|
55,831
|
|
|
12,463
|
|
|
6,611
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Supplemental cash flow information:
|
|
|
|
|
|
|
|
Cash paid during the period for:
|
|
|
|
Interest
|
|
|
|
9
|
|
|
10
|
|
|
50
|
|
|
2
|
|
|
Taxes
|
|
|
|
2,596
|
|
|
2,664
|
|
|
2,985
|
|
|
564
|
|
(*)
Convenience translation into U.S. dollars.
The
accompanying notes are an integral part of the financial statements.
F - 7
G. WILLI-FOOD
INTERNATIONAL LTD.
NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS
|
|
G.
Willi-Food International Ltd. (“the Company”) was incorporated in
Israel in January 1994 and is engaged in the import, marketing and distribution
of food products.
|
|
|
The
Company is a subsidiary of Willi-Food Investments Ltd. (“the parent company”).
The shares of the parent company are registered for trade on the Tel-Aviv Stock Exchange.
|
|
NOTE 2
|
–
|
SIGNIFICANT
ACCOUNTING POLICIES
|
|
|
The
consolidated financial statements have been prepared in conformity with accounting
principles generally accepted in Israel. As applicable to these financial statements,
these accounting principles are substantially identical to U.S. GAAP, except as indicated
in Note 14.
|
|
|
The
preparation of the financial statements in conformity with generally accepted accounting
principles requires management to make estimates and assumptions that affect the reported
amounts of assets and liabilities and disclosure of contingent assets and liabilities at
the date of the financial statements and the reported amounts of revenues and expenses
during the reporting period. Actual results could differ from those estimates.
|
|
|
C.
|
Ceasing
the adjustment of financial statements and financial reporting in “reported
amounts”
|
|
|
In
October 2001, the Israel Accounting Standards Board published Accounting Standard No. 12,
“Discontinuance of Adjustment of financial Statements”. Pursuant to this
standard and in accordance with Accounting Standard No. 17 that was published in December
2002, the adjustment of financial statements was discontinued as of January 1, 2004. Up
to December 31, 2003, the Company continued to prepare adjusted financial statements in
accordance with Opinion No. 36 of the Institute of Certified Public Accountants in
Israel. The adjusted amounts included in the financial statements as at December 31, 2003
constitute the starting point for the nominal financial report as of January 1, 2004. The
Company has implemented the provisions of the standard and has accordingly discontinued
the adjustments as of January 1, 2004.
|
|
|
1.
|
In
the past the Company prepared its financial statements on the basis of
historical cost adjusted for the changes in the Consumer Price Index. The
adjusted amounts that are included in the financial statements as at
December 31, 2003 constitute the starting point for the nominal financial
report as of January 1, 2004. Any additions made during the period are
included according to their nominal values.
|
F - 8
G. WILLI-FOOD
INTERNATIONAL LTD.
NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS
|
NOTE 2
|
–
|
SIGNIFICANT
ACCOUNTING POLICIES (Cont.)
|
|
|
C.
|
Ceasing the adjustment of financial statements and financial reporting in
“reported amounts” (Cont.)
|
|
|
2.
|
Amounts
of non-monetary assets do not necessarily reflect their realizable value
or updated economic value, but only the reported amounts of such assets.
|
|
|
3.
|
The
term “cost” in these financial statements means the reported
amount of cost.
|
|
|
4.
|
All
the comparative data for prior periods is stated adjusted to the index at
December 31, 2003.
|
|
|
a.
|
Non-monetary
items are stated at reported amounts.
|
|
|
b.
|
Monetary
items are stated in the balance sheet at their nominal historical values as at
balance sheet date.
|
|
|
a.
|
Income
and expenses deriving from non-monetary items from provisions included in
the balance sheet are derived from the difference between the reported
amounts of the opening balance and the reported amounts of the closing
balance.
|
|
|
b.
|
The
other income and expense items (such as: sales, purchases, current
manufacturing costs, etc.) are presented at their nominal values.
|
|
|
D.
|
Exchange
rates and linkage
|
|
|
Assets
and liabilities in, or linked to, foreign currency are included on the basis of the
representative exchange rate prevailing at the applicable balance sheet date.
Representative rates of exchange for the U.S. dollar were as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2005
|
- NIS 4.603
|
|
|
December 31, 2004
|
- NIS 4.308
|
|
|
December 31, 2003
|
- NIS 4.379
|
|
|
CPI-linked
balances are stated using the specific index to which the balances are linked.
|
|
|
E.
|
Convenience
translation
|
|
|
The
adjusted financial statements as of December 31, 2005 and for the year then ended have
been translated into United States dollars using the representative exchange rate at
December 31, 2005 as published by the Bank of Israel (US$ 1.00 = NIS 4.603). The translation
was made solely for the convenience of readers in the United States.
|
F - 9
G. WILLI-FOOD
INTERNATIONAL LTD.
NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS
|
NOTE 2
|
–
|
SIGNIFICANT
ACCOUNTING POLICIES (Cont.)
|
|
|
E.
|
Convenience
translation (Cont.)
|
|
|
It
should not be construed that the translated dollar figures actually represent, or could
be converted into, US dollars.
|
|
|
F.
|
Principles
of consolidation
|
|
|
The
consolidated financial statements include the financial statements of the Company and its
wholly owned subsidiaries. All significant inter-company transactions and balances are
eliminated upon consolidation.
|
|
|
Cash
equivalents include short-term, highly liquid investments that are readily convertible
into cash with original maturities of three months or less.
|
|
|
Marketable
securities are classified as “trading” and are stated at market value.
|
|
|
I.
|
Allowance
for doubtful accounts
|
|
|
The
allowance has been computed on the basis of specific accounts receivable.
|
|
|
Inventories
are stated at the lower of cost or market value. Cost is determined by the “first-in-first-out” method.
|
|
|
Fixed
assets are stated at cost, with depreciation computed by the straight-line method over
the assets’ estimated useful lives, as follows:
|
|
|
|
Years
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Motor vehicles
|
5-6.7
|
|
|
|
Office furniture and equipment
|
6.7-16
|
|
|
|
Computers and peripheral equipment
|
3-5
|
|
|
|
Leasehold
improvements are amortized by the straight-line method over the shorter of the term of
the lease, or the estimated useful life of the improvements.
|
|
|
The
Company assesses the recoverability of the carrying amount of its fixed assets, when
circumstances exist, based on expected undiscounted cash flows. If an asset’s
carrying amount is not expected to be recoverable, the Company recognizes an impairment
loss based upon the difference between the carrying amount and the fair value of such
assets, in accordance with SFAS No.144 (“Accounting for the Impairment or Disposal
of Long-Lived Assets”).
|
F - 10
G. WILLI-FOOD
INTERNATIONAL LTD.
NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS
|
NOTE 2
|
–
|
SIGNIFICANT
ACCOUNTING POLICIES (Cont.)
|
|
|
Deferred
income taxes are provided for temporary differences between the assets and liabilities,
as measured in the financial statements, and for tax purposes at the tax rates expected
to be in force when these differences reverse, in accordance with SFAS No. 109 (“Accounting
for Income Taxes”).
|
|
|
The
Company recognizes revenue upon the shipment of its products to the customer provided
that persuasive evidence of an arrangement exists, title has transferred, the price is
fixed, collection of resulting receivables is probable and there are no remaining
significant obligations.
The Company grants to certain customers a right to return the
products, with the corresponding provision recorded for the estimated future product
returns, based on the Company’s experience.
|
|
|
The
Company is obligated to pay incentives to certain customers based on the volume of sales.
The incentive is computed as a percentage of the annual volume and is generally paid at
the beginning of each year in respect of the previous year. In accordance with Emerging
Issues Task Force (EITF) No. 01-9,“Accounting for Consideration Given by a Supplier
to a Customer (Including a Reseller of the Vendor’s Products)", the Company
presents its revenues as net of such incentives, calculated based on the volume of sales.
|
|
|
O.
|
Stock-based
compensation
|
|
|
The
Company accounts for employee stock-based compensation in accordance with Accounting
Principles Board Opinion No. 25, “Accounting for Stock Issued to Employees” and
in accordance with FASB Interpretation No. 44. Pursuant to these accounting
pronouncements, the Company records compensation for options to purchase 63,000 shares of
the Parent Company granted to the Company’s employees over the vesting period of the
options based on the difference, if any, between the exercise price of the options and
the market price of the underlying shares at that date. Deferred compensation is
amortized to compensation expense over the vesting period of the options. Had
compensation cost for the Company’s option plans been determined on the basis of the
fair value at the grant dates in accordance with the provisions of SFAS No. 123 “Accounting
for Stock-Based Compensation,” as amended by SFAS No. 148, the Company’s pro
forma net income and pro forma basic and diluted net income per share would have been as
follows:
|
|
|
|
Year ended December 31, 2005
|
|
|
|
NIS
|
US dollars
|
|
|
|
(in thousands)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Income for the year, as reported
|
|
|
|
7,725
|
|
|
1,678
|
|
|
|
|
|
Deduct: stock-based compensation determined under APB 25
|
|
|
|
-
|
|
|
-
|
|
|
|
|
|
Add: stock-based compensation determined under SFAS 123
|
|
|
|
(82
|
)
|
|
(18
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Pro forma net income
|
|
|
|
7,643
|
|
|
1,660
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Income per share - basic and diluted:
|
|
|
|
|
|
|
As reported
|
|
|
|
0.9
|
|
|
0.2
|
|
|
|
|
|
Pro forma
|
|
|
|
0.9
|
|
|
0.2
|
|
|
|
The
following assumptions were used for the year 2005: dividend yield of 0.00%; risk-free
interest rate of 2.5%; an expected life of 1.75 – 3.75 years; a volatility rate of
48%.
|
F - 11
G. WILLI-FOOD
INTERNATIONAL LTD.
NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS
|
NOTE 2
|
–
|
SIGNIFICANT
ACCOUNTING POLICIES (Cont.)
|
|
|
Basic
and fully diluted net earnings per share have been computed in accordance with Opinion
No. 55 of the Institute of Certified Public Accountants in Israel (ICPAS), which, as it
relates to these financial statements, is consistent with SFAS No. 128 (“Earnings
per Share”), using the weighted average number of ordinary shares outstanding. Basic
earnings per share are computed by using the weighted average number of shares
outstanding. Fully diluted earnings per share are computed by using the weighted average
number of outstanding shares adjusted for the incremental shares attributed to
outstanding options to purchase ordinary shares. During 2004, 30,000 of the above were
exercised where the remaining 20,000 expired.
|
|
|
Certain
prior years amounts have been reclassified in conformity with current year’s
financial statements presentation.
|
|
|
R.
|
Impact
of recently-issued accounting standards
|
|
|
Accounting
Standard No.24 “Stock-Based Compensation”
|
|
|
In
September 2005, the Israeli Accounting Standards Board published Accounting Standard No.
24 “Share-Based Payment” (the “Standard”), which calls for the
recognition in the financial statements of share-based payment transactions. Such
transactions include transactions with employees and related parties to be settled by
cash, by other assets, or by equity instruments. Consequently, amongst other matters,
costs associated with grants of shares and options to employees will be expensed over the
vesting period of each grant. These costs will be determined based on the fair value of
the awards at each grant date. The Standard establishes guidelines for measuring each
award based on the settlement terms (either by cash or equity instrument). The Standard
also establishes certain disclosure requirements relating to share-based payment.
|
|
|
The
Standard is effective for financial statements for periods commencing January 1, 2006 or
thereafter (initial adoption is recommended). The application of the Standard is not
expected to affect the Company’s financial position and results of operations.
|
|
|
Accounting
Standard No. 21 “
Earnings Per Share
”
|
|
|
In
February 2006, the Israeli Accounting Standards Board approved for publication Accounting
Standard No. 21, “Earnings Per Share” (the “Standard”). With the
initial adoption of the Standard, Opinion No. 55 of the Institute of Certified Public
Accountants in Israel – Earnings per share will be cancelled. The Standard
prescribes that an entity shall calculate basic earnings per share amounts for profit or
loss attributable to ordinary equity holders of the parent entity and, if presented,
profit or loss from continuing operations attributable to those equity holders. The basic
earnings per share shall be calculated by dividing profit or loss attributable to
ordinary equity holders of the parent entity (the numerator) by the weighted average
number of ordinary shares outstanding (the denominator) during the reported period. For
the purpose of calculating diluted earnings per share, an entity shall adjust profit or
loss attributable to ordinary equity holders of the parent entity, and the weighted
average number of shares outstanding, for the effects of all dilutive potential ordinary
shares.
|
|
|
The
Standard is effective for financial statements for periods commencing January 1, 2006 or
thereafter. The initial adoption of the Standard will be accounted for retrospectively
and comparative Earnings per share data for prior periods shall be adjusted. The
application of the Standard is not expected to materially affect the Company’s
Earnings per share data.
|
F - 12
G. WILLI-FOOD
INTERNATIONAL LTD.
NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS
|
NOTE 2
|
–
|
SIGNIFICANT
ACCOUNTING POLICIES (Cont.)
|
|
|
R.
|
Impact
of recently-issued accounting standards (Cont.)
|
|
|
Accounting
Standard No. 25 “Revenues”
|
|
|
In
February 2006, the Israeli Accounting Standards Board approved for publication
Accounting Standard No. 25, "Revenues" (the "Standard").
|
|
|
This
Standard establishes the requirements for recognition criteria, measurement, disclosure
and presentation of revenues arising from sale of goods, rendering of services and from
the use by others of entity assets yielding interest, royalties and dividends. This
Standard prescribes that revenue shall be measured at the fair value of the consideration
received or receivable. The Standard is effective for financial statements for periods
commencing January 1, 2006 or thereafter. Assets and liabilities included in the
financial statements as of December 31, 2005 in different amounts from those that would
have been presented if the standard’s requirements were applied will be adjusted on
January 1, 2006 to the amounts to be recognized in accordance with the Standard’s
guidelines. The results of the initial adoption of the Standard as at January 1, 2006
shall be accounted for by the cumulative effect of a change in accounting method. The
application of the Standard is not expected to affect the Company’s financial
position and results of operations.
|
|
|
In
December 2004, the Financial Accounting Standards Board (FASB) issued SFAS No. 123(R).
SFAS No. 123(R) requires employee share-based equity awards to be accounted for under the
fair value method, and eliminates the ability to account for these instruments under the
intrinsic value method prescribed by APB Opinion No. 25 and allowed under the original
provisions of SFAS No. 123. SFAS No. 123(R) requires the use of an option pricing model
for estimating fair value, which is then amortized to expense over the service periods.
Had the Company adopted SFAS 123(R) in prior periods, the impact of that standard would
have approximated the impact of SFAS 123 as described in the disclosure of pro forma net
income and income per share above. SFAS No. 123(R) allows for either prospective
recognition of compensation expense or retrospective recognition. In January 2005, the
SEC issued SAB No. 107, which provides supplemental implementation guidance for SFAS No.
123(R). In the first quarter of 2006, the Company began to apply the prospective
recognition method and implemented the provisions of SFAS No. 123(R). The Company does
not expect the adoption of SFAS No. 123(R). will have any material impact on its
consolidated financial statements.
|
|
|
In
May 2005, the FASB issued SFAS No. 154, “Accounting Changes and Error Corrections.” SFAS
No. 154 replaces APB Opinion No. 20. “Accounting Changes” and SFAS No. 3, “Reporting
Accounting Changes in Interim Financial Statements.” SFAS No. 154 requires
retrospective application to prior periods’financial statements of changes in
accounting principle, unless it is impracticable to determine either the period-specific
effects or the cumulative effect of the change. The Company does not expect the adoption
of SFAS No. 154 will have any material impact on its consolidated financial statements.
|
F - 13
G. WILLI-FOOD
INTERNATIONAL LTD.
NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS
|
NOTE 3
|
–
|
RECEIVABLES AND OTHER CURRENT ASSETS
|
|
|
|
December 31,
|
|
|
|
2 0 0 5
|
2 0 0 4
|
2 0 0 5 (*)
|
|
|
|
NIS
|
NIS
|
US dollars
|
|
|
|
(in thousands)
|
|
|
|
|
|
|
|
|
Advances to suppliers
|
|
|
|
6,008
|
|
|
740
|
|
|
1,305
|
|
|
|
Value-added tax
|
|
|
|
1,213
|
|
|
72
|
|
|
264
|
|
|
|
Accrued interest
|
|
|
|
184
|
|
|
40
|
|
|
40
|
|
|
|
Deferred income taxes
|
|
|
|
37
|
|
|
98
|
|
|
8
|
|
|
|
Prepaid expenses and others
|
|
|
|
231
|
|
|
261
|
|
|
50
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
7,673
|
|
|
1,211
|
|
|
1,667
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31,
|
|
|
|
2 0 0 5
|
2 0 0 4
|
2 0 0 5 (*)
|
|
|
|
NIS
|
NIS
|
US dollars
|
|
|
|
(in thousands)
|
|
|
|
|
|
|
|
|
Cost:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Land and constructed fixed assets
|
|
|
|
12,886
|
|
|
-
|
|
|
2,799
|
|
|
|
Motor vehicles
|
|
|
|
7,920
|
|
|
6,168
|
|
|
1,721
|
|
|
|
Computers and peripheral equipment
|
|
|
|
1,451
|
|
|
1,345
|
|
|
315
|
|
|
|
Office furniture and equipment
|
|
|
|
775
|
|
|
766
|
|
|
168
|
|
|
|
Leasehold improvements
|
|
|
|
311
|
|
|
311
|
|
|
68
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
23,343
|
|
|
8,590
|
|
|
5,071
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accumulated depreciation and amortization:
|
|
|
|
|
Motor vehicles
|
|
|
|
4,555
|
|
|
3,685
|
|
|
989
|
|
|
|
Computers and peripheral equipment
|
|
|
|
1,279
|
|
|
1,123
|
|
|
278
|
|
|
|
Office furniture and equipment
|
|
|
|
583
|
|
|
516
|
|
|
127
|
|
|
|
Leasehold improvements
|
|
|
|
269
|
|
|
230
|
|
|
58
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
6,686
|
|
|
5,554
|
|
|
1,452
|
|
|
|
|
|
|
|
|
|
|
|
|
(*)
|
Convenience
translation into U.S. dollars.
|
|
NOTE 5
|
–
|
OTHER ASSETS, NET
|
|
|
As
of December 31, 2005 and 2004 the Company’s other asset’s consisted solely of
deferred income taxes.
|
F - 14
G. WILLI-FOOD
INTERNATIONAL LTD.
NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS
|
NOTE 6
|
–
|
PAYABLES AND OTHER CURRENT LIABILITIES
|
|
|
|
December 31,
|
|
|
|
2 0 0 5
|
2 0 0 4
|
2 0 0 5 (*)
|
|
|
|
NIS
|
US dollars
|
|
|
|
(in thousands)
|
|
|
|
|
|
|
|
|
Tax authorities
|
|
|
|
5,189
|
|
|
4,276
|
|
|
1,127
|
|
|
|
Declared dividend
|
|
|
|
4,754
|
|
|
-
|
|
|
1,033
|
|
|
|
Accrued expenses
|
|
|
|
1,452
|
|
|
1,015
|
|
|
315
|
|
|
|
Payroll-related amounts
|
|
|
|
879
|
|
|
760
|
|
|
191
|
|
|
|
Customer advances
|
|
|
|
699
|
|
|
613
|
|
|
152
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
12,973
|
|
|
6,664
|
|
|
2,818
|
|
|
|
|
|
|
|
|
|
|
|
|
(*)
|
Convenience
translation into U.S. dollars.
|
|
NOTE 7
|
–
|
ACCRUED SEVERANCE PAY, NET
|
|
|
The
Company’s obligation for severance pay is calculated in accordance with the Israeli
Severance Pay Law, 1963, and is based on the most recent monthly salary and the length of
employment in the Company. The obligation is partially funded through insurance policies
not under the Company’s custody, and the unfunded balance is accrued as a
liability on the balance sheet.
|
|
|
Severance
pay expenses for 2005, 2004 and 2003 were NIS 411 thousand ($89 thousand), NIS 306
thousand and NIS 271 thousand, respectively.
|
|
|
The
total value of the insurance policies at December 31, 2005 and 2004 and 2003 was NIS 665
thousand ($145 thousand), NIS 560 thousand and NIS 488 thousand, respectively.
|
|
|
The
Company has no liability for pension expenses to its employees.
|
|
NOTE 8
|
–
|
COMMITMENTS AND CONTINGENT LIABILITIES
|
|
|
A.
|
Contingent
liabilities and guarantees
|
|
|
The
Company is contingently liable in respect of documentary letters of credit from banks and
suppliers’ credit guaranteed by banks for the import of food products totaling, at
December 31, 2005, NIS 15,904 thousand ($3.5 million).
|
|
|
Financial
instruments that potentially subject the Company to credit risk consist principally of
trade receivables. A major portion of the Company’s sales was to a limited number of
customers (see Note 12A). The Company, which generally does not require security from
those customers, maintains an allowance for doubtful accounts, based upon factors
regarding the credit risk of specific customers, historical trends and other information,
which management believes adequately covers all anticipated losses in respect of trade
receivables.
|
F - 15
G. WILLI-FOOD
INTERNATIONAL LTD.
NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS
|
NOTE 8
|
–
|
COMMITMENTS AND CONTINGENT LIABILITIES (Cont.)
|
|
|
As
of December 31, 2005, the Company was dependent on one supplier in respect of some of its
products. Purchases of products from this supplier were approximately 15% and 11% of all
the Company’s purchases of products for 2005 and 2004, respectively. The Company has
a contract with the supplier, according to which the Company is the latter’s exclusive
agent and distributor in Israel in connection with certain products for a five-year
period starting March 2005. Termination of the Company’s business relationships with
this supplier and/or a material adverse change in the terms at which it purchases
products from him may have a material adverse effect on the Company’s financial
results. There can be no assurance that alternative source of supply, if required, will
be readily available nor can there be any assurance as to purchase terms.
|
|
|
D.
|
Fair
value of financial instruments
|
|
|
The
financial instruments of the Company consist mainly of cash and cash equivalents, current
accounts receivable, short-term borrowings, accounts payable and accruals.
In view of
their nature, the fair value of the financial instruments, included in working capital,
is usually identical or close to their book value.
|
|
|
The
premises of the Company and its subsidiaries are rented under various operating lease
agreements with related parties for various periods through 2006 (including renewal
options). Future aggregate minimum annual rental payments, pursuant to existing lease
commitments in effect on December 31, 2005, follow:
|
|
|
|
NIS
|
US dollars (*)
|
|
|
|
(in thousands)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2006
|
|
|
|
1,992
|
|
|
433
|
|
|
|
2007 and thereafter
|
|
|
|
75
|
|
|
16
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2,067
|
|
|
449
|
|
|
|
|
|
|
|
|
|
|
(*)
|
Convenience
translation into U.S. dollars.
|
|
|
Total
rent expenses for 2005, 2004 and 2003 were NIS 1,918 thousand ($417 thousand), NIS 1,833
thousand and NIS 1,837 thousand, respectively.
|
|
|
In
August 2005 the Company acquired from a related party a plot of land totaling 19,000 sq.
m. for establishing a logistics center of 8,600 sq. m. The transaction has been ratified
by the Company’s Audit Committee and Board of Directors on May 25, 2005 and by the
shareholders’ General Meeting on July 20, 2005.
|
|
|
The
new logistics center, which will be built on that land, will replace the present one
(which is rented from related parties). Upon completion of the new logistics center
(expected to open in November 2006) the Company will return to the related party the old
center whose lease expires in January 2007. Should the new logistic center be completed
before the expiration date of the present center’s lease, the related party
consented to a reduction in the lease period accordingly with no claim for
indemnification. Alternatively, should completion take place subsequently, the related
party consented to extend the lease until the new center’s opening date and under
identical terms ($35,886 per month).
|
F - 16
G. WILLI-FOOD
INTERNATIONAL LTD.
NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS
|
NOTE 8
|
–
|
COMMITMENTS AND CONTINGENT LIABILITIES (Cont.)
|
|
|
1.
|
A
lawsuit was filed in December 2001 against 29 importers/producers of food
products, including the Company, for an amount totaling NIS 500 million
($109 million). Concurrently, the plaintiffs filed a request for an
exemption from the court fee. Following the court’s rejection of the
plaintiffs’ request for the fee exemption and their failure to pay
it, the court dismissed the case.
|
|
|
In
January 2004 the abovementioned plaintiffs filed a new lawsuit against the 29 noted
importers/producers for NIS 1 billion ($218 million). A request was made concurrently for
an exemption from the court fee that was rejected by the court. The Company’s legal
counsel believes that the plaintiffs do not stand a reasonable chance for prevailing and
until the fee issue is settled this matter should not be regarded as a real claim.
|
|
|
2.
|
A
lawsuit was filed in June 2004 against the Company and a subsidiary in
connection with the marketing and distribution of ARLA products. The
plaintiffs allege that the defendants marketed products bearing a
commercial tag on which the plaintiffs posses the rights and, accordingly,
asked for a court injunction prohibiting the marketing of these products
by the defendants along with a compensation of NIS 100 thousand.
|
|
|
Concurrently,
ARLA filed its own lawsuit against the above plaintiffs in respect of the commercial tag,
alleging misleading actions, breach of trust, exceeding authority and beach of
intellectual property rights in that commercial tag. In March 2005 the court issued a
temporary injunction against the plaintiff regarding the marketing of products veering
the noted commercial tag until the issuance of a court final decision.
|
|
|
Based
on the opinion of its legal counsel, management believes that the plaintiffs’prospects
to be awarded the injunction and the compensation are not favorable.
|
|
|
3.
|
In
October, 2005, Vitarroz Corp. commenced a civil action in the Superior Court
of New Jersey, against Willi USA Holdings, Inc. (a subsidiary of the
Company), the Company and Zwi Williger (collectively, the “Defendants”)
due to a dispute concerning the press release announcing the termination
of the proposed acquisition of the Vitarroz business by the Company.
|
|
|
On
November 2005, the Company removed the matter from the Superior Court to the United
States District Court for the District of New Jersey. The complaint was subsequently
amended and, as amended, alleges breach of contract, defamation, breach of covenants of
good faith and fair dealing, fraudulent inducement and tortious interference with
contractual relations and prospective economic advantage. Defendants have not responded
to the allegations in the complaint.
|
|
|
Recently,
the parties agreed to submit the claims which are the subject of the complaint to binding
arbitration and, at the same time, to submit to arbitration (i) those claims that
Defendants have against plaintiff and related third parties, and (ii) those claims which
the Company has asserted against Vitarroz in an action now pending in Israel regarding
the breach of an agreement executed by the Company and Vitarroz, pursuant to which
Vitarroz undertook to supply its products to the Company.
|
|
|
Defendants
believe that Vitarroz’s allegations are without merit, and they intend to vigorously
defend against such claims. The company also intends to aggressively pursue their
affirmative claims.
|
F - 17
G. WILLI-FOOD
INTERNATIONAL LTD.
NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS
|
NOTE 8
|
–
|
COMMITMENTS AND CONTINGENT LIABILITIES (Cont.)
|
|
|
The
Company has registered fixed and floating liens in favor of banks on its assets and
insurance rights and a fixed lien, unlimited in amount, on its share capital and
goodwill.
|
|
|
1.
|
As
of June 1, 1998, the Company entered into certain management services
agreements with certain companies controlled by each of Messrs. Joseph and
Zvi Williger, respectively (collectively, the “Williger Management
Companies”), pursuant to which Messrs. Joseph and Zvi Williger are to
provide management services on behalf of the Williger Management Companies
to the Company (the “Management Services Agreements”).
|
|
|
The
Management Services Agreements were for a period of four years commencing on June 1,
1998 (the “Management Services Period”), were automatically renewed on June 1,
2002 for two years and were automatically renewed for an additional period of two years
in June 2004.
|
|
|
Each
of the Management Services Agreements provides for monthly services fees equal to $24,500
(excluding VAT) and an annual bonus at a rate of 3% of the Company’s consolidated
pre-tax annual profits, if such profits are equal to or less than NIS 3.0 million
(approximately USD 0.7 million), or at a rate of 5% if such profits exceed such
level.
|
|
|
On
May 14, 2005 the Company’s Audit Committee and Board of Directors decided to amend
the terms of the abovementioned agreements, mainly extending the management services
period for an unlimited period, with an option to terminate them by the Company’s
advance notice of 18 months and the management companies’ advanced notice of 180
days. The General Meeting of the Company’s shareholders ratified these amendments on
July 20, 2005.
|
|
|
On
February 15, 2006 the Company’s board of directors resolved, in light of the
expressed position of the Israeli Securities Authority, to set those agreements for a
five-year period following ratification by the Company’s shareholders General
Meeting, i.e., until July 19, 2010.
|
|
|
2.
|
On
April 1, 1997, the Company entered into an agreement to provide the Parent
Company administrative services pursuant to which the Company may provide
office facilities leased by the parent company for a monthly fee of NIS
5,480 to be adjusted annually for changes in the Israeli CPI.
|
|
|
3.
|
Lease
agreement with related parties – see E above.
|
F - 18
G. WILLI-FOOD
INTERNATIONAL LTD.
NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS
|
NOTE 9
|
–
|
SHAREHOLDERS’ EQUITY
|
|
|
A.
|
The
Company’s shares are traded on the NASDAQ.
|
|
|
B.
|
As
of December 31, 2003, 50,000 stock options were outstanding and exercisable, at
an exercise price of $4.1 per share. In April 2004, 30,000 of the above options
were exercised by related parties, for a total consideration of NIS 557
thousand. The remaining 20,000 stock options expired in May, 2004.
|
|
|
C.
|
In December 2004, the Company declared a share dividend of 1 ordinary share for
each outstanding ordinary share (an aggregate of 4,307,500 ordinary shares).
All shares and per share amounts in the financial statements have been
retroactively restated to reflect the aforementioned share dividend for all
periods presented.
|
|
|
D.
|
In February, 2005, the Company’s authorized share capital was increased by
40,000,000 shares of NIS 0.1 par value, from 10,000,000 to 50,000,000 shares.
|
|
|
E.
|
On
November 21, 2005, the Company declared a cash dividend of $ 0.12 per share
payable to its shareholder of record as of January 11, 2006. The cash dividend
was paid on January 25, 2006.
|
|
|
Taxation
under various laws
|
|
|
The
Company is assessed under the provisions of the Income Tax Law (Inflationary
Adjustments), 1985, pursuant to which the results for tax purposes are measured in real
terms in accordance with changes in the Israeli CPI.
|
|
|
Provision
for income taxes – consolidated:
|
|
|
|
Year ended December 31,
|
|
|
|
2 0 0 5
|
2 0 0 4
|
2 0 0 3
|
2 0 0 5 (*)
|
|
|
|
NIS
|
US dollars
|
|
|
|
(in thousands)
|
|
|
|
|
|
|
|
|
|
Current taxes
|
|
|
|
3,529
|
|
|
6,575
|
|
|
2,562
|
|
|
767
|
|
|
|
Deferred income taxes
|
|
|
|
34
|
|
|
(689
|
)
|
|
356
|
|
|
7
|
|
|
|
Erosion of tax advances
|
|
|
|
-
|
|
|
-
|
|
|
(29
|
)
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
3,563
|
|
|
5,886
|
|
|
2,889
|
|
|
774
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(*)
|
Convenience
translation into U.S. dollars.
|
F - 19
G. WILLI-FOOD
INTERNATIONAL LTD.
NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS
|
NOTE 10
|
–
|
INCOME TAXES (Cont.)
|
|
|
|
December 31,
|
|
|
|
2 0 0 5
|
2 0 0 4
|
2 0 0 5 (*)
|
|
|
|
NIS
|
US dollars
|
|
|
|
(in thousands)
|
|
|
|
|
|
|
|
|
Included in other assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accrued severance pay
|
|
|
|
90
|
|
|
63
|
|
|
20
|
|
|
|
|
|
|
|
|
Included in current assets (liabilities):
|
|
|
|
|
Marketable securities
|
|
|
|
(29
|
)
|
|
49
|
|
|
(6
|
)
|
|
|
Accrued vacation pay
|
|
|
|
64
|
|
|
47
|
|
|
14
|
|
|
|
Allowance for doubtful accounts
|
|
|
|
2
|
|
|
2
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
127
|
|
|
161
|
|
|
28
|
|
|
|
|
|
|
|
|
|
|
|
|
The
following is a reconciliation of the income taxes assuming that all income is taxed at
the ordinary statutory corporate tax rate in Israel and the actual taxes on income, in
the statement of operations:
|
|
|
Year ended December 31,
|
|
|
2 0 0 5
|
2 0 0 4
|
2 0 0 3
|
2 0 0 5 (*)
|
|
|
NIS
|
US dollars
|
|
|
(in thousands)
|
|
|
|
|
|
|
|
Income before taxes on income
|
|
|
|
11,288
|
|
|
17,079
|
|
|
11,665
|
|
|
2,452
|
|
|
|
|
|
|
Statutory tax rates
|
|
|
|
34
|
%
|
|
35
|
%
|
|
36
|
%
|
|
34
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Provision computed by ordinary rates
|
|
|
|
3,838
|
|
|
5,978
|
|
|
4,199
|
|
|
834
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Increase (decrease) in provision due to:
|
|
|
|
Tax-exempt income
|
|
|
|
(31
|
)
|
|
(16
|
)
|
|
(53
|
)
|
|
(7
|
)
|
|
Erosion of tax prepayments
|
|
|
|
-
|
|
|
-
|
|
|
(18
|
)
|
|
-
|
|
|
Non-deductible expenses
|
|
|
|
61
|
|
|
30
|
|
|
22
|
|
|
13
|
|
|
Utilization of tax loss carryforwards for
|
|
|
|
which deferred taxes were not
|
|
|
|
previously recorded
|
|
|
|
-
|
|
|
-
|
|
|
(750
|
)
|
|
-
|
|
|
Effect of decrease in tax rate on deferred
|
|
|
|
taxes assets
|
|
|
|
17
|
|
|
(15
|
)
|
|
-
|
|
|
4
|
|
|
|
|
|
|
|
|
Differences in the definition of Capital
|
|
|
|
and non-monetary items for tax
|
|
|
|
purposes and financial reporting
|
|
|
|
purposes
|
|
|
|
(255
|
)
|
|
(263
|
)
|
|
(402
|
)
|
|
(55
|
)
|
|
Other
|
|
|
|
(67
|
)
|
|
172
|
|
|
(109
|
)
|
|
(15
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(275
|
)
|
|
(92
|
)
|
|
(1,310
|
)
|
|
(60
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
3,563
|
|
|
5,886
|
|
|
2,889
|
|
|
774
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The
Company has not yet been assessed for income tax purposes since its inception.
|
|
|
(*)
|
Convenience
translation into U.S. dollars.
|
F - 20
G. WILLI-FOOD
INTERNATIONAL LTD.
NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS
|
NOTE 11
|
–
|
TRANSACTIONS WITH RELATED PARTIES
|
|
|
A.
|
Balances
with related parties
|
|
|
|
December 31,
|
|
|
|
2 0 0 5
|
2 0 0 4
|
2 0 0 5 (*)
|
|
|
|
NIS
|
US dollars
|
|
|
|
(in thousands)
|
|
|
|
|
|
|
|
|
Due to officers (shareholders in
|
|
|
|
|
|
|
|
|
|
|
|
|
|
the parent company)
|
|
|
|
1,356
|
|
|
1,929
|
|
|
295
|
|
|
|
Parent company
|
|
|
|
837
|
|
|
628
|
|
|
182
|
|
|
|
B.
|
Transactions
with related parties
|
|
|
Year ended December 31,
|
|
|
2 0 0 5
|
2 0 0 4
|
2 0 0 3
|
2 0 0 5 (*)
|
|
|
NIS
|
US dollars
|
|
|
(in thousands)
|
|
|
|
|
|
|
|
Management fees
|
|
|
|
3,894
|
|
|
4,531
|
|
|
3,822
|
|
|
846
|
|
|
Rent expenses
|
|
|
|
1,918
|
|
|
1,833
|
|
|
1,837
|
|
|
417
|
|
|
Participation in expenses
|
|
|
|
(64
|
)
|
|
(64
|
)
|
|
(64
|
)
|
|
(14
|
)
|
|
|
For
other transactions with related parties, see Note 8.
|
|
NOTE 12
|
–
|
SELECTED CONSOLIDATED STATEMENTS OF OPERATIONS DATA
|
|
|
A.
|
Classification
of major customers
|
|
|
Percentage
of revenues from customers constituting 10% or more of revenues:
|
|
|
|
Year ended December 31,
|
|
|
|
2 0 0 5
|
2 0 0 4
|
2 0 0 3
|
|
|
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Customer A
|
|
|
|
19
|
|
|
22
|
|
|
18
|
|
|
|
Customer B
|
|
|
|
12
|
|
|
6
|
|
|
14
|
|
|
|
Customer C
|
|
|
|
8
|
|
|
11
|
|
|
7
|
|
|
|
(*)
|
Convenience
translation into U.S. dollars.
|
F - 21
G. WILLI-FOOD
INTERNATIONAL LTD.
NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS
|
NOTE 12
|
–
|
SELECTED CONSOLIDATED STATEMENTS OF OPERATIONS DATA (Cont.)
|
|
|
|
Year ended December 31,
|
|
|
|
2 0 0 5
|
2 0 0 4
|
2 0 0 3
|
2 0 0 5 (*)
|
|
|
|
NIS
|
US dollars
|
|
|
|
(in thousands)
|
|
|
|
|
|
|
|
|
|
Purchases
|
|
|
|
125,131
|
|
|
132,192
|
|
|
107,490
|
|
|
27,185
|
|
|
|
Increase in inventory
|
|
|
|
(3,659
|
)
|
|
(8,316
|
)
|
|
(2,518
|
)
|
|
(795
|
)
|
|
|
Transportation and rent
|
|
|
|
5,046
|
|
|
4,872
|
|
|
3,952
|
|
|
1,096
|
|
|
|
Other
|
|
|
|
1,697
|
|
|
1,544
|
|
|
1,236
|
|
|
369
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
128,215
|
|
|
130,292
|
|
|
110,160
|
|
|
27,855
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(*)
|
Convenience
translation into U.S. dollars.
|
|
|
In
July 2005, Club Market Marketing Chains Ltd., one of the three largest food chains in
Israel, encountered major financial difficulties, announcing that it could not pay its
debts to its creditors. The District Court of Tel Aviv accepted Club Market’s
petition for a stay of procedures against it and appointed receivers for Club Market. On
August 28, 2005 the court allowed the Club Market court-appointed receivers to sell Club
Market to Supersol, one of the largest food chain in Israel, subject to several
conditions. The court also ratified the creditors’ arrangement presented by the
receivers. As of September 1, 2005 Club Market’s activities were been substantially
transferred to Supersol.
The Company submitted a claim of debt with the receivers with
respect to Club Market’s debt to the Company, which was NIS 6.5 million (USD 1.4
million), (NIS 5.5 million net of VAT ($1.2 million)), as of July 13, 2005. In view of
this claim and the ratification of the creditors’ arrangement by the court on
December 12, 2005, the Company is expected to receive a proportionate share of its claim
of debt. The Club Market receivers estimate the rate of payment to be approximately 51%
of the total debts, although this is subject to the examination by the receivers and
their approval of the Company’s claim of debt. There is no assurance as to the
portion of the debt owed by ClubMarket that will actually be paid to the Company. During
2005, the Company wrote off the sum of NIS 3.5 million (USD 0.76 million) as a bad debt
due to the abovementioned Club Market debt.
|
F - 22
G. WILLI-FOOD
INTERNATIONAL LTD.
NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS
|
NOTE 12
|
–
|
SELECTED CONSOLIDATED STATEMENTS OF OPERATIONS DATA (Cont.)
|
|
|
|
Year ended December 31,
|
|
|
|
2 0 0 5
|
2 0 0 4
|
2 0 0 3
|
2 0 0 5 (*)
|
|
|
|
NIS
|
US dollars
|
|
|
|
(in thousands)
|
|
|
|
|
|
|
|
|
|
Financing expenses:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Rate exchanges, interest
|
|
|
|
|
expenses and bank fees
|
|
|
|
(141
|
)
|
|
(521
|
)
|
|
(678
|
)
|
|
(31
|
)
|
|
|
Others
|
|
|
|
-
|
|
|
(255
|
)
|
|
(83
|
)
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(141
|
)
|
|
(776
|
)
|
|
(761
|
)
|
|
(31
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Financing income:
|
|
|
|
|
Interest income
|
|
|
|
1,654
|
|
|
1,457
|
|
|
1,551
|
|
|
359
|
|
|
|
Realized gains on derivative financial
|
|
|
|
|
instruments
|
|
|
|
184
|
|
|
-
|
|
|
-
|
|
|
40
|
|
|
|
Gain from marketable securities
|
|
|
|
755
|
|
|
440
|
|
|
3,546
|
|
|
164
|
|
|
|
Others
|
|
|
|
49
|
|
|
-
|
|
|
-
|
|
|
11
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2,642
|
|
|
1,897
|
|
|
5,097
|
|
|
574
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Financing income, net
|
|
|
|
2,501
|
|
|
1,121
|
|
|
4,336
|
|
|
543
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(*)
|
Convenience
translation into U.S. dollars.
|
|
NOTE 13
|
–
|
REPORTING SEGMENTS
|
|
|
The
Company is engaged in the import, marketing and distributing of preserved products and
non-preserved products which constitute the basis for its reporting segments.
|
|
|
|
Non- Preserved
products
|
Preserved
products
|
Total
|
|
|
|
NIS (in thousands)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year ended December 31, 2005
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Sales
|
|
|
|
92,784
|
|
|
73,498
|
|
|
166,282
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross profit
|
|
|
|
24,051
|
|
|
14,016
|
|
|
38,067
|
|
|
|
Selling & marketing expenses
|
|
|
|
(9,933
|
)
|
|
(5,838
|
)
|
|
(15,771
|
)
|
|
|
|
|
|
|
|
|
|
|
|
Income per segment
|
|
|
|
14,118
|
|
|
8,178
|
|
|
22,296
|
|
|
|
General & administrative expenses
|
|
|
|
|
|
|
|
|
|
(13,544
|
)
|
|
|
|
|
|
|
|
|
|
|
|
Consolidated operating income
|
|
|
|
|
|
|
|
|
|
8,752
|
|
|
|
Financing income, net
|
|
|
|
|
|
|
|
|
|
2,501
|
|
|
|
Other income, net
|
|
|
|
|
|
|
|
|
|
35
|
|
|
|
Income taxes
|
|
|
|
|
|
|
|
|
|
3,563
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income
|
|
|
|
|
|
|
|
|
|
7,725
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Inventory
|
|
|
|
16,456
|
|
|
14,342
|
|
|
30,798
|
|
|
|
Assets not allocated to segments
|
|
|
|
|
|
|
|
|
|
106,476
|
|
|
|
|
|
|
|
|
|
|
|
|
Total consolidated assets
|
|
|
|
|
|
|
|
|
|
137,274
|
|
|
|
|
|
|
|
|
|
|
F - 23
G. WILLI-FOOD
INTERNATIONAL LTD.
NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS
NOTE 13 -OPERATING
SEGMENTS (Cont.)
|
|
|
Non- Preserved
products
|
Preserved
products
|
Total
|
|
|
|
NIS (in thousands)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year ended December 31, 2004
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Sales
|
|
|
|
87,530
|
|
|
83,452
|
|
|
170,982
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross profit
|
|
|
|
22,390
|
|
|
18,300
|
|
|
40,690
|
|
|
|
Selling & marketing expenses
|
|
|
|
(9,271
|
)
|
|
(6,361
|
)
|
|
(15,632
|
)
|
|
|
|
|
|
|
|
|
|
|
|
Income per segment
|
|
|
|
13,119
|
|
|
11,939
|
|
|
20,058
|
|
|
|
General & administrative expenses
|
|
|
|
|
|
|
|
|
|
(9,134
|
)
|
|
|
|
|
|
|
|
|
|
|
|
Consolidated operating income
|
|
|
|
|
|
|
|
|
|
15,924
|
|
|
|
Financing income, net
|
|
|
|
|
|
|
|
|
|
1,121
|
|
|
|
Other income, net
|
|
|
|
|
|
|
|
|
|
34
|
|
|
|
Income taxes
|
|
|
|
|
|
|
|
|
|
5,886
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income
|
|
|
|
|
|
|
|
|
|
11,193
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Inventory
|
|
|
|
9,379
|
|
|
17,760
|
|
|
27,139
|
|
|
|
Assets not allocated to segments
|
|
|
|
|
|
|
|
|
|
102,722
|
|
|
|
|
|
|
|
|
|
|
|
|
Total consolidated assets
|
|
|
|
|
|
|
|
|
|
129,861
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year ended December 31, 2003
|
|
|
|
|
|
|
|
|
|
Sales
|
|
|
|
71,290
|
|
|
66,095
|
|
|
137,385
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross profit
|
|
|
|
14,859
|
|
|
12,366
|
|
|
27,225
|
|
|
|
Selling & marketing expenses
|
|
|
|
(7,192
|
)
|
|
(4,470
|
)
|
|
(11,662
|
)
|
|
|
|
|
|
|
|
|
|
|
|
Income per segment
|
|
|
|
7,667
|
|
|
7,896
|
|
|
15,563
|
|
|
|
General & administrative expenses
|
|
|
|
|
|
|
|
|
|
(8,335
|
)
|
|
|
|
|
|
|
|
|
|
|
|
Consolidated operating income
|
|
|
|
|
|
|
|
|
|
7,228
|
|
|
|
Financing income, net
|
|
|
|
|
|
|
|
|
|
4,336
|
|
|
|
Other income, net
|
|
|
|
|
|
|
|
|
|
101
|
|
|
|
Income taxes
|
|
|
|
|
|
|
|
|
|
2,889
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income
|
|
|
|
|
|
|
|
|
|
8,776
|
|
|
|
|
|
|
|
|
|
|
F - 24
G. WILLI-FOOD
INTERNATIONAL LTD.
NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS
|
NOTE 14
|
–
|
DIFFERENCES BETWEEN ISRAELI AND U.S. GAAP
|
|
|
A.
|
In
accordance with Israeli GAAP, the Company’s financial statements are
denominated through December 31, 2003 in adjusted amounts and as of January 1,
2004 in “reported amounts” (also see Note 2). Such accounting
principle is considered a more meaningful presentation than financial reporting
based on nominal historical cost. Accordingly, the Company is not required to
eliminate the effect of historic price level changes in a reconciliation to
U.S. GAAP.
|
|
|
B.
|
In
accordance with U.S. GAAP, SFAS No. 115, changes in trading securities should
be presented in the statement of cash flows as part of the operating
activities. The following table provides a reconciliation of the Statements of
Cash flows for 2005, 2004 and 2003 in accordance with U.S. GAAP:
|
|
|
|
Year ended December 31,
|
|
|
|
2 0 0 5
|
2 0 0 4
|
2 0 0 3
|
2 0 0 5 (*)
|
|
|
|
NIS
|
US dollars
|
|
|
|
(in thousands)
|
|
|
|
|
|
|
|
|
|
Net cash provided by (used in) operating
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
activities before adjustment
|
|
|
|
(7,293
|
)
|
|
(18
|
)
|
|
5,433
|
|
|
(1,585
|
)
|
|
|
Adjustment
|
|
|
|
(780
|
)
|
|
41,044
|
|
|
(17,607
|
)
|
|
(169
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash provided by (used in)
|
|
|
|
|
operating activities after adjustment
|
|
|
|
(8,073
|
)
|
|
41,026
|
|
|
(12,174
|
)
|
|
(1,754
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash used in investing
|
|
|
|
|
activities before adjustment
|
|
|
|
(15,618
|
)
|
|
40,385
|
|
|
(19,064
|
)
|
|
(3,393
|
)
|
|
|
Adjustment
|
|
|
|
780
|
|
|
(41,044
|
)
|
|
17,607
|
|
|
169
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash used in investing
|
|
|
|
|
activities after adjustment
|
|
|
|
(14,838
|
)
|
|
(659
|
)
|
|
(1,457
|
)
|
|
(3,224
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(*)
|
Convenience
translation into U.S. dollars.
|
|
NOTE 15
|
–
|
SUBSEQUENT EVENTS
|
|
|
Public
issuance on London’s AIM exchange of Gold Frost Ltd. a subsidiary
|
|
|
On
March 9, 2006 Gold Frost Ltd., a subsidiary, raised approximately $7.9 million (net) on
London’s AIM exchange upon the issuance of new shares constituting 24.3% of its
share capital after this allotment.
|
F - 25
SIGNATURES
Pursuant
to the requirements of Section 12 of the Securities Exchange Act of 1934, the registrant
certifies that it meets all of the requirements for filing on Form 20-F and has duly
caused this Annual Report to be signed on its behalf by the undersigned, thereunto duly
authorized.
|
|
|
G. WILLI-FOOD INTERNATIONAL LTD.
By: /s/ Joseph Williger
——————————————
Joseph Williger
Chief Executive Officer
|
Date: May 31, 2006
Page 70
EXHIBIT INDEX
Exhibit
Number
|
|
Description
|
|
†1.1
|
|
Memorandum
of Association of the Company, as amended (1)
|
|
1.2
|
|
Articles
of Association of the Company, as amended*
|
|
2.1
|
|
Specimen
of Certificate for ordinary shares (2)
|
|
4.1
|
|
Share
Option Plan (2)
|
|
†4.2
|
|
Management
Agreement between Registrant and Yossi Willi Management Investments Ltd., dated June 1,
1998 (3)
|
|
†4.3
|
|
Amendment
to the Management Agreement between Registrant and Yossi Willi Management
Investments Ltd., dated August 1, 2005*
|
|
†4.4
|
|
Management
Agreement between the Company and Zvi W. & Co. Ltd., dated June 1, 1998 (3)
|
|
†4.5
|
|
Amendment
to the Management Agreement between Registrant and Zvi W. & Co., Ltd., dated
August 1, 2005*
|
|
†4.6
|
|
Lease
of Company's premises with Titanic Food Ltd., dated November 23, 1998 (3)
|
|
†4.7
|
|
Services
Agreement between the Company and Willi Food, dated April 1, 1997 (3)
|
|
†4.8
|
|
Transfer
Agreement between Registrant and Gold Frost dated February 16, 2006*
|
|
†4.9
|
|
Lease
agreement for Logistics Center between Registrant and Gold Frost dated February 16,
2006*
|
|
4.10
|
|
Relationship
Agreement between Registrant, Gold Frost, Willi Food, Zvi Williger and Joseph
Williger dated February 28, 2006*
|
|
4.11
|
|
Placing
Agreement between Registrant, Gold Frost, certain officers of Gold Frost and
Corporate Synergy dated March 2, 2006*
|
|
4.12
|
|
Lock
In Agreement, between Registrant, Gold Frost, Corporate Synergy and certain officers
of Gold Frost dated March 2, 2006*
|
|
8
|
|
Subsidiaries
of the Company*
|
|
12.1
|
|
Certification
of CEO of the Company pursuant to Rule 13a-14(a), as adopted pursuant to
Section 302 of the Sarbanes-Oxley Act of 2002*
|
|
12.2
|
|
Certification
of CFO of the Company pursuant to Rule 13a-14(a), as adopted pursuant to
Section 302 of the Sarbanes-Oxley Act of 2002*
|
|
13.1
|
|
Certification
of CEO of the Company pursuant to Rule 13a-14(b), as adopted pursuant to
Section 906 of the Sarbanes-Oxley Act of 2002*
|
|
13.2
|
|
Certification
of CFO of the Company pursuant to Rule 13a-14(b), as adopted pursuant to
Section 906 of the Sarbanes-Oxley Act of 2002*
|
|
†
|
English
translations from Hebrew original.
|
|
(1)
|
Incorporated
by Reference to the Registrant’s Annual Report on Form 20-F for the Fiscal
year ended December 31, 1997.
|
|
(2)
|
Incorporated
by reference to the Company’s Registration Statement on Form F-1, File No. 333-6314.
|
|
(3)
|
Incorporated
by reference to the Company’s Annual Report on Form 20-F for the fiscal
year ended December 31, 2001.
|
EXHIBIT 1.2
THE COMPANIES LAW, 5759-1999
A PUBLIC COMPANY LIMITED BY SHARES
ARTICLES OF
G. WILLI-FOOD INTERNATIONAL LTD.
GENERAL
1. NAME OF THE COMPANY
The name of the Company is:
and in English: G. WILLI-FOOD INTERNATIONAL LTD.
2. DEFINITIONS AND INTERPRETATION
In these Articles each of the following terms shall have the meaning
appearing opposite it, unless the context requires or implies otherwise:
2.1 "THE COMPANY" - The company whose name appears above.
2.2 "THE COMPANIES ORDINANCE" - The Companies Ordinance (New Version),
5743-1983.
2.3 "THE COMPANIES LAW" - The Companies Law, 5759-1999, and any amendment
or change thereto, including those sections of the Companies Ordinance
which have not been cancelled by the provisions of the Companies Law,
and any amendment or change thereto. Any reference to a section in the
Companies Law or to any one of the abovementioned sections of the
Companies Ordinance shall be deemed a reference to any re-enactment or
change of the said section as shall then be in force.
2.4 "THE LAW" - The Companies Law as well as any other enactment then in
force applying to companies and concerning the Company as well.
2.5 "THE ARTICLES" or "THESE ARTICLES" - The Articles of Association of
the Company, including amendments (if any) as they are in force for
the time being.
2.6 "THE BOARD OF DIRECTORS" - The Board of Directors of the Company
officiating at that time.
2.7 "DIRECTOR" or "MEMBER OF THE BOARD OF DIRECTORS" - Any Member of the
Company's Board of Directors, including a person actually serving in
the office of a Director with whatever job description he may have at
that time.
2.8 "THE OFFICE" or "THE REGISTERED OFFICE" - The registered office of the
Company at that time.
2.9 "SHAREHOLDERS REGISTER" or "THE REGISTER" - The Register of
Shareholders of the Company that is to be kept according to the Law.
2.10 "HOLDER" or "SHAREHOLDER" or "MEMBER" - Whoever is registered in the
Shareholders Register as the owner of a Share.
2.11 "GENERAL MEETING" - Annual Meeting or Special Meeting of the
Shareholders.
2.12 "ANNUAL MEETING" - General Meeting of the Shareholders pursuant to
Section 60 of the Companies Law.
2.13 "SPECIAL MEETING" - General Meeting of the Company's Shareholders not
being an Annual Meeting.
2.13 "CLASS MEETING" - Meeting of the Holders of a Class of Shares.
2.15 "GENERAL MANAGER" - The general manager of the Company appointed
according to these Articles.
2.16 "RESOLUTION" or "ORDINARY RESOLUTION" - A resolution passed by the
General Meeting of the Company's Shareholders (and in the case of a
Class Meeting - by such Class Meeting) by a majority of the
Shareholders (or the Holders of the Class of Shares) or their duly
appointed proxies present and participating in the voting.
2.17 "AUDITOR" - the auditing accountant appointed or who must be appointed
to this office in the Company pursuant to the provisions of the
Companies Law.
2.18 "WRITTEN" or "IN WRITING" - shall include print, lithography, and any
other legible form of writing or impression of letters, digits or
other symbols in a visible or visually decipherable form, including
material transmitted by letter, telex, or cable, or by facsimile or by
electronic mail or by any other means of electronic communication
producing a legible copy of the transmitted material.
2.19 "VOTING INSTRUMENT" - a written form for Shareholders to use,
according to these Articles and the Law, in voting at General
Meetings.
3. Subject to the provisions of Article 2 above, the words and expressions in
these Articles shall have the meaning attributed to them at that time in
the Companies Law, unless such meaning is not consistent with the subject
or content written; words in the singular shall include the plural and vice
versa; words in the masculine shall include the feminine and vice versa;
and reference to a person shall also include corporate bodies. Whenever
these Articles determine a period by number of days or weeks from a given
date, such given date shall not be included in that period. Captions in
these Articles at the head of an article or chapter are not part of the
Articles and are not to be taken into account for the purpose of
interpreting the Articles.
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4. If the context does not imply otherwise, any reference in these Articles to
any law or regulation or enactment will include any changes therein or
enactment or re-enactment thereof, as well as any law, regulation or other
enactment replacing them.
THE PUBLIC COMPANY
5. The Company is a public company as defined in the Law. Therefore:
5.1 No limitations will apply to the transfer of its Shares.
5.2 The number of Shareholders is unlimited.
5.3 The Company may issue any form of its Shares or other securities to
the public.
5.4 Liability of the Shareholders is limited to the payment of the nominal
(par) value of the unpaid issued Share Capital of the Company.
OBJECTS OF THE COMPANY AND ITS POWER TO MAKE DONATIONS
6. 6.1 The objects for which this Company is established are:
6.1.1 To engage with import and export of products and other
commodities.
6.1.2 To engage with marketing of products and other commodities.
6.2 The Board of Directors may embark on any one of the businesses which
the Company may deal in specifically or by implication, as well as
withdraw from any such business at any time it deems fit.
6.3 The Company may donate a reasonable amount for any purpose it deems
proper, even if such donation is not within the framework of its
commercial regard for the creation of its profits.
THE COMPANY'S SHARE CAPITAL AND THE RIGHTS OF THE HOLDERS OF ORDINARY
SHARES
7. The authorized Share Capital of the Company is NIS. 5,000,000 (Five Million
New Israeli Shekels) divided into 49,893,520 (Forty Nine Million Eight
Hundred and Ninety Three Thousand Five Hundred and Twenty) Ordinary Shares
of NIS.0.1 (Zero Point One New Israeli Shekels) and 106,480 (One Hundred
and Six Thousand Four Hundred and Eighty) Preference Shares of NIS.0.1
(Zero Point One New Israeli Shekels) each ranking pari passu. The Company
may alter its Share Capital in accordance with the provisions of the
Companies Law and these Articles.
8. Each of the Ordinary Shares shall confer on the Holder thereof the
following rights:
8.1 The right to receive Notices of General Meetings of the Company, to be
present, participate and vote therein.
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8.2 The right to one (1) vote in the General Meetings of the Company in
which a ballot by poll takes place.
8.3 The right to participate pari passu with all other Holders of the
Company's Ordinary Shares in any distribution of dividend (whether in
cash, assets, or in any other legal form) resolved by the Company, as
well as the right to participate pari passu with all other Holders of
the Company's Ordinary Shares in any distribution of Bonus Shares
resolved by the Company.
8.4 The right to receive any return of capital, pari passu with all other
Holders of the Company's Ordinary Shares, upon the dissolution of the
Company
8.5 The right to participate, pari passu with all other Holders of the
Company's Ordinary Shares, in the distribution of the surplus of the
Company's assets available for distribution upon its dissolution,
remaining after the Company has paid the Holders of the Ordinary
Shares all the amounts payable as return of capital.
8.6 This Article is subject to the provisions of Sections 308 and 309 of
the Companies Law relating to dormant Shares or to Shares acquired by
subsidiaries of the Company, if and to the extent there are any at
that time.
LIMITATION OF SHAREHOLDERS LIABILITY
9. 9.1 The liability of a Member in respect of the Company's debts and
obligations shall be limited to the unpaid balance of the amount
(including premium) undertaken by him as consideration for the Shares
held by him, but not less than the par value of such Shares, and
always subject to the provisions of Section 304 of the Companies Law.
9.2 Where two (2) or more are registered jointly in the Shareholders
Register as Holders of a Share, they shall be responsible jointly and
severally for any call or other liability in connection with that
Share. However, for the purpose of voting, proxy and giving notices,
the Shareholder appearing first in the Shareholders Register shall be
deemed sole Holder of such Share, unless and until all the persons
registered as joint Shareholders have notified the Company in writing
that another among them should be considered as sole Holder of the
Shares as set out above.
REGISTERED OFFICE
10. The Registered Office of the Company will be situated in Israel at a place
to be determined from time to time by the Board of Directors.
SHAREHOLDERS REGISTER
11. The Company shall keep a Register of Shareholders and will record therein
the following particulars:
11.1 In respect to the Shares registered in the name of a Shareholder:
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11.1.1 the name, identity number and address of each Shareholder, as
notified to the Company;
11.1.2 the number and class of Shares held by each Shareholder,
stating their par value and - in the event that a certain amount
has not yet been paid on account of the consideration determined
for such Shares - the amount not yet paid;
11.1.3 the date of allotment of the Shares or the date of their
transfer to the Shareholder, as the case may be;
11.1.4 Should the Shares have serial numbers, the Company shall note
opposite the name of each Shareholder the respective numbers of
the Shares registered in his name;
11.1.5 the date on which any person has ceased to be a Shareholder in
the Company; and
11.1.6 all those other particulars which under the Companies Law or
these Articles are required or permitted to be recorded therein.
11.2 As regards dormant Shares, as defined in Section 308 of the Companies
Law - their number and the date on which they became dormant.
SHAREHOLDER
12. A Shareholder in the Company shall be whosoever is registered in the
Shareholders Register as a Holder of the Shares. The Board of Directors
shall register in the Shareholders Register the first Shareholders of the
Company who have signed the Articles and will note beside the name of each
of them the Shares allotted to him according to the Articles signed by him
as above.
13. Wherever two (2) or more persons are registered jointly as the Holders of a
Share, any one of them is duly authorized to give receipts binding all the
joint Holders for any dividend or other moneys in connection with such
Share, and the Company may pay all dividends or other moneys due in
connection with the Share to one (1) or more of them at its discretion.
14. A Shareholder being a trustee shall be so registered in the Shareholders
Register, stating that his holding is in trust and he shall be deemed a
Shareholder for all intents and purposes. Should a trustee fail to inform
the Company of his being a trustee, such trust shall not be recorded in the
Shareholders Register. Except for the above provisions relating to noting
the trusteeship in the Shareholders Register, the Company shall not be
obliged to recognize the right to a Share or any other right in connection
with such Share, except for the absolute and exclusive right relating
thereto of the Shareholder registered in the Shareholders Register as the
owner thereof.
SHARE CERTIFICATES
15. 15.1 A Shareholder is entitled to receive from the Company a Share
Certificate evidencing his ownership of the Company's Share.
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15.2 Subject to the provisions relating to the form of a Share Certificate
determined, if determined, by the Ministry of Justice pursuant to
Section 180 of the Companies Law: (i) the following particulars shall
be set out in the Share Certificate: the Company's authorized Share
Capital, the name of the Shareholder, the number of Shares owned by
him to which such certificate relates, the class of such Shares, their
par value and serial numbers (to the extent that the Company's Shares
are marked by serial numbers); as well as (ii) each Share Certificate
shall bear the signature on the Company's stamp or its printed name,
of a Director and/or of any other person appointed by the Board of
Directors for that purpose.
15.3 Whenever two (2) or more are registered in the Shareholders Register
as joint owners of a Share, the Company shall not be obliged to issue
more than one (1) Share Certificate to all the joint owners of the
Share and the delivery of such Certificate to one (1) of the joint
owners of a Share shall be deemed a delivery to all of them.
15.4 If any Share Certificate is erased, mutilated, destroyed or lost, a
new Share Certificate may be issued in lieu thereof based on such
proof submitted and such indemnity given as the Board of Directors
shall demand, and in the event of a mutilated Share Certificate - upon
return of the old Certificate.
CALLS
16. If the terms of allotment of any Shares of the Company do not specify a
particular date for the payment of all the consideration which is to be
paid therefore, or any part thereof, the Board of Directors may from time
to time, if it deems fit, make calls on the Shareholders in respect of the
amounts not yet paid for their Shares, whether on account of the par value
of the Shares or on account of the premium, and each such Shareholder shall
be obliged to pay the Company the amount so demanded from him not later
than the date of payment set out in the notice containing the call;
provided always that the Shareholder shall be given a prior notice of at
least fourteen (14) days in respect of any call. The Board of Directors may
at any time, by notice in writing, cancel the call or extend the time of
its payment.
17. Joint owners of a Share shall be bound, jointly and severally, to pay the
amounts set out in any call.
18. In the event that the amounts set out in the call have not been paid in
whole or in part by the date of payment set out in the call, the
Shareholders shall be obliged to pay linkage differences or interest (or
both) on the amounts not so paid, all as shall be determined by the Board
of Directors, from the due date until the date of actual payment; however,
the Board of Directors may waive the linkage differences or the interest
(in part or both).
19. Any amount which, under the conditions of issue of any share, has to be
paid upon the allotment of the Shares or at a set time, whether on account
of the par value of the Shares or on account of the premium, shall be
deemed for the purposes of these Articles, as if a call were duly made in
respect thereof by the Board of Directors in which the due date set out
therein is the date of allotment or the date set for payment. In the event
of non-payment of such amount at the time of allotment or on the date fixed
for payment (whichever is the case) the provisions of these Articles
relating to the payment of linkage differences or interest (or both),
forfeiture of Shares or any other consequence of non-payment or default of
payment by the Shareholders of the amount due from him to the Company in
connection with the Shares will apply.
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20. The Board of Directors may, if it deems fit, accept from a Shareholder
wishing to prepay, all or part of the amounts due on account of his Shares
(in addition to the payment of amounts actually demanded, if demanded) and
the Board of Directors may pay him interest on the amounts so prepaid by
him (or any part thereof) at the rate of interest agreed between the Board
of Directors and the Shareholders.
21. A Shareholder shall not be entitled to receive a dividend (or bonus shares)
and shall not be entitled to exercise any right as Shareholder unless he
has paid in full all the notices of call delivered to him, or which
according to these Articles are deemed to have been delivered to him,
together with linkage differences, interest, and expenses payable by him
under the provisions of these Articles in respect of calls which have not
been paid by him on time.
22. A Member shall not be entitled to receive any notice of or to be present at
any General Meeting or Class Meeting, nor to vote thereat or exercise any
right of a Member, unless he has paid in full all the calls made which have
become due, including linkage differences, interest and expenses, if any,
in respect of any Shares held by him - whether by himself or jointly with
another person.
23. When allotting Shares the Board of Directors may determine an arrangement
distinguishing between Shareholders with respect to the amounts of calls
and due dates.
LIEN AND FORFEITURE OF SHARES
24. The Company shall have a lien and first charge on all Shares whose price
(both par value and premium) has not been fully paid, as long as any
payment in respect of Shares registered in the Shareholder's name is
outstanding (whether such Shares are registered in his name only or jointly
with another or others), whether or not the date for such payment has
arrived, as well as in respect of his debts and obligations towards and
contracts with the Company, whether alone or jointly with others. Such
charge shall be in effect whether or not the due date for the
implementation of payment or fulfillment of the said duties, obligations or
such other contracts has arrived, and shall apply to all dividends resolved
from time to time in connection with such Shares. No benefit shall be
created with respect to any Share based on rules of equity, which shall
invalidate such charge, provided that the Board of Directors may from time
to time declare that a certain Share is temporarily or finally released in
whole or in part from the provisions of this Article.
25. If a Member has not paid any calls for payment or any installments on the
due date set therefor or prior thereto (whether on account of the par value
of the Share or on account of the premium), the Board of Directors may at
any time thereafter, for as long as the call for payment or installment
remains unpaid, deliver a notice to that Member pursuant to Article 16
above, demanding payment from him with the linkage differences and interest
accrued thereon, as well as any expenses incurred by the Company as a
result of the non-payment. The notice shall state the place at which such
payment shall be made. Should the Member not pay the amount due on the date
set out in such notice, the Share in respect of which such notice was given
shall be forfeited by a Resolution of the Board of Directors. The
provisions of this Article will apply subject to the conditions agreed (if
expressly agreed in writing) at the time of the allotment of any such
Share. The forfeiture of a Share pursuant to this Article shall also
include the dividends declared in respect of such Share, which have not
been paid prior to forfeiture.
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26. A document in writing signed by two (2) Members of the Board of Directors,
attesting that a call has been made for payment in relation to a Share and
that the Share was forfeited by a Resolution of the Board of Directors in
that matter, and that all requirements relating to the forfeiture under
these Articles have been complied with, shall constitute decisive proof
against all persons entitled to that Share in respect of the facts set out
in the document.
27. Each Share so forfeited shall become the Company's property and the Board
of Directors may, subject to the provisions of Section 181 of the Companies
Law and these Articles, re-allot or sell it on such terms and conditions
and in such manner as it deems fit.
28. A share forfeited but not yet re-allotted or sold shall be a Dormant Share
as defined in Section 308 of the Companies Law.
29. The Company is authorized to receive the consideration, if any, for the
re-allotment or sale of a Share so forfeited and credit or set off such
consideration on account of the amounts due and/or which may become due to
the Company from the owner of such Share pursuant to the provisions of
these Articles, and the person to whom such Share has been sold shall be
entitled to be registered as the owner of that Share and shall be deemed
owner of such Share and for all intents and purposes shall not be
responsible for any use made by the Company of the funds paid by him for
such Share, and furthermore, his title to the Share shall not be effected
by reason of any act, omission, defect or invalidity in the proceedings of
forfeiture or sale of such Share.
30. The Board of Directors may at any time prior to the sale of a Share cancel
the forfeiture on such terms and conditions as it deems fit.
31. Any Member whose Shares were forfeited shall cease to be a Member in
respect thereof, but nonetheless shall continue to be responsible for and
obliged to pay the Company, and shall pay immediately, all balances due to
the Company according to the calls, including expenses incurred at the time
of forfeiture on account of such Shares or in respect thereof, all together
with linkage differences and interest accrued on such amounts from the time
of forfeiture to the date of actual payment at the rate determined by the
Board of Directors, and the Board of Directors shall be entitled (but not
obliged) to enforce the payment of such amounts, in whole or in part, if it
so deems fit, unless the Shares so forfeited have been sold and the Company
has received in full, all amounts due from the Shareholders together with
the linkage differences, interest and expenses incurred by the Company in
respect of such sale. If, after payment in full of the said amounts, the
Company has surplus amounts, such surplus amounts shall be paid to the
previous owner of the Share so forfeited.
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BEARER SHARES AND REDEEMABLE SHARES
32. 32.1 The Company shall not issue Bearer Shares.
32.2 Subject to the provisions of the Companies Law and these Articles, the
Company may issue Redeemable Preference Shares and redeem them.
ALLOTMENT AND TRANSFER OF SHARES
OR THEIR TRANSMISSION BY LAW
ALLOTMENT OF SHARES
33. The Shares shall be under the control of the Board of Directors, and unless
otherwise set out in these Articles or unless otherwise resolved by the
Company in General Meeting, in any event of allotment of new Shares,
whether for a cash consideration or for a consideration other than cash,
the Board of Directors shall be authorized to offer and allot the new
Shares either to the Company's then present Shareholders, or to persons who
are not Shareholders of the Company, all at the Board of Directors'
absolute discretion, at such price and on such terms as the Board of
Directors shall deem fit.
34. The Company may allot Shares for a consideration being, in whole or in
part, other than cash, provided that the consideration for the Shares being
other than cash is set out in a document in writing.
35. The Company may issue or allot Shares having rights equal to the existing
Shares or having preferred rights, deferred rights, rights of redemption or
other special rights, having rights or limitations either in relation to
dividend, voting, appointment and dismissal of a Director, payment of Share
Capital, participation in the distribution of the Company's assets,
including distribution of surplus assets or in relation to any other
matter, all as the Company shall from time to time determine.
TRANSFER OF SHARES
36. 36.1 Subject to the restrictions in these Articles, Shares will be
transferable. Every transfer must be in writing in any usual or common
form, or in such other form as the Board of Directors may from time to
time approve. The written form of transfer will be delivered to the
Registered Office, accompanied by a true copy of the certificate of
the Shares to be transferred, and any other evidence as the Board may
require to prove the title of an intending transferor.
36.2 The written form of transfer of a Share will be executed both by the
transferor and the transferee. The transferor will be considered to
remain the Shareholder until the name of the transferee is entered in
the Register for the applicable Shares.
37. 37.1 Transfer of fully paid up shares is permissible by delivery of a deed
of transfer, duly signed by both the transferor and transferee, to the
registered office, accompanied by all the documents as provided in
Article 36.1 above.
37.2 The Board of Directors may decline to register any transfer of Shares,
which have not been fully paid up, provided that the Board of
Directors serves the transferee a written notice within two (2) months
of the date the Company received a notice regarding the transfer.
38. 38.1 The Board of Directors may determine a fee to be charged for
registration of a transfer.
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38.2 The registration of transfers may be suspended at such times and for
such periods as the Board of Directors may determine, not to exceed
thirty (30) days in any calendar year.
TRANSMISSION BY LAW
39. The executors or administrators of a deceased Holder of a person's Share
not being a joint Holder or, if there are no executors or administrators,
the persons beneficially entitled as heirs of the deceased Holder of the
Share, and such persons only, shall be recognized by the Company as having
any title to the Share. In the event of the demise of one (1) or more joint
Holders of registered Shares, unless otherwise proved to the Company, the
surviving Holders, and they only, shall be recognized by the Company as
having title to such Shares, provided however that the above shall not
release the estate of a deceased joint Holder from any responsibility or
indebtedness in respect of any Share jointly held by him.
40. Any person becoming entitled to a Share in consequence of the death,
liquidation, or bankruptcy of a Member (as the case may be) may, upon
producing evidence of his rights as shall be required by the Board of
Directors at its exclusive discretion , be registered as the owner of the
Shares or, subject to the provisions contained in these Articles relating
to the transfer of Shares, transfer them to another.
41. A person becoming entitled to a Share by reason of the death or bankruptcy
of a Holder shall not be entitled to receive any dividends or other
payments payable in connection with the Share, nor shall he be entitled to
receive notices relating to the Company's Meetings or participate therein
or vote thereat in respect of such Share, and in general he shall not be
permitted to exercise any right of a Shareholder until after his
registration as Shareholder in connection with such Share.
INCREASE, REDUCTION OR ALTERATION OF CAPITAL
42. The Company may from time to time by Resolution of the General Meeting,
increase its authorized share capital (whether or not its then-existing
share capital has been wholly issued) in Shares with a nominal value and
with preferred or deferred or other special rights (subject to any special
rights in the existing share capital) or subject to any conditions or
limitations in relation to dividends, the return on capital, voting, or
relating to any other matter, all as the General Meeting shall determine in
its Resolution relating to the increase of capital.
43. Unless otherwise determined in the Resolution increasing the Share Capital,
the new Shares shall be subject to the same provisions applicable to the
Shares of the original capital including all provisions applicable to such
capital in respect of the right to title, payment of calls, lien,
forfeiture and transfer, including transmission by law as set out in
Articles 39 to 41 (inclusive) above.
44. Subject to the provisions of the Companies Law, the Company may from time
to time by Resolution of the General Meeting:
44.1 Consolidate its share capital or any part thereof and divide it into
Shares of greater value than its existing Shares;
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44.2 By subdivision of its existing Shares, or any of them, divide the
whole, or any part, of its share capital into Shares of lesser value
than that of the existing shares
44.3 Cancel any authorized share capital which has not been allotted,
provided always that there is no undertaking of the Company, including
a contingent undertaking, to allot such share capital;
44.4 To implement a reduction of capital by way of distribution, pursuant
to Section 30.3 of the Companies Law, provided always that the Court's
approval therefor has been obtained.
45. If at any time the share capital of the Company is divided into different
classes, then:
45.1 The Company may, by Resolution of the General Meeting, vary the rights
attached to any class of Shares on the Company's stamp or its printed
name (unless otherwise determined in the terms of issue of the Shares
of such class) after obtaining a consent in writing of the Holders of
the majority of the issued Shares of that class, or with the approval
of a Resolution duly passed at a Class Meeting of the Holders of such
class of Shares. For the purpose of this Article, any change in the
Articles affecting the rights of a class of Shares shall be considered
as a variation in the rights attached to the Shares of that class.
45.2 Where pursuant to the provisions of the Companies Law or the
provisions of these Articles, Meetings of Class Shareholders must be
held, then the provisions of these Articles relating to the General
Meeting shall, mutatis mutandis, apply to those Meetings.
GENERAL MEETING
CONVENING OF A GENERAL MEETING
46. A General Meeting of the Company shall be held once in every year at such
time, not being more than fifteen (15) months after the holding of the last
preceding General Meeting, and at such place as may be prescribed by the
Board of Directors provided it is in Israel.
47. 47.1 The Board of Directors will convene a Special Meeting on receipt of a
written request from any of:
47.1.1 two (2) Directors or twenty-five percent (25%) of the total
number of, Directors;
47.1.2 one (1) or more Shareholders, holding at least five percent
(5%) of the issued Share Capital and at least one percent (1%) of
the Shareholders' voting power; or
47.1.3 one (1) or more Shareholders holding no less then five percent
(5%) of the Company's issued voting Shares.
47.2 The Board of Directors being so required to convene a Special Meeting
as aforesaid, shall convene it at a time which is at least twenty-one
(21) days, but not longer than thirty-five (35) days, after the date
of the notice of the convening of a General Meeting. In the event the
Board of Directors does not convene a Special Meeting within the said
period of time, those submitting the requisition - or part of them
representing more than one half (1/2) of the voting rights of all of
them - may convene the Meeting themselves in a manner which is as
close as possible to the manner in which General Meetings are convened
by the Board of Directors, provided that a meeting so convened shall
not be held after the passing of three (3) months from the date the
requisition was submitted.
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47.3 subject to the provisions of the Companies Law, a notice to a
Shareholder regarding a General Meeting will be served as a general
notice to all Shareholders, by publication in two daily Hebrew
newspapers appearing in Israel. Such notice will not be served to the
Shareholders individually.
49. Notwithstanding the provisions of these Articles, any Resolution may be
passed by the General Meeting without notice and without it being convened,
provided that such Resolution is passed unanimously in writing and signed
by all Shareholders (or all the Holders of a given Class of Shares)
entitled to participate in and vote at the General Meeting (or at such
Class Meeting).
POWERS OF THE GENERAL MEETING
50. Resolutions of the Company in the following matters shall be passed only by
and at the General Meeting.
50.1 The appointment of the Company's Auditor, the terms of his employment
(except for fixing his fees) and the termination of his employment
pursuant to the provisions of Sections 154-167 of the Companies Law.
50.2 The approval of acts and transactions with interested parties
requiring the approval of the General Meeting according to Sections
255 and 268 to 275 (inclusive) of the Companies Law.
50.3 All the matters which according to these Articles or the Companies Law
require the passing of a Resolution by the Company's General Meeting,
including:
50.3.1 Any Resolution relating to alterations in the Company's
Articles pursuant to Section 20 of the Companies Law.
50.3.2 Any Resolution relating to contracting for the sale of the
Company's principal activities and/or its principal holdings in
other companies and/or a Resolution for the sale of a material
asset or property of the Company to any person and/or other
entity.
50.3.3 Any Resolution for the merger of the Company with any person,
company or other entity as set out in Section 320 of the
Companies Law.
50.3.4 Any Resolution for the liquidation of the Company, whether
voluntarily or by way of application to the Court and/or the
liquidation of the Company's business or activity
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50.3.5 Expropriation of powers of another of the Company's organs or
the transfer thereof from one organ to another.
50.3.6 Exercising the powers of the Board of Directors when the Board
of Directors is unable to exercise its powers as set out in
Section 52(a) of the Companies Law, and in such event the
Shareholders shall, mutatis mutandis, be responsible for and
bound by the responsibilities and duties of the Directors as
regards the exercise of such powers taking into account their
holdings in the Company and participation in the Meetings and the
manner of their voting as set out in Section 50(b) of the
Companies Law.
50.3.7 Conversion of the Company to a public company.
50.3.8 Increasing or reducing the Company's authorized share capital.
50.3.9 Altering the rights attached to Shares or any Class of Shares.
PROCEEDINGS AT GENERAL MEETINGS
LEGAL QUORUM
51. Two (2) Members present at a General Meeting personally or by proxy or by a
Voting Instrument or if a Member be a corporation - by a representative or
proxy - and holding together a number of Shares entitling them to at least
25% (twenty-five percent) of the voting rights in the Company will
constitute a legal quorum, and no matter is to be discussed at any General
Meeting unless a legal quorum is present at the time of commencement of the
discussion.
52. If after the passing of half an hour from the time set for the General
Meeting a legal quorum is not present, the Meeting will be canceled if
convened by a requisition of Members pursuant to Sections 63 and 64 of the
Companies Law. In any other event the Meeting shall be adjourned for one
week to the same day in the week, the same time and at the same place, or
to such other day, time, and place as the Board of Directors shall
determine by notice to the Members entitled to receive invitations to
General Meetings. In the event that at the adjourned meeting a legal quorum
is not present within half an hour after the time set therefore the Meeting
shall be held with any number of participants who may discuss all the
matters for which the first meeting was convened.
CHAIRMAN OF THE GENERAL MEETING
53. 53.1 The Chairman of the Board of Directors shall preside as Chairman at
every General Meeting.
53.2 If the Board of Directors has no Chairman or if at any General Meeting
he is not present within fifteen (15) minutes after the time set for
holding the Meeting or although present is unable or unwilling to act
as Chairman of the Meeting, the Members present, personally or by
proxy, shall elect one (1) of the persons present, whether he is a
member or a proxy for a member, to act as Chairman of the Meeting.
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54. For as long as there is no Chairman of the Meeting, no matter is to be
discussed at the General Meeting except for the election the Chairman.
55. The Chairman may, with the consent of any Meeting at which a legal quorum
is present adjourn the Meeting from time to time and from place to place as
the meeting shall resolve and he shall be obliged to do so if so directed
by the General Meeting. When a Meeting is adjourned for twenty-one (21)
days or more, notice of the adjourned Meeting shall be given in the same
manner in which a notice of an original Meeting is given. Subject to the
provisions of Article 56.1, the adjourned meeting shall not discuss any
matters other than the matters on the agenda of the original meeting in
respect of which no resolution was passed.
AGENDA AT GENERAL MEETING
56. 56.1 Resolutions at the General Meeting shall be passed only on subjects
set out in the Agenda unless a majority of the Shareholders present
and participating at that Meeting have requested that a certain
subject which was not specified in the Agenda in the invitation also
be discussed at that meeting.
56.2 Any Shareholder may at any time request the Board of Directors to
include any given subject in the Agenda for a General Meeting to be
convened in the future, provided that the subject is suitable for
discussion at a General Meeting.
56.3 The Board of Directors may submit to the approval by the General
Meeting any Resolution in connection with any of the matters specified
in the notice for convening the meeting.
VOTES OF MEMBERS
VOTING
57. Each Member entitled to be present and vote at the General Meeting or Class
Meeting may vote either personally or by proxy. A Shareholder will have the
right, where permitted or required by provisions of the Law relating to
Voting Instruments, to vote by a Voting Instrument as an alternative to
voting in person or by Proxy. In all applicable cases, the Voting
Instrument will be sent to Shareholders before the applicable General
Meeting no later then the time required in the Law.
58. Subject to any special rights or limitations which will be in force at that
time in relation to any given class of Shares (if any), every Member
present personally or by proxy or by a Voting Instrument shall have one
vote for each fully paid up Share held by him without taking into account
its par value, provided always that such Share entitles the Holder thereof
the right to participate in voting.
59. A proposed Resolution presented for voting at a General Meeting shall be
passed by poll. The declaration by the Chairman that a certain Resolution
was passed unanimously or passed by a certain majority or rejected, and the
recording thereof in the Register of Minutes of the General Meetings of the
Company, and the Chairman's signature on the Minutes shall constitute prima
facie evidence of that fact.
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60. Every Resolution of the Company in General Meeting shall be deemed duly
passed if passed by a simple majority of the Members present and voting
unless another majority is required by the Companies Law or by these
Articles.
61. In the event of equality of votes, the Chairman of the Meeting in which the
voting took place shall not be entitled to any additional or casting vote
in addition to the vote or votes to which he is entitled as a Member or as
a proxy of a Member.
VOTING BY PROXY
62. The Instrument appointing a proxy or a power of attorney, whether for a
specific Meeting or otherwise, shall be in writing, signed by the appointer
or by the person duly authorized for that purpose and shall be as similar
to the following form as circumstances allow, or in any other form approved
from time to time by the Board of Directors:
"To: G. WILLI-FOOD INTERNATIONAL LTD.
I, ______ of ______, being a Member of your company and entitled to
______ votes hereby appoint ______ of ______ as my proxy to vote for
me and on my behalf at the (Annual or Special) General Meeting of the
Company to be held on the ______ day of ______ and at any adjournment
thereof.
In witness whereof I have signed this ______ day of ______"
63. Any person, whether or not a Shareholder of the Company, may be appointed
as Proxy.
64. Any Shareholder may, by duly executed power of attorney, appoint any other
person, whether or not a Shareholder of the Company, to act as his
representative in General Meetings, and such representative shall be
entitled to exercise at any Meeting such powers, for the Shareholder
represented by him, as if the representative was the Shareholder personally
present at that Meeting.
65. A company being a Shareholder in the Company may by Resolution of its Board
of Directors, authorize any person, whether or not he is a Member of the
Company, to act as that company's representative at any Meeting of the
Company, and such representative shall be entitled to exercise all such
powers on behalf of the company represented by him as if he were the
Shareholder personally present at that meeting. The Resolution shall be
evidenced by Minutes or such other documents as shall be approved by the
articles of the authorizing company, or by a certified copy of those
Minutes or that document, duly confirmed to the satisfaction of the Board
of Directors, and for that purpose confirmation by an advocate or notary or
bank shall be deemed proper confirmation.
66. The Instrument appointing a proxy and the power of attorney or other
authority, if any, under which it is signed or a certified copy of such
power of attorney or authority or document, certified by a notary or an
advocate or a bank authorizing any person to act as representative of a
company being a Member of the Company, shall be deposited at the Registered
Office of the Company not less than forty-eight (48) hours before the time
for holding the Meeting at which the person named in the Instrument
proposes to vote, and in default such person shall not be entitled to vote
by virtue thereof.
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67. If a proxy or representative has voted in accordance with the terms of his
appointment, his vote will be valid, even if his appointment was cancelled
or the appointer died or the Share by virtue of which he voted was
transferred before the voting, unless prior thereto a notification in
writing of the death, cancellation or transfer as above was received at the
Registered Office or by the Chairman of the Meeting.
68. A Member of unsound mind or a Member declared to be incapable of voting by
a court having jurisdiction in the matter of unsound persons may
participate in voting and vote through his guardian or his committee of
guardians or any other person appointed by any of them.
69. In the case of two (2) or more Holders registered in the Shareholders
Register as joint Holders of Shares, the vote of the senior who tenders a
vote, whether in person or by proxy, shall be accepted to the exclusion of
the votes of the other joint Holders; and for this purpose seniority shall
be determined by the order in which the names stand in the Register of
Members.
REGISTER OF MINUTES OF THE GENERAL MEETING
70. The Company will prepare Minutes of the proceedings of the General Meeting,
have them signed by the Chairman of each such Meeting, and shall keep them
at the Registered Office of the Company for a period of at least seven (7)
years from the date of each Meeting.
71. The Register of the Minutes of the General Meeting/Meetings shall be
available for inspection by the Members and a copy of the Minutes of any
given General Meeting shall be sent to any Shareholder requesting it.
THE BOARD OF DIRECTORS
THE NUMBER OF DIRECTORS, THEIR APPOINTMENT TO OFFICE AND THE TERMINATION
THEREOF.
72. The number of members of the Board of Directors shall be determined from
time to time in the General Meeting and shall not be less than four (4)
and, for as long as the General Meeting has not determined otherwise, the
number shall not exceed fifteen (15). Two of the Directors shall be
External Directors, as provided in Article 94 below. A corporation is
qualified to serve as a Director of the Company subject to the provisions
of Section 236 of the Companies Law. The Members of the Board of Directors
for the time being shall constitute the Company's Board of Directors and if
there is only one Director, he shall constitute the Board of Directors.
73. Directors will be elected annually by the Shareholders at the Annual
Meeting. Directors will hold office until the conclusion of the next Annual
Meeting or until their earlier removal or resignation. However, if no
Directors are elected at an Annual Meeting, then the persons who served as
Directors immediately prior to the Annual Meeting will continue to serve as
Directors unless otherwise determined by the Annual Meeting or by the
Board. Except as provided in Article 94 below regarding External Directors,
Directors will be eligible for re-election.
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74. A person nominated by the Board of Directors may be elected at the Annual
Meeting or a General Meeting to the office of Director. However, a
Shareholder entitled to vote at that Annual Meeting or General Meeting may
nominate a candidate for Director by submitting a written notice to the
Company at the Registered Office, no earlier than twenty-one (21) before
the meeting, signed by the Shareholder of his intention to propose at that
meeting a candidate for Director to which is attached the written consent
and resume of such nominee.
75. The Board of Directors will have the power to appoint additional Directors
to fill a vacant place only if the number of Directors will not exceed a
number of Directors approved at a General Meeting. Any Director so
appointed will hold office until the conclusion of the next Annual Meeting,
unless he is removed or resigns earlier. A Director will state the reasons
for his resignation.
76. If the number of Directors is reduced below two (2), the Board may not
continue to act, except for the purpose of convening a General Meeting.
77. omitted.
78. Subject to the provisions of these Articles, the office of a Director shall
be ipso facto vacated upon the happening of any of the following events:
78.1 If he has resigned from his office and has delivered a notice thereof
to the Company or to the Chairman of the Board of Directors;
78.2 If removed from office by the Shareholder who had appointed him;
78.3 Upon his death;
78.4 If he suspends payment of his debts and becomes insolvent or if he
compounds with his creditors or is adjudged bankrupt, or, in the case
of a corporation, resolves to enter into voluntary liquidation; or if
an order for its liquidation is issued.
78.5 If he be declared of unsound mind or in any other manner is declared
to be an incapacitated person;
78.6 If the General Meeting, by unanimous resolution, appropriates to
itself, the power to appoint Directors as aforesaid in Article 73
hereinabove, or if removed from office by resolution of the General
Meeting;
78.7 If convicted of a felony as set out in Section 232 of the Companies
Law;
78.8 By resolution of a court as set out in Section 233 of the Companies
Law.
79. Every Member of the Board of Directors shall serve in office until his
appointment is terminated pursuant to these Articles or until the date set
out for termination (if set out), in his Instrument of Appointment.
80. Upon a place on the Board of Directors becoming vacant, the remaining
Members of the Board of Directors may act and shall continue to constitute
the Board of Directors for so long as their number is not less than the
minimum number of Members of the Board of Directors as set out in Article
72 above.
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81. Subject to the provisions of Article 72 above, a Member of the Board of
Directors who has ceased to serve in office, will be eligible for
re-appointment.
A DIRECTOR WHO IS AN INTERESTED PARTY
82.
82.1 A Director may hold (and will not be disqualified by reason thereof)
any position or office yielding remuneration or profit from the
Company or from a company which is a Shareholder or otherwise
interested in the Company, or from any other company in which the
Company shall be a Shareholder or as otherwise interested (hereinafter
the "Interested Director"), and may also contract with the Company as
vendor, purchaser or otherwise, and any transaction made for and on
behalf of the Company in which such Director is in any way interested,
shall not be invalid nor shall such Director be liable to account to
the Company for any profit arising from the position or office which
yields such remuneration or profit accruing from such transactions
solely by virtue of such Director holding the office of a Director in
the Company, provided that he acted in this matter according to the
provisions of Article 82.2 and the provisions of Sections 270 to 278
of the Companies Law.
82.2 An Interested Director will disclose the substance of his interest at
the Meeting of the Board of Directors at which such contract or
arrangement, if then existing, is first raised for discussion, or in
any other case at the first Meeting of the Board of Directors after
the acquisition of his interest. A general notice by a Director that
he is a member in a given firm or company and that he is considered as
having an interest in all transactions made with such firm, shall be
deemed sufficient disclosure pursuant to this Article as relates to
such Interested Director and to such transactions.
83. Subject to the provisions of Section 278 of the Companies Law and of these
Articles, an Interested Director may, notwithstanding his interest, be
counted in a quorum of a Meeting of the Board of Directors, participate in
the discussion thereat and may vote on every question which may be
considered and voted upon thereat; provided that the vote of an Interested
Director on any questions in respect of which he has an interest shall be
deemed void ab initio if he failed to disclose his interest as aforesaid.
ALTERNATE DIRECTOR
84.
84.1 A Director (except for an External Director) may appoint any person to
be his alternate director (herein, "Alternate Director"), either
generally or for a specific period of time, or during the continuance
of any specific state of affairs, provided that such Alternate
Director complies with the qualification requirements for appointment
to be a Director of the Company according to these Articles and to the
Companies Law. A person already serving as a Director of the Company
(or as an Alternate Director) cannot be appointed as an Alternate
Director.
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84.2 The appointment shall be made by an Instrument of Appointment in
writing signed by both the appointer and appointee.
84.3 The Instrument of Appointment may impose such limitations and
qualifications on the Alternate Director as to time or otherwise as
the appointer may deem fit, but subject thereto an Alternate Director
shall be entitled to receive notices of Meetings of the Board of
Directors, and to attend and vote thereat provided that an Alternate
Director shall not vote at any Meeting of the Board of Directors at
which the Director who had appointed him is present. Furthermore, an
Alternate Director shall have and exercise all the rights and powers
and privileges as a Director and shall have all the obligations
imposed by law and by these Articles, excluding the power to appoint a
substitute, and he shall be authorized to exercise them in lieu of the
Director whom he replaces.
84.4 The Instrument of Appointment will be as similar as circumstances
permit to the following form:
"I ____________ of ____________ as a Member of the Board of Directors
of ____________ hereby appoint ____________ of to be my alternate
member on the Board of Directors (for the period of whatsoever absence
of mine from Israel/for the period of ____________ which will commence
on the ____________ day of the month of ____________, ____________ to
participate in and to vote at any Meeting of the Board of Directors,
to have all rights, authorities and privileges as a Member of the
Board of Directors and to use them in accordance with Article 84 of
the Articles of Association of the Company.
In witness whereof I have signed this ____________ day of the month of
____________ , ____________.
____________ signature of appointer.
And I the appointee mentioned above, hereby confirm my consent to
accept the abovementioned appointment and to serve as alternate member
of the Board of Directors in the abovementioned Company.
____________ signature of appointee.
84.5 The appointment of an Alternate Director shall take effect as of the
time of delivery to the Registered Office of the Instrument of
Appointment or as of such time as will be specified in the Instrument
of Appointment.
85. A Director who has appointed an Alternate Director may at any time
terminate the appointment of such Alternate Director by an Instrument in
writing duly signed by the Director who appointed him (hereinafter in this
Article, the "Instrument of Removal"). The office of Alternate Director
shall be vacated as of the time of delivery of the Instrument of Removal to
the Registered Office or as of such time as will be specified in the
Instrument of Removal.
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86. The Office of an Alternate Director will ipso facto be vacated upon the
happening of any of the following events:
86.1 Upon the happening of one of the events specified in Article 78 above.
86.2 If his appointment was made for a specified period of time or for the
continuation of any specific state of affairs, and such period of time
or state of affairs has come to an end.
86.3 If the Director who appointed him ceases to be a Member of the Board
of Directors of the Company.
87. Every Member of the Board of Directors of the Company, whether or not he is
a Shareholder in the Company, is entitled to be present at the General
Meetings of the Company and to participate in the deliberations thereat,
but shall not be entitled to vote thereat unless otherwise empowered to do
so, whether as a Shareholder or as the proxy of a Shareholder.
88. A Member of the Board of Directors as well as an Alternate Director shall
not be obliged to hold a qualifying share.
REMUNERATION AND REIMBURSEMENT OF EXPENSES
89. 89.1 The Company may pay remuneration to the Directors and to the Alternate
Directors for the services rendered by them to the Company as
Directors or as Alternate Directors as shall be determined from time
to time by the General Meetings of the Company in accordance with and
subject to the provisions of the Law.
89.2. A Director may be an employee of the Company and/or provide the
Company with services for consideration, all as subject to the
provisions of these Articles.
89.3 The Board of Directors may approve and pay to each Director or
Alternate Director such amount as the Board of Directors will deem
appropriate compensation for travel and hotel expenses outlaid by him
for the purpose of participating in the Meetings of the Board of
Directors and for such other expenses incurred by him in the
performance of his duties as a Director or Alternate Director.
89.4 A Director may, subject to the provisions of these Articles, fulfil
another function or any other paid position in the Company or in any
other company in which the Company holds shares or has any other
interest, together with his functions as a Director (excluding the
position of an Auditor) on such terms in respect of remuneration and
other matters as the Board of Directors shall determine.
POWERS OF THE BOARD OF DIRECTORS
MANAGEMENT OF THE COMPANY'S AFFAIRS
90. The Company's affairs will be managed by the Board of Directors which will
be empowered to exercise all such authority and powers of the Company,
perform in its name and on its behalf all such actions as the Company is
authorised to perform according to these Articles or according to the Law
and/or according to the Companies Law and/or any other law which, pursuant
to the Law and/or these Articles, are not prerogatives vested in the
Company in General Meeting, but always subject to the provisions of the Law
and these Articles as well as to such Articles which the Company may
determine from time to time in General Meeting. Any Article determined by
the Company in General Meeting shall not prejudice the legality of any
previous act performed by the Board of Directors which was then legal and
legitimate if such Article had not been determined.
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BORROWING AND ISSUING SECURITY FOR REPAYMENT THEREOF
91. 91.1 Without derogating from the powers granted to the Board of Directors
by the Companies Law and by these Articles, the Board of Directors
may, at its discretion, from time to time and for the needs of the
Company, determine to borrow and/or obtain other credit facilities in
any amount and to secure the repayment thereof as it will deem fit.
91.2 The Board of Directors may secure the repayment of such sum or sums,
the borrowing of which it has initiated, in such manner and on such
terms as it shall deem fit either by mortgage, charge or other
security on the Company's undertakings or on its property, in whole or
in part (both existing and future) including the share capital which
is, at that time, uncalled.
BUSINESS MANAGER/GENERAL MANAGER
92. 92.1 Subject to these Articles and the Law, the Board of Directors will
from time to time appoint a General Manager for such period, on such
terms and with such powers as the Board may determine. The appointment
of a General Manager is subject to the approval of a General Meeting.
The compensation of the General Manager may be by salary or any other
consideration as determined by the Board and approved by a General
Meeting.
92.2 A General Manager will be subject to the provisions of any contract
between him and the Company, the terms of which will be approved by
the Board of Directors and by the General Meeting, as required by the
Law.
92.3 The General Manager may hold, while he is General Manager, the office
of a Director, if he is elected or appointed in accordance with the
provisions of these Articles. If so elected the General Manager is
subject to the same provisions as resignation and removal as the other
Directors. In regard to his position as General Manager, the General
Manager will be appointed as provided in Article 92.1 above and may be
removed by the Board of Directors. If he ceases to hold the office of
General Manager for any reason and at that time he serves as a
Director, he will immediately cease to be a Director. In any case, if
the General Manager does not serve as a Director, he will be entitled
to participate in any Board meeting.
92.4 Subject to the supervision of the Board of Directors, the General
Manager may exercise all powers of the Company and do on behalf of the
Company all acts as may be exercised and done by the Company and that
are not by the Law or by these Articles required to be exercised or
done by other Company bodies. No resolution made by a General Meeting
will invalidate any prior act of the General Manager that would have
been valid if such resolution had not been made.
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92.5. Subject to applicable law and the specific or general approval of the
Board, the General Manager may delegate any of his powers to another
person.
92.6 The General Meeting and/or the Board of Directors may assume powers
granted under these Articles or by law to the General Manager,
provided that such decision to assume power specifies the matters and
time period for which such powers are assumed.
PROCEEDINGS AT MEETINGS OF THE BOARD OF DIRECTORS
CHAIRMAN OF THE BOARD OF DIRECTORS
93. The Board of Directors will elect one of its members as Chairman of the
Board of Directors who will chair and manage the Meetings of the Board of
Directors, and will determine the period for which he is to hold office.
EXTERNAL DIRECTORS
94. 94.1 The Board of Directors will include at least two (2) External
Directors complying with the qualifications described in the Law.
94.2 An External Director will be appointed by a majority vote at a General
Meeting, provided that:
94.2.1 The majority vote at the General Meeting will include at least
one-third (1/3) of the total number of the votes of the
non-controlling Shareholders voting at the meeting. For the
purposes of this Article, abstentions will not be taken into
consideration in counting the total number of the non-controlling
Shareholders; and
94.2.2 The total number of non-controlling Shareholders voting against
the resolution appointing an External Director is not more than
one percent (1%) of the overall voting rights in the Company.
94.3 The compensation and indemnification of expenses of External Directors
will be in accordance with the applicable provisions of the Law.
94.4 An External Director will be appointed for a period of three (3) years
and his office may be extended by a resolution of the General Meeting
for an additional three (3) years. An External Director may be removed
from his office only in accordance with the applicable provisions of
the Law.
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MEETINGS OF THE BOARD OF DIRECTORS AND THE PROCEEDINGS THEREAT
95. The Board of Directors will convene in accordance with the needs of the
Company. However, the Board will meet at least once every three (3) months.
96. The majority of the members of the Board of Directors then in office shall
constitute a legal quorum in any Meeting of the Board of Directors. If,
within thirty minutes of the time appointed for the holding of a Meeting of
the Board of Directors, no legal quorum is present, the Meeting shall be
adjourned until the same day of the week in the following week, at the same
time and at the same place, and if no legal quorum is present at the
adjourned Meeting, the members of the Board of Directors present at such
adjourned Meeting shall constitute a legal quorum and as long as it is not
unanimously resolved by all the Directors present, the adjourned meeting
may only discuss those matters which were to be discussed at the meeting
previously adjourned.
97. A Meeting of the Board of Directors may take place by means of any form of
communication provided always that all the participating Directors may
simultaneously hear and communicate with each other.
98. A Meeting of the Board of Directors at which a legal quorum is present will
be authorised to exercise each and every one of the authorities, powers and
discretions vested in the Board of Directors in general or which may be
exercised by it at such time, by virtue both of the Companies Law and these
Articles.
99. The Chairman of the Board of Directors may, at any time, convene a Meeting
of the Board of Directors and shall be obliged to convene such Meeting if
required to do so by a Director, and this within three (3) business days
from the date on which he was required to do so.
100. 100.1 A notice in writing of at least three (3) business days of the
convening of any Meeting of the Board of Directors will be delivered
to the Members of the Board of Directors, as well as to Alternate
Directors then present in Israel.
100.2 Notices under this Article may be delivered in person or by mail or
by facsimilia or by electronic mail to any Member of the Board of
Directors as well as to any Alternate Director as the case may be, to
his address as recorded in the Company's Register of Members of the
Board of Directors and/or Alternate Directors. The notice will specify
the date and place of convening the Meeting as well as giving
reasonable details of all the issues on the agenda.
101. Notwithstanding the provisions of the preceding Article 100, the Board of
Directors may, with the unanimous consent of all the Directors then in
office, convene a Meeting without any prior notice or by lesser notice.
102 If, in error, notice of any Meeting of the Board of Directors is not
delivered to a Director or Alternate Director, it shall not affect the
validity of any resolution passed at that Meeting.
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103. If a Chairman of the Board of Directors has not been elected, or if he is
not present within fifteen minutes of the time appointed for holding a
Meeting, the Directors then present may chose one of their number to act as
Chairman at that Meeting.
104. In voting at a Meeting of the Board of Directors, each Director shall have
one vote. Resolutions of the Board of Directors shall only be passed by a
simple majority of the Directors and of the duly appointed Alternate
Directors present and voting at that Meeting.
In the event that the voting on any resolution is equal, then such proposal
shall be deemed rejected and the Chairman of the Board of Directors shall
not have an additional or casting vote.
105. The Board of Directors may pass resolutions without actually convening
provided that all Directors entitled to participate in the discussion and
to vote on the matter to be discussed on the proposed resolution, have
agreed thereto, and in such case the Chairman of the Board of Directors
will prepare minutes of the resolutions as aforesaid and will add thereto
the signatures of the Directors.
106. A resolution in writing signed by all the Directors (or Alternate
Directors) or by all the Members of a Directors Committee (or their
Alternates) or a resolution in writing to which all the Members of the
Board of Directors (or their Alternates) or to which all the Members of a
Directors Committee (or their Alternates) have indicated their consent in
writing, shall be valid and shall be deemed for all intents and purposes as
if passed by a Meeting of the Board of Directors or by a Meeting of a
Directors Committee, at a Meeting duly convened therefor.
COMMITTEES OF THE BOARD OF DIRECTORS
107. Subject to the applicable provisions of the Law regarding matters that the
Board may not delegate to a committee, the Board of Directors may delegate
any of its powers to committees consisting of at least three (3) Directors,
including at least one (1) External Director. Any committee so formed will
in the exercise of its powers conform to any directions given to it by the
Board.
108. A resolution passed or an action taken by a Directors Committee shall have
the same validity as a resolution passed or an action taken by the Board of
Directors unless otherwise specifically expressed in the resolution of the
Board of Directors setting up such Directors Committee, whether in respect
of a given matter or in relation to a given Committee. The Board of
Directors may from time to time, extend, limit or revoke the delegation of
powers to the Directors Committee, however such limitation or revocation of
powers shall not affect the validity of any resolution in accordance with
which the Company has acted towards any third party which was not aware of
the limitation or revocation.
109. The Board of Directors will appoint an Audit Committee composed of at least
three (3) Directors qualified under the Law and under all other applicable
laws, regulations and rules to serve on the Audit Committee including all
External Directors. The Audit Committee will act under a charter issued by
the Board and according to the requirements of the Law and all other
applicable laws, regulations and rules.
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110. The provisions of these Articles relating to the convening of the Board of
Directors and the proceedings thereat shall apply mutatis mutandis to the
Directors Committees.
MINUTES OF THE MEETINGS OF THE BOARD OF DIRECTORS AND THE DIRECTORS
COMMITTEES
111. The Company shall cause minutes of the proceedings at the Meetings of the
Board of Directors and of the Directors Committees to be prepared and will
keep them at its Registered Office for a period of at least seven years
commencing on the date of each Meeting.
112. Minutes approved and signed by the Chairman of the Meeting or by the
Chairman of the Board of Directors shall constitute prima facie evidence of
the contents of such Minutes.
DEFAULTS IN CONVENING MEETINGS OF THE BOARD OF DIRECTORS OR THE DIRECTORS
COMMITTEES
113. A resolution passed at a Meeting of the Board of Directors or of a
Directors Committee for which the necessary preconditions of its convening
have not been observed, may be revoked at the request of any one of the
following:
113.1 A Director present at the Meeting provided that before such
resolution was passed, he demanded that the resolution in respect of
which the default occurred, not be passed;
113.2 A Director not present at a Meeting but who was entitled to be
invited thereto, if he shall request the revocation of the resolution
within a reasonable period of time of his having been made aware of
the resolution, and in any event not later than the occurrence of the
first Meeting of the Board of Directors or of the Directors Meeting
which takes place after he has becomes aware of the resolution.
113.3 If the defect in the notice relates to the place or time of the
Meeting, a Director who, notwithstanding the defect arrived at the
Meeting will not be entitled to demand the revocation of such
resolution.
INSURANCE AND INDEMNIFICATION
114. 114.1 Subject to the provisions of the Law, the Company may exempt in
advance any Director or Company officer from any liability to the
Company attributed to damage or loss caused by breach of the
Director's or officer's duty of care owed to the Company, except for
such breach of duty of care in distribution.
114.2 Subject to the provisions of the Law, the Company may procure
Directors' and officers' liability insurance for the following:
114.2.1 breach of duty of care by any Director or officer owed to the
Company or any other person;
114.2.2 breach of fiduciary duty by any Director or officer owed to
the Company, provided that such Director or officer acted in good
faith and had a reasonable basis to assume that the action would
not harm the interests of the Company; or
- 25 -
114.2.3 a monetary liability imposed on the Director or officer in
favor of a third party due to activities carried out in his
capacity as a Director or Company officer.
114.3 Subject to the provisions of the Law, the Company may undertake
retroactively to indemnify a Director or Company officer in respect of
a liability or expense imposed on him or incurred by him as a result
of an act carried out in his capacity as a Director or Company
officer. Such indemnity may be issued in respect of a liability or
expense as follows:
114.3.1 a monetary liability imposed on the Director of officer in
favor of a third party under a judgment, including a judgment by
way of compromise or a judgment of an arbitrator approved by a
court;
114.3.2 reasonable litigation expenses, including attorney's fees,
incurred by the Director or officer due to an inquiry he was
under or a proceeding filed against him by an authority, that
ended without filing a charge sheet and without having incurred
any monetary liability as an alternative to the criminal
proceedings, or that ended without filing a charge sheet but with
an imposition of a monetary liability as an alternative to the
criminal proceedings in a offense not requiring proof of criminal
intent
114.3.3 reasonable litigation expenses, including attorney's fees,
incurred by the Director or officer or charged to him by the
court, in a proceeding filed against him by or on behalf of the
company or by any other person, or for a criminal charge from
which he was acquitted or for a criminal charge in which he was
found guilty of an offense not requiring proof of criminal
intent.
114.4 Subject to the provisions of the Law, the Company may undertake in
advance to indemnify a Director or an officer in respect of a
liability or expense imposed on him as a result of an act carried out
in his capacity as a Director or officer, provided that the
undertaking will be limited as follows:
114.4.1 a monetary liability imposed on the Director of officer in
favor of a third party under a judgment, including a judgment by
way of compromise or a judgment of an arbitrator approved by a
court. However, such undertaking will be limited to the kinds of
events that in the Board's opinion are foreseeable at the time of
the issue of the undertaking and will be limited to the amount
fixed by the Board as reasonable under the circumstances, and
that the kinds of events and the amount will be mentioned in such
undertaking in writing.
- 26 -
114.4.2 reasonable litigation expenses, including attorney's fees,
incurred by the Director or officer due to an inquiry he was
under or a proceeding filed against him by an authority, that
ended without filing a charge sheet and without having incurred
any monetary liability as an alternative to the criminal
proceedings, or that ended without filing a charge sheet but with
an imposition of a monetary liability as an alternative to the
criminal proceedings in a offense not requiring proof of criminal
intent.
114.4.3 reasonable litigation expenses, including attorney's fees,
incurred by the Director or officer or charged to him by the
court, in a proceeding filed against him by or on behalf of the
company or by any other person, or for a criminal charge from
which he was acquitted or for a criminal charge in which he was
found guilty of an offense not requiring proof of criminal
intent.
SIGNATURE ON BEHALF OF THE COMPANY
115. Subject to the provisions of the Companies Law and of these Articles, the
Board of Directors may authorize any person to act and sign on behalf of
the Company, whether individually or jointly with another person, whether
generally or for a specific purpose.
RESERVE FUND, DIVIDENDS AND BONUS SHARES
116. The Board of Directors may, before making any decision on the distribution
of any dividend in respect of any financial year, set aside out of the
profits of the Company, such sums as the Board of Directors may deem proper
as a reserve fund or a general fund for any needs and purposes which the
Board of Directors may determine at its discretion.
117. Subject to the provisions of the Companies Law, the Board of Directors may
pass a resolution for the distribution of a dividend, including an interim
dividend. The Board of Directors may also resolve that the dividend or
interim dividend may be paid in whole or in part, either in cash or in kind
by way of the distribution of other assets, including securities or in any
other way at its discretion.
118. Unless otherwise determined in the terms of allotment of any Shares, the
Board of Directors may, when declaring the distribution of dividends in
respect of a given period, determine that the amount of dividends payable
to the Holder of a given Share shall entitle him only to a proportionate
amount of the dividends, taking into account the length of the period
during which he held the Share as well as with regard to the dates of the
respective payments made on account of the price of such Share (including
premium) until the date of declaration.
119. No dividend shall be payable except out of the profits of the Company and
no dividend shall carry interest as against the Company.
120. A transfer of Shares shall not pass the right to any dividend declared
thereon before the registration of the transfer unless another instruction
has been issued to the Company signed by the transferor and the transferee.
- 27 -
121. Except in the event where the requesting Shareholder has instructed
otherwise, any dividend may be paid to him by a crossed cheque sent by
registered mail to the address of such Shareholder or of the person
entitled to receive it, or in the case of joint owners, to the person first
mentioned in the Register of Shareholders in respect of the joint
ownership. Every such cheque shall be drawn in favor of the person to whom
it is mailed. The Company will not be liable or responsible in respect of
any cheque lost in the mail, or in respect of any dividend lost by any
Shareholder or any person entitled thereto, as a result of forged
endorsement of any cheque, any fraudulent collection or by any other
improper collection thereof.
122. The Shareholders entitled to a dividend shall be the Shareholders on the
date on which the resolution for the distribution of the dividend is
passed, or at a later date if such later date was specified in such
resolution.
ACCOUNTING, FINANCIAL STATEMENTS AND APPROVAL THEREOF
123. The Company will operate books of account and will prepare in respect of
each year, statements which will include a balance sheet as at December
31st (herein, the "Determining Date") and a profit and loss account for the
year ending on that date, as well as any additional financial statements as
may be required in accordance with generally accepted accounting
principles. The financial statements will be approved by a Director or
Directors and/or by the Board of Directors, and all that subject to the
relevant provisions that will be determined (if determined) by the Minister
of Justice and as set out in Section 172 (e) of the Companies Law. The
financial statements will be prepared within nine months of the Determining
Date. Section 173 (e) of the Companies Law will not apply to the Company.
KEEPING THE FINANCIAL STATEMENTS AND INSPECTION THEREOF
124. The financial statements will be kept at the Registered Office for at least
seven years from the date of their preparation and will be available for
the inspection of the Members of the Board of Directors of the Company in
office at that time and of those persons who are, at that time,
Shareholders of the Company.
125. Subject to the provisions of the Companies Law, the Board of Directors
shall, from time to time in any given event or class of events, or in
general, determine whether and to what extent and at what times and places
and under what conditions or regulations the accounts and books of the
Company or any of them shall be open to the inspection of Members not being
Directors. A Member, not being a Director, shall not have any right of
inspecting any account or book or document of the Company except as
conferred by law or authorized by the Board of Directors.
126. Not later than eighteen months after registration of the Company and,
thereafter, not less than once each year, the Directors will submit to the
General Meeting a financial statement including the balance sheet and a
profit and loss account, prepared according to generally accepted
principles of accounting for the period commencing on the date after the
date of the previous financial statements, and in the event that this is
the first set of financial statements, then for the period commencing on
the registration of the Company. There shall be added to the financial
statements, a report by the Auditor of the Company and shall be accompanied
by a report by the Directors relating to the state of affairs of the
Company and the amount (if any) which they recommend to be paid as a final
dividend, and the amount (if any) they recommend to be transferred to the
Company's reserves.
- 28 -
127. The Board of Directors may invest dividends unclaimed within a year after
they have been declared, or use them for the benefit of the Company until
such time as they are demanded.
128. Subject to the provisions of the Companies Law, the Board of Directors may
resolve to allot Bonus Shares to Shareholders entitled thereto, and for
that purpose, to convert into share capital part of the profits and/or of
the premium on Shares and/or any other source including in the capital of
the Company, all as set out in the Company's last financial statements. The
Bonus Shares distributed shall be of the class of shares held by the
Shareholders entitled to receive them, or of any other class of share as
the Board of Directors shall resolve.
129. For the purpose of implementing any resolution pursuant to Article 128
above, the Board of Directors may, at its absolute discretion, regulate in
such manner as it shall deem proper, any difficulty which will arise (if at
all) relating to such distribution and, in particular, may determine that
fractions being less than NIS 1 (one New Israeli Shekel) will not be taken
into account or that the amounts will be rounded up to a whole shekel in
order to accommodate the rights of all parties in such manner as the Board
of Directors will deem reasonable and just.
130. In any Annual Meeting, the Company will appoint an Auditor who will serve
in office until the conclusion of the next succeeding Annual Meeting.
However, the Annual Meeting may appoint an Auditor to serve in office for a
longer period which will not exceed the conclusion of the third Annual
Meeting after the Annual Meeting at which he was first appointed.
131. The remuneration of the Auditor for performing the audit will be determined
by the Board of Directors.
132. The Auditor shall at all times have right to access and to inspect the
Company's documents for the purpose of implementing his office, and shall
have the right to demand from the Members of the Board of Directors and its
Officers, all the information and explanations which may be required for
the purpose of implementing the office of Auditor.
133. The Auditor shall be entitled to receive notice from the Company's Board of
Directors, of any General Meeting of the Company at which financial
statements in respect of which he has performed the audit are to be
submitted, as well as notice of any Meeting of the Board of Directors which
will discuss the approval of financial statements or which is convened
pursuant to Section 169 of the Companies Law. The Auditor will also be
entitled to be present at any General Meeting, or Meeting of the Board of
Directors, or Meeting a Directors Committee dealing with this matter for
the purpose of providing an explanation relating to the financial
statements as he will deem proper.
INTERNAL AUDITOR
134. The Board of Directors, subject to the recommendation of the Audit
Committee, will appoint an Internal Auditor for the Company. Within the
organizational structure of the Company the Internal Auditor will report to
the General Manager. The Internal Auditor may only be removed or replaced
in accordance with the applicable provisions of the Law.
- 29 -
135. The Internal Auditor will submit a yearly audit plan for the approval of
the Audit Committee. The Internal Auditor will also submit a yearly account
of his findings to the chairman of the Board of Directors, the General
Manager and the chairman of the Audit Committee.
INDEPENDENT PUBLIC ACCOUNTANTS
136. The Company will appoint Independent Certified Accountants at a General
Meeting. The Independent Certified Accountants will hold office until the
end of the next Annual Meeting. However, the Shareholders at a General
Meeting may remove the Independent Certified Accountants or extend the term
of appointment for up to three (3) years.
137. The fee of the Independent Certified Accountants will be set and approved
by the Board of Directors and reported to the next Annual Meeting.
NOTICES
138. Subject to other provisions in these Articles and to any requirements
according to the Companies Law published and/or to be published by the
Ministry of Justice in relation to the serving of notices by the Company to
its Shareholders, the following provisions will apply:
The Company may serve a notice to any Member either by personal delivery or
by sending it by mail (airmail if posted abroad) by letter in an envelope
or other cover, pre-paid and addressed, to such Member to his address in
Israel as is recorded in the Shareholders Register, or by sending it to the
facsimile or other electronic mail address recorded in such Register.
139. A Shareholder whose registered address is outside of Israel may, from time
to time, notify the Company in writing of an address in Israel and such
address shall be deemed as the registered address within the meaning of the
previous Article.
140. Notices relating to Shares held jointly by several persons shall be
delivered to such person whose name appears first in the Shareholders
Register, and a notice so delivered shall be deemed sufficient notice to
all such Shareholders.
141. A notice or document having been sent by mail, by facsimilia or by other
electronic mail to a Member or deposited at his registered address pursuant
to these Articles, then notwithstanding the fact that such Member has
deceased, whether or not the Company was aware of his demise, shall be
deemed properly delivered in relation to any registered shares whether held
by such Member individually or jointly with other persons, until such time
as another person will be registered in his place as the owner or joint
owners of such Shares, and such delivery shall be deemed for all purposes
of these Articles as sufficient delivery of the notice or the documents to
the personal representative as well as to all other persons, if any,
jointly interested with him in such Shares.
142. Accidental non-delivery of a notice to a Member regarding a Meeting, or
non-receipt of such notice by a Member, will not derogate from the validity
of any resolution passed at such Meeting.
- 30 -
EXHIBIT 4.3
ADDENDUM TO THE AGREEMENT TO RECEIVE MANAGEMENT SERVICES
MADE AND EXECUTED IN YAVNE ON AUGUST 1, 2005
BETWEEN: G. WILLI-FOOD INTERNATIONAL LTD.
of 3 Nahal Snir St., Yavne Industrial Zone
(hereinafter: "THE COMPANY")
OF THE ONE PART
AND: YOSSI WILLI MANAGEMENT INVESTMENT LTD. (CORPORATE NO.
512416033)
of 3 Nahal Snir St., Yavne Industrial Zone
(hereinafter: "THE MANAGEMENT COMPANY")
or any wholly-owned company of Mr. Joseph Williger
OF THE OTHER PART
WHEREAS Mr. Joseph Williger (hereinafter: "JOSEPH") serves as the
CEO of the Company and as director thereof; and
WHEREAS Joseph is a former employee of the Company and according to
Joseph's original employment agreement, which was approved
on March 28, 1997 by the Board of Directors and on April 1,
1997 by the general meeting of the Company (which was on
that date still a private company), Joseph was entitled to
receive from the Company a vehicle and reimbursement of
expenses; and
WHEREAS Joseph requested in June 1998 to provide the Company with
services, not as an employee, but through the medium of the
Management Company and as an independent contractor; and
WHEREAS In 1998, the Audit Committee, the Board of Directors and
the general meeting of the Company approved a variation in
the terms of Joseph's employment in a manner whereby Joseph
would cease being an employee of the Company and start
providing management services to the Company through the
medium of the Management Company, in consideration for
receiving management fees in an amount equal to the costs
to the Company of employing Joseph prior to the variation;
and
WHEREAS An agreement to receive management services was made on
June 1, 1998 between the Company and the Management Company
to be in force until May 31, 2006, and which is annexed to
this Addendum as SCHEDULE "A" (hereinafter: "THE ORIGINAL
MANAGEMENT AGREEMENT") under which the Management Company
is entitled to receive management fees in an amount equal
to the cost to the Company of employing Joseph prior to the
variation mentioned above; and
WHEREAS An error occurred in the Original Management Agreement and
the right of Joseph to receive from the Company a vehicle
and reimbursement of expenses was omitted from the
Agreement, despite the fact that these rights were not
taken into account in calculating the cost of the Company
of employing Joseph prior to the variation mentioned above
and, therefore, they were not included within the
definition of the management fees to which the Management
Company is entitled pursuant to the Original Management
Agreement; and
|
WHEREAS Despite the omission from the original Management
Agreement, the Company effectually continued to provide a
vehicle for Joseph's use and reimburse him for his
expenses; and
WHEREAS The parties are desirous of extending the term of the
Original Management Agreement, subject to modifications
arising from the present Addendum, as more particularly set
out below; and
WHEREAS The parties are desirous of rectifying the error that
occurred in the Original Management Agreement, and embed
therein the right to use the vehicle and the right to
receive a reimbursement of expenses.
|
IT IS THEREFORE AGREED, STIPULATED AND DECLARED BETWEEN THE PARTIES AS
FOLLOWS:
1. PREAMBLE, SCHEDULES, AND HEADINGS
1.1 The preamble to this Addendum constitutes an integral part hereof and
is binding as equally as any of the terms thereof.
1.2 The headings to the clauses do not form part thereof and have been
inserted for ease of reference only and are not to be applied in
interpreting the Agreement.
2. EXTENSION OF THE ORIGINAL MANAGEMENT AGREEMENT TERM
Clause 4 of the Original Management Agreement will be replaced by the
following provisions:
"4.1 The term of this Agreement is for an unlimited period, subject as
provided in clauses 4.2 and 4.5 hereof (hereinafter: "THE AGREEMENT
TERM").
4.2 The Company and/or the Management Company will be entitled to bring
the Agreement to an end at any time, and for any reason whatsoever,
before the end of the Agreement Term, by giving prior written notice
to the other party, as follows:
4.2.1 The Company will be entitled to bring the Agreement to an end at
any time for any reason whatsoever, by giving prior notice in
writing that will be given to the Management company at least 18
months in advance.
4.2.2 The Management Company will be entitled to bring the Agreement
to an end at any time by giving prior notice that will be
delivered to the Company at least 180 days in advance.
4.3 It is hereby agreed that the Company may waive the actual receipt of
the management services from the Management Company for the duration
of the prior notice period, but this will not serve to derogate from
its obligation to continue to pay the Management Company the
management fees and the remaining payments and rights due to the
Management Company under this Agreement, including, and without
limitation from the generality of the foregoing, a bonus, provision of
a vehicle and the reimbursement of expenses mentioned in clause 5A
hereof until the end of the prior notice term, as stated in clause
4.2.1 or 4.2.2 above, as appropriate.
2
4.4 It is hereby agreed that in the event of the Management Company being
the party that brings the Agreement to an end as stated in clause
4.2.2 above, the Management Company will then be entitled to receive
the management fees for the duration of an acclimatization period of 6
months that will begin after the end of the prior notice period
mentioned in clause 4.2.2, notwithstanding that it will not, during
such six-month period, provide the Company with any management
services.
4.5 It is hereby agreed that if the Management Company will start
providing the management services otherwise than by means of Joseph
and/or in the event of the death or permanent and continuous loss of
working capacity of Joseph (God forbid), the Company will be entitled
to terminate the Agreement forthwith, without any prior notice.
4.6 It is hereby agreed that if a receiving order or winding-up order
issues against the Management Company or a temporary liquidator or
temporary receiver is appointed for it or a liquidator or permanent
receiver and/or a stay of proceedings order is issued at its petition
or at the petition of any third party in a manner which prevents the
Management Company from continuing to supply the management services,
then Joseph will immediately start to work for the Company in exchange
for the salary and social benefits the cost of which to the Company
will be identical to the monthly management fees under this Agreement,
as of such date, or alternatively, at the exclusive choosing of
Joseph, Joseph will begin to supply the Company with management
services by means of another company that is wholly-owned and
controlled by him, pursuant to the conditions contained in this
Agreement."
3. VEHICLE AND ENTERTAINMENT EXPENSES
Clause 5A will be added to the original Management Agreement in the
following wording:
"5A.1 The Company will provide for Joseph's use a vehicle that will be used
for business and private purposes. The Company will bear all expenses
relating to the handling and maintenance of such vehicle. The Company,
at the discretion of the Board of Directors, may replace such vehicle
from time to time.
5A.2 Joseph will be entitled to full reimbursement of the expenses paid by
him during the course of providing the management services to the
Company, including entertainment expenses and reasonable travelling
expenses in Israel and abroad, against presentation of receipts.
Without derogating from the generality of the foregoing, Joseph will
be entitled to full reimbursement of the telephone expenses at home
and of the mobile telephone, including calls abroad, that are related
to the provision of the management services to the Company."
3
4. GENERAL
4.1 This Agreement was approved on July 20, 2005 by the general meeting of
shareholders of the Company by the majority required according to
section 275 of the Companies Law, 1999.
4.2 All the remaining provisions of the Original Management Agreement will
continue to apply without variation. In the event of any inconsistency
between the provisions of the Original Management Agreement and those
contained in this Addendum, the provisions contained in this Addendum
will prevail.
IN WITNESS WHEREOF THE PARTIES HAVE SET THEIR HANDS:
G. WILLI-FOOD INTERNATIONAL LTD. YOSSI WILLI MANAGEMENT INVESTMENT LTD.
PERSONAL UNDERTAKING
G. Willi-Food International Ltd.
3 Nahal Snir St.,
YAVNE
Dear Sir,
I, the undersigned, Joseph Williger, hereby declare that the provisions of the
above Addendum like those of the Original Management Agreement are acceptable to
me and I confirm that my guarantee for all the undertakings of the Management
Company according to the Original Management Agreement will continue to remain
in full force and effect also in relation to the above Addendum, and that my
undertaking contained in clause 4.5 of the above Addendum is agreed and accepted
by me.
Yours faithfully,
Joseph Williger
4
EXHIBIT 4.5
ADDENDUM TO THE AGREEMENT TO RECEIVE MANAGEMENT SERVICES
MADE AND EXECUTED IN YAVNE ON AUGUST 1, 2005
BETWEEN: G. WILLI-FOOD INTERNATIONAL LTD.
of 3 Nahal Snir St., Yavne Industrial Zone
(hereinafter: "THE COMPANY")
OF THE ONE PART
AND: ZVI W. & CO., LTD. (CORPORATE NO. 512715970)
of 3 Nahal Snir St., Yavne Industrial Zone
(hereinafter: "THE MANAGEMENT COMPANY")
or any wholly-owned company of Mr. Zvi Williger
OF THE OTHER PART
WHEREAS Mr. Zvi Williger (hereinafter: "ZVI") serves as chairman of
the Board of directors of the Company and as COO of the
Company; and
WHEREAS Zvi is a former employee of the Company and according to
Zvi's original employment agreement, which was approved on
March 28, 1997 by the Board of Directors and, on April 1,
1997 by the general meeting of the Company (which was on
that date still a private company), Zvi was entitled to
receive from the Company a vehicle and reimbursement of
expenses; and
WHEREAS Zvi requested in June 1998 to provide the Company with
services, not as an employee, but through the medium of the
Management Company and as an independent contractor; and
WHEREAS In 1998, the Audit Committee, the Board of Directors and
the general meeting of the Company approved a variation in
the terms of Zvi's employment in a manner whereby Zvi would
cease being an employee of the Company and start providing
management services to the Company through the medium of
the Management Company, in consideration for receiving
management fees in an amount equal to the costs to the
Company of employing Zvi prior to the variation; and
WHEREAS An agreement to receive management services was made on
June 1, 1998 between the Company and the Management Company
to be in force until May 31, 2006, and which is annexed to
this Addendum as SCHEDULE "A" (hereinafter: "THE ORIGINAL
MANAGEMENT AGREEMENT") under which the Management Company
is entitled to receive management fees in an amount equal
to the cost to the Company of employing Zvi prior to the
variation mentioned above; and
WHEREAS An error occurred in the Original Management Agreement and
the right of Zvi to receive from the Company a vehicle and
reimbursement of expenses was omitted from the Agreement,
despite the fact that these rights were not taken into
account in calculating the cost of the Company of employing
Zvi prior to the variation mentioned above and, therefore,
they were not included within the definition of the
management fees to which the Management Company is entitled
pursuant to the Original Management Agreement; and
|
WHEREAS Despite the omission from the original Management
Agreement, the Company effectually continued to provide a
vehicle for Zvi's use and reimburse him for his expenses;
and
WHEREAS The parties are desirous of extending the term of the
Original Management Agreement, subject to modifications
arising from the present Addendum, as more particularly set
out below; and
WHEREAS The parties are desirous of rectifying the error that
occurred in the Original Management Agreement, and embed
therein the right to use the vehicle and the right to
receive a reimbursement of expenses.
|
IT IS THEREFORE AGREED, STIPULATED AND DECLARED BETWEEN THE PARTIES AS
FOLLOWS:
1. PREAMBLE, SCHEDULES, AND HEADINGS
1.1 The preamble to this Addendum constitutes an integral part hereof and
is binding as equally as any of the terms thereof.
1.2 The headings to the clauses do not form part thereof and have been
inserted for ease of reference only and are not to be applied in
interpreting the Agreement.
2. EXTENSION OF THE ORIGINAL MANAGEMENT AGREEMENT TERM
Clause 4 of the Original Management Agreement will be replaced by the
following provisions:
"4.1 The term of this Agreement is for an unlimited period, subject as
provided in clauses 4.2 and 4.5 hereof (hereinafter: "THE AGREEMENT
TERM").
4.2 The Company and/or the Management Company will be entitled to bring
the Agreement to an end at any time, and for any reason whatsoever,
before the end of the Agreement Term, by giving prior written notice
to the other party, as follows:
4.2.1 The Company will be entitled to bring the Agreement to an end at
any time for any reason whatsoever, by giving prior notice in
writing that will be given to the Management company at least 18
months in advance.
4.2.2 The Management Company will be entitled to bring the Agreement
to an end at any time by giving prior notice that will be
delivered to the Company at least 180 days in advance.
4.3 It is hereby agreed that the Company may waive the actual receipt of
the management services from the Management Company for the duration
of the prior notice period, but this will not serve to derogate from
its obligation to continue to pay the Management Company the
management fees and the remaining payments and rights due to the
Management Company under this Agreement, including, and without
limitation from the generality of the foregoing, a bonus, provision of
a vehicle and the reimbursement of expenses mentioned in clause 5A
hereof until the end of the prior notice term, as stated in clause
4.2.1 or 4.2.2 above, as appropriate.
2
4.4 It is hereby agreed that in the event of the Management Company being
the party that brings the Agreement to an end as stated in clause
4.2.2 above, the Management Company will then be entitled to receive
the management fees for the duration of an acclimatization period of 6
months that will begin after the end of the prior notice period
mentioned in clause 4.2.2, notwithstanding that it will not, during
such six-month period, provide the Company with any management
services.
4.5 It is hereby agreed that if the Management Company will start
providing the management services otherwise than by means of Zvi
and/or in the event of the death or permanent and continuous loss of
working capacity of Zvi (God forbid), the Company will be entitled to
terminate the Agreement forthwith, without any prior notice.
4.6 It is hereby agreed that if a receiving order or winding-up order
issues against the Management Company or a temporary liquidator or
temporary receiver is appointed for it or a liquidator or permanent
receiver and/or a stay of proceedings order is issued at its petition
or at the petition of any third party in a manner which prevents the
Management Company from continuing to supply the management services,
then Zvi will immediately start to work for the Company in exchange
for the salary and social benefits the cost of which to the Company
will be identical to the monthly management fees under this Agreement,
as of such date, or alternatively, at the exclusive choosing of Zvi,
Zvi will begin to supply the Company with management services by means
of another company that is wholly-owned and controlled by him,
pursuant to the conditions contained in this Agreement."
3. VEHICLE AND ENTERTAINMENT EXPENSES
Clause 5A will be added to the original Management Agreement in the
following wording:
"5A.1 The Company will provide for Zvi's use a vehicle that will be used
for business and private purposes. The Company will bear all expenses
relating to the handling and maintenance of such vehicle. The Company,
at the discretion of the Board of Directors, may replace such vehicle
from time to time.
5A.2 Zvi will be entitled to full reimbursement of the expenses paid by him
during the course of providing the management services to the Company,
including entertainment expenses and reasonable travelling expenses in
Israel and abroad, against presentation of receipts. Without
derogating from the generality of the foregoing, Zvi will be entitled
to full reimbursement of the telephone expenses at home and of the
mobile telephone, including calls abroad, that are related to the
provision of the management services to the Company."
3
4. GENERAL
4.1 This Agreement was approved on July 20, 2005 by the general meeting of
shareholders of the Company by the majority required according to
section 275 of the Companies Law, 1999.
4.2 All the remaining provisions of the Original Management Agreement will
continue to apply without variation. In the event of any inconsistency
between the provisions of the Original Management Agreement and those
contained in this Addendum, the provisions contained in this Addendum
will prevail.
IN WITNESS WHEREOF THE PARTIES HAVE SET THEIR HANDS:
G. WILLI-FOOD INTERNATIONAL LTD. ZVI W. & CO., LTD.
PERSONAL UNDERTAKING
G. Willi-Food International Ltd.
3 Nahal Snir St.,
YAVNE
Dear Sir,
I, the undersigned, Zvi Williger, hereby declare that the provisions of the
above Addendum like those of the Original Management Agreement are acceptable to
me and I confirm that my guarantee for all the undertakings of the Management
Company according to the Original Management Agreement will continue to remain
in full force and effect also in relation to the above Addendum, and that my
undertaking contained in clause 4.5 of the above Addendum is agreed and accepted
by me.
Yours faithfully,
Zvi Williger
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EXHIBIT 4.8
AGREEMENT
MADE AND EXECUTED IN YAVNE ON FEBRUARY 16, 2006
BETWEEN: G. WILLI-FOOD INTERNATIONAL LTD.
of 3 Nahal Snir St., Yavne Industrial Zone
(hereinafter: "WILLI-FOOD")
OF THE ONE PART
AND: GOLD FROST LTD.
of 3 Nahal Snir St., Yavne Industrial Zone
(hereinafter: "GOLD FROST")
OF THE OTHER PART
WHEREAS By an agreement signed between Willi-Food and Gold Frost in
May 2001 it was agreed that Willi-Food would store, sell
and distribute Gold Frost's food products, such agreement
having been amended on January 30, 2002 (hereinafter "THE
ORIGINAL AGREEMENT"); and
WHEREAS Gold Frost is desirous of terminating the Original
Agreement on December 31, 2005, and start storing,
marketing, selling and distributing independently its own
food products from January 1, 2006 onwards (hereinafter:
"THE OPERATIVE DATE"); and
WHEREAS Gold Frost, for the purposes of marketing Gold Frost's food
products, is in need of employees, managers, equipment,
etc.; and
WHEREAS It has been agreed between the parties that Willi-Food will
transfer to Gold Frost, on the Operative Date, employees,
equipment and various rights to enable Gold Frost to start
storing, marketing, selling and distributing from the
Operative Date its products, independently; and
WHEREAS Willi-Food has agreed to provide Gold Frost with assistance
in all matters related to the sale of Gold Frost's food
products in Israel, including by way of issuing
certificates of despatch and invoicing customers, assisting
in collection from customers, etc., as more particularly
set out in this Agreement; and
WHEREAS The parties are desirous of regulating their relationship
as hereinafter provided;
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IT IS THEREFORE AGREED, STIPULATED AND DECLARED BETWEEN THE PARTIES AS
FOLLOWS:
1. PREAMBLE, HEADINGS AND SCHEDULES
1.1 The preamble to this Agreement constitutes an integral part thereof
and is binding as equally as the remaining terms thereof.
1.2 The headings to the clauses of this Agreement are for ease of
reference only and do not constitute any part of the Agreement and are
not to be taken into account at the time of interpreting any of the
provisions of this Agreement or in determining the validity of extent
thereof.
1.3 The Schedules attached hereto constitute an integral part thereof, and
are as follows:
SCHEDULE 2.1 - List of Transferring Employees.
SCHEDULE 3.1.1 - The Trucks/Vehicles being sold to Gold Frost.
SCHEDULE 5.2 - Freight Company's Pricelist
SCHEDULE 6 - Lease Agreement of part of Willi-Food 's Logistics
Center
SCHEDULE 9.1 - List of Additional Services to be provided by
Willi-Food to Gold Frost and List of Eliminated
Administrative and General Expenses.
SCHEDULE 10.1 - Management Services Agreement with Zvi W.& Co.
SCHEDULE 10.2 - Management Services Agreement with Yossi Willi
Management Investment Ltd.
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2. TRANSFER OF EMPLOYEES FROM WILLI-FOOD TO GOLD FROST
2.1 It is hereby agreed that on the Operative Date all the employees whose
names are listed in SCHEDULE 2.1 hereto (hereinafter: "THE
TRANSFERRING EMPLOYEES") will become employees of Gold Frost and
continuity of their rights will be preserved, and for such purpose
Willi-Food will transfer and assign on the Operative Date all its
rights and obligations and the employment agreements of the
Transferring Employees, to Gold Frost. It is to be noted, however,
that Mr. Gil Hochboim will, on the Operative Date, will become an
employee of Gold Frost to the extent of a 33% position only.
2.2 On the Operative Date, Willi-Food will transfer to Gold Frost all the
existing rights in respect of the Transferring Employees under
insurance policies and/or funds and/or provident funds and/or under
any central redundancy fund and/or otherwise by which Willi-Food has
accumulated funds for its employees in respect of all their social
benefits, including in respect of any debt following the termination
of the employer/employee relationship (hereinafter: "THE FUNDS") and
Gold Frost will bear responsibility towards the Transferring Employees
in respect of all their social benefits, including in respect of any
debt following the conclusion of the employer/employee relationship
that will enure following the Operative Date, in a manner whereby the
period of employment of the Transferring Employees at Willi-Food will,
for purposes of the Severance Pay Law, 1963, be regarded as if they
had worked at Gold Frost.
2.3 Willi-Food hereby declares that it has received from all the
Transferring Employees their consent to the substitution of the
employers mentioned in This Agreement.
2.4 It is hereby agreed that Willi-Food will, by the Operative Date,
deposit in the Funds all the sums in respect of the Transferring
Employees which it is bound to deposit up till the Operative Date
pursuant to the provisions of any law or the agreements with the
Transferring Employees.
2.5 Willi-Food will, in addition to that stated in clause 2.4 above,
concurrently with the Operative Date, transfer to Gold Frost the sum
of NIS 47,972 to cover all Willi-Food's obligations in respect of
outstanding vacation leave that has not been taken and to cover the
liability for vacation allowance that has accrued to their benefit up
till the Operative Date, towards those Transferring Employees.
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2.6 Willi-Food hereby declares that in relation to some of the
Transferring Employees, it has not made full contributions to the
Funds in relation to the period culminating with the Operative Date,
and that the shortfall in the contributions appears in SCHEDULE 2.1.
Willi-Food undertakes that on the date of the cessation of the
employer/employee relationship between Gold Frost and any of the
Transferring Employees, Willi-Food will pay Gold Frost the shortfall
in the contributions mentioned above in respect of the particular
employee, if and to the extent that such shortfall exists, as well as
any additional sum in respect of any debt consequent upon the
termination of the employer/employee relationship and which results
from the period preceding the Operative Date, to which Willi-Food
ought to have contributed in respect of such employee to the Funds
prior to the Operative Date, but has failed to do so. For the
avoidance of any doubt, the enhancement of the employment terms of any
of the Transferring Employees (if any) resulting from Gold Frost's
liability for severance pay in relation to the term during which the
relevant Employee was employed by Willi-Food prior to the Operative
Date, will not be borne by Willi-Food.
2.7 The parties will, shortly after the Operative Date, notify the Income
Tax Commissioner of the commencement of employment of the Transferring
Employees with Gold Frost, as stated in this Agreement, ensuring that
the continuity of their rights in relation to severance pay will be
preserved.
2.8 For the avoidance of any doubt, in the event of any of the parties
being desirous of hiring the services of any additional employee after
the Operative Date, it will do so in accordance with its needs and at
its sole determination. For the avoidance of any doubt, as from the
Operative Date onwards, Willi-Food will cease recruiting employees for
the purpose of working and/or providing services to Gold Frost.
3. SALE OF TRUCKS AND VEHICLES TO GOLD FROST
3.1 DECLARATIONS AND UNDERTAKINGS OF WILLI-FOOD
3.1.1 Willi-Food hereby declares that it is the exclusive and sole
owner of the Trucks and Vehicles detailed in SCHEDULE 3.1.1.
hereto (hereinafter: "THE TRUCKS AND VEHICLES"), and that the
sale price of the Trucks and Vehicles is set out in SCHEDULE
3.1.1.
3.1.2 Willi-Food hereby declares that the company Trucks and Vehicles
are free and clear of all and any charge and/or pledge and/or
attachment and/or debt and/or other third party right and that
there is no contractual or legal or other impediment to the sale,
and transfer of the possession thereof, to Gold Frost.
3.1.3 Willi-Food undertakes to transfer the Trucks and Vehicles to
Gold Frost's possession on the Operative Date, in their condition
as stated in clause 3.1.2. above.
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3.2 DECLARATIONS OF GOLD FROST
Gold Frost hereby declares that it found the Trucks and Vehicles
suitable for its needs and purposes and hereby waives any claim for
fault or inconsistency.
3.3 THE SALE
3.3.1 Willi-Food hereby sells to Gold Frost and Gold Frost hereby
purchases from Willi-Food the Trucks and Vehicles in
consideration of the amount stated in clause 3.4 hereof.
3.3.2 Gold Frost will take possession of the Trucks and Vehicles on
the Operative Date.
3.3.3 It is hereby agreed that notwithstanding the fact that Gold
Frost will, from the Operative Date onwards, be the true owner of
the Trucks and Vehicles, Willi-Food will remain registered in the
records of the Licensing Office as owner of the Trucks and
Vehicles, but this registration will only be valid against third
parties and will be of no effect between the parties to This
Agreement, and Willifood will act as trustee of Gold Frost in
relation to the registered right of title in the records of the
Licensing Office in relation to the Trucks and Vehicles.
Willi-Food will be estopped from claiming against Gold Frost that
it is the owner of the Trucks and Vehicles, and hereby waives
against Gold Frost only, any claim in relation to the ownership
of the Trucks and Vehicles.
3.3.4 Willi-Food may not and undertakes also not to take action to
charge and/or pledge and/or sell and/or grant any rights to any
third party in the Trucks and Vehicles, with the exception of a
sale pursuant and according to the provisions contained in clause
3.6 hereof.
3.3.5 Willi-Food undertakes to notify Gold Frost forthwith of any
attachment and/or charge and/or any other third party rights that
will be imposed on the Trucks and Vehicles during the term of
This Agreement, and notify the attachor and/or the chargee and/or
such third party that the Trucks and Vehicles belong to and are
owned by Gold Frost, and take action to immediately remove all or
any attachment and/or charge and/or other third party rights that
will be imposed on the Trucks and Vehicles by reason of the fact
that such attachor and/or chargee and/or third party believes
that the Trucks and Vehicles belong to Willi-Food, and Willi-Food
undertakes to indemnify Gold Frost in respect of any damage that
will have been incurred by it by reason of such attachment and/or
charge and/or third party rights, so imposed.
3.4 CONSIDERATION
In consideration of the Trucks and Vehicles Gold Frost will pay
Willi-Food concurrently with the Operative Date, the depreciated cost
price of the Trucks and Vehicles according to Willi-Food's books, as
more particularly set out in SCHEDULE 3.1.1.
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3.5 PAYMENTS TO BE BORNE: INSURANCE PROCEEDS
3.5.1 It is hereby agreed that commencing from the Operative Date,
Gold Frost will bear all and any insurance, operating,
maintenance and fuel expenses of the Trucks and Vehicles, and all
and any parking fines and traffic violations which will be
imposed on Willi-Food as a result of the use of the Trucks and
Vehicles. Willi-Food will be entitled to pay those fines on Gold
Frost's behalf, Gold Frost will indemnify Willi-Food in respect
thereof immediately.
Willi-Food receives any tickets for traffic violations and/or
parking fines in respect of the Trucks and Vehicles mentioned
above, it will forward them to Gold Frost as soon as possible.
3.5.2 In the event of any damage being caused to the Trucks and
Vehicles and, as a result and/or in consequence or by reason of
such damage, Willi-Food receives from any third party any
payment, including from the insurance company of the third party
who has caused such damage, Willi-Food will immediately remit any
such payment received, to Gold Frost.
3.5.3 Gold Frost will indemnify Willi-Food in respect of any damage
that will be occasioned to Willi-Food as a result of any claim
for which Willi-Food will be sued by any third party with respect
to any damage that has been caused to it and/or to its property,
by the Trucks and Vehicles.
3.6 TRANSFER OF THE TRUCKS AND VEHICLES INTO GOLD FROST'S NAME/SALE
THEREOF BY GOLD FROST
3.6.1 Willi-Food undertakes, immediately after receiving a written
instruction from Gold Frost to do so, to sign all and any
documents and perform all the acts that will be required to
transfer the registration of the ownership in the Trucks and
Vehicles (or part thereof) from Willi-Food's name into that of
Gold Frost, the Trucks and Vehicles being free and clear of all
and any charge and/or pledge and/or attachment and/or debt or
other third party right except for any charge, pledge,
attachment, debt or other third party right that has been imposed
on the Trucks and Vehicles by Gold Frost. Gold Frost personally
will bear all payments and fees necessary to transfer the
registration of the ownership in the Trucks and Vehicles (or part
thereof) from Willi-Food's name into that of Gold Frost.
3.6.2 If Gold Frost sells the Trucks and Vehicles (or any of them),
the following provisions will then apply:
(a) Gold Frost will give notice thereof to Willi-Food in
writing, setting out the particulars of the purchaser/s
(hereinafter: "THE PURCHASER").
(b) Willi-Food undertakes to immediately sign all the
documentation and perform all the acts that will be required
for transferring the registration of the ownership in the
Trucks and Vehicles (or any of them) from Willi-Food's name
to that of the Purchaser, the Trucks and Vehicles (or any of
them) being free and clear of all or any charges and/or
pledge and/or attachments and/or debts and/or other third
party rights except for any charge, pledge, attachment, debt
or other third party right that has been imposed on the
Trucks and Vehicles (or any of them) of Gold Frost. Gold
Frost will, personally or by means of the Purchaser, bear
all payments and fees necessary to transfer the registration
of the ownership in the Trucks and Vehicles (or any of them)
from Willi-Food's name into that of the Purchaser.
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(c) For the avoidance of any doubt, Gold Frost will be solely
entitled to all items received from the Purchaser in respect
of the sale of the Trucks and Vehicles (or any of them).
3.7 VALIDITY OF CLAUSE 3
The provisions of clause 3 above will lapse in relation to any of the
Trucks and Vehicles on the date on which Willi-Food transfers
registration of the ownership therein as stated in clause 3.6 above,
from Willi-Food's name into that of Gold Frost, or into the name of
the Purchaser.
4. STORAGE
The parties hereby declare that since, according to the lease agreement of
the storage areas that was signed between Willi-Food and Minrav
Infrastructures Ltd, (hereinafter: "MINRAV") on July 3, 1998 and the
supplemental agreement of February 15, 2005, (hereinafter: "MINRAV
AGREEMENT"), Willi-Food may not assign its rights and undertakings under
the Minrav Agreement to any third party without Minrav's consent, and since
Willi-Food has effectively used Minrav's services solely for storage of
Gold Frost's products, and since the Minrav Agreement in any event expires
during April 2006, the parties will act as follows:
4.1 Willi-Food will continue to receive from Minrav for and in the name of
Gold Frost, the leasing and storage services of the refrigerated
warehouses according to the Minrav Agreement while, so far as Minrav
is concerned, Willi-Food will be the party who receives the leasing
and storage services, although in fact it will be the products of Gold
Frost that will be actually stored in Minrav's warehouses. For the
avoidance of any doubt, if Willi-Food will be entitled under the
Minrav Agreement to receive any compensation and/or indemnity from
Minrav in connection with the services that Minrav will have supplied
in connection with Gold Frost's products under the Minrav Agreement,
Willi-Food will pay Gold Frost the amounts so received immediately
following the receipt thereof.
4.2 Gold Frost will bear the payments that Willi-Food will be required to
pay to Minrav in respect of the Minrav Agreement, and for such purpose
will pay the same to Willi-Food on the date on which, according to the
Minrav Agreement, it was incumbent upon Willi-Food to pay the same to
Minrav.
4.3 Shortly prior to the expiration of the Minrav Agreement, the parties
will act in concert to bring about the extension of the Minrav
Agreement either on the same conditions or on such other conditions as
will be agreed between Gold Frost and Minrav, and assign all
Willi-Food's rights and obligations under the Minrav Agreement, to
Gold Frost.
4.4 If the parties have failed to reach an Agreement with Minrav as stated
in clause 4.3 above, Gold Frost will contact any such warehouse or
refrigeration house that will be selected in connection with the
receipt of leasing and/or storage services of its food products.
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5. TRANSPORTATION SERVICES
5.1 It is hereby agreed that as from the Operative Date, Gold Frost may
contract with any transportation company that will be selected in
connection with the receipt of transportation services.
5.2 Willi-Food declares that as of the date of this Agreement, it receives
transportation services from the Yavne and Gederot Drivers Association
Limited company (hereinafter: "THE FREIGHT COMPANY") against the
consideration detailed in the agreed pricelist attached hereto as
SCHEDULE 5.2.
5.3 If Gold Frost elects to receive transportation services specifically
from the Freight Company, but the Freight Company will demand higher
prices from Gold Frost than those set out in SCHEDULE 5.2, then, to
the extent Gold Frost will request Willi-Food to do so, Willi-Food
will hire the services of the Freight Company on Gold Frost's behalf
also, Willi-Food will be the party to pay the Freight Company the
consideration in respect of the transportation services that the
Freight Company will provide to Gold Frost, and Willi-Food will pay
those amounts on the date on which Willi-Food will be required to pay
the same to the Freight Company.
5.4. Whereas two refrigerated trucks, that will remain in Willi-Food's
ownership also after the Operative Date, are also currently used for
the purpose of transporting Gold Frost's products to trucks of remote
agents, that do not frequently come to the center of Israel, it is
hereby agreed that Willi-Food will continue to grant Gold Frost such
transportation services in relation to the various agents to the
extent customary on the date of this Agreement, and in exchange Gold
Frost will participate in Willi-Food `s costs in respect thereof
(depreciation, repairs, fuel, insurance, licensing fees, drivers'
wages, etc.) to the extent of 20%. For the avoidance of any doubt,
Willi-Food will be absolutely responsible towards Gold Frost for the
integrity of the Gold Frost's products that have been given to it as
stated above from the moment they are given until the delivery thereof
to such wholesalers, and will be responsible for any loss or damage
that will be caused to the Gold Frost products mentioned, for any
reason whatsoever. Willi-Food will maintain suitable insurance to Gold
Frost's satisfaction in connection with such Products.
6. LEASING PART OF WILLI-FOOD'S NEW LOGISTICS CENTER
It is hereby agreed that on the date on which Form 4 will be given to the
New Logistics Center being established by Willi-Food, the lease agreement
attached hereto as SCHEDULE 6 will enter into effect between Willi-Food (as
lessor) and Gold Frost (as lessee) of the refrigeration rooms in such
Logistics Center.
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7. TRANSFER OF CELLULAR TELEPHONES
7.1 Whereas the Transferring Employees use, as of the date of this
Agreement, CellCom's cellular telephones that are registered in the
name of Willi-Food (hereinafter: "CELLULAR TELEPHONES") it is hereby
agreed that on the Operative Date, Willi-Food will arrange for CellCom
to transfer all the Cellular Telephones used by the Transferring
Employees into the name of Gold Frost. The parties will cooperate in
order to enable Gold Frost to continue to enjoy also in the future the
favourable terms that are granted to Willi-Food in its capacity of a
large customer. Insofar as the transfer of the Cellular Telephones
will not be enabled into Gold Frost's name, Willi-Food will pay
CellCom the charge in respect of the use of the Cellular Telephones,
and Gold Frost will pay Willi-Food such sums on the date on which it
will be incumbent on Willi-Food to pay the same to CellCom.
8. SALE OF GOLD FROST'S PRODUCTS TO CUSTOMERS, SPECIAL OFFERS AND COLLECTION
8.1 Gold Frost's sales personnel are those who will carry out the sale
activity in relation to the products that Gold Frost will market from
time to time (in this Agreement referred to as - "GOLD FROST'S
PRODUCTS"), to the various customers.
8.2 Since, up to the date of this Agreement, Gold Frost has not sold Gold
Frost Products and the Gold Frost Company Products were sold to
various customers by Willi-Food, and in order to enable Gold Frost to
exploit Willi-Food's marketing and selling power, and the trading
conditions on which Willi-Food sells its products to the various
customers, Willi-Food will supply to Gold Frost sales personnel
mini-terminals and/or certificates of despatch, and/or invoicing by
Willi-Food, and Gold Frost's sales personnel will issue to the various
customers in Willi-Food's name, certificates of despatch and invoices
in respect of Gold Frost's products that will be sold to them.
Notwithstanding the foregoing, it is hereby agreed that the collection
risks from the various customers in respect of Gold Frost's Products
will remain vested in Gold Frost and that insofar as Willi-Food will
not collect any moneys from a customer in respect of Gold Frost's
Products, for any reason whatsoever, Willi-Food will not pay Gold
Frost in respect of those products.
8.3 Whereas Willi-Food has considerable know-how and experience in all
matters relating to customer credit management and liabilities, it is
hereby agreed that Willi-Food will be the party that will manage the
credit and liability volume that will be granted to the various
customers (including by Gold Frost), and this will include making
customer checks with the credit data companies, determining the types
and volume of the collateral that will be required from the various
customers, and pursue the receipt thereof from them, update, on a
daily basis, Gold Frost's sales personnel regarding the credit and
liability volumes that they can grant to any of the various customers,
and employ the necessary measures to realize such collateral to
collect the payments due from the various customers (in the event of
non-payment on due date). In order to implement the foregoing,
Willi-Food undertakes to act pursuant to its existing procedures, as
prevailing from time to time, in all matters relating to the provision
of credit and the liability, and for procuring the collateral from the
various customers.
8.4 It is hereby agreed that the date on which Gold Frost's sales
personnel will deliver any of the Gold Frost Products to any
particular customer, will be deemed to be the date on which Willi-Food
will have purchased those products from Gold Frost, and only on such
date will title to those specific products pass to Willi-Food, in
light of the fact that Willi-Food constitutes Gold Frost's sales
channel, as stated in clause 8.2 above.
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8.5 Willi-Food will pay Gold Frost, in consideration of the Gold Frost
products purchased by Willi-Food from Gold Frost as stated in clause
8.4 above, within 76 days of the end of each calendar month during the
course of which the Products were purchased (hereinafter: "THE PAYMENT
DATE TO GOLD FROST"), the consideration in respect of the Gold Frost
Products so purchased, plus VAT, against a lawful tax invoice
(hereinafter: "THE GOLD FROST PRODUCTS CONSIDERATION"). Such
Consideration will be the equivalent of the total payments that
Willi-Food is entitled to receive from the various customers in
respect of the Gold Frost Products sold by it to them during the
course of the relevant month, according to the tax invoices issued by
Willi-Food to those customers.
8.6 It is hereby agreed that if the following conditions are fulfilled:
8.6.1 the payment date on which any of the customers is meant to pay
Willi-Food in respect of the Gold Frost products purchased by it
during a particular month, preceded the Payment Date to Gold
Frost;
8.6.2 such customer mentioned has not paid Willi-Food in respect of
the Gold Frost Products either on the date on which it ought to
have paid Willi-Food nor by the Payment Date to Gold Frost (in
this clause 8.6 called - "A PROBLEMATIC CUSTOMER"):
then Willi-Food will not pay Gold Frost on the Payment Date to Gold
Frost in respect of those Products so sold to a Problematic Customer,
and the payment in respect of those Products will only be made on the
date on which Willi-Food succeeds to collect the same from the
Problematic Customer. For the avoidance of any doubt, should
Willi-Food not succeed in collecting any sums from the Problematic
Customer even after legal proceedings and execution proceedings have
been pursued, then Willi-Food will be excused from payment of those
monies to Gold Frost.
8.7 It is hereby agreed that if the following conditions are fulfilled:
8.7.1 Willi-Food has paid Gold Frost on the Payment Date to Gold Frost
in respect of any Products before the maturity date on which the
Customer that purchased such Products was bound to make payment
for them to Willi-Food pursuant to the trading conditions between
Willi-Food and such Customer;
8.7.2 and on the date on which such Customer ought to have paid
Willi-Food in respect of the Gold Frost Products, such customer
has not paid Willi-Food in respect of the Willi-Food Products (in
this clause 8.7 called - "A PROBLEMATIC CUSTOMER");
then Gold Frost will pay Willi-Food immediately such sums that
Willi-Food paid to Gold Frost and which the Problematic Customer
failed to pay Willi-Food as stated above, and the payment in respect
of those Products will only be made on the date on which Willi-Food
succeeds to collect the same from the Problematic Customer. For the
avoidance of any doubt, should Willi-Food not succeed in collecting
any sums from the Problematic Customer even after legal proceedings
and execution proceedings have been pursued, then Willi-Food will be
excused from payment of those monies to Gold Frost.
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8.8 It is hereby agreed that if the following conditions are fulfilled:
8.8.1 any of the customers has paid Willi-Food a partial payment in
respect of Products it purchased from Willi-Food during the
course of a particular calendar month;
8.7.2 Willi-Food has sold to such customer both Gold Frost Products as
well as other products of Willi-Food;
If it is possible to impute the amount unpaid to specific invoices
issued by Willi-Food in respect of Gold Frost Products, then
Willi-Food will not pay such sum or Gold Frost will repay such amount
to Willi-Food, and the provisions of clauses 8.6 or 8.7 above, as
appropriate, will respectively apply, and if IT IS NOT possible to
impute the amount unpaid to specific invoices issued by Willi-Food in
respect of Gold Frost Products, then part of the payment that will be
received by Willi-Food will be deemed to be payment in respect of Gold
Frost Products, and part will be deemed to be payment in respect of
the remaining products that have been sold to it, pursuant to the
ratio that the sums which ought to have been received from such
customer in respect of Gold Frost Products that were sold to such
Customer in the relevant month bears to the aggregate amounts that
ought to have been received from such Customer in respect of the
relevant month, and the provisions of clauses 8.6 or 8.7 above, as
appropriate, will respectively apply.
8.9 In the event that any of Willi-Food's customers will debit Willi-Food
and/or offsets against the amounts that it owes Willi-Food in respect
of an annual bonus and/or discounts (such as: a new product discount,
branch opening discount, etc.,) and/or special offers and/or
advertising expenses and/or charges, provided that such charge is not
in respect of any act or omission falling within the responsibility of
Willi-Food (hereinafter: "PAYMENT TO THE MARKETING Chains"), then the
following provisions will apply:
8.9.1 If it is possible to impute a particular part of the payment to
customers to any offer that has been held by the relevant
customer in relation to any of Gold Frost's Products, then Gold
Frost will be the party that will bear such part and such amount
will be reduced from the sums payable by Willi-Food to Gold Frost
pursuant to this Agreement.
8.9.2 If it is not possible to impute a particular part of the payment
to the customers to any offer that has been held by the relevant
customer in relation to any of the Gold Frost Products, then
Willi-Food will be the party that will bear such payment to the
customers.
8.10 The parties will co-operate and do all they are able in order to cause
customers to pay Willi-Food the full amount of the consideration in
respect of the Gold Frost Products. It is hereby agreed that if
Willi-Food notifies Gold Frost that it has exhausted all the
collection possibilities short of resorting to legal proceedings
against any of the Problematic Customers as stated in clauses 8.6 or
8.7 above, as appropriate, then Willi-Food will file an action against
the Problematic Customers mentioned in clauses 8.6 or 8.7 above, as
appropriate, only after receiving Gold Frost's confirmation in advance
and in writing, subject to Gold Frost bearing the costs of such
proceedings (if the sums that were paid were only in respect of Gold
Frost's Products) or a proportionate part of the costs of such
proceedings (if the amounts that were unpaid were in respect of both
Gold Frost Products as well as in respect of other products sold by
Willi-Food to those Customers), pursuant to the rate which constituted
the amount not paid in respect of Gold Frost Products out of the
aggregate amount not paid to Willi-Food by the relevant customer.
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8.11 It is hereby agreed that the provisions of this clause 8 above will
apply solely on sales of Gold Frost Products in Israel, and that
Willi-food will not provide the services mentioned in clause 8 above,
with respect to Gold Frost's products sales abroad.
9. PROVISION OF VARIOUS SERVICES TO GOLD FROST
9.1 In addition to anything else stated in this Agreement, Willi-Food will
provide Gold Frost during the term of this Agreement various services
as enumerated in SCHEDULE 9.1 HERETO (hereinafter: "THE SERVICES"),
which are included in Willi-Food's administration and general expenses
as set out in Willi-Food's consolidated profit and loss statement
(reviewed or audited, as appropriate).
9.2 It is hereby agreed that 3 days following the date on which
Willi-Food's consolidated and reviewed or audited financial statements
for the end of any calendar quarter will have been approved, Gold
Frost will pay Willi-Food in respect of the Services a proportion of
Willi-Food's administrative and general expenses (eliminating the
Services set out in SCHEDULE 9.1 that will be borne solely by
Willi-Food) in respect of such calendar quarter, such proportion to be
computed in accordance with the formula of (A/B) * C, where:
A = Revenues from Gold Frost's sales in the relevant calendar
quarter, pursuant to Gold Frost's reviewed or audited profit and
loss statement (as appropriate) for the end of such quarter.
B = Revenues from Willi-Food's sales in the relevant calendar
quarter, according to Willi-Food's consolidated, reviewed or
audited profit and loss statement (as appropriate) for the end of
such quarter.
C = Willi-Food's administrative and general expenses in respect of
such quarter, pursuant to Willi-Food's consolidated reviewed or
audited profit and loss statement (as appropriate) for the end of
such quarter.
10. MANAGEMENT SERVICES, MANAGEMENT FEES AND BONUSES
10.1 Willi-Food hereby declares that it entered into an agreement on June
1, 1998 to receive management services with Zvi W. & Co., Ltd.,
(hereinafter: "ZVI'S MANAGEMENT COMPANY") which was amended on August
1, 2005, and which is attached hereto as SCHEDULE 10.1 (hereinafter:
"THE ZVI MANAGEMENT AGREEMENT").
10.2 Willi-Food hereby declares that it entered into an agreement on June
1, 1998 to receive management services with Yossi Willi Management
Investment Ltd., (hereinafter: "JOSEPH'S MANAGEMENT COMPANY") which
was amended on August 1, 2005, and which is attached hereto as
SCHEDULE 10.2 (hereinafter: "THE JOSEPH MANAGEMENT AGREEMENT").
11
10.3 Subject to receiving the confirmation of Zvi's Management Company and
of Zvi Williger, Willi-Food hereby assigns to Gold Frost 50% of
Willi-Food's rights and obligations under the Zvi Management Agreement
in a manner whereby as from the Operative Date onwards, the Zvi's
Management Company will supply Gold Frost with management services to
the extent of 50% of its undertakings under the Zvi Management
Agreement, and Gold Frost will pay, as from the Operative Date onwards
to Zvi's Management Company directly, 50% of the management fees and
expenses payable by Willi-Food to Zvi's Management Company according
to the Zvi Management Agreement, and Willi-Food will pay Zvi's
Management Company the balance of the management fees and expenses
that are due to it under the Zvi Management Agreement.
It is hereby agreed that in addition to that stated above, Gold Frost
will pay Zvi's Management Company "the bonus from the Company's
profits" pursuant to clause 6 of the Zvi Management Agreement, this
clause to be construed as relating to Gold Frost's profits
(hereinafter: "ZVI'S BONUS FROM GOLD FROST'S PROFITS"), while
Willi-Food will pay Zvi's Management Company "the bonus from the
Company's profits", pursuant to clause 6 of the Zvi Management
Agreement, less the amount of Zvi's Bonus from Gold Frost's Profits,
if and to the extent Gold Frost's profits constitute part of
Willi-Food's profits. For the avoidance of any doubt it is hereby
clarified that the Company's profits before tax etc., in relation to
which "the Operative Profit" (as defined in clause 6 of Zvi's
Management Agreement) is calculated are Willi-Food's consolidated
profits.
10.4 Subject to receiving the confirmation of Joseph's Management Company
and of Joseph Williger, Willi-Food hereby assigns to Gold Frost 20% of
Willi-Food's rights and obligations under the Joseph Management
Agreement in a manner whereby as from the Operative Date onwards,
Joseph's Management Company will supply Gold Frost with management
services to the extent of 20% of its undertakings under Joseph's
Management Agreement, and Gold Frost will pay, as from the Operative
Date onwards to Joseph's Management Company directly, 20% of the
management fees and expenses payable by Willi-Food to Joseph's
Management Company according to Joseph's Management Agreement, and
Willi-Food will pay Joseph's Management Company the balance of the
management fees and expenses that are due to it under Joseph's
Management Agreement.
It is hereby agreed that in addition to that stated above, Gold Frost
will pay Joseph's Management Company "the bonus from the Company's
profits" pursuant to clause 6 of Joseph's Management Agreement, this
clause to be construed as relating to Gold Frost's profits
(hereinafter: "JOSEPH'S BONUS FROM GOLD FROST'S PROFITS"), while
Willi-Food will pay Joseph's Management Company "the bonus from the
Company's profits", pursuant to clause 6 of the Joseph Management
Agreement, less the amount of Joseph's Bonus from Gold Frost's
Profits, if and to the extent Gold Frost's profits constitute part of
Willi-Food's profits. For the avoidance of any doubt it is hereby
clarified that the Company's profits before tax etc., in relation to
which "the Operative Profit" (as defined in clause 6 of Joseph's
Management Agreement) is calculated, are Willi-Food's consolidated
profits.
10.5 It is hereby agreed that from the Operative Date onwards, each of the
parties will pay Zvi's Management Company and Joseph's Management
Company directly its share of the payments mentioned in clauses 10.3
and 10.4 above, the undertakings to make such payments being solely of
each party.
12
11. INDEMNITY
11.1 In the event of any third party, including a competent authority
(hereinafter: "THIRD PARTY") filing an action and/or demand against
any of the parties to this Agreement (hereinafter: "THE DEFENDANT
PARTY") by reason of an act or omission of the other party
(hereinafter: "THE INDEMNIFIOR"), the following provisions will apply:
11.1.1 The Defendant Party will give notice in writing thereof to the
Indemnifior as quickly as possible.
11.1.2 The Defendant Party will allow the Indemnifior to defend such
action by granting a power of attorney to the Indemnifior's
lawyer, empowering him to represent the Defendant Party in the
defence against the action, provided that the Indemnifior will
bear all costs involved in the defence against the action,
including legal fees. The power of attorney will not allow any
consent, admission or compromise to be made in the Indemnifior's
name, without its prior written consent.
11.1.3 The Defendant Party will not waive any right against the Third
Party, nor will it compromise with the Third Party in relation to
any action of the Third Party unless the Indemnifior's prior
written and advance consent will have been granted, such consent
not to be unreasonably withheld.
12. TERM OF THE AGREEMENT
12.1 This Agreement will enter into effect on the Operative Date and will
remain in full force and effect until terminated as provided in
clauses 12.2 and 12.3 hereof.
12.2 Gold Frost will be entitled to bring this Agreement to an end at any
time by at least 6 months' notice to be given to Willi-Food.
Willi-Food will be entitled to bring this Agreement to an end at any
time by at least 12 months' written notice that will be given to Gold
Frost.
12.3 Each of the parties may terminate this Agreement immediately and
without any prior notice upon the occurrence of one or more of the
following events with respect to the other party:
12.3.1 a receivership order or winding-up order has been issued
against it or a temporary liquidator or temporary receiver has
been appointed and such appointment is not vacated within 45
days.
12.3.2 a liquidator or permanent receiver has been appointed for it; a
stay of proceedings order has been issued at its petition or at
the petition of any third party; an arrangement has been made
with or for the benefit of creditors.
12.3.3 it has committed a fundamental breach of this Agreement and
such breach will not have been cured within 14 days of the date
on which the infringing party has been required by the other
party in writing to cure such breach.
13
12.3.4 it has committed a breach not being a fundamental breach of
this Agreement, and such breach will not have been cured within
75 days of the date on which the infringing party has been
required by the other party in writing to cure such breach.
13. ASSIGNMENT OF RIGHTS
The parties and/or any person on their behalf (hereinafter: "THE TRANSFEROR
COMPANY") will not sell or lease or assign or charge or pledge or convey or
otherwise dispose of all or any of their rights or obligations under this
Agreement to another or other parties except to a company that is in its
full ownership and control (hereinafter: "THE TRANSFEREE COMPANY"),
provided that such Transferee Company (1) will remain in the full control
and ownership of the Transferor Company for the entire Term of the
Agreement; (2) will undertake towards the other party for all the
liabilities of the Transferor Company, subject to the Transferor Company
remaining guarantor and exclusively responsible in relation to all the acts
and omissions of the Transferee Company.
14. GENERAL
14.1 This Agreement and/or any addendum thereto, whether existing or
future, constitutes everything which has been agreed between the
parties on the matters set out therein and may not be amended or
modified except by way of a written document signed by them.
14.2 The parties irrevocably agree that in relation to this Agreement
and/or whatever results therefrom, the exclusive jurisdiction will be
vested in the courts of Tel Aviv - Jaffa.
14.3 The consent of any of the parties to deviate from any condition of
this Agreement in a particular instance or series of instances will
not constitute any precedent nor will any inference be drawn therefrom
with regard to any other instance in the future.
14.4 The failure to enforce or delayed enforcement by any of the parties of
the rights conferred upon it under this Agreement or at law, in any
particular instance or in a series of instances, will not be regarded
as a waiver of such right or of any other rights whatsoever.
14.5 The parties will bear stamp duty in respect of this Agreement (if any)
in equal shares.
14.6 Each party will bear the costs of its own lawyer.
14.7 Until any party notifies to the other in writing, the addresses of the
parties for the purpose of this Agreement are as appearing at the head
thereof, and any such notice that will be sent by one party to the
other will be deemed to have been received by the addressee on the
same day - if served or left at its address or if sent to it by fax -
if a certificate of the despatch thereof has been received, and, if
sent by mail, will be deemed to have been received by the addressee
within 4 (four) business days following the date on which it was sent
by registered mail.
14
IN WITNESS WHEREOF THE PARTIES HAVE SET THEIR HANDS:
G. WILLI-FOOD INTERNATIONAL LTD. GOLD FROST LTD.
CERTIFICATE
We confirm that stated in clause 10 above and confirm that we are aware that as
from the Operative Date onwards, Willi-Food's undertakings towards us will be
reduced to the extent of Gold Frost's undertakings towards us and that the
undertakings of each of Willi-Food and Gold Frost will be freestanding, without
there being any guarantee whatsoever of Willi-Food for Gold Frost's
undertakings, and vice-versa.
________________________ ___________________________________
Zvi W. & Co., Ltd. Zvi Williger
_____________________________________ ___________________________________
Yossi Willi Management Investment Ltd. Joseph Williger
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15
SCHEDULE 2.1
NAMES OF "THE TRANSFERRING EMPLOYEES"
SHORTFALL IN THE CONTRIBUTORY PAYMENTS TO SEVERANCE PAY
1. Iluz David -
2. Amsilli Yaron NIS. 4,463
3. Asban Yehuda NIS. 3,873
4. Barzilai Ronnen NIS. 1,460
5. Dadshov Roslyn NIS. 3,500
6. Dahan Moshe NIS. 583
7. Vazani Herzel NIS. 1,460
8. Vaknin Oren NIS. 4,375
9. Verolker Oded NIS. 730
10. Zorin Natalie NIS. 2,293
11. Cohen Amos NIS. 3,612
12. Lanziano Avraham NIS. 802
13. Zirotin Yevgeni NIS. 3,496
14. Samuelov Yaacov NIS. 2,625
15. Amar Raffi -
16. Plotnick Ron NIS. 6,249
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SCHEDULE 3.1.1
PARTICULARS OF TRUCKS/VEHICLES BEING SOLD
TYPE OF TRUCK/VEHICLE LICENCE NO. SALE COST IN NIS.
--------------------- ----------- -----------------
1. Renault Mascot 15-948-77 18,027
2. Renault Mascot 15-780-77 17,315
3. Renault Mascot 15-471-83 29,779
4. Renault Mascot 15-594-87 41,150
5. Renault Mascot 15-711-89 43,779
6. Renault Mascot 50-805-99 70,223
7. Renault Mascot 51-960-58 73,659
8. Daf 45 56-530-36 175,639
9. Daf 45 56-755-36 200,981
10. Isuzu 57-159-68 211,374
11. Isuzu 14-911-28 306,262
12. Renault Megane 14-446-13 120,274
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2
SCHEDULE 5.2
PRICE LIST OF THE FREIGHT COMPANY - IN NEW SHEKELS
CONTAINER 20F. CONTAINER 40F.
-------------- --------------
ASHDOD-YAVNE 676 832
YAVNE-HOLON 676 832
YAVNE-JERUSALEM 832 1,144
YAVNE-HAIFA 832 1,144
ADDITIONAL CARRIAGE 180 360
GENERATOR 400 500
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3
SCHEDULE 9.1
LIST OF "THE SERVICES"
1. Wages and incidentals - Secretariat, bookkeeping, bill collection, clerical
work, etc.
2. Professional services - legal and accountancy fees, directors' insurance,
consulting.
3. Communications - telephony and cellular appliances for managers.
4. Office maintenance - messengers, office leasing, electricity, city taxes,
computers, office needs and the like.
5. Vehicle maintenance for managers.
6. Depreciation - computer equipment, furniture and manager's vehicles.
7. Other - fees, Trendline, typing, professional literature, entertainment
expenses, donations, gifts to customers and the like.
EXPENSES ELIMINATED
1. Management fees and bonuses paid by Willi-Food pursuant to Zvi's Management
Agreement and Joseph's Management Agreement.
2. Stock exchange fees.
3. Legal fees in connection with Willi-Food being a public company traded on
Nasdaq.
4. Directors' fees.
5. Willi-Food's bad debts expenses.
4
EXHIBIT 4.9
RENTAL AGREEMENT
made and signed in Yavne on February 16, 2006
BETWEEN: G. WILLI-FOOD INTERNATIONAL LTD. (PUBLIC COMP. NO. 520043209)
of 3 Nahal Snir Street, Northern Industrial Zone, Yavne 81106
(hereinafter: "THE LESSOR")
AS THE PARTY OF THE FIRST PART;
AND: GOLD FROST LTD. (PUBLIC COMP. NO. 520034828)
of 3 Nahal Snir Street, Northern Industrial Zone, Yavne 81106
(hereinafter: "THE LESSEE")
AS THE PARTY OF THE SECOND PART;
Whereas the Lessor owns the rights in a Logistics Center built on
property located in Yavne, in the north industrial zone, and
which is known as part of Parcel 3 in Block 5403, Plot No.
2035 on an area of approximately 19,016 m(2) (hereinafter:
"THE LOGISTICS CENTER");
and whereas the Lessor is entitled to rent spaces in the Logistics Center
to tenants;
and whereas the Lessee is interested in renting from the Lessor and the
Lessor is interested in renting to the Lessee, in unprotected
tenancy, rented premises in the LOGISTICS CENTER, and
everything for the purpose and under the terms specified
hereunder in this agreement;
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THEREFORE, IT HAS BEEN AGREED, DECLARED AND STIPULATED BETWEEN THE PARTIES AS
FOLLOWS:
1. PREAMBLE
1.1 The Parties' declarations, the Preamble and the Appendices constitute
an integral part of this Agreement.
1.2 The clause headings in the Agreement are for orientation and
convenience only, and shall not be used for the interpretation
thereof.
2. DEFINITIONS AND APPENDICES
2.1 In this agreement, the following terms shall have the following
meanings:
"THE RENTED PREMISES" - refrigeration rooms and offices in the
Logistics Center, as detailed in APPENDIX A to this Agreement, which
are demarcated in color in the diagram attached hereto as APPENDIX B
to this Agreement, on a total area of 1,445 m(2). It is hereby
clarified that determination of the area of the Rented Premises also
took into account an addition for use of a relative part of the
service areas in the Logistics Center.
"THE PURPOSE OF THE TENANCY" - Use of the Rented Premises for cold
storage of products, as well as use of part of the Rented Premises as
offices for conducting the Lessee's business on the Rented Premises.
"POSSESSION DELIVERY DATE" - 4 days after receipt of Form 4.
"THE RENTAL PERIOD" - 24 years and 11 months beginning from the
Possession Delivery Date and ending on the Rented Premises Vacation
Date.
"RENTED PREMISES VACATION DATE" - Immediately following the end of the
Rental Period in accordance with this Agreement, or upon cancellation
of this Agreement under the circumstances stipulated in this Agreement
or in any law.
"DOLLAR" - one dollar of the United States of America.
"ARREARS INTEREST" - The highest rate of interest that is determined
from time to time at Bank Leumi Le-Israel Ltd. with respect to
excessive credit utilization in customer accounts that are over the
approved credit ceiling.
To remove all doubt, it is hereby clarified that, as prescribed by law,
value-added tax shall be added to each payment in accordance with the
provisions of this Agreement.
2.2 APPENDICES
Appendix A - Description and costs of the Rented Premises
Appendix B - Diagram
Appendix C - Technical specification
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3. THE PARTIES' DECLARATIONS
3.1 The Lessor hereby declares that it is entitled to rent the Rented
Premises to the Lessee, and it has no legal impediment to renting the
Rented Premises to the Lessee.
3.2 The Lessee hereby declares that it knows that this Agreement grants it
the right to rent the Rented Premises only, that it does not now, nor
will it in the future, have any additional rights whatsoever in the
Logistics Center, that the Lessor shall be entitled to make any change
or addition to the Logistics Center from time to time, to build
additional floors in the Logistics Center, carry out additional
construction, jobs and changes therein, to increase or change the
service spaces in the Logistics Center, to create adjacent additions
of any kind, to grant rights of any kind in the Rented Premises and
service areas to any person and for any purpose whatsoever, everything
at its sole discretion, and the Lessee hereby waives every demand or
claim with respect to all these vis-a-vis the Lessor and/or vis-a-vis
other lessees in the Logistics Center, insofar as there will be such,
provided that these do not pose an ongoing, unreasonable hindrance to
the management of the Rented Premises pursuant to the Purpose of the
Tenancy.
2
3.3 In addition to the aforesaid, the Lessee hereby declares and
undertakes, subject to the Lessor's declarations and the fulfillment
of its obligations pursuant to this Agreement, that it has seen and
examined the plot on which the Logistics Center will be built, and its
surroundings and its planning status, and found them to be suited to
its needs and purposes from all points of view and to its full
satisfaction.
4. THE TENANCY
The Lessor hereby rents to the Lessee, and the Lessee hereby rents from the
Lessor, the Rented Premises for the period and purpose detailed in this
Agreement, and under the terms specified therein.
5. EXCLUSION OF TENANTS' PROTECTION LAWS
5.1 The tenancy, the Lessee and the Lessor are not protected by the
Tenants' Protection Law or by any other law that exists or will be
enacted in the future that protects the Lessee in any manner
whatsoever, and the said laws and their amendments as well as the
regulations and/or the orders that have been or will be promulgated
pursuant thereto do not and will not apply to the tenancy and the
Rented Premises, or to the Agreement.
5.2 The Lessee hereby declares that it has not been asked and has not paid
key money as it is defined in the Tenants' Protection Law or payments
that may be construed or regarded as key money, and that all the jobs,
changes, renovations, improvements and enhancements done to the Rented
Premises - insofar as they will be done - are not and were not
fundamental changes, and the provisions of Section C of the Tenants'
Protection Law shall not apply to the Agreement.
6. THE PURPOSE OF THE TENANCY
The Lessee undertakes to use the Rented Premises solely for the Purpose of
the Tenancy, neither to use nor to allow anyone to use the Rented Premises
or any part thereof for any purpose other than the Purpose of the Tenancy.
And without derogating from the generality of the aforesaid, the Lessee
undertakes not to conduct any business on the Rented Premises other than
that which is specified in the Purpose of the Tenancy.
3
7. THE RENTAL PERIOD
7.1 The Lessor hereby rents to the Lessee, and the Lessee hereby rents
from the Lessor, the Rented Premises for the Rental Period, and in
accordance with the provisions below.
7.2 The Lessee shall be entitled, at any time, to shorten the Rental
Period by notifying the Lessor in writing 6 months in advance, and the
Lessee will vacate the Rented Premises at the end of the
aforementioned 6 months.
7.3 The Lessor will be entitled, at any time, to shorten the Rental Period
by notifying the Lessee in writing 12 months in advance, and the
Lessee will vacate the Rented Premises at the end of the
aforementioned 12 months.
8. THE RENTAL FEE
8.1 The Lessee undertakes to pay the Lessor during the Rental Period,
every month, a rental fee for the Rented Premises.
8.2 For its use of the Rented Premises during the Rental Period, the
Lessee shall pay the Lessor a monthly rental fee in NIS equivalent to
18,084$ (eighteen thousand and eighty four dollars) according to the
representative dollar rate on the payment date, according to the
details in APPENDIX A to this Agreement, for each month during the
Rental Period, plus VAT (hereinafter: "THE RENTAL FEE").
8.3 The Rental Fee will be paid on the first day each calendar quarter, in
advance for the three months beginning on that date. Should any
payment date fall on a Saturday or a holiday, the Rental Fee will be
paid on the first business day thereafter.
8.4 The Lessee undertakes to pay the Lessor the Rental Fee throughout the
Rental Period, even if for any reason whatsoever, it shall not use the
Rented Premises during the Rental Period or any part thereof.
8.5 A delay of over 15 (fifteen) days in paying the Rental Fee will
constitute a material breach of the Agreement.
9. ADAPTING THE RENTED PREMISES TO MEET THE LESSEE'S NEEDS
9.1 The Lessor undertakes to implement, at its own expense, adaptation
jobs on the Rented Premises in accordance with the technical
specification attached to this Agreement as APPENDIX C and install
therein the installations detailed in the aforementioned specification
(hereinafter: "THE ADAPTATION JOBS"). The Adaptation Jobs will be
implemented by the Lessor with the proper expertise and good
materials, using good, skilled professionals who are licensed and
experienced at working in their profession. The aforesaid shall not be
construed as derogating from the Lessor's right to build by means of
skilled contractors and/or subcontractors who are licensed and
experienced at working in their profession.
4
The Lessor undertakes to scrupulously uphold the provisions of any
applicable law with respect to implementation of the Adaptation Jobs
and to fulfill the demands of the Competent Authorities, including the
Local Authority, the Firefighting Department, Civil Defense, the
Israel Police Department, the Electric Company and Bezeq with respect
to the implementation thereof.
9.2 The Lessor undertakes to complete the Adaptation Jobs at the Rented
Premises by the Possession Delivery Date.
9.3 The Lessor undertakes to deliver possession of the Rented Premises to
the Lessee on the Possession Delivery Date whilst it is vacant of all
persons and belongings and complete in accordance with APPENDIX C, and
whilst it is worthy of use for the Rental Purpose. Without derogating
from the generality of the aforesaid, it is hereby explicitly agreed
that, on the Possession Delivery Date, the Rented Premises will be
clean and ready for immediate use, whilst it is connected to the
electrical, sewage, water, communication and telephone systems, and
whilst it is worthy of occupancy and use in accordance with any law,
after all the requisite approvals have been given for the Rented
Premises, including and without derogating from the generality of the
aforesaid, Form 4, approval by the Electric Company and the Standards
Institute, approval by a safety engineer. The Lessee also undertakes
that on the Possession Delivery Date all the access roads to the
Rented Premises will be whole and in good condition.
10. MANAGING THE LOGISTICS CENTER
The Lessee undertakes to fully carry out each provision, instruction,
permit and/or prohibition that apply or will apply from time to time to the
Logistics Center, including each repair and/or change therein, as it will
be determined from time to time at the Lessor's sole discretion. The Lessee
undertakes not to do anything by itself and/or allow anyone to do anything
in or related to the Rented Premises that contradicts the aforesaid.
11. MAINTAINING THE RENTED PREMISES
11.1 The Lessee undertakes to maintain the Rented Premises, including
equipment and installations that serve the Rented Premises and which
are situated therein, in good and proper condition and at a high level
and quality that are suitable for the Logistics Center. The Lessee
undertakes to avoid causing any damage or impairment to the Rented
Premises or its installations, and to immediately repair, by itself
and at its own expense, any defect, impairment or damage that is
caused as stated above by itself and/or by anyone acting on its behalf
and/or by any other person, such that the situation will return to the
way it was in accordance with the standard that prevailed before the
defect or impairment or damage occurred.
5
11.2 The Lessee undertakes that all the equipment, accessories and other
installations it brings into the Rented Premises will be of a level
and quality that are suited to a first-class business of the type
conducted by the Lessee and suited to the level of the Logistics
Center.
11.3 If the Lessee does not make the repairs as stated above in Clause 11.1
and/or does not make said repairs properly and/or does not act as
stated above in Clause 11.2, the Lessor shall be entitled, though not
obliged, to make each repair and perform each action as it sees fit
for the purpose of repairing the damage and/or placing the Rented
Premises on the proper level and quality as stated above and/or
returning the situation to the way it was, at the Lessee's expense.
The Lessee shall pay, immediately following the first request by the
Lessor and without delay, each sum that the Lessor has spent in
carrying out the aforesaid. The Lessor's invoices will constitute
irrefutable proof of their accuracy.
The Lessor and/or anyone acting on its behalf shall be entitled to
enter the Rented Premises in order to exercise the Lessor's right as
stated above in this clause.
11.4 The Lessee undertakes to carry out the provisions of any law,
regulation, order or municipal law with respect to the Rented Premises
and the maintenance and use thereof. The Lessee undertakes not to do
and/or permit anyone to do anything in the Rented Premises or any part
thereof or with respect thereto that may constitute a hazard or
nuisance or to cause damage or inconvenience to the Lessor and/or the
Logistics Center and/or any other person, and the Lessee shall bear
all the consequences of a breach of these obligations.
11.5 The Lessee undertakes to keep the Rented Premises and their immediate
surroundings clean and conduct its business solely within the bounds
of the Rented Premises. The Lessee undertakes not to place movable
property and/or any other thing outside the Rented Premises, and not
to cause any hazard, nuisance, inconvenience or unpleasantness to the
Lessor and/or any other person. The Lessee shall bear all the fines
that will be imposed by a municipal and/or other Authority for a
breach of the provisions of this clause. If fines are imposed on the
Lessor for an act or omission by the Lessee, the Lessee shall
indemnify the Lessor for the full amount of the fines, plus arrears
interest for the period beginning on the date of payment of the fine
by the Lessor and ending on the date of payment of the indemnity.
6
11.6 For the purpose of accessing the Rented Premises, the Lessee
undertakes to use only the stipulated and marked access roads. The
Lessee undertakes to park vehicles and transport vehicles only in the
designated places, and not to use any vehicle and/or other transport
means that is liable to damage and/or harm the access roads at the
Logistics Center, and also to avoid using transport means that are
liable to harm the service areas. The Lessee undertakes to carry out
each instruction that is given by the Lessor and/or anyone acting on
its behalf, from time to time, with respect to access to the Rented
Premises and their surroundings.
The Lessee also undertakes to use the service areas only, and the
access roads especially intended for same, in order to transfer goods
and/or equipment to and from the Rented Premises, and also in order to
dispose of refuse.
11.7 The Lessee undertakes to ensure that its employees and any other
person acting on its behalf wears proper attire, and appears and
behaves in a proper, civilized, quiet, orderly and clean manner at the
Logistics Center, in accordance with the nature of the Logistics
Center.
12. LICENSING AND LICENSES
12.1 The Lessee hereby declares that it is sufficiently well versed in its
business and the required conditions in order to obtain every license
and/or approval and/or permit for the purpose of running said
business, and that before signing this Agreement, it has looked into
the possibility of obtaining the licenses, permits and approvals it
needs in order to run the Rented Premises according to the Purpose of
the Tenancy.
12.2 The Lessee undertakes to obtain all the licenses and/or permits and/or
approvals it needs in order to run and/or manage its business on the
Rented Premises, from each municipal and/or local and/or government
and/or other Authority and maintain their validity throughout the
Rental Period. The Lessee declares that the Lessor is bears no
responsibility for obtaining for it any license and/or permit and/or
approval as stated above.
13. PERFORMING JOBS ON THE RENTED PREMISES
13.1 The Lessee undertakes not to carry out any internal and/or external
change to the Rented Premises, not to make any addition, not to
destroy any part of the Rented Premises, and/or any of its
installations, and not to allow anyone to carry out any change and/or
addition and/or renovation and/or destruction, including changes to
the structure, form or any other change and/or modification to the
inside or outside of the Rented Premises, without obtaining the
Lessor's advance written consent, which the Lessor will given, or not
give, at its sole and absolute discretion, and without having to give
reasons for its decision. The Lessor shall be entitled to prevent the
performance of any act that contradicts this clause, as well as to
destroy and remove any change, addition and renovation that have been
performed in a manner that is not in accordance with this clause, and
everything at the Lessee's expense.
7
13.2 The Lessee undertakes that each job and/or action that is performed by
it or by anyone acting on its behalf, whether for its purposes or for
any other purpose, will be performed in a manner that does not entail
unreasonable noise or inconvenience or nuisance.
Without derogating from the Lessee's liability as stipulated in this
Agreement, the Lessee shall be liable for all damage of any kind that
is caused to the Lessor and/or the Rented Premises and/or the
Logistics Center and/or the property and/or any person for performance
of and/or during jobs, bear the cost of each repair that is required
and pay said cost immediately following the Lessor's request, and
compensate the injured party for all damage it has incurred.
13.3 Every change, addition, renovation and/or repair that has been made by
the Lessee during or before the Rental Period, and everything that is
connected to the Rented Premises will transfer to the Lessor's
possession at the end of the Rental Period or upon termination of this
Agreement. The Lessee shall not be entitled to any payment whatsoever
for the materials or for performance of these jobs and it hereby
waives all claims and/or demands with respect thereto. Should the
Lessor demand that the Lessee return the Rented Premises to the state
it was in prior to the signing of this Agreement, the Lessee shall do
so at its own expense.
13.4 The Lessee undertakes to enable the Lessor and/or anyone acting on its
behalf to enter the Rented Premises at any time in order to examine
the Rented Premises and/or in order to perform therein jobs and
repairs of any kind whatsoever, including the opening of walls,
floors, ceilings and other parts of the Rented Premises, the
replacement and repair of installations and piping to connect thereto,
the performance of any job that is required in the Lessor's opinion.
Should the Lessor perform the aforementioned jobs, it shall make every
effort to ensure that the disturbance to the Lessee is minimal and
that the Rented Premises are returned to their previous state as soon
as possible.
14 TAXES AND OTHER PAYMENTS
14.1 The Lessee undertakes that, throughout the Rental Period, it shall pay
all the taxes, fees, municipal taxes, and compulsory levies that are
imposed and will be imposed, whether directly or indirectly (including
by means of billing the entire Logistics Center), according to its
relative share of the floor space of the Logistics Center (minus the
service areas), which, as at the date of signing this Agreement, is
16.8%. Every aforementioned payment shall be made by the Lessee,
whether directly or indirectly (to the Lessor), on the binding date
for payment thereof.
Without derogating from the generality of the aforesaid, the Lessee
undertakes to bear the payments and expenses for municipal taxes and
water - according to the relative share of the Rented Premises out of
the Logistics Center as at the date of signing this Agreement, i.e.
16.8% of the expenses involving municipal taxes, water and sewage
fees.
8
14.2 The Lessee undertakes that, throughout the Rental Period, it shall
bear all the payments and expenses for electricity, water, gas and
fuel supply, as well as telephone service, insurance and every other
expense related to its use of the Rented Premises and the running
thereof, in full and on time.
Without derogating from the generality of the aforesaid, the Lessee
undertakes to bear the payments and expenses for electricity according
to its actual consumption thereof. To that end, a separate electricity
meter for the Rented Premises will be installed.
14.3 Insofar as any of the payments or expenses apply to the Lessee
directly and for which receipts and/or confirmations are issued, the
Lessee undertakes to show the Lessor, from time to time, at the
Lessor's request, all the receipts and/or confirmations that prove
that it has indeed paid the payments to which it is subject in
accordance with this Agreement, and, at the end of the tenancy, to
leave the Lessor with copies of all receipts and/or confirmations as
stated above.
15. LIABILITY AND INDEMNIFICATION
15.1 The Lessor and anyone coming and/or acting on its behalf shall not be
liable in any way for any damage and/or injury caused to the Lessee
and/or its business and/or its property, including and without
derogating from the generality of the aforesaid, damage or injury
caused by the entry of the Lessor and/or anyone acting on its behalf
into the Rented Premises for any of the purposes detailed in this
Agreement, unless said damage is caused as a direct result of
negligence on the part of the Lessor and/or its employees.
The Lessee hereby waives all claims, demands and contentions, as
stated above, toward the Lessor.
15.2 To remove all doubt, and without derogating from the aforesaid in
Clause 15.1, it is hereby clarified that the Lessor and anyone coming
and/or acting on its behalf shall not bear any liability whatsoever
and/or indebtedness whatsoever for bodily damage and/or loss and/or
property damage of any kind that is caused to the Lessee and/or its
employees and/or anyone acting on its behalf, except under the
circumstances detailed in Clause 15.1 above.
15.3 The Lessee only shall bear liability for all losses and/or damage
caused to the Rented Premises and/or the Logistics Center and/or its
contents and/or any person and/or corporation, including its employees
and/or the Lessor and/or anyone acting on its behalf and/or any other
person, due to the running of its business on the Rented Premises
and/or from the maintenance and/or use of the Rented Premises, and/or
from any other act or omission by the Lessee.
9
15.4 The Lessee undertakes to compensate and/or indemnify the Lessor
for all damages and/or expenses that it will pay and/or may
undertake to pay or be forced to pay due to any damage caused
under the circumstances that do not establish the Lessor's
liability as specified in Clause 15.1 above.
15.5 The Lessee undertakes to compensate and/or indemnify the Lessor
for all damages or expenses it incurs due to a lawsuit filed
against it, be it civil or criminal, and stems from the need to
defend itself against said lawsuit, insofar as same results from
nonfulfillment of the Lessee's obligations pursuant to this
Agreement or a breach of said obligations, including any damage
claim that is not within the scope of the circumstances that
establish the Lessor's liability as specified in Clause 15.1
above.
16. INSURANCE - cancelled
17. VACATING THE RENTED PREMISES
17.1 The Lessee undertakes that it shall vacate the Rented Premises on the
Rented Premises Vacation Date and deliver possession thereof to the
Lessor and/or anyone appointed by the Lessor, whilst the Rented
Premises are empty of all persons and objects belonging to the Lessee,
and neat and clean.
17.2 Without derogating from any other right granted to the Lessor by this
Agreement and/or in accordance with any law, the Lessee undertakes
that, should it fail to vacate the Rented Premises as stated above in
Clause 17.1, it shall pay the Lessor for the period between the Rented
Premises Vacation Date and its actual vacation thereof, a sum that is
equivalent to twice the daily Rental Fee for each day of delay in
vacating the Rented Premises. The Lessee declares that this sum has
been determined and agreed between the parties as stipulated,
pre-estimated, damages that have been prudently set by the parties as
the reasonable sum for damage incurred by the Lessor due to the
Lessee's failure to vacate the Rented Premises on the Rented Premises
Vacation Date, without derogating from the Lessor's right to be
awarded any other remedy due it in accordance with the Agreement
and/or the law.
18. BREACHES, REMEDIES, AND NULLIFYING THE AGREEMENT
18.1 This Agreement is subject to the provisions of the Contract Law
(Remedies for Breach of Contract), 1970.
18.2 Without derogating from the aforesaid in this Agreement, and with each
remedy granted to the Lessor in accordance therewith, should the
Lessee be in arrears with respect to one of the payments it is obliged
to make in accordance with this Agreement, the following provisions
will apply:
10
18.2.1 Each sum owed by the Lessee to the Lessor in accordance with
this Agreement, and which is paid late, will bear collection
expenses and Arrears Interest beginning from the binding date for
payment pursuant to this Agreement and ending with the actual
payment, plus value-added tax as required by law, without
derogating from any right and/or other remedy granted to the
Lessor in accordance with the provisions of this Agreement and/or
any law.
18.2.2 Should the Lessee fail to fulfill any of its obligations
pursuant to this Agreement as regards payments it owes to any
third party whomsoever, the Lessor shall be entitled, though not
obliged, following advance notification to the Lessee, to pay any
aforementioned payment and/or charge at its discretion and charge
the Lessee for any sum it has paid, as stated above, plus index
linkage differentials calculated from the day of payment until
receipt of the actual reimbursement, plus a 10% (ten percent)
handling fee, and the Lessee undertakes to pay the Lessor the
aforementioned sum immediately following the Lessor's first
request.
18.2.3 Each delay in any payment that the Lessee is obliged to pay the
Lessor according to this Agreement, that exceeds 21 (twenty-one)
business days shall be considered a material breach of this
Agreement.
18.3 The Lessor shall be entitled to immediately nullify the Agreement
should one of the following events occur:
18.3.1 Any bailiff's proceedings whatsoever have been instituted
against the Lessee, and these have not been canceled within 60
(sixty) days.
18.3.2 Bankruptcy and/or liquidation proceedings and/or suspension of
proceedings have been instituted against the Lessee, and these
have not been canceled within 45 (forty-five) days.
18.3.3 A receiver has been appointed for the Lessee and/or its
property, and said appointment has not been canceled within 45
(forty-five) days.
18.3.4 A judicial closure order has been issued for the Lessee's
business and has not been cancelled within 14 days.
19. TRANSFERRING RIGHTS
19.1 The Lessee shall not be entitled to deliver and/or transfer and/or
lease and/or assign and/or convert and/or mortgage and/or pledge its
rights in accordance with this Agreement and/or to allow any third
party whomsoever to use and/or possess the Rented Premises or any part
thereof and/or to involve any third party whomsoever in its possession
of the Rented Premises or in the use thereof or in the deriving of
pleasure therefrom, be it directly or indirectly, be it for
consideration or not for consideration.
11
19.2 The Lessor shall be entitled to transfer its rights according to this
Agreement and/or to sell the Rented Premises, provided that the
Lessee's rights according to this Agreement are not infringed upon as
a result, and provided that it informs the recipient of the rights
and/or the Buyer (as applicable) of the existence of this Rental
Agreement, and the recipient of the rights and/or the Buyer assumes
all the Lessor's obligations and rights vis-a-vis the Lessee according
to this Rental Agreement and delivers a copy of the Buyer's
aforementioned approval to the Lessee. Should the Lessor's rights be
transferred as stated above, the Lessor shall notify the Lessee of
same in writing.
20. GENERAL
20.1 All the payments that the Lessee must make to the Lessor according to
this Agreement will be paid by the Lessee to the Lessor at its offices
or any other location determined by the Lessor.
20.2 For each payment remitted by the Lessee in accordance with this
Agreement, the Lessee shall add, at the time of payment, value-added
tax as required by law, and receive a legal tax invoice for same.
20.3 The Lessor is entitled to offset any sum due it from the Lessee and/or
which the Lessee has undertaken to pay according to this Agreement
and/or any sum required for the fulfillment of any of the Lessee's
obligations according to this Agreement, from any sum due the Lessee
and/or to which it is entitled in its account.
20.4 The Lessee shall not be entitled to offset sums that it is entitled to
receive from the Lessor, from sums due the Lessor, if there are any,
unless the offset is performed vis-a-vis the Lessor for sums that it
has agreed that the Lessee is entitled to receive from it.
20.5 There will be no validity to any waiver, absolution or extension that
have been given or implemented by the Lessor unless they have been
implemented explicitly and in writing, and no one may deduce or
understand a waiver, absolution or extension of any breach of this
Agreement by the very act or omission that is not an explicit, written
notification. A delay or avoidance of the use of any right granted to
the Lessor according to this Agreement will not be considered
impediments toward it by the Lessee.
A written waiver in any case whatsoever will not be construed by
anyone as learning comparison by analogy with respect to another
matter, and no one may deduce therefrom with respect to any other
waiver by that party.
12
20.6 This Agreement nullifies all previous agreements between the parties,
whether they have been given, implemented or reached orally or in
writing. No amendment to this Agreement will be valid unless it has
been put in writing and signed by the parties to this Agreement.
21. ADDRESSES AND NOTIFICATIONS
21.1 The parties' addresses for the purposes of this Agreement are as
stated in the Preamble to this Agreement.
21.2 Any notification given in accordance with the aforesaid in this
Agreement will be written and sent by one party to the other via
registered mail or hand-delivered and will be considered delivered
within a reasonable time for said notification to arrive at it the
addressee's destination.
AND IN WITNESS WHEREOF, THE PARTIES HERETO HAVE AFFIXED THEIR SIGNATURES:
------------------------------------ -----------------------
G. WILLI-FOOD GOLD FROST LTD.
INTERNATIONAL LTD.
|
13
APPENDIX A
DESCRIPTION AND COSTS OF THE RENTED PREMISES
ONGOING
UNIT OF NO. OF MONTHLY PER MONTHLY
MEASUREMENT UNITS(1) UNIT COST COST
----------- -------- ---------- -----
Frozen warehouse (-18 degrees) M(2) per month 308 $15.00 $ 4,620
Chilled warehouse (0-4 degrees) M(2) per month 546 $12.00 $ 6,552
Entrance warehouse (0-4 degrees) M(2) per month 374 $12.00 $ 4,488
Cheese cutting (12 degrees) M(2) per month 187 $12.00 $ 2,244
Operations offices M(2) per month 30 $ 6.00 $ 180
TOTAL 1,445 $18,084
|
NOTE:
(1) The spaces include relative loading of the service areas - APS, toilets,
dressing rooms, rubbish, elevators, stairs, kitchenette, dining room,
forklift loading, etc.
14
APPENDIX C
TECHNICAL SPECIFICATION
THE BUILDING CONTENTS:
(1) Refrigeration system in the various areas, as follows:
a. LEVEL 0.0
i. Frozen warehouse: -18 degrees Celsius
ii. Chilled warehouse: 0 to 4+ degrees Celsius
iii. "0" Room: 0 to 4+ degrees Celsius
b. LEVEL 7.5
i. Cheese cutting room: 12+ degrees Celsius
(2) Doors of various types at all the openings
(3) Sealing sleeves at all the external openings
(4) Two height equalizers
(5) Firefighting system + firefighting equipment
(6) Shelf system according to the specification in the diagram, storage
height - 10.90 m.
(7) Air conditioned rooms for the manager + a clerk
(8) Cheese cutting room including an epoxy floor, water drainage in the
floor, a sink including marble, and electricity supply for the cutting
machines and the packing machines
15
EXHIBIT 4.10
DATED FEBRUARY 28, 2006
(1) GOLD FROST LTD
AND
(2) G. WILLI-FOOD INTERNATIONAL LTD
AND
(3) OTHERS
RELATIONSHIP AGREEMENT
Mishcon de Reya
Summit House
12 Red Lion Square
London WC1R 4QD
Tel: 020 7440 7000
Fax: 020 7404 3014
Ref: RJT/SCM/22816-1-1
THIS DEED is made on FEBRUARY 28, 2006
BETWEEN:
(1) GOLD FROST LTD a company incorporated in the State of Israel with company
number 52-003482-8 and whose registered office is situated at 3 Nahal Snir
Street, Yavne 81106, Israel (the "COMPANY"); and
(2) G. WILLI-FOOD INTERNATIONAL LTD a company incorporated in the State of
Israel with number 52-004320-9 and whose registered office is situated at 3
Nahal Snir Street, Yavne 81106, Israel (the "SHAREHOLDER"); and
(3) THOSE PARTIES whose names and addresses are set out in schedule 1 hereto
(together, the "CONTROLLING PARTIES").
WHEREAS:
(A) It is proposed that application be made for the Company's entire ordinary
issued share capital to be admitted to trading on AIM, the market operated
by the London Stock Exchange plc.
(B) On Admission the Shareholder will hold 40,000,000 Ordinary shares
representing 75.7 per cent. of the issued share capital of the Company and
as such will be a Substantial Shareholder (as defined below).
(C) The Shareholder, the Controlling Parties and the Company consider it
necessary and desirable for the success of the Company and the maintenance
of market confidence in it that (i) the Company be capable at all times of
carrying on its business independently of the Shareholder, the Controlling
Parties (and/or their Associates) and (ii) all transactions and
relationships in the future between the Company and the Shareholder or the
Controlling Parties (and/or their Associates) must be at arm's length and
on a normal commercial basis (subject to clause 3.4). Where potential
conflicts exist between the interests of the Company and those of any
controlling shareholder, it is considered desirable to demonstrate that
arrangements are in place to avoid detriment to the general body of
shareholders of the Company and that decisions as to enforcement of those
contractual arrangements are taken independently of the controlling
shareholder.
(D) Accordingly, the parties have agreed to enter into this Agreement to
regulate the relationship between them.
IT IS AGREED as follows:
1. DEFINITIONS AND INTERPRETATION
1.1 In this Agreement (including the Recitals) the following words and
expressions have the following meanings, except as otherwise provided or
where the context otherwise requires:
1
"ADMISSION" means the admission of the entire issued share capital of the
Company to trading on AIM becoming effective as provided in rule 6 of the
AIM Rules;
"AIM RULES" means the London Stock Exchange plc's rules relating to AIM as
in force at the date of this agreement or, where the context requires, as
amended or modified after the date of this agreement;
"ASSOCIATE" means:
1.1.1 in relation to an individual:
(a) that individual's spouse or child (together the "INDIVIDUAL'S
FAMILY")
(b) the trustees (acting as such) of any trust of which the
individual or any of the individual's family is a beneficiary or
discretionary object;
(c) any company in whose equity shares the individual or any member
or members (taken together of the individual's family) or the
individual and any such member or members (taken together) are
directly or indirectly interested (or have a conditional or
contingent entitlement to become interested) so that they are or
would on the fulfilment of the condition or the occurrence of the
contingency be) able:
(i) to exercise or control the exercise of 30 per cent. or more
of the votes able to be cast at general meetings on all, or
substantially all, matters; or
(ii) to appoint or remove directors holding a majority of voting
rights at board meetings on all, or substantially all,
matters; and
1.1.2 in relation to a company:
(a) any other company which is its subsidiary undertaking or parent
undertaking or fellow subsidiary undertaking of the parent
undertaking;
(b) any company whose directors are accustomed to act in accordance
with the directions or instructions of the relevant company;
(c) any company in the capital of which the relevant company and any
other company under (a) and (b) taken together, is (or would on
the fulfilment of a condition or the occurrence of a contingency
would be) interested in the manner described in paragraph .1.1.1
(c) above.
2
"BOARD" means the board of directors of the Company or any duly authorised
committee thereof;
"GROUP" shall mean the Company and any other body corporate which is from
time to time its subsidiary undertaking and for this purpose "SUBSIDIARY
UNDERTAKING" shall have the same meaning as in section 258 of the Companies
Act 1985;
"RELATED PARTY TRANSACTION" means any transaction, agreements or
arrangements between a Relevant Party and/or any of their Associates on the
one hand and any member of the Group on the other hand (or the enforcement,
implementation or amendment thereof);
"RELEVANT PARTY" means any of the Shareholder and the Controlling Parties,
and a reference to the "RELEVANT PARTIES" is a reference to each of them
jointly and severally; and
"SUBSTANTIAL SHAREHOLDER" means any person (or persons acting jointly by
agreement whether formal or otherwise) who is:
(a) entitled to exercise, or to control the exercise of, more than 30
per cent. of the rights to vote at general meetings of the
Company; or
(b) able to control the appointment of directors who are able to
exercise a majority of votes at board meetings of the Company;
1.2 In this Agreement (including the Recitals):
1.2.1 references to Clauses, or Recitals are to the clauses of this
Agreement and to the recitals to this Agreement, unless otherwise
stated;
1.2.2 words and expression defined in the Companies Act 1985 shall have the
same meaning herein;
1.2.3 unless otherwise stated, time shall be of the essence of this
agreement;
1.2.4 any reference to an individual shall, if the context so permits,
extend to his personal representatives and be enforceable accordingly;
and
1.2.5 words denoting the singular include the plural and vice versa, words
importing any gender shall include all genders and words denoting
persons only shall include corporations, unincorporated associations
and partnerships and vice versa.
3
2. CONDITION
2.1 This Agreement is conditional upon Admission occurring by not later than
the close of business on 9 March 2006 or such later date as the parties may
agree.
3. UNDERTAKING
3.1 Each of the Relevant Parties jointly and severally undertakes to the
Company that they will exercise all their powers and will procure (so far
as each is able to do so) that each of their Associates will exercise all
their respective powers with a view to ensuring that:
3.1.1 the Company is capable at all times of carrying on its business
independently of the Relevant Parties and their Associates;
3.1.2 any Related Party Transaction entered into or proposed to be entered
into is at arm's length and on a normal commercial basis or otherwise
approved in accordance with the laws of Israel in force from time to
time regulating transactions amongst related parties;
3.1.3 each proposed Related Party Transaction shall be considered on behalf
of the Company by the Board as a whole (or if by committee of the
Board, such committee to have one or more non-executive directors
present throughout) and none of the Relevant Parties nor any of their
Associates shall seek to influence the consideration of such matter by
the Board (or that committee, if relevant) in such a way as to further
the interests which are or are potentially in conflict with the
interests of the relevant Group member;
3.1.4 in the event that a conflict of interest or potential conflict of
interest exists or is likely to arise between on the one hand a
Relevant Party and/or any of their Associates and on the other hand
the interests of any member of the Group, disclosure of the
circumstances of such conflict or potential conflict shall be made to
the Board and that any decision by the Board in relation thereto shall
be taken by the Board but excluding any director who is a Relevant
Party or who is an Associate of a Relevant Party or appointed by a
Relevant Party;
3.1.5 save as permitted by the Board voting unanimously in favour, and save
for any interests existing at the date of this Agreement and which are
disclosed in the admission document issued by the Company in
connection with Admission, no Relevant Party nor any of their
Associates shall have any interests or other duties or
responsibilities which could give rise to a conflict or potential
conflict of interest between on the one hand a Relevant Party and/or
any of their Associates and on the other hand the interests of any
member of the Group;
3.1.6 the independence of the Board is maintained so as to enable decisions
as to the enforcement of this Agreement to be taken independently of
such Relevant Party or any of their Associates and otherwise in
accordance with the requirements from time to time of the London Stock
Exchange plc;
4
3.1.7 no variations are made to the Company's articles of association which
would be contrary to the maintenance of the Company's independence;
and
3.1.8 the provisions of this Agreement are observed.
3.2 Each of the Relevant Parties jointly and severally undertakes to the
Company that they will exercise all their powers and will procure (so far
as each is able to do so) that each of their Associates will exercise all
their respective powers with a view to ensuring that any new opportunity of
which any Relevant Party becomes aware to enhance or further the business
interests of the Group shall be promptly disclosed to the Board as a whole,
so as to enable the Board to give proper consideration as to whether the
Group is commercially able to exploit such opportunity.
3.3 The Company undertakes to the Shareholder that any new opportunity of which
the Company becomes aware to enhance or further the business interests of
the Shareholder shall be promptly disclosed to the Shareholder, so as to
enable the Shareholder to give proper consideration as to whether the
Shareholder is commercially able to exploit such opportunity.
3.4 Notwithstanding anything to the contrary, any Related Party Transaction
entered into or proposed to be entered into, which may not be deemed to be
at arm's length and on a normal commercial basis, providing that the
transaction does not harm the Company's welfare, may be approved by the
Company but shall require the approval, according to the provisions of the
Israeli Law, of the Audit Committee, which will make a recommendation to
the Board of Directors and then the transaction will be subject to
subsequent approval by a General Meeting of the Company.
4. TERMINATION
4.1 This Agreement shall continue in full force and effect from the date of
Admission until such time as:
4.1.1 each of the Relevant Parties ceases to be a Substantial Shareholder;
4.1.2 each of the Relevant Parties ceases to have any Associate who is a
Substantial Shareholder, and
4.1.3 each of the Relevant Parties and their Associates cease to have any
other direct or indirect ownership or control interest (whether legal,
beneficial, contingent or otherwise) in 30 per cent or more of the
issued ordinary share capital of the Company (or the proceeds or other
rights derived therefrom)
5
whereupon this Agreement shall cease and determine without prejudice to any
rights and obligations which have already accrued under it as regards any
party before such termination.
5. THIRD PARTIES
5.1 Each Relevant Party agrees to procure that any Associate of theirs to whom
any shares in the Company are transferred or issued after the date hereof
shall enter into a deed agreeing to be bound by the terms of this Agreement
as if they were themselves a Relevant Party.
6. ACKNOWLEDGMENT AND CONFIRMATION
6.1 The parties acknowledge that the restrictions set out in this Agreement are
fair and reasonable and are no greater than is reasonable and necessary for
the protection of the interests of the Company and its shareholders as a
whole, but if any such restriction shall be held to be void but would be
valid if deleted in part or reduced in application, such restriction shall
apply with such deletion or modification as may be necessary to make it
valid and enforceable.
6.2 The parties agree that damages may not be an adequate remedy for any breach
of the covenants and agreements contained in this Agreement and the Company
shall be entitled to the remedies of injunction, specific performance and
other equitable relief for any threatened or actual breach of those
covenants or agreements.
6.3 The Relevant Parties acknowledge and agree that details of this agreement
require disclosure in the admission document to be prepared in connection
with the Admission.
6.4 Each party warrants and represents to the others that it has the power to
enter into this Agreement and to exercise its rights and perform its
obligations under this Agreement, and all corporate and other action
required to authorise the execution of this Agreement and performance of
its obligations under this Agreement have been duly taken.
7. WAIVER, AMENDMENT
7.1 No waiver of any term, provision or condition of this Agreement shall be
effective unless such waiver is evidenced in writing and signed by the
waiving party.
7.2 No omission or delay on the part of either party hereto in exercising any
right, power or privilege hereunder shall operate as a waiver thereof, nor
shall any single or partial exercise of any such right, power or privilege
preclude any other or further exercise thereof or of any other right, power
or privilege.
7.3 No variation of this Agreement shall be effective unless made in writing
and signed by both parties.
6
8. NOTICES
8.1 Save as specifically otherwise provided in this Agreement any notice, or
other communication to be given under, or in connection with the matters
contemplated by, this Agreement shall be in writing and in the English
language and signed by or on behalf of the party giving it and shall be
served by delivering it personally or sending it by pre-paid recorded
delivery or registered post (or registered airmail in the case of an
address for service outside Israel) or by facsimile to the address and for
the attention of the relevant party set out below (or as otherwise notified
by that party hereunder). Any such notice shall be deemed to have been
received:-
8.1.1 if delivered personally, at the time of delivery;
8.1.2 in the case of pre-paid recorded delivery or registered post, 48
hours from the date of posting; and
8.1.3 in the case of registered airmail, five days from the date of
posting; and
8.1.4 in the case of fax, at the time of transmission (subject to
production of proof of transmission of all pages);
Provided that if deemed receipt occurs before 9.00 am on a business day the
notice shall be deemed to have been received at 9.00 am on that day and if
deemed receipt occurs after 5.00 pm on a business day, or on a day which is
not a business day, the notice shall be deemed to have been received at
9.00 am on the next business day. For the purpose of this Clause 6,
"BUSINESS DAY" means any day which is not a Friday, a Saturday, or a public
holiday in the place at or to which the notice is left or sent.
8.2 The addresses and facsimile numbers of the parties for the purposes of this
Clause 8 are:
8.2.1 The Company
Address: The address of the Company set out at page 1 of this
Agreement
For the attention of: Gil Hochboim
Fax number: 972-8-9322299
8.2.2 The Shareholder
Address: The address of the Shareholder set out at page 1 of this
Agreement
For the attention of: Zwi Williger
Fax number: 972-8-9322299
7
8.2.3 The Controlling Parties
Address: as per the contact details for each Controlling
Party set out in Schedule 1 of this Agreement
For the attention of: as per the contact details for each Controlling
Party set out in Schedule 1 of this Agreement
Fax number: as per the contact details for each Controlling
Party set out in Schedule 1 of this Agreement
|
or such other address or facsimile number as may be notified in writing
from time to time by the relevant party to the other parties.
8.3 For the avoidance of doubt notice given under this Agreement shall not be
validly served if sent by e-mail
9. COUNTERPARTS
This Agreement may be executed in any number of counterparts and by the
several parties hereto on separate counterparts, each of which when so
executed are delivered shall be an original, but all the counterparts shall
together constitute one and the same instrument.
10. GOVERNING LAW
This Agreement shall be governed by, and construed in all respects in
accordance with Israeli law, and the parties irrevocably agree to submit to
the exclusive jurisdiction of the Israeli Courts and waive any objection on
the ground of venue or on the ground that the proceedings have been brought
in an inconvenient forum.
IN WITNESS whereof this Agreement has been duly executed by the parties as a
Deed, on the date stated above.
8
SCHEDULE 1
THE CONTROLLING PARTIES
------------------------------ -------------------------------------------------
NAME CONTACT DETAILS
------------------------------ -------------------------------------------------
Willi Food Investment Ltd Attention of: Joseph Williger
Address: 3 Nahal Snir Street, Yavne 81106, Israel
Fax Number: 972-8-9322299
------------------------------ -------------------------------------------------
Zwi Williger Attention of: Zwi Williger
Address: 3 Nahal Snir Street, Yavne 81106, Israel
Fax Number: 972-8-9322299
------------------------------ -------------------------------------------------
Joseph Williger Attention of: Joseph Williger
Address: 3 Nahal Snir Street, Yavne 81106, Israel
Fax Number: 972-8-9322299
------------------------------ -------------------------------------------------
|
9
EXECUTED and DELIVERED as ) Director:
a DEED by GOLD FROST LTD. )
acting by: Zwi Williger ) Director/Secretary:
Gil Hochboim
EXECUTED and DELIVERED as ) Director:
a DEED by G. WILLI-FOOD INTERNATIONAL LTD )
acting by: Zwi Williger ) Director/Secretary:
Gil Hochboim
EXECUTED and DELIVERED as ) Director:
a DEED by WILLI FOOD INVESTMENT LTD )
acting by: ) Director/Secretary:
Joseph Williger
Gil Hochboim
EXECUTED and DELIVERED as )
a DEED by ZWI WILLIGER )
in the presence of: )
|
SIGNATURE OF WITNESS:
NAME OF WITNESS:
ADDRESS OF WITNESS:
OCCUPATION OF WITNESS:
EXECUTED and DELIVERED as )
a DEED by JOSEPH WILLIGER )
in the presence of: )
|
SIGNATURE OF WITNESS:
NAME OF WITNESS:
ADDRESS OF WITNESS:
OCCUPATION OF WITNESS:
10
EXHIBIT 4.11
DATED 2 MARCH 2006
(1) CORPORATE SYNERGY
(2) THE DIRECTORS
(3) GOLD FROST LTD
(4) G. WILLI-FOOD INTERNATIONAL LTD
---------------------------------------------
PLACING AND
AIM SPONSORSHIP AGREEMENT
---------------------------------------------
WWW.MARRIOTTHARRISON.CO.UK
12 GREAT JAMES STREET LONDON WC1N 3DR
T +44 (0)20 7209 2000 F +44 (0)20 7209 2001
DX 0001 LONDON CHANCERY LANE
CONTENTS
CLAUSE PAGE
1. INTERPRETATION 1
2. CONDITIONS 5
3. APPLICATION FOR ADMISSION 6
4. AUTHORITIES 6
5. PLACING 7
6. ALLOTMENT OF PLACING SHARES 7
7. PAYMENT AND REGISTRATION 8
8. FEES, COMMISSIONS AND EXPENSES 9
9. WARRANTIES 10
10. INDEMNITY 11
11. TERMINATION 15
12. ANNOUNCEMENTS 16
13. NOTICES 17
14. GENERAL 18
SCHEDULE 1 20
SCHEDULE 2 21
SCHEDULE 3 22
SCHEDULE 4 29
AGREED FORM DOCUMENTS
Announcement
AIM Admission Document (Final Proof)
Controlling Shareholder Agreement
Legal Due Diligence Report
Long Form Report
Option Agreement
Presentation
Rule 39 Letters
Working Capital Report
DATED March 2006
PARTIES
(1) CORPORATE SYNERGY PLC (registered number 02617599) whose registered office
is at 30 Old Broad Street, London EC2N 1HT ("CS");
(2) THE PERSONS whose names and addresses are set out in Schedule 1 (the
"DIRECTORS"); and
(3) GOLD FROST LTD, a company which is incorporated and registered in Israel
(registered number 52-003482-8) whose registered office is at 3 Nahal, Snir
Street, Yavne 81106, Israel (the "COMPANY").
(4) G. WILLI-FOOD INTERNATIONAL LTD, a company which is incorporated and
registered in Israel (registered number 520043209) whose registered office
is at 3 Nahal, Snir Street, Yavne 81106, Israel (the "PARENT").
RECITALS
(A) Subject to and upon the terms and conditions set out below, the Company
proposes to issue 12,857,142 Ordinary Shares, being the Placing Shares, at
the Placing Price, to Placees procured by or on behalf of CS, to provide
additional working capital to the Group.
(B) CS is willing as agent for the Company to use reasonable endeavours to
procure subscribers for the Placing Shares and CS will act as the Company's
nominated adviser and broker following completion of the fundraising
referred to above.
(C) Application will be made for the admission to trading on AIM of the
Admission Shares.
OPERATIVE PROVISIONS
1. INTERPRETATION
1.1 In this agreement (including the recitals and the Schedules) the following
words and expressions have the following meanings unless the context
otherwise requires:
"ADMISSION" means the admission of the Admission Shares to trading on AIM
becoming effective as provided in rule 6 of the AIM Rules;
"ADMISSION SHARES" means all Ordinary Shares which will be in issue or
unconditionally allotted following Admission;
"AIM" means the market of that name operated by London Stock Exchange;
"AIM ADMISSION DOCUMENT" means the document in the Agreed Form containing
details of the Placing and comprising an admission document for the
purposes of the AIM Rules;
"AIM RULES" means London Stock Exchange's rules relating to AIM as in force
at the date of this agreement or, where the context requires, as amended or
modified after the date of this agreement;
1
"ANNOUNCEMENT" means the regulatory announcement in the Agreed Form
containing details of the Placing which announcement shall have been made
in accordance with AIM Rule 2 prior to the date of this agreement;
"ASSOCIATED COMPANY" means in relation to a company, any subsidiary
undertaking or parent undertaking in relation to it or any subsidiary
undertaking in relation to such a parent undertaking;
"BOARD" means the board of directors of the Company from time to time or a
duly authorised committee of it;
"BROKER" has the meaning given to the expression "BROKER" in the AIM Rules;
"BUSINESS DAY" means a day upon which dealings in domestic securities may
take place on London Stock Exchange;
"CA 85" means the Companies Act 1985 (as amended by the Companies Act
1989);
"COMPANY'S SOLICITORS" means Mishcon de Reya of Summit House, 12 Red Lion
Square, London WC1R 4QD (as to English law) and Cohen Legal Partners of 50
Basel Street, Hertzliya Pituach 46646, Israel (as to Israeli law);
"CONDITIONS" means the conditions set out in clause 2.1;
"CONTROLLING SHAREHOLDER AGREEMENT" means the agreement in the Agreed Form
of even date between the Company and the Parent;
"CREST" means the computer-based system established under the Regulations
which enables title to units of relevant securities (as defined in the
Regulations) to be evidenced and transferred without a written instrument
and in respect of which CRESTCo Limited is the Operator (as defined in the
Regulations);
"DIRECTORS" means those persons listed in Schedule 1;
"EXECUTIVE DIRECTORS" means Zwi Williger, Joseph Williger and Gil Hochboim;
"EXISTING ORDINARY SHARES" means the Ordinary Shares in issue on the date
of this agreement;
"FORMS OF CONFIRMATION" means the letters of confirmation attached to the
Placing Letters;
"FSA" means the Financial Services Authority;
"FSMA" means the Financial Services and Markets Act 2000;
"GROUP" means the Company and its subsidiary undertakings and associated
undertakings from time to time (if any) and "MEMBER OF THE GROUP" shall be
construed accordingly;
"INDEMNIFIED PERSON" means CS, each subsidiary of CS and each of the
directors, officers and employees of CS and each such subsidiary;
"INDEMNITY" means the indemnity contained in clause 10.2;
2
"ISSUE DOCUMENTS" means the Placing Letter, the Presentation and the AIM
Admission Document;
"LAST ACCOUNTS" means the audited consolidated profit and loss account of
the Group for the twelve months' period ended on the Last Accounts Date and
the audited consolidated balance sheet of the Group as at the Last Accounts
Date and the notes to and the directors' and auditor's reports on them;
"LAST ACCOUNTS DATE" means 30 September 2005;
"LEGAL DUE DILIGENCE REPORT" means the Company's Solicitors' legal due
diligence report on the Company in the Agreed Form addressed to each of the
Company and CS, of even date;
"LISTING RULES" means the listing rules made pursuant to Part VI of FSMA;
"LONDON STOCK EXCHANGE" means London Stock Exchange plc;
"LONG FORM REPORT" means the long form report by Haysmacintyre on the
Company in the Agreed From addressed to each of the Company and CS;
"LONG STOP DATE" means 23 March 2006;
"MARRIOTT HARRISON" means Marriott Harrison of 12 Great James Street,
London WC1N 3DR;
"NIS" means New Israeli Shekels;
"NOMINATED ADVISER" has the meaning given to the expression "NOMINATED
ADVISER" in the AIM Rules;
"NON-EXECUTIVE DIRECTORS" means Barry Morris, Yael Rothschild and Ron
Guttmann;
"ORDINARY SHARES" means ordinary shares of NIS 1.0 each in the capital of
the Company;
"PLACEES" means persons who have, immediately prior to Admission, agreed to
subscribe for Placing Shares pursuant to the Placing Letters and who have
not withdrawn such agreement to subscribe for Placing Shares as at
Admission;
"PLACING" means the placing of the Placing Shares pursuant to this
agreement;
"PLACING LETTERS" means the placing letters delivered or sent to potential
Placees by CS in connection with the Placing including the letters of
confirmation attached to them;
"PLACING PRICE" means the price of 35 pence per Placing Share;
"PLACING PROOF" means the placing proof of the AIM Admission Document in
the Agreed Form;
"PLACING SHARES" means 12,857,142 Ordinary Shares which are to be issued by
the Company pursuant to the Placing and the terms of this agreement;
"PRESENTATION" means the institutional presentation in the Agreed Form ;
3
"REGISTRARS" means the Company's registrars, being Computershare Investor
Services PLC of PO Box 82, The Pavilions, Bridgwater Road, Bristol BS99
7NH;
"REGULATIONS" means the Uncertificated Securities Regulations 2001 (SI 2001
No. 3755);
"REGULATORY NEWS SERVICE" means the electronic information dissemination
service operated by the London Stock Exchange's Company Announcements
Office, or any alternative "PIP service" (primary information provider
service) which the Company has selected for the purposes of making
regulatory announcements in accordance with the AIM Rules;
"SETTLED" means agreed, compromised or settled by the relevant Indemnified
Person in accordance with clause 10.5 or determined by a court of competent
jurisdiction to be the responsibility of an Indemnified Person and
"Settlement" shall be construed accordingly;
"SPECIFIED EVENT" means an event occurring or matter arising on or after
the date of this agreement and before Admission which if it had occurred or
arisen before such date would have rendered any of the Warranties untrue or
incorrect; in any material respect;
"SUPPLEMENTARY ADMISSION DOCUMENT" means any document supplementary to the
AIM Admission Document which the Company is required to publish in
accordance with this Agreement;
"VAT" means United Kingdom value added tax;
"VERIFICATION NOTES" means the verification notes, questions and answers in
their final, signed form dated with the date of this agreement relating to
the AIM Admission Document and the Announcement;
"WARRANTIES" means the warranties set out in clause 9 and Schedule 3; and
"WARRANTY CERTIFICATE" means a certificate in the form set out in Schedule
4; and
"WORKING CAPITAL REPORT" means the board memorandum in the Agreed Form
containing the cash flow and working capital projections for the period to
30 June 2007 in relation to the Company (including a forecast of its
working capital requirements).
1.2 In this agreement:
(A) any reference to a document being "IN THE AGREED FORM" means in the
form of the draft signed for the purpose of identification by Marriott
Harrison (on behalf of CS) and either of the Company's Solicitors (on
behalf of the Company) with such alterations (if any) as may
subsequently be agreed by or on behalf of the parties;
(B) the Interpretation Act 1978 shall apply in the same way as it applies
to an enactment;
(C) save where the context otherwise requires and except as expressly
provided to the contrary, words and expressions defined in CA 85 have
the same meaning as in CA 85 save that references to a "company" shall
be construed so as to include any company, incorporation or other
corporate body wheresoever and howsoever incorporated or established;
4
(D) references to clauses, recitals and Schedules are to clauses of and
recitals and Schedules to this agreement;
(E) headings are included for convenience only and shall be disregarded in
its interpretation;
(F) any document referred to as being certified shall be certified as a
true and complete copy by either of the Company's Solicitors;
(G) general words shall not be given a restrictive meaning by reason of
their being preceded or followed by words indicating a particular
class or examples of acts matters or things;
(H) any obligations arising from, or representations, warranties,
indemnities and undertakings made or given under, the provisions of
this agreement which are incurred, made or given by two or more
persons shall, unless expressly provided to the contrary, be joint and
several;
(I) references to "(pound)", "pounds" or "pence" shall be to the currency
of the United Kingdom.
2. CONDITIONS
2.1 The obligations of CS under clauses 6 and 7 of this agreement are
conditional upon:
(A) the release of the Announcement through the Regulatory News Service by
not later than 7.30 am on 24 February 2006;
(B) the delivery to Marriott Harrison on behalf of CS of each of the
documents referred to in Schedule 2 by the times and in the form
referred to in that Schedule;
(C) the Controlling Shareholder Agreement having been duly executed by the
Parent and dated with a date being no later than the date which falls
immediately prior to the date of Admission and a certified copy having
been delivered to Marriott Harrison on behalf of CS;
(D) the Warranty Certificate having been duly executed and dated with the
date immediately prior to the date of Admission and having been
delivered to Marriott Harrison on behalf of CS on that date;
(E) the Company having fully complied with its obligations under this
Agreement to the extent that such obligations are required to be
performed before Admission;
(F) the obligations of CS not having been lawfully terminated pursuant to
clause 11; and
(G) Admission having become effective at or before 8.00 a.m. on 9 March
2006;
5
or (in the case of any time/date provided above) such later time or date
(being not later than 3.00 p.m. on the Long Stop Date) as the Company and
CS may agree in writing PROVIDED THAT each of the parties shall perform its
obligations under this agreement until such time (if any) as any of the
Conditions shall have become incapable of being satisfied.
2.2 The Company shall, with the assistance of CS, procure due satisfaction of
the Conditions set out in clauses 2.1.(A), 2.1(B) and use all reasonable
endeavours to procure the fulfilment of the other Conditions in each case
by the times and dates (if any) stated in clause 2.1.
2.3 If any of the Conditions are not fulfilled (or waived in writing by CS) by
3.00 p.m. on the Long Stop Date, this agreement shall automatically lapse
(unless CS shall first have served notice in writing upon the Company to
extend the Long Stop Date, any such notice being in the absolute discretion
of CS) and clause 11.4 shall apply. CS may, in its absolute discretion,
waive or extend the time and date for the satisfaction of any of the
Conditions. Any such waiver or extension may be granted by CS subject to
such conditions as CS may in its absolute discretion consider appropriate.
3. APPLICATION FOR ADMISSION
3.1 Subject to the condition specified in clause 3.3 the Company hereby
instructs CS to make an application for Admission and will use all
reasonable endeavours with the assistance of CS to obtain Admission
including paying all fees and executing and delivering all such documents
as shall be necessary in connection with the application therefor and,
insofar as lies within its power, shall generally use all reasonable
endeavours to do or procure to be done all such things as may properly be
required by London Stock Exchange for the purposes of or in connection with
Admission so as to enable Admission to take place by 8.00 a.m. on9 March
2006.
3.2 CS is given all such reasonable and proper authorities and powers by the
Company as are required for the purposes of obtaining Admission and CS
shall take all reasonable steps to assist in the obtaining of Admission
including (without limitation) liaising with and dealing (insofar as it is
able) with any requirements of London Stock Exchange in connection with the
same.
3.3 The application for Admission shall be conditional upon fulfilment of the
following conditions (unless waived in writing by the Company) (i) the
receipt by CS of duly executed Placing Letters from Placees containing
commitments to subscribe in aggregate for all the Placing Shares at the
Placing Price, (ii) the receipt by CS of cleared funds from any Placees who
do not intend to take their Placing Shares through CREST, and (iii) none of
such Placees having indicated any intention to CS prior to Admission to
withdraw its commitment to subscribe for the number of Placing Shares
indicated in its duly executed Placing Letter. In the event that either of
the conditions expressed in this clause is not satisfied, then CS shall
immediately notify the Company of this event and, unless the Company
consents to the contrary, CS shall use all reasonable endeavours to
withdraw the application for Admission, and this agreement shall
automatically lapse and Clause 11.4 shall apply.
4. AUTHORITIES
4.1 The Company authorises and instructs CS and CS hereby agrees to use its
reasonable endeavours to procure subscribers at the Placing Price for the
Placing Shares and for such purpose:
6
(A) irrevocably appoints CS as its agent for the purpose of procuring
Placees and confirms its authority to CS or its agents to seek
commitments from Placees by the distribution of Placing Letters and
copies of the Presentation and Placing Proof;
(B) confers on CS and its agents all lawful and proper powers, authorities
and discretions on behalf of the Company which are within its powers
and necessary to implement the Placing; and
(C) agrees to ratify and approve all documents, acts and things which CS
and its agents shall lawfully and properly do or have done in the
exercise of or in contemplation of such appointment, powers,
authorities and discretions.
4.2 The Company shall give all such assistance and provide any information CS
may reasonably require for the making and implementation of the Placing and
subject to the advice of the Company's Solicitors given in good faith will
do (or procure to be done insofar as it is reasonably able) all such
reasonable things and execute (or procure to be executed insofar as it is
reasonably able) all such reasonable documents as may be necessary to be
done or executed by the Company or on its behalf by its officers or
employees in connection with the Placing.
5. PLACING
5.1 Pursuant to but without limiting the authority in clause 4.1, CS agrees, as
agent of the Company and in reliance on the Warranties, to use reasonable
endeavours to procure persons to subscribe for the Placing Shares at the
Placing Price and otherwise upon the terms of the Issue Documents.
5.2 CS shall hold all subscription monies received by it from Placees pending
payment of the sums due under clause 7 or (if this agreement shall lapse in
accordance with clauses 2.3 or 3.3 or shall be terminated pursuant to
clause 11) return of the same to the persons entitled to those monies.
5.3 For the avoidance of doubt, nothing in this Agreement obliges CS to
subscribe any Placing Shares itself or implies an absolute obligation on it
to subscribe any Placing Shares, and CS may, if it so wishes, subscribe as
a Placee some of the Placing Shares.
6. ALLOTMENT OF PLACING SHARES
6.1 Subject to prior notifications in accordance with Clause 6.2, (if all
Conditions other than allotment of the Placing Shares and Admission have
been satisfied) the Company shall allot Placing Shares to the persons
notified in accordance with clause 6.2, conditionally only upon Admission
and otherwise upon the terms of the Issue Documents, and following such
allotment shall deliver to Marriott Harrison on behalf of CS a certified
copy of the relevant allotment resolution.
6.2 CS shall notify the Company as soon as possible following the signature of
this agreement of the names and denominations in which the Placing Shares
are to be allotted and issued as specified in the registration particulars
included in the Forms of Confirmation together with details as specified in
the Forms of Confirmation of those shares which are to be held in
certificated form and those which are to be held in uncertificated form
and, with respect to the latter, specifying each relevant Placee's CREST
participant ID reference and the relevant CREST member account ID
reference(s) relating to the CREST member account(s) to which that Placee
wishes Placing Shares to be credited, and further specifying any other
information reasonably required to enable the Company's shares to be traded
on AIM.
7
6.3 The Placing Shares allotted pursuant to this clause 6 shall be issued
subject to the memorandum and articles of association of the Company and
subject to payment in full of the Placing Price for each such share and
shall be allotted and issued fully paid free from all claims, liens,
charges, encumbrances and equities and on terms that they rank pari passu
in all respects with the Existing Ordinary Shares.
6.4 In the event that any Placee shall fail within 72 hours from Admission to
make payment in full for the Placing Shares allotted to it in accordance
with this clause 6, CS shall notify the Company of this fact and shall use
its reasonable endeavours to find an alternative person to acquire such
shares. If CS procures an alternative person to acquire such shares, and
such person pays for the shares in full in cleared funds, then such person
shall be deemed to replace the original Placee for the purposes of this
agreement. CS acknowledges that it may be required pursuant to the Civil
Procedure Rules of England and Wales to provide evidence to a court in
respect of any claim which the Company may make against any such non-paying
Placee. CS confirms that it shall, as agent of the Company, request (in
such manner and at such times as CS deems reasonable) any such non-paying
Placee to make payment to the Company. CS shall use its reasonable
endeavours on behalf of the Company, by liaising with the Registrar and
monitoring the operation of the DVP system within CREST and in respect of
any Placing Shares to be issued in uncertificated form, with the aim of
ensuring that no Placing Shares are acquired by any Placee which has not
paid for such shares in full in cleared funds.
7. PAYMENT AND REGISTRATION
7.1 Subject to the satisfaction or waiver of all the Conditions, CS will pay or
cause to be paid to the Company to the account specified in clause 7.4, or
as the Company may direct, the proceeds of the Placing (being the Placing
Price multiplied by the number of the Placing Shares) which shall have been
received by it in cleared funds (the "PLACING PROCEEDS"), less the fees and
commission referred to in clause 8.1 and less any costs and expenses which
CS is entitled to be reimbursed pursuant to clause 8.2 and less any
deduction properly made pursuant to clause 8.4 as soon as reasonably
practicable following Admission and subject to the preceding provisions of
this clause not later than the second Business Day after the date of
Admission.
7.2 As soon as practicable following Admission, and subject to clause 6.4, the
Company shall instruct its Registrars to procure registration (without
registration fees and in accordance with the Regulations) of the Placees
(as indicated to it in accordance with clause 6.2) as the holders of
Placing Shares.
7.3 Company shall instruct its Registrars to procure that definitive
certificates in respect of the Placing Shares which CS shall have notified
the Company under clause 6.2 (subject to the operation of clause 6.3) are
to be issued in certificated form will be prepared and delivered or posted
to the persons entitled to them and that the appropriate CREST member
accounts are properly credited in respect of Placing Shares which CS shall
have notified the Company under clause 6.2 are to be issued in
uncertificated form, in each case as soon as practicable after Admission
or, in the event of any difficulties or delays in the admission of the
Placing Shares to CREST and if CS shall so determine, shall procure that
definitive certificates in respect of all of the Placing Shares shall be
prepared and delivered to the Placees as soon as reasonably practicable
thereafter.
8
7.4 The account of the Company referred to in clause 7.1 is:
Bank Bank Leumi
Branch Alenbi no. 802
Swift-code LUMIILIT802 or IBAN: IL10802
Account Number 655900/61
Account Name Gold Frost Ltd.
7.5 The Company irrevocably instructs CS either itself or through its agents to
make payments to the Company under clauses 7.1 and 7.2 by electronic funds
transfer.
8. FEES, COMMISSIONS AND EXPENSES
8.1 In consideration of the services to be provided by CS in connection with
the Placing, and subject to Admission occurring, the Company shall pay
(together with VAT where applicable):
8.1.1 to CS a corporate finance fee of (pound)100,000 (which shall
become due and owing once all of the Placing Proceeds (being
(pound)4,499,999.70) shall have been received by CS in cleared
funds);
8.1.2 to CS a commission of 5.5% of the Placing Proceeds which have
been received by CS in cleared funds;
8.1.3 the expenses to be borne by the Company under clause 8.2.
8.2 Whether or not Admission occurs, the Company will bear all expenses of or
incidental to the Placing, including, without limitation, the fees of its
and CS's professional advisers (including the reasonable fees plus out of
pocket expenses of Marriott Harrison, subject to a maximum in respect of
such fees of (pound)20,000 and in respect of disbursements of (pound)600
inclusive in each case of VAT) (provided always that all fees and expenses
of CS in excess of (pound)1,000 per item have been approved in advance by
the Company), the cost of printing (and CS shall use its reasonable
endeavours to ensure that the printers of the AIM Admission Document shall
invoice the Company directly) and distribution of the Issue Documents, the
Announcement and the AIM Admission Document and all other documents
connected with the Placing, brokers' fees, Registrars' fees, all reasonable
out of pocket expenses and disbursements of CS and, where properly
chargeable, VAT (provided always that CS shall not deduct any expenses from
the Placing Proceeds which it remits to the Company other than the expenses
stated on the schedule of expenses in the Agreed Form). The Company will
forthwith upon demand by CS (as the case may be) reimburse to it the amount
of any such expenses which it has paid on behalf of the Company.
8.3 Save where this agreement lapses in accordance with clauses 2.3 or 3.3, or
is terminated pursuant to clause 11, the amounts payable under clause 8.1
shall become payable at the times indicated in clause 8.1 and may be
withheld by CS from any payment under clause 7.1 against production of an
invoice therefor.
8.4 Where under any provision of this agreement a sum is reimbursed to CS the
Company shall, in addition, pay to CS, as appropriate, in respect of VAT:
9
8.4.1 to the extent that any reimbursement is in respect of any supply
of services to the Company, such amount as equals any VAT
properly charged to CS in respect of such expenses and which it
is unable to recover together with an amount representing any VAT
properly chargeable on the consideration for the supply; and
8.4.1 any VAT properly chargeable on the consideration for the supply;
and
8.4.2 to the extent that any such reimbursement is in respect of a
disbursement made by CS as agent on behalf of the Company, such
amount as equals any VAT properly paid on that disbursement by CS
(provided that CS shall notify the supplier that the supply is
being made to an overseas company, and shall seek to have the
supplier invoice the Company directly).
9. WARRANTIES
9.1 The Company the Parent and each of the Executive Directors (each of whom
acknowledges that CS is entering into this agreement in reliance on such
Warranties) warrant to CS in the terms set out in Part 1 of Schedule 3.
Each of the Non-Executive Directors (each of whom acknowledges that CS is
entering into this agreement in reliance on such warranty) warrants to CS
in the terms set out in Part 2 of Schedule 3.
9.2 Where any of the Warranties is given to the best of the knowledge,
information and belief of the Company, the Parent or the Directors (or
qualified by any similar expression) the Company, the Parent and each of
the Directors is deemed also to warrant that such Warranty has been given
after it has made all due and careful enquiries.
9.3 Acceptance of the terms of this agreement will constitute an undertaking by
the Company not knowingly, recklessly or negligently to cause, and to use
all reasonable endeavours not to permit, any Specified Event to occur
before Admission.
9.4 If any breach of Warranty or Specified Event or matter which may give rise
to a claim under the Indemnity shall occur or come to the knowledge of the
Company, the Parent or any of the Directors prior to Admission or any other
fact or circumstance occurs or arises within its or his knowledge at any
time prior to Admission which would or might constitute a significant new
factor, material mistake or inaccuracy for the purposes of section 87G of
FSMA as if the Admission Document were a prospectus for the purposes of
Part II of FSMA, it or he shall forthwith give notice of the same to CS and
provide it with such information with regard to it as CS shall reasonably
require.
9.5 Each of the Directors severally warrants in relation to himself only that:
(A) he has never been charged with or convicted of any criminal offence
other than a road traffic offence (except one involving or which could
involve a custodial sentence, whether suspended or not);
(B) the performance of his duties to the Company will not breach or
infringe any obligation, duty or restriction binding upon him or to
which he is otherwise subject (including, without limitation, any duty
of confidence or any non-competition or other restrictive covenant);
10
(C) he has never been the subject of any order under the Company Directors
Disqualification Act 1986 or been adjudged bankrupt or been the
subject of a petition for a bankruptcy order duly presented to the
Court or entered into a voluntary arrangement (within the meaning
given in Section 253 Insolvency Act 1986) or been the subject of any
interim order under Section 252 of that Act nor have any bankruptcy or
any analogous proceedings been brought against him;
(D) he has received advice and guidance from the Company's Solicitors as
to the nature of his responsibilities and obligations under the AIM
Rules in relation to the application for Admission, the Company's
compliance with the AIM Rules on an ongoing basis and his status as a
director of an AIM quoted company under the AIM Rules and he has had a
proper opportunity to discuss, and raise questions concerning, such
advice and guidance with the Company's Solicitors.
9.6 Each Director's and the Parent's aggregate liability for all claims made by
CS under the Warranties is limited to the amount set out against his or its
name in Schedule 1 unless the claim, or the delay in discovering it,
results from the fraud, or wilful concealment of such Director or the
Parent in which case the liability of that Director and/or the Parent (as
the case may be) shall be unlimited.
9.7 The Warranties shall continue in full force and effect notwithstanding the
completion of all matters and arrangements referred to in or contemplated
by this agreement.
9.8 For a claim for breach of any of the Warranties to be valid as against the
Company, the Parent or any of the Directors, notice of such claim
(specifying the basis and quantum of such claim in reasonable detail) must
be given to the person against whom it is asserted on or before the date
being three months following the date of the publication of the interim
financial statements of the Company for the period ending 30 June 2007.
9.9 In so far as it is lawfully able, the Company will not and will procure
that none of its subsidiary undertakings will, (and the Directors each
undertake that they will not on behalf of any member of the Group) between
the date of this agreement and the earlier of Admission or termination of
this Agreement, enter into any agreement, commitment or arrangement which
is a substantial transaction (within the meaning of Rule 12 of the AIM
Rules) or which is reasonably likely to materially and adversely affect the
Placing or the issue of the Placing Shares, without the prior written
consent of CS (such consent not to be unreasonably withheld or delayed).
9.10 The Warranties are given in each case by the Company, the Parent and the
Directors subject to matters fairly disclosed in the Admission Document.
9.11 Where any warranty contains the word "material", this shall be deemed to
mean material in the context of the Placing.
10. INDEMNITY
10.1 No claim shall be made by the Company, the Parent or the Directors against
any Indemnified Person to recover any loss, damage, costs, charges or
expenses which any member of the Group or any other person may suffer or
incur by reason of or arising out of the performance by any Indemnified
Person of its obligations under this agreement or in connection with the
Placing or the publication or despatch of any of the Issue Documents, the
Announcement or the AIM Admission Document save to the extent that such
loss, damage, costs, charges or expenses arise(s) as a result of the
negligence or wilful default or fraud of any Indemnified Person or the
material breach by any Indemnified Person of its obligations under this
agreement or any other relevant contractual undertaking or any material
contravention by any Indemnified Person of the regulatory system (as
defined in the handbook and rules of the FSA).
11
10.2 The Company undertakes to CS (for itself and on the basis that it shall
enjoy absolute discretion as to the enforcement of any claim under this
clause, as agent or trustee on behalf of and for the benefit of any
Indemnified Persons) to the fullest extent permitted by law to indemnify
and keep indemnified each Indemnified Person against all Settled claims,
Settled actions, Settled demands, Settled liabilities, judgments or
proceedings in any jurisdiction which may be made, brought or established
against it (together "CLAIMS") and against all Settled loss, Settled
damage, reasonable costs, reasonable charges and reasonable expenses in any
jurisdiction which any such person may suffer or incur (including but not
limited to those suffered or incurred in disputing any Claim) (together
"LOSSES") and which in any case directly results from or is attributable to
the Placing or the transactions contemplated by this agreement including
without limitation:
(A) the approval and/or despatch or publication of the Issue Documents
and/or the Announcement and/or the AIM Admission Document;
(B) the allotment or issue of the Placing Shares;
(C) any breach by the Company of any of the Warranties or any of its other
obligations under this agreement;
(D) the proper performance by any Indemnified Person of its obligations
under this agreement or otherwise in connection with the Placing
and/or Admission;
(E) any failure or alleged failure to comply with any legal, statutory or
regulatory requirement of the United Kingdom or elsewhere in relation
to the Placing and/or Admission;
(F) any Issue Document, the Announcement or the AIM Admission Document not
containing or being alleged not to contain all information required to
be stated in it or any statement in it being or being alleged to be
defamatory, untrue, inaccurate, incomplete or misleading in any
respect or having been or alleged to have been made negligently or
otherwise without the required standard of skill and care or
reasonableness;
unless and to the extent that such Claim(s) or Loss(es) result(s) from the
negligence, wilful default or fraud of such Indemnified Person or material
breach by it of its obligations under this agreement or a material
contravention by it of the regulatory system (as defined in the handbook
and rules of the FSA) or the provisions of the FSMA.
12
10.3 If the United Kingdom HM Revenue & Customs or any other taxing authority in
any jurisdiction brings into any charge to taxation any sum payable under
any indemnity contained in this clause 10 (the "ORIGINAL AMOUNT") then (to
the extent that the matter in respect of which the sum is payable is not
allowable as a deduction for tax purposes) the amount so payable shall be
grossed-up by such amount (the "ADDITIONAL AMOUNT") as will ensure that
after subtraction of the taxation so chargeable there shall remain a net
sum equal to the original amount. To the extent that an Indemnified Person
subsequently obtains any tax credit, allowance or repayment of tax as a
result of the Company paying to the Indemnified Person the additional
amount or as a result of or in connection with the circumstances giving
rise to the payment of the additional amount, the Indemnified Person shall
notify the Company and shall pay to the Company an amount which equates to
so much of the economic benefit which the Indemnified Person has received
from that tax credit, allowance, repayment or relief as does not exceed the
additional amount (any question as to the accrual or amount of any such
economic benefit, the order and manner of making any claim for any tax
credit, allowance, repayment or relief, and the timing of any payment being
determined by the Indemnified Person's auditors or the Nominated Adviser's
auditors if the relevant person does not have auditors).
10.4 The Indemnity shall extend to include all costs and expenses including
reasonable legal fees and expenses suffered or incurred by any Indemnified
Person in connection with establishing or obtaining advice relating to or
enforcing its rights under this clause 10 (together with any VAT properly
chargeable on them).
10.5 As soon as reasonably practical and in any event within 20 Business Days
after it becomes aware of any claim made or threatened within the scope of
the indemnities contained in clause 10 or any matter which has given or is
likely to give rise to a claim under the Warranties or the Indemnity, CS
shall notify in the case of any such claim within the scope of the
Indemnity the Company, and in the case of any such claim under the
Warranties to the Company, the Directors and the Parent of the relevant
claim or matter and shall thereafter on request (i) keep (as the case may
be) the Company, the Directors and the Parent informed of the progress of
the claim or the status of the matter, (ii) provide (as the case may be)
the Company, the Directors and the Parent with copies of such documentation
relating to the claim or matter as it may reasonably request and (iii) give
(as the case may be) the Company, the Directors and the Parent such
opportunity as it may reasonably request to make representations regarding
the conduct of the claim or the handling of the matter; and (iv) take such
action as the Company and/or the Directors and/or the Parent may reasonably
request to avoid, dispute, resist, appeal, compromise, settle or defend any
such claim; in each case subject to the relevant Indemnified Person being
indemnified in a manner satisfactory to it against any and all reasonable
costs, charges and expenses incurred by it in complying with any such
request and provided always that nothing in this clause 10.5 shall require
any of the Indemnified Persons to:
(a) provide a copy of any document or provide any information which the
Indemnified Person is legally advised is privileged as regards the
Indemnified Person in the context of any litigation connected with the
claim or subject to a duty of confidentiality; or
(b) do, or refrain from doing, anything which would, or which such
Indemnified Person in good faith considers might, prejudice any
insurance cover to which any of the Indemnified Persons may from time
to time be entitled to or from which it or any of them may benefit; or
(c) do, or refrain from doing, anything the doing of or failure to do, CS
in good faith considers (i) would damage its reputation or the
goodwill attaching to its business or that of any subsidiary of CS or
(ii) would or would be likely to conflict with CS's duties or
obligations under any law or regulatory requirement (including any
requirement of the London Stock Exchange plc); or
13
Provided that if none of the Company or the Directors or the Parent
indemnifies the relevant Indemnified Person in a manner satisfactory to it
as aforesaid, or if none of the Company or the Directors or the Parent
requests the relevant Indemnified Person to take action in respect of the
claim or matter, in either case within 20 Business Days of the notification
by CS of the claim, then the Indemnified Person may pay or settle or resist
or otherwise deal with the claim as it in its absolute discretion thinks
fit. In the event that CS receives contradictory instructions or requests
under this clause, it shall be entitled to disregard such instructions or
requests and follow the instructions or requests from the Company. Where
any notification or information is provided by CS to the Company for the
purposes of this clause, such notification or information shall be
disclosed by the Company to the Directors and the Parent.
10.6 The Company agrees that it will not without the prior written consent of CS
(such consent not to be unreasonably withheld or delayed) settle or
compromise or consent to the entry of any judgement with respect to any
pending or threatened claim in respect of which indemnification is being
sought under this clause 10 unless such settlement, compromise or consent
includes a release of all Indemnified Persons from all liability arising
out of such claim.
10.7 This clause 10 does not seek to exclude or restrict any duty or liability
which CS has to the Company or any other party under FSMA, the Conduct of
Business Rules made by the FSA and set out in the FSA's Conduct of Business
Sourcebook (the "RULES") or any other principles, rules or guidance in the
handbook of rules and guidance of the FSA or pursuant to any applicable
common law principles. In addition, the undertakings, limitations and
exclusions of liability and the indemnities under this clause 10 shall only
have effect in so far as they are not prohibited under the Rules or under
any other applicable laws, rules or regulations, and they shall not extend
to any actions, claims, demands, expenses, costs, charges, losses, damages,
or other liabilities ("Indemnified Loss") to the extent the same arise from
or are attributable to the negligence, fraud or wilful default of any
Indemnified Person or any of their agents or sub-agents or a breach by any
Indemnified Person of the Rules or any relevant contractual undertaking.
Furthermore, the indemnity in clause 10.2 shall not apply to any
Indemnified Loss suffered or incurred by an Indemnified Person in respect
of any Ordinary Shares acquired or held or disposed by it, unless those
shares were acquired by it as a Placee or otherwise pursuant to this
agreement. Neither the Warranties nor the indemnity in clause 10 shall
apply to any shares acquired by CS pursuant to the option agreement in
favour of CS described in the Admission Document.
10.8 Payment of any claim under the Warranties or the Indemnity shall pro tanto
satisfy and discharge any other claim thereunder which is capable of being
made in respect of the same subject matter. No Indemnified Person shall be
entitled to recover damages or any other amount in respect of any claim
under this agreement or otherwise obtain reimbursement or restitution more
than once in respect of the same subject matter.
10.9 The Company, the Parent and the Directors shall not be liable for any
individual claim under the Warranties unless the amount of such claim
exceeds (pound)1,000. Further, no liability shall attach to the Warrantors
in respect of claims under the Warranties unless the aggregate amount of
the liability of the Warrantors in respect of all such claims shall exceed
(pound)5,000, in which event the Warrantors shall be liable for the whole
of such liability and not merely the excess; Provided that such limitation
shall not apply to any Claim which arises as a result of the fraud or
willful misconduct or willful concealment of any of the Warrantors;
provided further that this clause shall be without prejudice to the need
for CS to notify claims or matter to the Company under clause 10.5.
14
10.10 No liability under this agreement shall attach to any of the Warrantors,
and no claim shall be brought under this agreement against any of the
Warrantors, if the loss or liability suffered or incurred by the
Indemnified Person to which the claim relates is contingent or future.
10.11 No claim may be made by an Indemnified Person against any party under this
agreement to the extent that an Indemnified Person has already made
recovery in respect of the subject matter of such claim and if any such
recovery is made after any party to this agreement has made payment to an
Indemnified Person, then that Indemnified Person shall refund to such party
the full amount of any such payment less any costs, expenses and tax
suffered or incurred by the Indemnified Person.
11. TERMINATION
11.1 If before Admission:
(A) any statement contained in the Announcement has, in the reasonable
opinion of CS been discovered to be untrue, incorrect or misleading in
any respect which it reasonably considers (acting in good faith) to be
material in the context of the Placing; or
(B) there has, in the reasonable opinion of CS (acting in good faith),
been a breach of any of the Warranties or any other obligations on the
part of the Company under this agreement which it reasonably considers
(acting in good faith) to be material in the context of the Placing;
or
(C) a Specified Event has, in the reasonable opinion (acting in good
faith) of CS, occurred which it reasonably considers to be material in
the context of the Placing; or
(D) any of the Conditions shall have become incapable of fulfilment before
the latest time provided in clause 2.1 and has not been waived as
provided in clause 2; or
(E) in the opinion of CS, acting reasonably, any circumstances have arisen
such that a supplementary Admission Document would be required under
the AIM Rules and which in the opinion of CS (after such reasonable
consultation with the Company as the circumstances permit) is a
significant new factor, material mistake or inaccuracy in the context
of the Placing, notwithstanding that (where applicable) a
supplementary admission document may have been published by the
Company or the Company is willing to publish such supplementary
admission document;
then, upon CS (as appropriate) giving notice of such matter to the Company,
clause 11.3 shall apply.
11.2 If before Admission there shall in the opinion of CS (acting in good
faith), develop, occur or come into effect any change in national or
international financial, economic, political, military or market conditions
or other event, which in the opinion of CS, is likely materially and
adversely to affect the financial or trading position or prospects of the
Group or to have a materially prejudicial effect on the Placing or make the
success of the Placing doubtful or makes it impracticable or inadvisable to
proceed with the Placing CS will consult with the Company (to the extent
practicable) and, if CS shall, at any time before Admission, give notice of
any such matter to the Company, clause 11.3 shall apply.
15
11.3 Where this clause 11.3 applies, CS may in their absolute discretion,
following discussions with the Company:
(A) allow the issue of the Placing Shares to proceed on the basis of the
Issue Documents; or
(B) give notice to the Company (at the same time as the notice pursuant to
clause 11.1 or, as the case may be, clause 11.2 or at any time after
it, but before Admission) terminating this agreement in which case
clause 11.4 shall apply.
11.4 If this agreement is terminated pursuant to the provisions of this clause
11 or lapses in accordance with clauses 2.3 or 3.3:
(A) no party to this agreement will have any claim against any other
party, except that:
(1) such termination or lapse shall be without prejudice to any
accrued rights or obligations under this agreement (provided
always that no party shall have any liability in respect of the
Warranties in such circumstances;
(2) the Company shall pay the expenses specified in clause 8.2;
(3) if the reason for the termination shall be an act or omission
knowingly undertaken by the Company such that any of the
Warranties are thereby rendered untrue or incorrect in any
material respect, then CS shall be entitled to receive from the
Company a corporate finance fee of (pound)100,000 and an amount
equal to 25 per cent of the value at the Placing Price of the
Placing Shares for which CS held firm Placing Letters;
(4) any payments required to be made in accordance with this clause
11.4(A) shall be made within ten Business Days after such
termination or lapse; and
(5) the provisions of clauses 1, 10, 11, 12, 13 and 14 shall remain
in full force and effect;
(B) the Company shall withdraw or cause to be withdrawn the application
for Admission; and
(C) if so requested in writing by CS the Company shall make an
announcement in a form reasonably and properly required by CS, or if
the Company shall fail so to do CS may themselves jointly make such
announcement.
12. ANNOUNCEMENTS
12.1 Save for the issue and publication of the Announcement, no public
announcement or communication which is or might be material in the context
of the Placing or which relates to Admission shall be published, by or on
behalf of any member of the Group between the date of this agreement and
the date thirty days after Admission without the prior written consent of
CS such consent not to be unreasonably withheld or delayed.
16
12.2 The Company will not and will procure that no other member of the Group
will prior to Admission:
(A) enter into any commitment or agreement, or put itself in a position
where it is obliged to announce that any commitment or agreement may
be entered into, which is or might be material in the context of the
Placing or Admission; or
(B) issue any relevant securities (as defined in CA 85); or
(C) enter into any agreement or undertaking to do any of the above;
without the prior written consent of CS, such consent not to be
unreasonably withheld or delayed.
12.3 CS shall be entitled to make for itself or on behalf of any other
Indemnified Person, after such consultation with the Company as shall be
reasonably practicable in the circumstances, any announcement concerning
the Placing as may be necessary in its reasonable and proper opinion to
ensure compliance with rule 10 of the AIM Rules or the FSMA (and, in
particular, Parts VIII and XXVII of that Act).
13. NOTICES
13.1 Any notice to be given under this agreement shall be in writing (not
including writing on the screen of a visual display unit or other similar
device which shall not be treated as writing for the purposes of this
agreement) and shall be addressed as follows:
(A) In the case of the Company:
13.(A).1 The Company irrevocably appoints Mishcon de Reya
(RJT/22816-1) of Summit House, 12 Red Lion Square, London
WC1R 4QD to be its agent for the receipt of service of
process in England and Wales. It agrees that any Service
Document may be effectively served on it in connection with
proceedings in England and Wales by service on its agent.
13.(A).2 Any Service Document shall be deemed to have been duly
served if marked for the attention of Richard Tyler
(RJT/22816-1) at Mishcon de Reya (address as per clause
13.(A).1 or such other address within England and Wales as
may be notified to the party wishing to serve the Service
Document and:
13.(A).2.1 left at the specified address; or
13.(A).2.2 sent to the specified address by first class post.
In the case of clause 13.(A).2.1 the Service Document will
be deemed to have been duly served when it is left. In the
case of clause 13.(A).2.2, the Service Document shall be
deemed to have been duly served two clear Business Days
after the date of posting.
17
13.(A).3 If the agent at any time ceases for any reason to act as
such, the Company shall appoint a replacement agent having
an address for service in England or Wales and shall notify
the other parties to this Agreement of the name and address
of the replacement agent. Failing such appointment and
notification, CS shall be entitled by notice to the Company
to appoint a replacement agent to act on the Company's
behalf. The provisions of this clause applying to service on
an agent apply equally to service on a replacement agent;
13.(A).4 A copy of any Service Document served on an agent shall be
sent by post to the Company. Failure or delay in so doing
shall not prejudice the effectiveness of service of the
Service Document;
13.(A).5 "Service Document" means a claim form, order or judgement
issued out of the courts of England and Wales or other
document relating to or in connection with any Proceedings;
(B) in the case of CS:
Corporate Synergy PLC
30 Old Broad Street
London EC2N 1HT
Fax: 0207 448 4477
Attention: For the urgent attention of the Head of Corporate Finance
(C) in the case of the Directors and the Parent, the addresses
respectively set out in Schedule 1 and at the beginning of this
agreement.
13.2 Any notice shall be valid if delivered by hand or sent by legible facsimile
transmission or pre-paid first class post (airmail if sent to or from an
address outside the United Kingdom) and if delivered by hand or sent by
legible facsimile transmission shall conclusively be deemed to have been
given or served at the time of despatch and if sent by post in the manner
described above shall conclusively be deemed to have been received 48 hours
from the time of posting (or 72 hours if sent to or from an address outside
the United Kingdom).
13.3 Any notice given by CS under clauses 13.1 or 13.2 may also be given by any
of its directors to any director of the Company either personally or by
telephone (to be confirmed immediately in writing) and shall have immediate
effect from such personal or telephone notification.
14. GENERAL
14.1 Any time, date or period referred to in this agreement may be extended by
mutual agreement between the parties but as regards any time, date or
period as originally fixed or so extended, time shall be of the essence.
14.2 The obligations and liabilities of any party shall not be affected by any
time forbearance, indulgence, release or compromise given to him or any
other party, nor by any other matter or circumstance which (but for this
provision) would operate to or affect any such obligations except an
express written release by all the parties to whom the relevant obligations
and liabilities are owed or due.
18
14.3 The rights and remedies reserved to any party under any provision of this
agreement or in any document to be executed pursuant to it shall be in
addition and without prejudice to any other rights or remedies available to
it whether under this agreement or any such document or by statute common
law or otherwise.
14.4 The provisions of this agreement (including without limitation, the
Warranties, the Indemnity and the provisions of clauses 12 to 14 inclusive)
which are capable of having effect following Admission shall remain in full
force and effect, notwithstanding the completion of all matters,
arrangements and transactions referred to in or contemplated by this
agreement.
14.5 This agreement may be entered into in any number of counterparts and by the
parties to it on separate counterparts, each of which when executed and
delivered shall be an original but all the counterparts shall together
constitute one and the same instrument.
14.6 The parties agree and acknowledge that:
(A) nothing in this agreement, except for clauses 10.1 and 10.2 which are
intended to benefit persons who are not parties to this agreement, is
intended to benefit any person who is not a party to it (a
"NON-PARTY") and no Non-Party has any right under the Contracts
(Rights of Third Parties) Act 1999 to enforce any term of this
agreement without the prior written consent of CS; and
(B) no consent of any Non-Party shall be required for any rescission of or
amendment to this agreement.
The provisions of this clause 14.7 do not affect any right or remedy of a
third party which exists or is available otherwise than by operation of the
Contracts (Rights of Third Parties) Act 1999.
14.7 This agreement shall be governed by and construed in accordance with
English Law and the parties irrevocably submit themselves to the exclusive
jurisdiction of the English Courts.
THIS AGREEMENT has been duly executed under hand by the parties and delivered on
the date set out at the head of page 1
19
SCHEDULE 1
DIRECTORS
-------------------------- -------------------------- --------------------------
MAXIMUM LIABILITY
UNDER WARRANTIES
NAME ADDRESS (POUND STERLING)
-------------------------- -------------------------- --------------------------
Gil Hochboim 3 Nahal Snir Street
Yavne 81106
Israel 11,000
-------------------------- -------------------------- --------------------------
Zwi Williger 3 Nahal Snir Street
Yavne 81106
Israel 250,000
-------------------------- -------------------------- --------------------------
Joseph Williger 3 Nahal Snir Street
Yavne 81106
Israel 250,000
-------------------------- -------------------------- --------------------------
Barry Morris Fairways
23 Harsbourne Avenue
Bushey Heath
Hertfordshire
WD23 1JP 15,000
-------------------------- -------------------------- --------------------------
Ron Guttman 8 Shivat Zion Street
Kfar-Saba 42286
Israel 3,000
-------------------------- -------------------------- --------------------------
Yael Rothschild 4 Herzel Rosenblum Street
Apartment 121
South Tower
Tel Aviv
Israel 3,000
-------------------------- -------------------------- --------------------------
THE PARENT
-------------------------- -------------------------- --------------------------
G. Willi-Food 3 Nahal, Snir Street0
International Ltd Yavne 81106
Israel 250,000
-------------------------- -------------------------- --------------------------
20
SCHEDULE 2
DOCUMENTS TO BE DELIVERED
(A) Save to the extent that they have been delivered to CS prior to signature
of this agreement, each of the following documents is to be delivered, in a
form previously approved by CS, to Marriott Harrison on behalf of each of
CS, forthwith upon execution of this agreement (or such other time as is
specified below) and, save where the context otherwise requires, is to be
dated with the date of this agreement:
1. a certified copy of the minutes of a meeting of the Board:
(a) approving and authorising the execution of this agreement;
(b) approving the Placing;
(c) approving and authorising the application for Admission;
(d) approving and authorising the publication of the Issue Documents,
the Announcement and the AIM Admission Document
2. a copy of the Announcement initialled by a Director;
3. a copy of the Placing Proof initialled by a Director;
4. a certified copy of a resolution of the Board in accordance with
clause 7 approving the allotment and issue of the Placing Shares;
5. a copy of the AIM Admission Document initialled by a Director;
6. a copy of the Presentation initialled by a Director;
7. certified copies of the responsibility letters and powers of attorney
given by each Director;
8. the Verification Notes (with supporting documents) duly signed by each
party responsible for them;
9. an original of the Legal Due Diligence Report;
10. an original of the Long Form Report;
11. an original of the Working Capital Report;
12. an original of the Controlling Shareholder Agreement;
13. an original of the Option Agreement;
14. the original Rule 39 Letters;
15. the application for Admission duly signed by a Director.
(B) An original copy of the Warranty Certificate to be delivered by close of
business on the Business Day immediately preceding the expected date of
Admission.
21
SCHEDULE 3
WARRANTIES
PART 1
1. PRESENTATION, ANNOUNCEMENT AND AIM ADMISSION DOCUMENT
1.1 All statements of fact contained in the Presentation, the Announcement, the
AIM Admission Document are true and accurate and not misleading and all
expressions of opinion, intention or expectation contained therein are made
on reasonable grounds, are truly and honestly held and are made after due
and careful consideration and enquiry.
1.2 There are no facts or matters known or which on reasonable enquiry could
have been known to the Company or the Directors which have not been
disclosed in the Presentation, the Announcement, the AIM Admission
Document, the omission of which makes any statement therein misleading or
which would be material for disclosure therein.
1.3 The Directors have made all due and careful enquiry to satisfy themselves
that, taking into account the proceeds of the Placing and the bank
facilities currently available to it, the Company and the Group has
sufficient working capital for its present requirements that is for at
least 12 months from the date of Admission.
1.4 All reasonable enquiries have been made to ascertain and verify the
accuracy of all statements of fact and the reasonableness of all other
statements contained in the Presentation, the Announcement, the AIM
Admission Document and in particular the replies to the Verification Notes
have been prepared or approved by persons having appropriate knowledge and
responsibility to enable them properly to provide such replies and the
replies therein for which any officer or employee of the Company or the
Group is responsible have been provided with due care and attention are
true and accurate.
2. AUTHORITY TO ALLOT CASH PLACING SHARES
2.1 Save as disclosed in the Admission Document, the Company has power under
its memorandum and articles of association to allot and issue the Cash
Placing Shares in the manner proposed in this agreement and all necessary
steps have been taken (subject only to Admission) to permit and implement
the issue of the Cash Placing Shares so as to enable full effect to be
given to the terms of this agreement and the Placing. The Company has
sufficient authority pursuant to its constitutional documents and the laws
under which it operates to allot and issue the Cash Placing Shares to
Placees procured by CS without first offering them to holders of existing
Ordinary Shares on a pre-emptive basis.
2.2 Save as disclosed in the Admission Document, the allotment and issue of the
Cash Placing Shares will not infringe any limits, powers or restrictions to
which the Company is subject or the terms of any contract, obligation or
commitment whatsoever of the Company nor give rise to any obligation under
any such contract, obligation or commitment which is inconsistent with the
acquisition by any allottee or subscriber of valid unencumbered title to
the Placing Shares or any of them.
22
3. SHARE CAPITAL
3.1 Save as disclosed in the Admission Document, there are not in force any
options or other agreements which have not been disclosed to CS which call
for the issue of, or accord to any person the right to call for the issue
of, any Ordinary Shares or shares in the capital or other securities of the
Company.
3.2 Save as disclosed in the Admission Document, all sums due in respect of the
issued share capital of the Company have been paid to and received by the
Company.
3.3 Save as disclosed in the Admission Document, there have been given to CS
(or its professional advisers) details of all current agreements (whether
written or unwritten) between the Company and any one or more of the
shareholders in the Company relating to any rights of pre-emption over or
rights to require a sale or purchase of any shares in the capital of the
Company.
4. LAST ACCOUNTS
Save as disclosed in the Admission Document, the Last Accounts:
(A) give a true and fair view of the state of affairs of the Company as at
the Last Accounts Date, of the profit or loss and of the cash flows of
the Company for the financial year ended on that date; and
(B) have been prepared in accordance with all applicable statements of
standard accounting practice and generally accepted accounting
principles and practices consistently applied save to the extent
disclosed in the Last Accounts.
5. POSITION SINCE LAST ACCOUNTS DATE
Save as disclosed in the Admission Document, since the Last Accounts Date:
(A) the business of the Company has been carried on in the ordinary and
usual course;
(B) there has been no adverse change in the financial or trading position
or prospects of the Company;
(C) no contracts or commitments of an unusual or unduly onerous nature
have been entered into by the Company;
(D) other than in the ordinary course of business, the Company has not
entered into or assumed or incurred any contract, commitment,
borrowings, indebtedness in the nature of borrowing, guarantee,
liability (including contingent liability) or other obligation which,
in any such case, has not been discharged at the date of this
agreement or will not be discharged prior to Admission;
(E) no dividend or other distribution has been declared, paid or made by
the Company;
(F) no debtor has been released by the Company to an extent which is
material on terms that he pays less than the book value of his debt
and no debt of such material amount owing to the Company has been
deferred, subordinated or written-off or so far as the Directors are
aware is now likely to prove to any material extent irrevocable (and
for the purposes of this warranty "material" shall mean having a value
of (pound)20,000 or more); and
23
(G) neither the Company, nor the Directors, have entered into any
memorandum of understanding, heads of terms or similar arrangements in
respect of the issue or transfer of any shares in the capital of the
Company or offer for the same;
save, in each case, for matters which, individually or in aggregate, are
not material for disclosure in the context of the Placing.
6. ACCOUNTING RECORDS
Save as set out in the Legal Due Diligence Report or the Long Form Report
or the Admission Document, all accounts, books, ledgers, financial and
other records of the Company have been properly and accurately maintained
in all material respects and contain true and accurate records of all
matters required to be entered therein.
7. LITIGATION AND PROCEEDINGS
7.1 Save as disclosed in the Admission Document, the Company does not have any
claims outstanding against it or is engaged in, or has within the last
twelve months been engaged in, any litigation or arbitration or similar
proceedings, or in any governmental, regulatory or similar investigation or
enquiry, which individually or collectively may have or, during the last
twelve months, has had a significant effect on the financial or trading
position or prospects of the Company. So far as the Company and the
Directors are aware there is no such claim, litigation, proceeding,
investigation or enquiry pending or threatened. There are no circumstances
known or which, on reasonable enquiry, could have been known to the Company
or the Directors which are likely to give rise to any such claim,
litigation, proceeding, investigation or enquiry.
7.2 Save as disclosed in the Admission Document, the Company has not taken any
action and no other steps have been taken or legal proceedings started or
threatened against the Company for its administration, winding up or
dissolution, or for it to enter into any compromise, arrangement or
composition for the benefit of creditors, or for the appointment of a
receiver, administrator, provisional liquidator, trustee or similar officer
of it, or of any of its properties, revenues or assets and there are no
circumstances known, or which could on reasonable enquiry have been known,
known, to the Company or the Directors which are likely to give rise to any
of the foregoing.
8. BORROWINGS
9.1 Save as disclosed in the Admission Document the Company does not have any
borrowings not has granted any security interest to secure any future
borrowings, in each case which are material in the context of the Placing
and Admission.
9.2 Save as disclosed in the Admission Document, no event has occurred or, to
the best of the knowledge, information and belief of the Directors is about
to occur by reason of the happening of which any secured or unsecured
borrowings of the Company have become or would, with the giving of notice
or the lapse of time, become payable prior to maturity, and there are not
circumstances known to the Directors having made all reasonable enquiries
which might lead to the occurrence of any such event.
24
9. DIRECTORS' RESPONSIBILITIES AND FINANCIAL REPORTING PROCEDURES
9.1 The Directors are aware of the nature of their responsibilities and
obligations as directors of a company whose shares are admitted to trading
on AIM.
9.2 The Directors have established procedures which provide a reasonable basis
for them to make proper judgments as to the financial position and
prospects of the Company.
10. CONFLICTS OF INTEREST
Save for contracts of employment or engagement between the Company and the
directors or as disclosed in the Admission Document, there are no
agreements, arrangements or understandings (whether legally enforceable or
not) between the Company and any person who is a director (or connected
party) or shareholder or the beneficial owner of any interest in the
Company or any company in which the Company is interested relating to the
management of the Company's business or the appointment or removal of the
directors of the Company or the ownership or transfer of ownership or the
letting of any assets to or by the Company or the provision of finance,
goods, services or other facilities to or by the Company or otherwise
howsoever relating to its affairs.
11. GENERAL
Save as disclosed in the Admission Document, neither the Company nor, so
far as the Company and the Directors are aware any of its officers, agents
or employees, has committed or omitted to do any act or thing the
commission or omission of which is materially in contravention of any Act,
Order or Regulation or the like giving rise to any fine, penalty, default
proceedings or other liability on the part of the Company and the Company
has not committed any material breach of any anti-trust or anti-monopoly
legislation and no officer has committed any such breach in relation to the
Company.
12. PRO FORMA STATEMENT OF NET ASSETS
The pro forma statement of net assets of the Company at Part IV of the AIM
Admission Document:
(A) has been prepared (and is presented in the AIM Admission Document) on
a basis consistent with the Company's accounting policies and
practices;
(B) has been prepared on the bases and assumption set out in it (but not
on any other bases or assumption which, in either case, ought to be
disclosed in the AIM Admission Document); and
(C) has been made after making the adjustments set out in it (but not
after any other adjustment), all of which adjustments are appropriate
in the context of the matters described in the AIM Admission Document.
13. WORKING CAPITAL
13.1 The Working Capital Report has been approved by the Directors and has been
prepared after due and careful enquiry and on the bases and assumption
stated in the Working Capital Report which each director believes to be
reasonable. Based on the current awareness of the Company, there is no
material fact or assumption not set out in the Working Capital Report which
ought reasonably to have been taken into account but which has not been
taken into account in the preparation of the Working Capital Report.
25
13.2 Each statement of fact in the Working Capital Report is true and accurate
in all material respects and not misleading (by itself or in its context),
each expression of opinion or intention or expectation in it has been made
on reasonable grounds after due and careful enquiry and has been duly and
honestly held by the directors and is fairly based and, so far as the
Company is aware, there is no other material fact omitted to be disclosed
in the Working Capital Report which, by such omission, would make any such
statement or expression misleading.
13.3 The statement in relation to the working capital available to the Group set
out in the AIM Admission Document has been properly made after due and
careful enquiry and has been made after taking full account of all relevant
factors.
13.4 So far as the Company is aware, all information supplied by or on behalf of
the Company to CS for the purpose of reviewing the working capital
projections and/or requirements of the Company in connection with the
Admission was when given, and so far as the Company is aware remains,
complete, true and accurate in all material respects and not misleading in
any material respect.
14. TAXATION
14.1 Save as disclosed in the Admission Document, so far as the Company is aware
no claim or dispute involving the Company has been made or has arisen with
any Tax Authority which could reasonably be considered material in the
context of Admission. So far as the Company and the Directors are aware,
there is no significant risk that such a claim will be made or that such a
dispute will arise.
15. ADMISSION DOCUMENT
So far as the Warrantors are aware, and taking into account the
professional responsibilities of the relevant advisers to the Company, the
Admission Document contains all such information as, investors would
reasonably require, and reasonably expect to find there, for the purpose of
making an informed assessment of the assets and liabilities, financial
position, profits and losses and prospects of the Group and of the rights
attaching to the Placing Shares.
16. PROPERTY AND ENVIRONMENTAL MATTERS
Save as disclosed in the Admission Document, the Company does not own or
occupy any property or have any actual or contingent liability of any kind
in respect of any freehold or leasehold land or buildings, other than any
of the property expressly stated in the Admission Document as being used or
occupied by, or let or licensed to the Company.
17. THE BUSINESS
17.1 Save as disclosed in the Admission Document, the Company carries adequate
insurance cover (having regard to the levels and the risks normally insured
against by persons carrying on the same or (a) similar business or
business(es) as that/those carried on by the Company) and all such
insurances are in full force and effect and not voidable and there is no
material insurance claim made by or against the Company pending, threatened
or outstanding and all premiums due and payable in respect of all
insurances have been duly paid.
26
17.2 Save as disclosed in the Admission Document, all material licences,
consents and other permissions and approvals required for carrying on the
business or businesses now carried on by the Company or any of its
subsidiary undertakings have been obtained and are in full force and effect
and, so far as the Company and the Directors are aware, there is no
circumstance which indicates that any licence, consent, permission or
approval is likely to be revoked or incapable of renewal.
17.3 Save as disclosed in the Admission Document, no services supplied, no goods
or articles manufactured or distributed or currently proposed to be
manufactured or distributed by the Company and no method or process
employed by it (or by any licensee under any licence granted by it)
infringe or are likely to infringe any valid and enforceable patent, trade
mark, registered design or other industrial, intellectual or commercial
monopoly rights of any third party and so far as aforesaid no claim has
been made against the Company or any such licensee in respect of such
infringement in each such case as is material in the context of the
Placing.
17.4 Save as disclosed in the Admission Document, so far as the Company and the
Directors are aware all the agency, distributorship, marketing, purchasing,
manufacturing and licensing agreements to which the Company is a party and
which are individually material in the context of the Placing, are valid
and subsisting and so far as the Company and the Directors are aware
nothing has been done or omitted to be done by the Company or the Directors
which would enable any such agreement to be terminated validly for material
breach of the terms of any such agreement.
17.5 The Company is duly incorporated and has the requisite power and authority
to carry on its businesses.
18. INSOLVENCY
18.1 So far as the Company and the Directors are aware, no order has been made
or petition presented or resolution passed for the winding up of the
Company or for the appointment of a provisional liquidator to the Company
or for an administration order in respect of the Company.
18.2 So far as the Company and the Directors are aware, No receiver (whether or
not an administrative receiver) or receiver and manager has been appointed
by any person of the whole or any part of the business or assets of the
Company.
18.3 So far as the Company and the Directors are aware, no voluntary arrangement
has been proposed under the Israeli equivalent (if any) to section 1 of the
Insolvency Act 1986 in respect of the Company, no compromise or arrangement
has been proposed, agreed to or sanctioned under the Israeli equivalent (if
any) to section 45 CA 85 in respect of the Company and no action is being
taken to strike the Company off the register under the Israeli equivalent
(if any) to section 652 CA 85.
19. REPORTS
19.1 So far as the Warrantors are aware, and taking into account the
professional responsibilities of the relevant advisers in relation to such
reports, all statements and financial information contained in the Long
Form Report and in the Legal Due Diligence Report are correct in every
material respect and not incomplete or misleading in any material respect,
no information has been knowingly withheld which would make any statement
of fact in such reports misleading in any material respect and the
Warrantors agree in all material respects with all expressions of opinion,
expectation and intention contained in the Long Form Report and the Legal
Due Diligence Report and such expressions of opinion, expectation and
intention attributed to the Directors in such respects are honestly held by
them and are either fairly based on facts which are within their knowledge
(having made all reasonable enquiries) or made on reasonable grounds.
27
19.2 So far as the Company and the Directors are aware, all written information
supplied directly or indirectly by the Directors and the Company to CS (or
any persons acting on its behalf) or to the Reporting Accountants for the
purposes of or in connection with the Placing and the Acquisition was when
supplied and is now true and accurate in all material respects.
20. VERIFICATION
The Company and the Directors are satisfied that the answers recorded in
the Verification Notes have been prepared or approved by persons having
appropriate knowledge and responsibility to enable them properly to provide
such replies and are, subject to any express limitation included in such
answers, neither untrue nor inaccurate not incomplete nor misleading in any
material respect.
PART 2
21. Each Non-Executive Director severally warrants that the personal
information given by him for the purpose of publishing the Admission
Document is true, complete and accurate in all material respects at the
date of this document, that there is no omission therefrom which might make
the same misleading and that, without prejudice to the foregoing all
information relating to himself which might be material for disclosure in
the Admission Document has been disclosed in writing to CS.
22. Each Non-Executive Director severally warrants that he has read the Long
Form Report and the Legal Due Diligence Report and the Admission Document,
and severally warrants that he has discussed with the Executive Directors
any matters referred to therein which appear to him to be material in the
context of Admission and the Placing.
23. Each Non-Executive Director severally warrants that, so far as he is aware,
all statements of fact contained in the Presentation, the Announcement, the
Placing Proof and the AIM Admission Document are true and accurate and not
misleading and all expressions of opinion, intention or expectation
contained therein are made on reasonable grounds, are truly and honestly
held and are made after due and careful consideration and enquiry.
28
SCHEDULE 4
WARRANTY CERTIFICATE
Corporate Synergy PLC
30 Old Broad Street
London EC2N 1HT
o 2006
Dear Sirs
We refer to the placing agreement dated o 2006 between Corporate Synergy PLC (1)
the Directors (2) Gold Frost Ltd (3) and G. Willi-Food International Ltd (4)
(the "PLACING AGREEMENT"). Words and expressions defined in the Placing
Agreement have the same meanings in this letter.
We confirm to you that so far as we are aware:
1. each of the Conditions (other than Admission) has been, or will, upon
delivery of this letter, have been satisfied or fulfilled in accordance
with its terms; and
2. none of the Warranties was breached, or untrue, or inaccurate or misleading
at the date of the Placing Agreement and no Specified Event has occurred.
This letter, which has been delivered to you prior to the date of Admission, is
to be released to you immediately prior to Admission.
-------------------------
duly authorised on
behalf of Gold Frost Ltd
29
SIGNED by )
for and on behalf of )
CORPORATE SYNERGY PLC )
SIGNED by )
for and on behalf of )
GOLD FROST LTD )
EXECUTED AND DELIVERED AS A DEED BY
--------------------------------------------------
GIL HOCHBOIM
IN THE PRESENCE OF:
----------------------------------------
EXECUTED AND DELIVERED AS A DEED BY
--------------------------------------------------
ZVI WILLIGER
IN THE PRESENCE OF:
----------------------------------------
30
EXECUTED AND DELIVERED AS A DEED BY
--------------------------------------------------
JOSEPH WILLIGER
IN THE PRESENCE OF:
----------------------------------------
EXECUTED AND DELIVERED AS A DEED BY
--------------------------------------------------
BARRY MORRIS
IN THE PRESENCE OF:
----------------------------------------
EXECUTED AND DELIVERED AS A DEED BY
--------------------------------------------------
RON GUTTMAN
IN THE PRESENCE OF:
----------------------------------------
31
EXECUTED AND DELIVERED AS A DEED BY
--------------------------------------------------
YAEL ROTHSCHILD
IN THE PRESENCE OF:
----------------------------------------
EXECUTED AND DELIVERED )
AS A DEED BY )
G. WILLI-FOOD INTERNATIONAL )
LTD )
)
acting by: )
------------------------------------------------
Director
------------------------------------------------
Director/Secretary
32
EXHIBIT 4.12
DATED 2 MARCH 2006
(1) G WILLI-FOOD INTERNATIONAL LIMITED
(2) GOLD FROST LTD
(3) THE DIRECTORS OF GOLD FROST LIMITED
(4) CORPORATE SYNERGY PLC
------------------------------------------
SHARE LOCK-IN AND ORDERLY MARKET AGREEMENT
------------------------------------------
WWW.MARRIOTTHARRISON.CO.UK
12 GREAT JAMES STREET LONDON WC1N 3DR
T +44 (0)20 7209 2000 F +44 (0)20 7209 2001
DX 0001 LONDON CHANCERY LANE
CONTENTS
Clause
Page
1 LOCK-IN AND ORDERLY MARKET 2
2 POWER TO ENTER INTO THIS AGREEMENT 4
3 COUNTERPARTS 4
4 CHOICE OF LAW 4
5 ADDRESS FOR SERVICE 5
2
THIS AGREEMENT is dated 2 March 2006
BETWEEN:
(1) G WILLI-FOOD INTERNATIONAL LTD (a company which is incorporated and
registered in Israel with registered no. 520043209) whose registered office
is at 3 Nahal, Snir Street, Yavne 81106, Israel (the "COVENANTOR");
(2) GOLD FROST LTD (a company which is incorporated and registered in Israel
with registered no. 52-003482-8) whose registered office is at 3 Nahal,
Snir Street, Yavne 81106, Israel (the "COMPANY");
(3) THE PERSONS whose names are set out in the schedule to this agreement (the
"DIRECTORS"); and
(4) CORPORATE SYNERGY PLC (incorporated in England and Wales with registered
no. 2617599) whose registered office is at 30 Old Broad Street, London EC2N
1HT ("CS").
BACKGROUND:
(A) The Company is to apply to London Stock Exchange plc (the "EXCHANGE") for
its entire ordinary share capital to be admitted to trading on the AIM
market of the Exchange ("ADMISSION").
(B) At the request of the Company and CS, the Covenantor has agreed not to
dispose of the 40,000,000 ordinary shares of NIS 0.01 each in the capital
of the Company ("ORDINARY SHARES") which are at the date of this agreement
registered in its name or over which it controls the voting rights or in
which it has a beneficial interest, all ordinary shares arising from the
exercise of options or convertible loan notes or similar rights granted to
the Covenanter to subscribe for or otherwise become entitled to ordinary
shares (all such details being set out in Part V of the AIM Admission
Document of the Company of even date), ("ORIGINAL SHARES") and all shares
and/or securities exchangeable for or convertible into shares in the
Company arising from any capitalisation issue or any consolidation or
sub-division of the Company's capital (to the extent that the entitlement
to such shares or securities arises by reference to Original Shares)
(together the "SHARES") for a period of 12 months from the date of
Admission (the "PERIOD") and for a further period of 12 months to deal in
those Shares in such a manner as to ensure an orderly market in the share
capital of the Company.
1
(C) The Directors have agreed to act in a similar manner as that set out in
recital (B) above in relation to any Ordinary Shares which arise from any
exercise of options to subscribe for Ordinary Shares ("RESULTING SHARES"),
the details of which options are set out in paragraph 5.1 of part V of the
AIM admission document of the Company of even date.
IT IS AGREED as follows:
1 LOCK-IN AND ORDERLY MARKET
1.1 UNDERTAKINGS AND COVENANTS
(a) Conditional upon Admission, the Covenantor covenants and undertakes with
each of the Company and CS that (save for in the circumstances set out in
clauses 1.2(a) to (g) (inclusive)):
(i) during the Period, it shall not directly or indirectly offer,
mortgage, charge, pledge, sell, contract to sell or grant any option,
right or warrant to purchase or otherwise transfer or dispose of all
or any interest in any of its Shares or agree to do or permit to be
done any of the same without the prior written consent of the
Company's broker from time to time (the "BROKER") (such consent not to
be unreasonably withheld or delayed, but provided that such consent
may be granted subject to such conditions as the Broker may reasonably
impose); and
(ii) for a period of 12 months following the end of the Period only effect
disposals of interests in Shares through the Broker and in accordance
with the reasonable requirements of the Broker with a view to
maintaining an orderly market for the issued share capital of the
Company; provided always that this clause 1.1(a)(ii) shall only apply
if the price and brokers' commission applicable to the proposed
disposal are overall on terms such that the proceeds to be received by
the Covenantor in respect of such disposal are not less than the
proceeds that would be received by the Covenantor based on market
terms quoted by any other reputable stockbroker or dealer in
securities in respect of the same disposal as identified to the
Broker; and provided that this clause 1.1(a)(ii) shall not apply if
the Broker fails to effect a disposal within 5 business days from the
date on which the Covenantor gives notice to the Broker of its
intention to effect a disposal of the Shares.
For the purposes of this clause "interest" shall have the meaning given to
it in section 208 of the Companies Act 1985 (as amended).
2
1.2 PERMITTED DISPOSALS
The covenant and undertaking in clause 1.1 shall not apply to any disposal:
(a) to a connected person (within the meaning of Section 346 of the
Companies Act 1985) in relation to the Covenanter; or
(b) to any person acting in the capacity of trustee of a trust created by
the Covenanter or upon any change of trustees of a trust so created
provided that the trust is established for charitable purposes or
there are no persons beneficially interested under the trust other
than the Covenanter and connected persons of the Covenanter; or
(c) in acceptance of a general offer (or by the giving of an irrevocable
undertaking to accept such offer) made to shareholders of the Company
to acquire all the issued Ordinary Shares (other than any shares which
are already owned by the person making such offer and any other person
acting in concert with him); or
(d) pursuant to any compromise or arrangement under the Israeli equivalent
to section 425 of the Companies Act providing for the acquisition by
any person or group of persons acting in concert, of 50 per cent. or
more of the equity share capital of the Company; or
(e) to any body corporate which is a member of the Covenantor's group
provided that the transfer is made off-market and that if the
transferee ceases to be a member of the Covenantor's group, then the
Covenantor must procure that such shares are transferred promptly back
to the Covenantor or to another member of the Covenantor's group; or
(f) pursuant to any scheme or reconstruction under the Israeli equivalent
to section 110 of the Insolvency Act 1986 in relation to the Company;
(g) to raise funds to satisfy any claim made against it involving a breach
of any of the warranties contained in the placing agreement made
between, inter alios, the Covenantor and CS of even date and which
agreement relates to the Company; or
(h) the granting of any charge, mortgage, security or any other
encumbrance whatsoever to any third party in respect of any interest
in Shares for the purposes of borrowing or providing collateral or
otherwise in connection with the Covenantor's banking arrangements;
provided that the Covenantor undertakes to notify promptly CS of any
such encumbrance; or
3
(i) in the case of an individual, to the personal representatives of the
relevant individual pursuant to will or intestacy.
1.3 Each of the Directors severally covenants and undertakes with each of the
Company and CS in relation to his Resulting Shares in the terms of the
provisions of clause 1.1 as though references therein to the "Covenantor"
were references to the relevant Director and to "Shares" were to Resulting
Shares.
1.4 The provisions of this clause 1 are without prejudice to any obligations
which the Covenantor may have from time to time pursuant to the Company's
code for dealings in Ordinary Shares from time to time, the AIM Rules for
Companies published by the Exchange, the Financial Services and Markets Act
2000 and under any applicable criminal statutes in the United Kingdom.
2 POWER TO ENTER INTO THIS AGREEMENT
The Covenantor hereby represents and warrants that it has full power and
authority to enter into this agreement, that it holds the Shares on the
date of this agreement free from all third party rights (other than
charges, pledges and security granted to its bankers) and that immediately
following Admission it will have full power and authority to perform the
obligations hereunder in respect of the Shares.
3 COUNTERPARTS
This agreement may be executed in any number of counterparts and by the
parties to it on separate counterparts, each of which when so executed and
delivered shall be an original, but all the counterparts shall together
constitute one and the same instrument.
4 CHOICE OF LAW
4.1 This agreement shall be construed in accordance with English law and the
parties irrevocably submit to the exclusive jurisdiction of the English
Courts to settle any disputes which may arise in connection with this
agreement.
4
5 ADDRESS FOR SERVICE
5.1 The Covenantor irrevocably appoints Mishcon de Reya (RJT/22816-1) of Summit
House, 12 Red Lion Square, London WC1R 4QD to be its agent for the receipt
of service of process in England and Wales. It agrees that any Service
Document may be effectively served on it in connection with proceedings in
England and Wales by service on its agent.
5.1.1 Any Service Document shall be deemed to have been duly served if
marked for the attention of Richard Tyler (RJT/22816-1) at
Mishcon de Reya (at the address specified above) or such other
address within England and Wales as may be notified to the party
wishing to serve the Service Document and:
5.1.1.1 left at the specified address; or
5.1.1.2 sent to the specified address by first class post.
In the case of clause 5.1.1.1 the Service Document will be deemed
to have been duly served when it is left. In the case of clause
5.1.1.2, the Service Document shall be deemed to have been duly
served two clear Business Days after the date of posting.
5.1.2 In the case of the Directors, the addresses respectively set out
in the Schedule to this agreement.
5.2 If the agent at any time ceases for any reason to act as such, the
Covenantor shall appoint a replacement agent having an address for service
in England or Wales and shall notify the other parties to this agreement of
the name and address of the replacement agent. Failing such appointment and
notification, CS shall be entitled by notice to the Covenantor to appoint a
replacement agent to act on its behalf. The provisions of this clause
applying to service on an agent apply equally to service on a replacement
agent.
5
5.3 A copy of any Service Document served on an agent shall be sent by post to
the Covenantor. Failure or delay in so doing shall not prejudice the
effectiveness of service of the Service Document.
5.4 "Service Document" means a claim form, order or judgment issued out of the
courts of England and Wales or other document relating to or in connection
with any proceedings.
6
SCHEDULE
THE DIRECTORS
--------------------------------------- ---------------------------------------
Name Address
--------------------------------------- ---------------------------------------
Zwi Williger 3 Nahal Snir Street
Yavne 81106
Israel
--------------------------------------- ---------------------------------------
Joseph Williger 3 Nahal Snir Street
Yavne 81106
Israel
--------------------------------------- ---------------------------------------
Gil Hochboim 3 Nahal Snir Street
Yavne 81106
Israel
--------------------------------------- ---------------------------------------
IN WITNESS hereof the parties have executed this agreement as their deed on the
date set out at the beginning.
EXECUTED AND DELIVERED AS A DEED )
BY GOLD FROST LTD )
acting by: )
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Director
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Director/Secretary
EXECUTED AND DELIVERED AS A DEED )
BY G WILLI-FOOD INTERNATIONAL LTD )
acting by: )
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Director
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Director/Secretary
7
EXECUTED AND DELIVERED AS A DEED )
BY CORPORATE SYNERGY PLC )
acting by )
-------------------
Director
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Director/Secretary
EXECUTED AND DELIVERED AS A DEED BY
Zwi Williger
in the presence of:
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EXECUTED AND DELIVERED AS A DEED BY
Joseph Williger
in the presence of:
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EXECUTED AND DELIVERED AS A DEED BY
Gil Hochboim
in the presence of:
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8
EXHIBIT 8 - SUBSIDIARIES OF THE COMPANY
Gold Frost Ltd., organized in Israel.
W.F.D. (Import, Marketing and Trading) Ltd., organized in Israel.
Willi USA Holdings, Inc., a Delaware corporation - an inactive subsidiary.
EXHIBIT 12.1
CERTIFICATION
I, Joseph Williger, certify that:
1. I have reviewed this annual report on Form 20-F of G. Willi-Food
International Ltd.;
2. Based on my knowledge, this report does not contain any untrue statement of
a material fact or omit to state a material fact necessary to make the
statements made, in light of the circumstances under which such statements
were made, not misleading with respect to the period covered by this
report;
3. Based on my knowledge, the financial statements, and other financial
information included in this report, fairly present in all material
respects the financial condition, results of operations and cash flows of
the company as of, and for, the periods presented in this report;
4. The company's other certifying officer(s) and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined
in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the company and have:
a. Designed such disclosure controls and procedures, or caused such
disclosure controls and procedures to be designed under our
supervision, to ensure that material information relating to the
company, including its consolidated subsidiaries, is made known to us
by others within those entities, particularly during the period in
which this report is being prepared;
b. Evaluated the effectiveness of the company's disclosure controls and
procedures and presented in this report our conclusions about the
effectiveness of the disclosure controls and procedures, as of the end
of the period covered by this report based on such evaluation; and
c. Disclosed in this report any change in the company's internal control
over financial reporting that occurred during the period covered by
the annual report that has materially affected, or is reasonably
likely to materially affect, the company's internal control over
financial reporting; and
5. The company's other certifying officer(s) and I have disclosed, based on
our most recent evaluation of internal control over financial reporting, to
the company's auditors and the audit committee of the company's board of
directors (or persons performing the equivalent functions):
a. All significant deficiencies and material weaknesses in the design or
operation of internal control over financial reporting which are
reasonably likely to adversely affect the company's ability to record,
process, summarize and report financial information; and
b. Any fraud, whether or not material, that involves management or other
employees who have a significant role in the company's internal
control over financial reporting.
Date: May 31, 2006
By: /s/ Joseph Williger
-----------------------
Joseph Williger
Chief Executive Officer
|
EXHIBIT 12.2
CERTIFICATION
I, Gil Hochboim, certify that:
1. I have reviewed this annual report on Form 20-F of G. Willi-Food
International Ltd.;
2. Based on my knowledge, this report does not contain any untrue statement of
a material fact or omit to state a material fact necessary to make the
statements made, in light of the circumstances under which such statements
were made, not misleading with respect to the period covered by this
report;
3. Based on my knowledge, the financial statements, and other financial
information included in this report, fairly present in all material
respects the financial condition, results of operations and cash flows of
the company as of, and for, the periods presented in this report;
4. The company's other certifying officer(s) and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined
in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the company and have:
a. Designed such disclosure controls and procedures, or caused such
disclosure controls and procedures to be designed under our
supervision, to ensure that material information relating to the
company, including its consolidated subsidiaries, is made known to us
by others within those entities, particularly during the period in
which this report is being prepared;
b. Evaluated the effectiveness of the company's disclosure controls and
procedures and presented in this report our conclusions about the
effectiveness of the disclosure controls and procedures, as of the end
of the period covered by this report based on such evaluation; and
c. Disclosed in this report any change in the company's internal control
over financial reporting that occurred during the period covered by
the annual report that has materially affected, or is reasonably
likely to materially affect, the company's internal control over
financial reporting; and
5. The company's other certifying officer(s) and I have disclosed, based on
our most recent evaluation of internal control over financial reporting, to
the company's auditors and the audit committee of the company's board of
directors (or persons performing the equivalent functions):
a. All significant deficiencies and material weaknesses in the design or
operation of internal control over financial reporting which are
reasonably likely to adversely affect the company's ability to record,
process, summarize and report financial information; and
b. Any fraud, whether or not material, that involves management or other
employees who have a significant role in the company's internal
control over financial reporting.
Date: May 31, 2006
/s/ Gil Hochboim
----------------
Gil Hochboim
Chief Financial Officer
|
EXHIBIT 13.1
CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the Annual Report of G. Willi-Food International Ltd.
(the "Company") on Form 20-F for the year ended December 31, 2005 as filed with
the Securities and Exchange Commission on the date hereof (the "Report"), I,
Joseph Williger, Chief Executive Officer of the Company, certify, pursuant to 18
U.S.C. ss. 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of
2002, that:
(1) The Report fully complies with the requirements of Section 13(a) or
15(d) of the Securities Exchange Act of 1934, as amended; and
(2) The information contained in the Report fairly presents, in all
material respects, the financial condition and results of operations of the
Company.
Date: May 31, 2006
By: /s/ Joseph Williger
-----------------------
Joseph Williger
Chief Executive Officer
(Principal Executive Officer)
|
A signed original of this written statement required by Section 906 has
been provided to G. Willi-Food International Ltd. and will be retained by G.
Willi-Food International Ltd. and furnished to the Securities and Exchange
Commission or its staff upon request.
EXHIBIT 13.2
CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the Annual Report of G. Willi-Food International Ltd.
(the "Company") on Form 20-F for the year ended December 31, 2005 as filed with
the Securities and Exchange Commission on the date hereof (the "Report"), I, Gil
Hochboim, Chief Financial Officer of the Company, certify, pursuant to 18 U.S.C.
ss. 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002,
that:
(1) The Report fully complies with the requirements of Section 13(a) or
15(d) of the Securities Exchange Act of 1934, as amended; and
(2) The information contained in the Report fairly presents, in all
material respects, the financial condition and results of operations of the
Company.
Date: May 31, 2006
By: /s/ Gil Hochboim
--------------------
Gil Hochboim
Chief Financial Officer
(Principal Financial Officer)
|
A signed original of this written statement required by Section 906 has been
provided to G. Willi-Food International Ltd. and will be retained by G.
Willi-Food International Ltd. and furnished to the Securities and Exchange
Commission or its staff upon request.
