£
|
REGISTRATION STATEMENT PURSUANT TO SECTION 12(b) OR (g) OF THE SECURITIES EXCHANGE ACT OF 1934
|
S
|
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
|
£
|
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
|
£
|
SHELL COMPANY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
|
Title of each class
|
Name of each exchange on which registered
|
Ordinary Shares, NIS 0.015 Par Value
|
NASDAQ Capital Market
|
Ordinary Shares, par value NIS 0.015 per share…15,898,965
|
Large accelerated filer
o
|
Accelerated filer
o
|
Non-accelerated filer
x
|
U.S. GAAP
x
|
International Financial Reporting
Standards as issued by the
International Accounting
Standards Board
o
|
Other
o
|
Page No.
|
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|
1
|
||
1
|
|||
1
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|||
1
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|||
A.
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Selected Financial Data
|
1
|
|
B.
|
Capitalization and Indebtedness
|
2
|
|
C.
|
Reasons for the Offer and Use of Proceeds
|
2
|
|
D.
|
Risk Factors
|
2
|
|
15
|
|||
A.
|
History and Development of the Company
|
15
|
|
B.
|
Business Overview
|
15
|
|
C.
|
Organizational Structure
|
24
|
|
D.
|
Property, Plants and Equipment
|
24
|
|
24
|
|||
24
|
|||
A.
|
Operating Results
|
24
|
|
B.
|
Liquidity and Capital Resources
|
32
|
|
C.
|
Research and Development, Patents and Licenses
|
35
|
|
D.
|
Trend Information
|
36
|
|
E.
|
Off-Balance Sheet Arrangements
|
36
|
|
F.
|
Tabular Disclosure of Contractual Obligations
|
36
|
|
37
|
|||
A.
|
Directors and Senior Management
|
37
|
|
B.
|
Compensation
|
39
|
|
C.
|
Board Practices
|
40
|
|
D.
|
Employees
|
50
|
|
E.
|
Share Ownership
|
52
|
|
53
|
|||
A.
|
Major Shareholders
|
53
|
|
B.
|
Related Party Transactions
|
54
|
|
C.
|
Interests of Experts and Counsel
|
56
|
|
56
|
|||
A.
|
Consolidated Statements and Other Financial Information
|
56
|
|
B.
|
Significant Changes
|
56
|
|
56
|
|||
A.
|
Offer and Listing Details
|
56
|
|
B.
|
Plan of Distribution
|
57
|
|
C.
|
Markets
|
58
|
|
D.
|
Selling Shareholders
|
58
|
|
E.
|
Dilution
|
58
|
|
F.
|
Expense of the Issue
|
58
|
|
58
|
|||
A.
|
Share Capital
|
58
|
|
B.
|
Memorandum and Articles of Association
|
58
|
|
C.
|
Material Contracts
|
61
|
|
D.
|
Exchange Controls
|
61
|
|
E.
|
Taxation
|
61
|
|
F.
|
Dividend and Paying Agents
|
69
|
|
G.
|
Statement by Experts
|
69
|
|
H.
|
Documents on Display
|
69
|
|
I.
|
Subsidiary Information
|
69
|
|
69
|
70
|
|||
70
|
|||
70
|
|||
70
|
|||
70
|
|||
71
|
|||
71
|
|||
71
|
|||
72
|
|||
73
|
|||
73
|
|||
73
|
|||
73
|
|||
74
|
|||
75
|
|||
75
|
|||
75
|
|||
75
|
ITEM 1.
|
IDENTITY OF DIRECTORS, SENIOR MANAGEMENT AND AD
VISER
S
|
ITEM 2.
|
OFFER STATISTICS AND EXPECTED TIM
ET
ABLE
|
ITEM 3.
|
KEY INFO
RM
ATION
|
Year Ended December 31,
|
||||||||||||||||||||
2011
|
2012
|
2013
|
2014
|
2015
|
||||||||||||||||
(U.S. dollars in thousands, except share and per share data)
|
||||||||||||||||||||
Revenues
|
$ | 19,405 | $ | 21,551 | $ | 21,761 | $ | 22,481 | $ | 14,864 | ||||||||||
Cost of revenues
|
13,800 | 16,233 | 17,160 | 15,944 | 12,291 | |||||||||||||||
Gross profit
|
5,605 | 5,318 | 4,601 | 6,537 | 2,573 | |||||||||||||||
Research and development, net
|
2,543 | 2,423 | 1,459 | 789 | 693 | |||||||||||||||
Marketing and selling
|
2,106 | 1,664 | 1,959 | 2,392 | 2,358 | |||||||||||||||
General and administrative
|
1,944 | 2,137 | 1,919 | 1,901 | 1,858 | |||||||||||||||
Goodwill impairment
|
- | - | - | - | 587 | |||||||||||||||
Operating income (loss)
|
(988 | ) | (906 | ) | (736 | ) | 1,455 | (2,923 | ) | |||||||||||
Financial expense, net
|
531 | 1,149 | 1,907 | 1,254 | 3,574 | |||||||||||||||
Net income (loss)
|
(1,519 | ) | (2,055 | ) | (2,643 | ) | 201 | (6,497 | ) | |||||||||||
Net (income) loss attributable to non-controlling interest
|
(7 | ) | 4 | 8 | 7 | 36 | ||||||||||||||
Net income (loss) attributable to RADA Electronic Industries' shareholders
|
(1,526 | ) | (2,051 | ) | (2,635 | ) | 208 | (6,461 | ) | |||||||||||
Basic and diluted net income (loss) per Ordinary share attributable for RADA Electronic Industries' shareholders
|
$ | (0.17 | ) | $ | (0.23 | ) | $ | (0.30 | ) | $ | 0.02 | $ | (0.54 | ) | ||||||
Weighted average number of shares used to compute basic and diluted net income (loss) per share
|
8,919 | 8,919 | 8,919 | 8,945 | 11,904 |
As of December 31,
|
||||||||||||||||||||
2011
|
2012
|
2013
|
2014
|
2015
|
||||||||||||||||
(U.S. dollars in thousands)
|
||||||||||||||||||||
BALANCE SHEET DATA:
|
||||||||||||||||||||
Working capital (deficiency)
|
$ | 2,954 | $ | 1,977 | $ | (152 | ) | $ | 35 | $ | 6,522 | |||||||||
Total assets
|
24,190 | 22,886 | 22,007 | 20,097 | 18,576 | |||||||||||||||
Short-term credits and current maturities of long-term loans
|
6,338 | 7,140 | 7,194 | 6,709 | - | |||||||||||||||
Convertible note - short term
|
2,810 | 3,000 | 3,000 | 3,000 | 3,090 | |||||||||||||||
Long-term shareholders loans, net of current maturities
|
176 | - | - | - | - | |||||||||||||||
Shareholders' equity
|
7,224 | 5,906 | 3,350 | 3,547 | 8,507 |
C.
|
Reasons for the Offer and Use of Proceeds
|
D.
|
Risk Factors
|
|
·
|
their requirements or budgetary constraints change;
|
|
·
|
they cancel multi-year contracts and related orders if funds become unavailable;
|
|
·
|
they shift spending priorities into other areas or for other products; or
|
|
·
|
they adjust contract costs and fees on the basis of audits.
|
|
·
|
Limitations and disruptions resulting from the imposition of government controls;
|
|
·
|
Changes in regulatory requirements;
|
|
·
|
Export license requirements;
|
|
·
|
Economic or political instability;
|
|
·
|
Trade restrictions;
|
|
·
|
Changes in tariffs;
|
|
·
|
Currency fluctuations;
|
|
·
|
Longer receivable collection periods and greater difficulty in accounts receivable collection;
|
|
·
|
Greater difficulty in safeguarding intellectual property;
|
|
·
|
Difficulties in managing overseas subsidiaries and international operations; and
|
|
·
|
Potential adverse tax consequences.
|
|
·
|
Quarterly variations in our operating results;
|
|
·
|
Operating results that vary from the expectations of securities analysts and investors;
|
|
·
|
Changes in expectations as to our future financial performance, including financial estimates by securities analysts and investors;
|
|
·
|
Announcements of technological innovations or new products by us or our competitors;
|
|
·
|
Announcements by us or our competitors of significant contracts, acquisitions, strategic partnerships, joint ventures or capital commitments;
|
|
·
|
Changes in the status of our intellectual property rights;
|
|
·
|
Announcements by third parties of significant claims or proceedings against us;
|
|
·
|
Additions or departures of key personnel;
|
|
·
|
Future sales of our ordinary shares;
|
|
·
|
Delisting of our shares from the NASDAQ Capital Market; and
|
|
·
|
Stock market price and volume fluctuations.
|
ITEM 4.
|
INFORMATION ON THE CO
MP
ANY
|
|
·
|
Military avionics (Data/video recorders, core avionics for aircraft and UAVs);
|
|
·
|
Inertial navigation systems for aerial and land platforms;
|
|
·
|
Tactical Radars for defense forces and border protection systems (land based).
|
|
·
|
Flight data recorders, or FDR, for fighter aircraft;
|
|
·
|
Digital video/audio/data recorders, or DVDR (with data transfer functions);
|
|
·
|
High-rate (no compression) data recorders, or HRDR, for aircraft and airborne pods;
|
|
·
|
Video recorders and airborne data servers, or VRDS, the latest approach to avionic data management;
|
|
·
|
A wide range of head-up-displays color video cameras, or HCVC, for fighter aircraft; and
|
|
·
|
A variety of ground debriefing solutions, or GDS.
|
|
·
|
Complete integrated avionics upgrade suites for fighters and mission aircraft;
|
|
·
|
Mission and display computers;
|
|
·
|
Weapon management systems;
|
|
·
|
Data interface and processing computers;
|
|
·
|
Mission data recorders and debriefing solutions;
|
|
·
|
HUD video cameras;
|
|
·
|
INS;
|
|
·
|
Avionics for UAVs (Interface control processors, engine control computers, Payload management computers, and others).
|
|
·
|
R-100F: FOG-based, navigation-grade Embedded GPS-INS;
|
|
·
|
R-200M: Compact, MEMS-based, multiple-sensor aided INS for combat platforms and weapons;
|
|
·
|
MAVINS – Modular Avionics and MEMS-Based INS: Specially-designed compact integrated solution for UAVs and disposable applications; and
|
|
·
|
Inertial measurement units, or IMUs.
|
|
§
|
The
RPS-10 radar sensors for active protection systems, or APS, detect all relevant threats that may be fired at combat vehicles, including RPGs, anti-tank guided missiles (ATGMs) and projectiles and provide 360
°
hemispheric coverage. The system delivers threat data to the APS, enabling it to neutralize threats.
|
|
§
|
The RPS-12 short-range hemispheric air surveillance radar system can detect, classify and track aerial vehicles at ranges of up to 10km, with emphasis on small UAVs. Mobile or stationary, the system can be integrated with any C4I system and other radars and sensors, and can operate either as a stand-alone, or as part of a large-scale surveillance system.
|
|
§
|
The RPS-14 radar system for perimeter and border protection can detect, identify, and track aerial and surface intruders including slow and small aircraft, vehicles, vessels, and pedestrians at tactical ranges. The RPS-14 can operate either as a stand-alone, or as part of a large-scale surveillance system.
|
|
§
|
The
RPS-15 comprehensive hostile fire management system for combat vehicle detects, tracks, classifies
,
and locates direct and elevated threats fired at combat vehicles, allowing the mobile force to successfully complete its mission while operating in a hostile environment.
|
|
§
|
The RPS-40/70/80 hostile fire detection radar systems detect, track, classify and locate direct and elevated threats fired at stationary or mobile forces. They compute the Point-Of-Origin (POO) and Point-Of-Impact (POI) of the threats, which may be rockets, artillery, mortars, ATGMs, RPGs, and more other threats. The systems can be integrated with any protection and Command, Control, Communications, Computers and Intelligence (C4I) system and be installed at stationary bases and posts, or onboard fighting vehicles.
|
|
§
|
The
RPS-42/72/82 tactical hemispheric air surveillance radar systems can detect, classify and track all types of aerial vehicles, including fighters, helicopters, UAVs, transport aircraft, etc. at tactical ranges. Mobile or stationary, the systems can be integrated with any C4I system and other radars and sensors, and can operate either as a stand-alone, or as part of a large-scale surveillance system.
|
|
§
|
The
RHS-44/74/84 radar systems for border protection can detect, identify, and track aerial and surface border intruders including slow and small aircraft, vehicles, vessels, and pedestrians at tactical ranges. The systems can operate either as a stand-alone, or as part of a large-scale surveillance system.
|
|
·
|
Maintaining our business focus on electronic systems for the military and para-military markets;
|
|
·
|
Expanding our product offerings by adding new applications to our existing product lines and by adapting our products to land systems;
|
|
·
|
Expanding our customer base by including our products in solutions and integrated systems for airborne and land vehicles;
|
|
·
|
Expanding our global presence by engaging business development consultants and service providers in all of the countries and territories to which our products are applicable;
|
|
·
|
Establishing sales channels with system integrators and major manufacturers such as Embraer, HAL, Lockheed Martin, Boeing, IMI, IAI, Rafael, DRS and others; and
|
|
·
|
Expanding our products base, business development and marketing activities to large potential markets, especially in the land systems and the Homeland Security segments, through identification of current and future applications that may become affordable by the injection of advanced commercial off-the-shelf technologies that offer superior performance and/or significant price savings, and developing new marketing channels aimed directly at these segments.
|
Percentage of Revenues
|
||||||||||||
2013
|
2014
|
2015
|
||||||||||
Embraer S.A.
|
20 | % | 16 | % | 9 | % | ||||||
Lockheed Martin Corporation
|
17 | % | 13 | % | 7 | % | ||||||
Hindustan Aeronautics Ltd
|
17 | % | 22 | % | 12 | % | ||||||
Israel Aerospace Industries
|
12 | % | 10 | % | 23 | % | ||||||
A Latin America Customer
|
11 | % | - | - |
2013
|
2014
|
2015
|
||||||||||
Israel
|
20 | % | 22 | % | 41 | % | ||||||
South and Latin America
|
31 | % | 12 | % | 11 | % | ||||||
Asia
|
25 | % | 30 | % | 23 | % | ||||||
North America
|
23 | % | 36 | % | 24 | % | ||||||
Europe
|
1 | % | 0 | % | 1 | % |
Year Ended December 31,
|
||||||||||||
2013
|
2014
|
2015
|
||||||||||
Revenues
|
100 | % | 100 | % | 100 | % | ||||||
Cost of revenues
|
78.9 | % | 70.9 | % | 82.6 | % | ||||||
Gross profit
|
21.1 | % | 29.1 | % | 17.3 | % | ||||||
Research and development, net
|
6.7 | % | 3.5 | % | 4.6 | % | ||||||
Marketing and selling
|
9.0 | % | 10.6 | % | 15.9 | % | ||||||
General and administrative
|
8.8 | % | 8.5 | % | 16.4 | % | ||||||
Operating income (loss)
|
(3.4 | )% | 6.5 | % | (19.7 | )% | ||||||
Financial expenses, net
|
(8.8 | )% | (5.6 | )% | (24.0 | )% | ||||||
Net income (loss)
|
(12.2 | )% | 0.9 | % | (43.7 | )% | ||||||
Net Loss attributable to non-controlling interest
|
0.0 | % | 0.0 | % | 0.2 | % | ||||||
Net income (loss) attributable to RADA shareholders
|
(12.2 | )% | 0.9 | % | (43.5 | )% |
Year Ended December 31,
|
||||||||||||||||||||
2011
|
2012
|
2013
|
2014
|
2015
|
||||||||||||||||
NIS vs. U.S. Dollar
|
7.7 | % | (2.3 | )% | (7.0 | )% | 12 | % | 0.3 | % | ||||||||||
Israeli Consumer Price Index
|
2.2 | % | 1.6 | % | 1.8 | % | (0.2 | )% | (1 | )% |
Year ended December 31,
|
||||||||||||
2013
|
2014
|
2015
|
||||||||||
(U.S. dollars in thousands)
|
||||||||||||
Net cash provided by (used in) operating activities
|
1,432 | 122 | (2,765 | ) | ||||||||
Net cash provided by (used in) investing activities
|
(85 | ) | 66 | (378 | ) | |||||||
Net cash provided by (used in) financing activities
|
(435 | ) | (528 | ) | 3,227 | |||||||
Effect of exchange rate changes on cash and cash equivalents
|
61 | (11 | ) | (116 | ) | |||||||
Increase(decrease) in cash and cash equivalents
|
973 | (351 | ) | (32 | ) | |||||||
Cash and cash equivalents at beginning of the year
|
1,164 | 2,137 | 1,786 | |||||||||
Cash and cash equivalents at end of the year
|
2,137 | 1,786 | 1,754 |
|
·
|
Military Avionics INS; and
|
|
·
|
Tactical radar systems for force and border protection solutions.
|
Contractual Obligations
|
Payments due by Period
|
|||||||||||||||||||
Total
|
Less than 1 year
|
1-3 Years
|
3-5 Years
|
More than 5 years
|
||||||||||||||||
Long-term debt obligations
|
$ | 3,169,000 | $ | 3,119,000 | $ | 50,000 | - | - | ||||||||||||
Operating lease obligations
|
1,386,000 | 713,000 | 673,000 | - | - | |||||||||||||||
Total
|
$ | 4,555,000 | $ | 3,832,000 | $ | 723,000 | - | - |
Name
|
Age
|
Position
|
||
Herzle Bodinger
|
73
|
Executive Chairman of the Board of Directors
|
||
Zvi Alon
|
62
|
Chief Executive Officer
|
||
Dov Sella
|
60
|
Chief Business Development Officer
|
||
Shiri Lazarovich
|
41
|
Chief Financial Officer
|
||
Oleg Kiperman
|
62
|
Chief Technology Officer
|
||
Adrian Berg
|
68
|
Director
|
||
Roy Kui Chuen
Chan
|
69
|
Director
|
||
Ben Zion Gruber (1)
(2)
|
57
|
Director
|
||
Michael Letchinger
|
60
|
Director
|
||
Nurit Mor
(1)(2)
|
72
|
External director
|
||
Elan Sigal (1)(2)
|
48
|
External director
|
||
Dr Alon Dumanis
(1)(2)
|
66
|
Director
|
(1) Member of the Audit Committee
(2) Member of the Compensation Committee
|
Herzle Bodinger
|
Zvi Alon
|
Dov Sella
|
Oleg Kiperman
|
Shiri Lazarovich
|
||||||||||||||||
Annual salary cost and other benefits
($)
1
|
304,391 | 284,556 | 271,789 | 227,071 | 191,467 | |||||||||||||||
Total
($)
|
304,391 | 284,556 | 271,789 | 227,071 | 191,467 |
|
·
|
monitoring deficiencies in the management of the company, including in consultation with the independent auditors or the internal auditor, and to advise the board of directors on how to correct such deficiencies. If the audit committee finds a material deficiency, it will hold at least one meeting regarding such material deficiency, with the presence of the internal auditor or the independent auditors but without the presence of the senior management of the company. However, a member of the company’s senior management can participate in the meeting in order to present an issue which is under his or her responsibility;
|
|
·
|
determining, on the basis of detailed arguments, whether to classify certain engagements or transactions as material or extraordinary, as applicable, and therefore as requiring special approval under the Israeli Companies Law. The audit committee may make such determination according to principles and guidelines predetermined on an annual basis;
|
|
·
|
determining if transactions (excluding extraordinary transactions) with a controlling shareholder, or in which a controlling shareholder has a personal interest, are required to be rendered pursuant to a competitive procedure;
|
|
·
|
deciding whether to approve engagements or transactions that require the audit committee approval under the Israeli Companies Law;
|
|
·
|
determining the approval procedure of non-extraordinary transactions, following classification as such by the audit committee, including whether such specific non-extraordinary transactions require the approval of the audit committee;
|
|
·
|
examining and approving the annual and periodical working plan of the internal auditor;
|
|
·
|
overseeing the company’s internal auditing and the performance of the internal auditor; confirm that the internal auditor has sufficient tools and resources at his disposal, taking into account, among other, the special requirements of the company and its size;
|
|
·
|
examining the scope of work of the independent auditor and its pay, and bringing such recommendations on these issue before the Board; determining the procedure of addressing complaints of employees regarding shortcomings in the management of the company and ensure the protection of employees who have filed such complaints;
|
|
·
|
determining with respect to transactions with the controlling shareholder or in which such controlling shareholder has personal interest, whether such transactions are extraordinary or not, an obligation to conduct competitive process under supervisions of the audit committee or determination that prior to entering into such transactions the company shall conduct other process as the audit committee may deem fit, all taking into account the type of the company. The audit committee my set such qualifications for one year in advance; and
|
|
·
|
determining the manner of approval of transactions with the controlling shareholder or in which it has personal interest which (i) are not negligible transactions (pursuant to the committee's determination) and (ii) are not qualified by the committee as extraordinary transactions.
|
|
·
|
a breach of the office holder's duty of care to the company or to another person;
|
|
·
|
a breach of the office holder's duty of loyalty to the company, provided that the office holder acted in good faith and had reasonable cause to assume that his or her act would not prejudice the company's interests; or
|
|
·
|
a financial liability imposed upon the office holder in favor of another person.
|
|
·
|
a monetary liability imposed on the office holder in favor of another person by any judgment, including a settlement or an arbitrator's award approved by a court;
|
|
·
|
reasonable litigation expenses, including attorney's fees, actually incurred by the office holder as a result of an investigation or proceeding instituted against him or her by a competent authority, provided that such investigation or proceeding concluded without the filing of an indictment against the office holder or the imposition of any monetary liability in lieu of criminal proceedings, or concluded without the filing of an indictment against the office holder and a monetary liability was imposed on the officer holder in lieu of criminal proceedings with respect to a criminal offense that does not require proof of criminal intent; and
|
|
·
|
reasonable litigation expenses, including attorneys' fees, incurred by the office holder or which were imposed on him or her by a court, in an action instituted by the company or on the company's behalf or by another person, against the office holder, or in a criminal charge from which he was acquitted, or in a criminal proceeding in which the office holder was convicted of a criminal offense which does not require proof of criminal intent.
|
|
·
|
prospectively undertake to indemnify an office holder, except that with respect to a monetary liability imposed on the office holder by any judgment, settlement or court-approved arbitration award, the undertaking must be limited to types of events which the company's board of directors deems foreseeable considering the company's actual operations at the time of the undertaking, and to an amount or standard that the board of directors has determined as reasonable under the circumstances.
|
|
·
|
retroactively indemnify an office holder of the company.
|
|
·
|
a breach by the office holder of his duty of loyalty unless, with respect to insurance coverage or indemnification, the office holder acted in good faith and had a reasonable basis to believe that the act would not prejudice the company;
|
|
·
|
a breach by the office holder of his duty of care if such breach was committed intentionally or recklessly, unless the breach was committed only negligently.
|
|
·
|
any act or omission done with the intent to unlawfully yield a personal benefit; or
|
|
·
|
any fine or forfeiture imposed on the office holder.
|
Name
|
Number of Ordinary Shares
Beneficially Owned
(1)
|
Percentage of
Ownership
(2)
|
||||||
Herzle Bodinger
|
-- | -- | ||||||
Zvi Alon
|
-- | -- | ||||||
Dov Sella
|
-- | -- | ||||||
Shiri Lazarovich
|
-- | -- | ||||||
Oleg Kiperman (3)
|
4,000 | * | ||||||
Adrian Berg (4)
|
1,533 | * | ||||||
Roy Kui Chuen Chan (5)
|
1,533 | * | ||||||
Ben Zion Gruber
|
- | - | ||||||
Michael Letchinger
|
-- | -- | ||||||
Nurit Mor
|
-- | -- | ||||||
Elan Sigal
|
-- | -- | ||||||
Alon Dumanis
|
-- | -- | ||||||
All directors and executive officers as a group (11 persons)
|
7,066 | * |
(1)
|
Beneficial ownership is determined in accordance with the rules of the SEC and generally includes voting or investment power with respect to securities. Ordinary shares relating to options and warrants currently exercisable or exercisable within 60 days of the date of this table are deemed outstanding for computing the percentage of the person holding such securities but are not deemed outstanding for computing the percentage of any other person. Except as indicated by footnote, and subject to community property laws where applicable, the persons named in the table above have sole voting and investment power with respect to all shares shown as beneficially owned by them.
|
(2)
|
The percentages shown are based on 15,898,965 ordinary shares issued and outstanding as of May 15, 2016.
|
(3)
|
The business address of Mr. Kiperman is c/o RADA Electronic Industries Ltd., 7 Giborei Israel Street, Netanya, Israel.
|
(4)
|
The business address of Mr. Berg is Alexander & Co., 17 St. Ann's Square, Manchester M2 7 PW, U.K.
|
(5)
|
The business address of Mr. Roy Chan is Gearhart Holdings (H.K.) Limited, 2202 Kodak House II, 39 Healthy Street, E. North Point, Hong Kong.
|
Name
|
Number of
Ordinary Shares
Beneficially Owned(1)
|
Percentage of
Ownership(2)
|
||||||
Howard P.L. Yeung
(3) (5)
|
12,741,232 | 50.83 | % | |||||
Kenneth Yeung
(4) (5)
|
450,029 | 2.8 | % |
(1)
|
Beneficial ownership is determined in accordance with the rules of the SEC and generally includes voting or investment power with respect to securities. Ordinary shares relating to options and notes currently exercisable or convertible or exercisable or convertible within 60 days of the date of this table are deemed outstanding for computing the percentage of the person holding such securities but are not deemed outstanding for computing the percentage of any other person. Except as indicated by footnote, and subject to community property laws where applicable, the persons named in the table above have sole voting and investment power with respect to all shares shown as beneficially owned by them.
|
(2)
|
The percentages shown are based on 15,898,965 ordinary shares outstanding as of May 15, 2016.
|
(3)
|
Based on a Schedule 13D/A filed by Howard P.L.Yeung on August 28, 2015. Includes 3,121,990 outstanding ordinary shares and 9,169,213 ordinary shares issuable upon the conversion of unpaid loan balances of $2,988,000 due to Faith Content Development Ltd., an entity owned by Mr. Howard P.L. Yeung. In addition, though not presented on the Schedule 13D/A, as an admission of beneficial ownership by Mr. Howard P.L. Yeung, we are including 450,029 ordinary shares held by Horsham Enterprises Ltd., a British Virgin Islands corporation jointly owned by Messrs. Howard P.L. Yeung and his brother Kenneth Yeung. These shares are also listed under Kenneth Yeung’s holdings (see footnote 4).
|
(4)
|
The shares are held by Horsham Enterprises Ltd., a British Virgin Islands corporation jointly owned by Messrs. Howard P.L. Yeung and his brother Kenneth Yeung.
|
(5)
|
The address of Messrs. Howard P.L. Yeung and Kenneth Yeung is 2202 Kodak House II, 39 Healthy Street, North Point, Hong Kong.
|
FINANCIAL INFORMATION
|
A.
|
Consolidated Statements and Other Financial Information
|
ITEM 9.
|
THE OFFER A
ND
LISTING
|
A.
|
Offer and Listing Details
|
Year
|
High
|
Low
|
||||||
2011
|
$ | 4.48 | $ | 1.55 | ||||
2012
|
$ | 2.37 | $ | 0.95 | ||||
2013
|
$ | 2.26 | $ | 0.96 | ||||
2014
|
$ | 6.29 | $ | 1.26 | ||||
2015
|
$ | 2.90 | $ | 0.35 |
2014
|
High
|
Low
|
||||||
First Quarter
|
$ | 1.80 | $ | 1.26 | ||||
Second Quarter
|
$ | 1.73 | $ | 1.30 | ||||
Third Quarter
|
$ | 6.29 | $ | 1.31 | ||||
Fourth Quarter
|
$ | 3.86 | $ | 1.80 | ||||
2015
|
High
|
Low
|
||||||
First Quarter
|
$ | 3.25 | $ | 1.55 | ||||
Second Quarter
|
$ | 2.82 | $ | 1.81 | ||||
Third Quarter
|
$ | 2.17 | $ | 0.70 | ||||
Fourth Quarter
|
$ | 0.79 | $ | 0.35 | ||||
2016
|
High
|
Low
|
||||||
First Quarter
|
$ | 0.46 | $ | 0.28 | ||||
Second Quarter( through May 15)
|
$ | 0.45 | $ | 0.36 |
High
|
Low
|
|||||||
November 2015
|
$ | 0.71 | $ | 0.43 | ||||
December 2015
|
$ | 0.50 | $ | 0.35 | ||||
January 2016
|
$ | 0.37 | $ | 0.28 | ||||
February 2016
|
$ | 0.37 | $ | 0.29 | ||||
March 2016
|
$ | 0.46 | $ | 0.36 | ||||
April 2016
|
$ | 0.45 | $ | 0.36 | ||||
May 2016 (through May 15)
|
$ | 0.42 | $ | 0.37 |
ADDITIONAL INFORMATION
|
|
·
|
Amortization of the cost of purchased know-how and patents and/or right to use a patent and know-how which are used for the development or advancement of the company, over an eight-year period;
|
|
·
|
Accelerated depreciation rates on equipment and buildings;
|
|
·
|
Under specified conditions, an election to file consolidated tax returns with additional related Israeli Industrial Companies; and
|
|
·
|
Expenses related to a public offering are deductible in equal amounts over three years.
|
|
·
|
broker-dealers,
|
|
·
|
financial institutions,
|
|
·
|
certain insurance companies,
|
|
·
|
investors liable for alternative minimum tax,
|
|
·
|
tax-exempt organizations,
|
|
·
|
non-resident aliens of the United States or taxpayers whose functional currency is not the U.S. dollar,
|
|
·
|
persons who hold the ordinary shares through partnerships or other pass-through entities,
|
|
·
|
persons who acquire their ordinary shares through the exercise or cancellation of employee stock options or otherwise as compensation for services,
|
|
·
|
investors that actually or constructively own 10% or more of our shares by vote or value, and
|
|
·
|
investors holding ordinary shares as part of a straddle, appreciated financial position, a hedging or conversion transaction.
|
|
·
|
an individual who is a citizen or, for U.S. federal income tax purposes, a resident of the United States;
|
|
·
|
a corporation or other entity taxable as a corporation created or organized in or under the laws of the United States or any political subdivision thereof;
|
|
·
|
an estate whose income is subject to U.S. federal income tax regardless of its source; or
|
|
·
|
a trust that (a) is subject to the primary supervision of a court within the United States and the control of one or more U.S. persons or (b) has a valid election in effect under applicable U.S. Treasury regulations to be treated as a U.S. person.
|
|
·
|
you would be required to allocate income recognized upon receiving certain dividends or gain recognized upon the disposition of ordinary shares ratably over your holding period for such ordinary shares,
|
|
·
|
the amount allocated to the current taxable year, and to any taxable years in your holding period prior to the first day in which we were treated as a PFIC will be treated as ordinary income, and
|
|
·
|
the amount allocated to each prior taxable year during which we are considered a PFIC would be subject to tax at the highest individual or corporate tax rate, as the case may be, and an interest charge would be imposed with respect to the resulting tax liability allocated to each such year.
|
QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISKS
|
DESCRIPTION OF SECURITIES OTHER THAN EQUITY SECURITIES
|
DEFAULTS, DIVIDEND ARREARAGES AND DELINQUENCIES
|
MATERIAL MODIFICATIONS TO THE RIGHTS OF SECURITY HOLDERS AND USE OF PROCEEDS
|
CONTROLS AND PROCEDURES
|
|
·
|
pertain to the maintenance of records that in reasonable detail accurately and fairly reflect the transaction and dispositions of the assets of the company;
|
|
·
|
provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and
|
|
·
|
provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of the company's assets that could have a material effect on the financial statements.
|
Year Ended December 31
|
||||||||
Services Rendered:
|
2014
|
2015
|
||||||
Audit (1)
|
$ | 100,000 | $ | 81,000 | ||||
Audit -related (2)
|
- | $ | 70,000 | |||||
Tax (3)
|
5,000 | 5,000 | ||||||
Total (2)
|
$ | 105,000 | $ | 156,000 |
|
(1)
|
Audit fees are the aggregate fees for the audit of our consolidated annual financial statements. It also includes fees billed for accounting consultations regarding the accounting treatment of matters that occur in the regular course of business, implications of new accounting pronouncements and other accounting issues that occur from time to time.
|
|
(2)
|
Audit-related fees relate to assurance and associated services that traditionally are performed by the independence auditor including SEC filings, comfort letters, consents and comment letters in connection with regulatory filings.
|
|
(3)
|
Tax fees are the aggregate fees billed for professional services rendered for tax compliance and tax advice, other than in connection with the audit. Tax compliance involves preparation of original and amended tax returns, tax planning and tax advice.
|
EXEMPTIONS FROM THE LISTING STANDARDS FOR AUDIT COMMITTEES
|
PURCHASE OF EQUITY SECURITIES BY THE ISSUER AND AFFILIATED PURCHASERS
|
CHANGES IN REGISTRANT'S CERTIFYING ACCOUNTANT
|
CORPORATE GOVERNANCE
|
|
·
|
The Rule requiring maintaining a majority of independent directors, as defined under the NASDAQ Marketplace Rules. Instead, under Israeli law and practice, we are required to appoint at least two external directors, within the meaning of the Israeli Companies Law, to our board of directors. In addition, in accordance with the rules of the SEC and NASDAQ, we have the mandated three independent directors, as defined by the rules of the SEC and NASDAQ, on our audit committee. See above in Item 6C. "Directors, Senior Management and Employees - Board Practices Outside and Independent Directors.”
|
|
·
|
The Rule requiring that our independent directors have regularly scheduled meetings at which only independent directors are present: instead, we follow Israeli law according to which independent directors are not required to hold executive sessions.
|
|
·
|
The Rule regarding independent director oversight of director nominations process for directors. Instead: instead, we follow Israeli law and practice according to which our board of directors recommends directors for election by our shareholders. See above Item 6C. "Directors, Senior Management and Employees - Board Practices - Election of Directors."
|
|
·
|
The requirements regarding the directors’ nominations process. Instead, we follow Israeli law and practice in accordance with which our directors are recommended by our board of directors for election by our shareholders. See Item 6C “Directors, Senior Management and Employees - Board Practices - Election of Directors.
|
|
·
|
The requirement to obtain shareholder approval for the establishment or amendment of certain equity based compensation plans, an issuance that will result in a change of control of the company, certain transactions other than a public offering involving issuances of a 20% or more interest in the company and certain acquisitions of the stock or assets of another company. Under Israeli law and practice, the approval of the board of directors is required for the establishment or amendment of equity based compensation plans and private placements. Under Israeli regulations, Israeli companies whose shares have been publicly offered only outside of Israel or are listed for trade only on an exchange outside of Israel, such as our company, are exempt from the Israeli law requirement to obtain shareholder approval for private placements of a 20% or more interest in the company. For the approvals and procedures required under Israeli law and practice for an issuance that will result in a change of control of the company and acquisitions of the stock or assets of another company, see Item 6C “Directors, Senior Management and Employee - Board Practices - Approval of Related Party Transactions Under Israeli Law - Disclosure of Personal Interests of a Controlling Shareholder; Approval of Transactions with Controlling Shareholders” and Item 10B “Additional Information - Memorandum and Articles of Association - Provisions Restricting Change in Control of Our Company.”
|
|
·
|
Shareholder Approval. We seek shareholder approval for all corporate action requiring such approval in accordance with the requirements of the Israeli Companies Law rather than under the requirements of the NASDAQ Listing Rules, including (but not limited to) the appointment or termination of auditors, appointment and dismissal of directors, approval of interested party acts and transactions requiring general meeting approval as discussed above and a merger.
|
|
·
|
Shareholder Approval. We seek shareholder approval for all corporate action requiring such approval in accordance with the requirements of the Israeli Companies Law rather than under the requirements of the NASDAQ Listing Rules, including (but not limited to) the appointment or termination of auditors, appointment and dismissal of directors, approval of interested party acts, adoption of Stock Option Plans and any amendment thereto, and transactions requiring general meeting approval as discussed above and a merger.
|
MINE SAFETY DISCLOSURE
|
Index to Financial Statements
|
F-1
|
Report of Independent Registered Public Accounting Firm
|
F-2
|
Consolidated Balance Sheets
|
F-3
|
Consolidated Statements of Operations
|
F-5
|
Consolidated Statements of Other Comprehensive Income (loss)
|
F-6
|
Consolidated Statements of Changes in Shareholders' Equity
|
F-7
|
Consolidated Statements of Cash Flows
|
F-8
|
Notes to Consolidated Financial Statements
|
F-10
|
(1)
|
Filed as an exhibit to our Annual Report on Form 20-F for the year ended December 31, 2000 and incorporated herein by reference.
|
(2)
|
Filed as Annex A to our Proxy Statement on Form 6-K furnished on April 4, 2016 and incorporated herein by reference.
|
(3)
|
Filed as Exhibit 4.4 to our Annual Report on Form 20-F for the year ended December 31, 2008 and incorporated herein by reference.
|
(4)
|
Filed as Exhibit 4.6 to our Annual Report on Form 20-F for the year ended December 31, 2008 and incorporated herein by reference.
|
(5)
|
Filed as Exhibit 4.3 to our Annual Report on Form 20-F for the year ended December 31, 2012 and incorporated herein by reference.
|
(6)
|
Filed as an Annex B to our Proxy Statement on Form 6-K furnished on April 4, 2016 and incorporated herein by reference.
|
Page
|
|
F-2
|
|
F-3 – F-4
|
|
F-5
|
|
F-6
|
|
F-7
|
|
F-8 – F-9
|
|
F-10 – F-34
|
Kost Forer Gabbay & Kasierer
2 Pal-Yam Blvd. Brosh Bldg.
Haifa 3309502, Israel
|
Tel: +972-4-8654000
Fax: +972-3-5633433
ey.com
|
Haifa, Israel
|
/s/
Kost Forer Gabbay & Kasierer
Kost Forer Gabbay & Kasierer
|
May 15, 2016
|
A member of Ernst & Young Global
|
December 31,
|
||||||||
2015
|
2014
|
|||||||
ASSETS
|
||||||||
CURRENT ASSETS:
|
||||||||
Cash and cash equivalents
|
$ | 1,754 | $ | 1,786 | ||||
Restricted deposits
|
609 | 349 | ||||||
Trade receivables (net of allowance for doubtful accounts of $10 and $24 at December 31, 2015 and 2014)
|
4,038 | 3,455 | ||||||
Costs and estimated earnings in excess of billings on uncompleted contracts
|
2,207 | 2,657 | ||||||
Other accounts receivable and prepaid expenses
|
206 | 428 | ||||||
Inventories, net
|
6,565 | 6,651 | ||||||
Total
current assets
|
15,379 | 15,326 | ||||||
LONG-TERM RECEIVABLES AND OTHER DEPOSITS
|
119 | 1,394 | ||||||
PROPERTY, PLANT AND EQUIPMENT, NET
|
3,078 | 2,790 | ||||||
GOODWILL
|
- | 587 | ||||||
Total
assets
|
$ | 18,576 | $ | 20,097 |
Year ended December 31,
|
||||||||||||
2015
|
2014
|
2013
|
||||||||||
Revenues:
|
||||||||||||
Products
|
$ | 12,375 | $ | 20,927 | $ | 20,443 | ||||||
Services
|
2,489 | 1,554 | 1,318 | |||||||||
14,864 | 22,481 | 21,761 | ||||||||||
Cost of revenues:
|
||||||||||||
Products
|
11,139 | 15,124 | 16,487 | |||||||||
Services
|
1,152 | 820 | 673 | |||||||||
12,291 | 15,944 | 17,160 | ||||||||||
Gross profit
|
2,573 | 6,537 | 4,601 | |||||||||
Operating costs and expenses:
|
||||||||||||
Research and development, net
|
693 | 789 | 1,459 | |||||||||
Marketing and selling
|
2,358 | 2,392 | 1,959 | |||||||||
General and administrative
|
1,858 | 1,901 | 1,919 | |||||||||
Goodwill impairment
|
587 | - | - | |||||||||
Total
operating costs and expenses
|
5,496 | 5,082 | 5,337 | |||||||||
Operating income (loss)
|
(2,923 | ) | 1,455 | (736 | ) | |||||||
Amortization of shareholders' convertible loans discount and beneficial conversion feature
|
2,684 | 43 | 489 | |||||||||
Other financial expenses, net
|
890 | 1,211 | 1,418 | |||||||||
Total financial expenses, net (Note 14)
|
3,574 | 1,254 | 1,907 | |||||||||
Net income (loss)
|
(6,497 | ) | 201 | (2,643 | ) | |||||||
Less: Net income (loss) attributable to non-controlling interest
|
(36 | ) | (7 | ) | (8 | ) | ||||||
Net income (loss) attributable to RADA Electronic Industries' shareholders
|
$ | (6,461 | ) | $ | 208 | $ | (2,635 | ) | ||||
Net income (loss) per share attributable to RADA Electronic Industries' shareholders
|
||||||||||||
Basic and diluted net income (loss) per Ordinary share
|
$ | (0.54 | ) | $ | 0.02 | $ | (0.30 | ) | ||||
Weighted average number of Ordinary shares used for computing basic and diluted net income (loss) per share
|
11,904,088 | 8,944,803 | 8,918,647 |
Year ended December 31,
|
||||||||||||
2015
|
2014
|
2013
|
||||||||||
Net income (loss)
|
$ | (6,497 | ) | $ | 201 | $ | (2,643 | ) | ||||
Other Comprehensive Income (loss):
|
||||||||||||
Change in foreign currency translation adjustment
|
(186 | ) | (14 | ) | 99 | |||||||
Total comprehensive income (loss)
|
(6,683 | ) | 187 | (2,544 | ) | |||||||
Less: comprehensive income (loss) attributable to non-controlling interest
|
(73 | ) | (10 | ) | 12 | |||||||
Comprehensive income (loss) attributable to RADA Electronic Industries' shareholders
|
$ | (6,610 | ) | $ | 197 | $ | (2,556 | ) |
Number of
|
Additional
|
Accumulated other
|
Non
|
|||||||||||||||||||||||||
Ordinary
|
Share
|
paid-in
|
comprehensive
|
Accumulated
|
controlling
|
Total
|
||||||||||||||||||||||
shares
|
capital
|
capital
|
income
|
deficit
|
interest
|
equity
|
||||||||||||||||||||||
Balance at January 1,2013
|
8,918,647 | $ | 119 | $ | 70,884 | $ | 468 | $ | (65,565 | ) | $ | 623 | $ | 6,529 | ||||||||||||||
Net loss
|
(2,635 | ) | (8 | ) | (2,643 | ) | ||||||||||||||||||||||
Other comprehensive income
|
79 | 20 | 99 | |||||||||||||||||||||||||
Balance at December 31, 2013
|
8,918,647 | $ | 119 | $ | 70,884 | $ | 547 | $ | (68,200 | ) | $ | 635 | $ | 3,985 | ||||||||||||||
Cashless exercise of Warrants
|
69,749 | (* | ) | (* | ) | - | ||||||||||||||||||||||
Net income (loss)
|
208 | (7 | ) | 201 | ||||||||||||||||||||||||
Other comprehensive income (loss)
|
(11 | ) | (3 | ) | (14 | ) | ||||||||||||||||||||||
Balance at December 31, 2014
|
8,988,396 | $ | 119 | $ | 70,884 | $ | 536 | $ | (67,992 | ) | $ | 625 | $ | 4,172 | ||||||||||||||
Issuance of Ordinary shares, net of issuance costs of $1,070
|
6,910,569 | 27 | 7,403 | - | - | - | 7,430 | |||||||||||||||||||||
Beneficial conversion feature related to convertible loans from shareholders (Note 9)
|
- | - | 4,140 | - | - | - | 4,140 | |||||||||||||||||||||
Net income (loss)
|
- | - | - | - | (6,461 | ) | (36 | ) | (6,497 | ) | ||||||||||||||||||
Other comprehensive income (loss)
|
(149 | ) | - | (37 | ) | (186 | ) | |||||||||||||||||||||
Balance at December 31, 2015
|
15,898,965 | $ | 146 | $ | 82,427 | $ | 387 | $ | (74,453 | ) | $ | 552 | $ | 9,059 |
(*)
|
Represents an amount lower than $1.
|
Year ended December 31,
|
||||||||||||
2015
|
2014
|
2013
|
||||||||||
Cash flows from operating activities:
|
||||||||||||
Net income (loss)
|
$ | (6,497 | ) | $ | 201 | $ | (2,643 | ) | ||||
Adjustments required to reconcile net income (loss) to net cash provided by (used in) operating activities:
|
||||||||||||
Depreciation and amortization
|
651 | 690 | 752 | |||||||||
Impairment of goodwill
|
587 | - | - | |||||||||
Amortization of discount on convertible note and loans
|
2,684 | 43 | 489 | |||||||||
Severance pay, net
|
53 | (15 | ) | 50 | ||||||||
Decrease (increase) in trade receivables, net
|
(583 | ) | 1,435 | 491 | ||||||||
Decrease (increase) in other accounts receivable and prepaid expenses
|
224 | 13 | 484 | |||||||||
Grants received from Chief Scientist's Office (OCS)
|
- | - | 15 | |||||||||
Decrease (increase) in unbilled receivables
|
1,467 | (599 | ) | (236 | ) | |||||||
Decrease (increase) in inventories
|
(487 | ) | 111 | 449 | ||||||||
Increase (decrease) in trade payables
|
584 | (1,594 | ) | 981 | ||||||||
Increase (decrease) in other accounts payable and accrued expenses
|
(1,448 | ) | (163 | ) | 600 | |||||||
Net cash provided by (used in) operating activities
|
(2,765 | ) | 122 | 1,432 | ||||||||
Cash flows from investing activities:
|
||||||||||||
Purchase of property, plant and equipment
|
(374 | ) | (328 | ) | (370 | ) | ||||||
Increase in deposits, net
|
(10 | ) | 2 | 3 | ||||||||
Change in restricted deposits, net
|
6 | 392 | 282 | |||||||||
Net cash provided by (used in) investing activities
|
(378 | ) | 66 | (85 | ) |
Year ended December 31,
|
||||||||||||
2015
|
2014
|
2013
|
||||||||||
Cash flows from financing activities:
|
||||||||||||
Proceeds from loans from shareholders
|
- | 1,000 | 850 | |||||||||
Issuance of Ordinary shares, net
|
7,430 | - | - | |||||||||
Proceeds from (repayment of) short-term bank credit, net
|
827 | (298 | ) | (1,285 | ) | |||||||
Repayment of short-term loans from shareholders
|
(5,030 | ) | (1,230 | ) | - | |||||||
Net cash provided by (used in) financing activities from continuing operations
|
3,227 | (528 | ) | (435 | ) | |||||||
Effect of exchange rate changes on cash and cash equivalents
|
(116 | ) | (11 | ) | 61 | |||||||
Increase (decrease) in cash and cash equivalents
|
(32 | ) | (351 | ) | 973 | |||||||
Cash and cash equivalents at the beginning of the year
|
1,786 | 2,137 | 1,164 | |||||||||
Cash and cash equivalents at the end of the year
|
$ | 1,754 | $ | 1,786 | $ | 2,137 |
Year ended December 31,
|
|||||||||||||
2015
|
2014
|
2013
|
|||||||||||
(b)
|
Supplemental disclosures of cash flow activities:
|
||||||||||||
Net cash paid during the year for:
|
|||||||||||||
Income taxes
|
$ | 15 | $ | 35 | $ | 14 | |||||||
Interest
|
$ | 2,106 | $ | 57 | $ | 180 | |||||||
(c)
|
Non-cash transactions
|
||||||||||||
Transfer of inventory to property, plant and equipment
|
$ | 573 | $ | 37 | $ | 25 | |||||||
Purchase of property, plant and equipment in credit
|
$ | 62 | $ | 144 | $ | 11 |
NOTE 1:-
|
GENERAL
|
|
a.
|
RADA Electronic Industries Ltd. (the "Company") is an Israeli based defense electronics contractor that specialize in the development, manufacture and sale of data recording and management systems (such as digital video and data recorders, ground debriefing stations, head-up display cameras), inertial navigation systems for air and land applications, avionics solutions (such as aircraft upgrades, avionics for unmanned aircraft vehicles, ("UAVs"), store management systems and interface computers) and land radar for defense forces and border protection applications (active protective systems for armored fighting vehicles, hostile fire detection and perimeter surveillance). The Company also provides test and repair services using its CATS testers and test program sets for commercial aviation electronic systems mainly through its Chinese subsidiary.
|
|
b.
|
The Company operates a test and repair shop using its Automated Test Equipment ("ATE") products in Beijing, China, through its 80% owned Chinese subsidiary, Beijing Huari Aircraft Components Maintenance and Services Co. Ltd. ("CACS" or the "subsidiary"). CACS was established with a Chinese third party, which owns the remaining 20% equity interest.
|
|
c.
|
Revenues from major customers accounted for 64%, 71% and 77% of total revenues for the years ended December 31, 2015, 2014 and 2013, respectively (see Note 16c).
|
|
d.
|
Liquidity and Capital Resources:
|
|
NOTE 1:-
|
GENERAL (Cont.)
|
|
d.
|
Liquidity and Capital Resources (Cont.)
|
NOTE 2:-
|
SIGNIFICANT ACCOUNTING POLICIES
|
|
a.
|
Use of estimates:
|
|
b.
|
Financial statements in U.S. dollars:
|
NOTE 2:-
|
SIGNIFICANT ACCOUNTING POLICIES (Cont.)
|
|
b.
|
Financial statements in U.S. dollars (Cont.)
|
|
c.
|
Basis of consolidation:
|
|
d.
|
Cash equivalents:
|
|
e.
|
Restricted deposit:
|
|
f.
|
Inventories:
|
NOTE 2:-
|
SIGNIFICANT ACCOUNTING POLICIES (Cont.)
|
|
g.
|
Property, plant and equipment:
|
%
|
|
Factory and other buildings
|
4
|
Machinery and equipment
|
7 - 33
|
Office furniture and equipment
|
6 - 15
|
|
h.
|
Impairment of long-lived assets:
|
|
i.
|
Goodwill
|
NOTE 2:-
|
SIGNIFICANT ACCOUNTING POLICIES (Cont.)
|
|
i.
|
Goodwill (Cont.)
|
|
j.
|
Research and development costs:
|
|
k.
|
Income taxes:
|
NOTE 2:-
|
SIGNIFICANT ACCOUNTING POLICIES (Cont.)
|
|
l.
|
Severance pay:
|
|
m.
|
Fair value of financial instruments:
|
|
Level 1 -
|
Valuations based on quoted prices in active markets for identical assets that the Company has the ability to access. Valuation adjustments and block discounts are not applied to Level 1 instruments. Since valuations are based on quoted prices that are readily and regularly available in an active market, valuation of these products does not entail a significant degree of judgment.
|
|
Level 2 -
|
Valuations based on one or more quoted prices in markets that are not active or for which all significant inputs are observable, either directly or indirectly.
|
|
Level 3 -
|
Valuations based on inputs that are unobservable and significant to the overall fair value measurement.
|
NOTE 2:-
|
SIGNIFICANT ACCOUNTING POLICIES (Cont.)
|
|
m.
|
Fair value of financial instruments (Cont.)
|
December 31, 2014
|
||||||||||||||||
Level 1
|
Level 2
|
Level 3
|
Total
|
|||||||||||||
Derivatives:
|
||||||||||||||||
Foreign currencies derivatives
|
$ | - | $ | (216 | ) | $ | - | $ | (216 | ) | ||||||
Total
|
$ | - | $ | (216 | ) | $ | - | $ | (216 | ) |
December 31, 2015
|
||||||||||||||||
Level 1
|
Level 2
|
Level 3
|
Total
|
|||||||||||||
Derivatives:
|
||||||||||||||||
Foreign currencies derivatives
|
$ | - | $ | (23 | ) | $ | - | $ | (23 | ) | ||||||
Total
|
$ | - | $ | (23 | ) | $ | - | $ | (23 | ) |
|
n.
|
Concentrations of credit risk:
|
NOTE 2:-
|
SIGNIFICANT ACCOUNTING POLICIES (Cont.)
|
|
o.
|
Comprehensive income (loss):
|
December 31,
|
||||||||
2015
|
2014
|
|||||||
Accumulated foreign currency translation differences
|
$ | 387 | $ | 536 |
Accumulated foreign currency translation differences
|
Total
|
|||||||
Balance as of December 31, 2014
|
$ | 536 | $ | 536 | ||||
Current period other comprehensive loss
|
(149 | ) | (149 | ) | ||||
Balance as of December 31, 2015
|
$ | 387 | $ | 387 |
|
p.
|
Warranty:
|
NOTE 2:-
|
SIGNIFICANT ACCOUNTING POLICIES (Cont.)
|
|
q.
|
Revenue recognition:
|
NOTE 2:-
|
SIGNIFICANT ACCOUNTING POLICIES (Cont.)
|
|
q.
|
Revenue recognition (Cont.)
|
|
r.
|
Basic and diluted net income (loss) per share:
|
|
s.
|
Derivatives and hedging:
|
NOTE 2:-
|
SIGNIFICANT ACCOUNTING POLICIES (Cont.)
|
|
t.
|
Recently Issued Accounting Standards:
|
NOTE 2:-
|
SIGNIFICANT ACCOUNTING POLICIES (Cont.)
|
|
t.
|
Recently Issued Accounting Standards (Cont.)
|
NOTE 3:-
|
CONTRACTS IN PROGRESS
|
NOTE 3:-
|
CONTRACTS IN PROGRESS (Cont.)
|
December 31,
|
||||||||
2015
|
2014
|
|||||||
Costs incurred on uncompleted contracts
|
$ | 19,167 | $ | 18,417 | ||||
Estimated earnings
|
6,465 | 8,544 | ||||||
25,632 | 26,961 | |||||||
Less - billings and progress payments
|
23,425 | 23,287 | ||||||
Costs and estimated earnings in excess of billings on uncompleted contracts
|
2,207 | 3,674 | ||||||
Less: Long-term portion
|
- | (1,017 | ) | |||||
Costs and estimated earnings in excess of billings on uncompleted contracts - Current portion
|
$ | 2,207 | $ | 2,657 |
NOTE 4:-
|
OTHER ACCOUNTS RECEIVABLE AND PREPAID EXPENSES
|
December 31,
|
||||||||
2015
|
2014
|
|||||||
Prepaid expenses
|
$ | 146 | $ | 279 | ||||
Government institutions
|
12 | 53 | ||||||
Advance payment to vendors
|
48 | 96 | ||||||
$ | 206 | $ | 428 |
NOTE 5:-
|
INVENTORIES
|
December 31,
|
||||||||
2015
|
2014
|
|||||||
Raw materials
|
$ | 3,169 | $ | 2,891 | ||||
Work in progress, net *)
|
2,087 | 2,394 | ||||||
Finished goods
|
1,309 | 1,366 | ||||||
$ | 6,565 | $ | 6,651 |
*)
|
Net of provision for losses on long-term contracts as of December 31, 2015 and 2014, in the amount of $27 and $0, respectively.
|
December 31,
|
||||||||
2015
|
2014
|
|||||||
Costs and estimated earnings in excess of billings on uncompleted contracts (see Note 3)
|
$ | - | $ | 1,017 | ||||
Restricted deposits
|
64 | 330 | ||||||
Leasing deposits
|
55 | 47 | ||||||
$ | 119 | $ | 1,394 |
December 31,
|
||||||||
2015
|
2014
|
|||||||
Cost:
|
||||||||
Factory building
|
$ | 1,989 | $ | 1,989 | ||||
Other buildings
|
1,291 | 1,366 | ||||||
Machinery and equipment *)
|
9,822 | 9,530 | ||||||
Office furniture and equipment
|
628 | 435 | ||||||
Leasehold improvements
|
300 | 231 | ||||||
14,030 | 13,551 | |||||||
Accumulated depreciation:
|
||||||||
Factory building
|
1,958 | 1,898 | ||||||
Other buildings
|
777 | 726 | ||||||
Machinery and equipment *)
|
7,743 | 7,693 | ||||||
Office furniture and equipment
|
353 | 332 | ||||||
Leasehold improvements
|
121 | 112 | ||||||
10,952 | 10,761 | |||||||
Depreciated cost
|
$ | 3,078 | $ | 2,790 |
*)
|
Includes machinery at cost of $374 and accumulated depreciation of $37, which are under operating leases to customers.
|
NOTE 8:-
|
GOODWILL
|
December 31,
|
||||||||
2015
|
2014
|
|||||||
Beginning balance
|
$ | 587 | $ | 587 | ||||
Impairment of Goodwill *)
|
(587 | ) | - | |||||
$ | - | $ | 587 |
*)
|
During the fourth quarter of 2015, the Company determined that sufficient indicators of potential impairment existed which require goodwill impairment analysis. These indicators included the trading value of the Company's stock at the time of the impairment test, coupled with existing market conditions and business trends. Based on the step one and step two analyses, the Company recorded goodwill impairment charge in 2015, in the amount of $587.
|
NOTE 9:-
|
BANK CREDIT AND LOANS
|
A.
|
LOANS AND CONVERTIBLE NOTE FROM SHAREHOLDERS
|
December 31,
|
||||||||
2015
|
2014
|
|||||||
Loan in U.S. dollars from shareholders
|
$ | - | $ | 5,120 | ||||
Convertible note from shareholders
|
3,090 | 3,000 | ||||||
Less: Beneficial Conversion Feature
|
(1,456 | ) | - | |||||
$ | 1,634 | $ | 8,120 |
NOTE 9:-
|
BANK CREDIT AND LOANS (Cont.)
|
|
A.
|
LOANS AND CONVERTIBLE NOTE FROM SHAREHOLDERS (Cont.)
|
NOTE 9:-
|
BANK CREDIT AND LOANS (Cont.)
|
|
A.
|
LOANS AND CONVERTIBLE NOTE FROM SHAREHOLDERS (Cont.)
|
NOTE 9:-
|
BANK CREDIT AND LOANS (Cont.)
|
|
A.
|
LOANS AND CONVERTIBLE NOTE FROM SHAREHOLDERS (Cont.)
|
|
B.
|
BANK CREDIT
|
December 31,
|
||||||||
2015
|
2014
|
|||||||
Bank Credit
|
$ | 2,416 | $ | 1,589 |
NOTE 10:-
|
OTHER ACCOUNTS PAYABLE AND ACCRUED EXPENSES
|
December 31,
|
||||||||
2015
|
2014
|
|||||||
Payroll and related accruals
|
$ | 1,815 | $ | 1,476 | ||||
Accrued expenses - subcontractors
|
79 | 392 | ||||||
Accrued expenses
|
565 | 486 | ||||||
Accrued interest due to shareholders loan
|
115 | 1,041 | ||||||
Tax authorities
|
224 | 602 | ||||||
Derivatives Instruments
|
23 | 216 | ||||||
Others
|
25 | 54 | ||||||
$ | 2,846 | $ | 4,267 |
|
a.
|
As of December 31, 2015, the Company was not a party to any legal proceedings.
|
|
b.
|
The Company's research and development efforts have been partially financed through royalty-bearing programs sponsored by the OCS. In return for the OCS's participation, the Company is committed to pay royalties at a rate ranging from 3% to 5% of sales of the products whose research was supported by grants received from the OCS, up to 100% of the amount of such participation received linked to the U.S. dollar. The obligation to pay these royalties is contingent on actual sales of the products and in the absence of such sales, no payment is required. As of December 31, 2015, the Company received total grants from the OCS in the amount of $5,545 including LIBOR interest.
|
|
c.
|
Research and development projects undertaken by the Company were partially financed by the Binational Industrial Research and Development Foundation ("BIRD-F"). The Company is committed to pay royalties to the BIRD-F at a rate of 5% of sales proceeds generating from projects for which the BIRD-F provided funding up to 150% of the sum financed by the BIRD-F.
|
|
d.
|
The Company's offices in Netanya, Israel are leased under a non-cancelable operating lease expiring on January 31, 2018. In addition, the Company's motor vehicles are leased under operating leases.
|
2016
|
$ | 713 | ||
2017
|
577 | |||
2018
|
90 | |||
2019
|
6 | |||
$ | 1,386 |
|
e.
|
Floating charges have been recorded on all of the Company's assets and specific charges have been recorded on certain assets in respect of the Company's liabilities to its banks and other creditors, including its shareholders.
|
|
f.
|
The Company provides bank guarantees to its customers and others in the ordinary course of business. The guarantees which are provided to customers are to secure advances received at the commencement of a project or to secure performance of operational milestones. The total amount of bank guarantees provided to customers and others as of December 31, 2015, is approximately $386.
|
NOTE 12:-
|
SHAREHOLDERS' EQUITY
|
|
a.
|
Share capital:
|
NOTE 12:-
|
SHAREHOLDERS' EQUITY (Cont.)
|
b.
|
Warrants:
|
NOTE 13:-
|
TAXES ON INCOME
|
|
a.
|
The Israeli corporate tax rate and real capital gains tax in Israel were 25% in 2013, 26.5% in 2014, and 26.5% in 2015.
|
|
b.
|
Tax benefits under the Law for the Encouragement of Industry (Taxes), 1969:
|
NOTE 13:-
|
TAXES ON INCOME (Cont.)
|
|
c.
|
As of December 31, 2015, the net operating tax loss carryforward relating to the Company in Israel amounted to approximately $62,355, including a carryforward capital loss amounting to approximately $3,400. Carryforward losses in Israel may be carried forward indefinitely and may be offset against future taxable income.
|
|
d.
|
The main reconciling items between the statutory tax rate of the Company and the effective tax rate is the valuation allowance recorded in respect of the deferred tax assets relating to net operating loss carryforward and other temporary differences due to the uncertainty of the realization of such tax assets.
|
December 31,
|
||||||||
2015
|
2014
|
|||||||
Net operating loss carry forward
|
$ | 16,439 | $ | 16,389 | ||||
Allowance and reserve
|
364 | 346 | ||||||
Total deferred tax assets before valuation allowance
|
16,803 | 16,735 | ||||||
Valuation allowance
|
(16,803 | ) | (16,735 | ) | ||||
Net deferred tax assets
|
$ | - | $ | - |
NOTE 13:-
|
TAXES ON INCOME (Cont.)
|
NOTE 14:-
|
FINANCIAL EXPENSES, NET
|
Year ended
December 31,
|
||||||||||||
2015
|
2014
|
2013
|
||||||||||
Income:
|
||||||||||||
Foreign currency exchange differences
|
$ | 131 | $ | 208 | $ | 15 | ||||||
Interest on cash equivalents and restricted deposits
|
4 | 5 | 12 | |||||||||
(135 | ) | (213 | ) | (27 | ) | |||||||
Expenses:
|
||||||||||||
Amortization of shareholders' convertible loans discount and BCF
|
2,684 | 43 | 489 | |||||||||
Interest on shareholders' convertible note and loans
|
575 | 708 | 729 | |||||||||
Withholding taxes on interest of convertible note and loans from shareholders
|
119 | 294 | 205 | |||||||||
Bank commissions and others
|
149 | 144 | 292 | |||||||||
Foreign currency exchange differences
|
161 | 271 | 135 | |||||||||
Interest on loans from banks and other credit balances
|
21 | 7 | 84 | |||||||||
3,709 | 1,467 | 1,934 | ||||||||||
Total financial expenses, net
|
$ | 3,574 | $ | 1,254 | $ | 1,907 |
NOTE 15:-
|
RELATED PARTY BALANCE AND TRANSACTIONS
|
NOTE 16:-
|
MAJOR CUSTOMERS AND GEOGRAPHIC INFORMATION
|
|
a.
|
In accordance with Statement of ASC 280, "Segment Reporting", the Company is organized and operates as one business segment, which develops, manufactures and sells ATE products, avionics equipment and aviation data acquisition and debriefing systems (see also Note 1a).
|
|
b.
|
Revenues by geographic areas:
|
Year ended
December 31,
|
||||||||||||
2015
|
2014
|
2013
|
||||||||||
Israel
|
$ | 6,062 | $ | 5,005 | $ | 4,267 | ||||||
Asia
|
3,482 | 6,604 | 5,466 | |||||||||
North America
|
3,558 | 8,072 | 5,091 | |||||||||
Latin America
|
1,614 | 2,731 | 6,798 | |||||||||
Europe
|
148 | 69 | 139 | |||||||||
Total
|
$ | 14,864 | $ | 22,481 | $ | 21,761 |
|
c.
|
Major customers:
|
Year ended
December 31,
|
||||||||||||
2015
|
2014
|
2013
|
||||||||||
%
|
||||||||||||
Customer A
|
23 | 10 | 12 | |||||||||
Customer B
|
- | - | 11 | |||||||||
Customer C
|
9 | 16 | 20 | |||||||||
Customer D
|
12 | 22 | 17 | |||||||||
Customer E
|
7 | 13 | 17 | |||||||||
Customer F
|
13 | 10 | - |
NOTE 16:-
|
MAJOR CUSTOMERS AND GEOGRAPHIC INFORMATION (Cont.)
|
|
d.
|
Long-lived assets by geographic areas:
|
December 31,
|
||||||||
2015
|
2014
|
|||||||
Israel
|
$ | 2,686 | $ | 2,820 | ||||
China
|
392 | 557 | ||||||
$ | 3,078 | $ | 3,377 |
NOTE 17:-
|
SUBSEQUENT EVENTS
|
RADA ELECTRONIC INDUSTRIES LTD.
|
|||
|
By:
|
/s/ Zvi Alon | |
Name: Zvi Alon | |||
Title: Chief Executive Officer |
Rada Electronic Industries Ltd
.
By:
Name:
Title:
|
DBSI Investments Ltd.
By:
Name:
Title:
|
Exhibit A-1
|
Shareholders Executing Proxy
|
Exhibit A-2
|
Form of Proxy
|
Exhibit B-1
|
Form of Warrant
|
Exhibit C
|
Amended Articles of Association
|
Exhibit D
|
Resolution of the Company’s Board of Directors
|
Exhibit E
|
New Convertible Note
|
Exhibit F
|
Registration Rights Agreement
|
Exhibit H
|
Disclosure Schedule
|
Exhibit I-1
|
Company General Meeting Notice
|
Exhibit I-2
|
Shareholders Resolutions
|
Exhibit 2.4(f)
|
Changes in Board Structure
|
Exhibit 2.4(g)
|
D&O Indemnification Agreement
|
WHEREAS
|
the Holder is a holder of the Ordinary Shares, par value NIS 0.015 each, of the Company (“
Ordinary Shares
”) and/or of options and/or warrants convertible or exercisable into Ordinary Shares;
|
WHEREAS
|
the parties wish to set provisions governing the registration of the Company’s Ordinary Shares held by the Holder or issuable upon conversion or exercise of options or warrants to purchase Ordinary Shares, in accordance with the terms set forth herein.
|
1.
|
Definitions
. Capitalized terms used and not otherwise defined herein that are defined in the Purchase Agreement (as defined below) will have the meanings given such terms in the Purchase Agreement. As used in this Agreement, the following capitalized terms shall have the following respective meanings:
|
|
1.1.
|
“
Board
” means the Board of Directors of the Company.
|
|
1.2.
|
“
Exchange Act
” means the Securities Exchange Act of 1934, as amended, and the rules and regulations promulgated thereunder.
|
|
1.3.
|
“
Form F-1
” means such form (or Form S-1, as the case may be) under the Securities Act as in effect on the date hereof or any successor or similar registration form under the Securities Act subsequently adopted by the SEC.
|
|
1.4.
|
“
Form F-3
” means such form (or Form S-3, as the case may be) under the Securities Act as in effect on the date hereof or any successor or similar registration form under the Securities Act subsequently adopted by the SEC, which permits inclusion or incorporation of substantial information by reference to other documents filed by the Company with the SEC.
|
|
1.5.
|
“
Holder
” means as set forth in the preamble to this Agreement and any of their respective successors, transferees and assigns (in accordance with Section 10 of this Agreement), so long as they own of record Registrable Securities,
provided
, however, that the definition of Holder shall not include persons who have acquired Ordinary Shares sold pursuant to the Purchase Agreement in the open market or pursuant to a registration statement.
|
|
1.6.
|
“Original Registrable Securities”
means the Registrable Securities, excluding any Registrable Securities that cease to be Registrable Securities due to their subsequent resale pursuant to an effective registration under the Securities Act or in the open market pursuant to Rule 144.
|
|
1.7.
|
“
Prospectus
” means the prospectus included in a Shelf Registration Statement, as amended or supplemented by any prospectus supplement and by all other amendments thereto and all material incorporated by reference in such prospectus.
|
|
1.8.
|
“Purchase Agreement”
means that certain Purchase Agreement, dated April __, 2016, by and among the Company and the Holder signatory thereto.
|
|
1.9.
|
“
Register
,” “
registered
,” and “
registration
” refer to a registration effected by preparing and filing a registration statement in compliance with the Securities Act, and the declaration or ordering of effectiveness of such registration statement or document.
|
|
1.10.
|
“
Registrable Securities
” means any Ordinary Shares purchased by or issued to the Holder pursuant to the Purchase Agreement (including Ordinary Shares issued or issuable upon exercise or conversion of securities, including the Warrant Agreement, any additional warrants, convertible into or exercisable for Ordinary Shares as well as any Ordinary Shares issued or issuable as indemnity and/or pursuant to adjustment provisions under the Purchase Agreement) together with any and all securities issued or issuable with respect to the securities described above upon any stock split, stock dividend or the like, or into which such Ordinary Shares have been or may be converted to or exchanged into in connection with any merger, consolidation, reclassification, recapitalization or similar event; in each case, until their effective registration under the Securities Act and their resale in accordance with the registration statement in which such Registrable Securities are included or until their sale in the open market pursuant to Rule 144. However, it is understood by the parties to this Agreement that the number of Registrable Securities that may be included any registration statement filed with the SEC may be limited by the requirements of the Securities Act and the SEC.
|
|
1.11.
|
"
Eligible Registrable Securities
" means such lesser number of Registrable Securities that may be included in a registration statement under the Securities Act due to limitations on registration imposed by the Securities Act or the SEC.
|
|
1.12.
|
“
SEC
” means the United States Securities and Exchange Commission.
|
|
1.13.
|
“
Securities
Act
” shall mean the Securities Act of 1933, as amended, and the rules and regulations promulgated thereunder.
|
|
1.14.
|
"
Warrant Agreement
" shall mean the Warrant Agreement by and between the Company and the Holder, dated
dated April 14, 2016
, as we amended from time to time.
|
2.
|
Demand Registration
.
|
|
2.1.
|
Request for Registration
. Subject to the conditions of this Section 2, at any time after
six (6) months following the Closing of the Purchase Agreement, if the Company shall receive a written request from the Holder that the Company file a registration statement on Form F-3, or if the use of such form is not available on Form F-1, then the Company shall, subject to the limitations of this Section 2, use its best efforts to effect, as promptly as reasonably possible, the registration under the Securities Act of the Eligible Registrable Securities that the Holder requests.
|
|
2.2.
|
Underwritten Offering
|
|
2.2.1.
|
If the Holder intends to distribute the Eligible Registrable Securities covered by its request by means of an underwriting, it shall so advise the Company as a part of its request made pursuant to this Section
2 or any request pursuant to Section
4. The Holder shall enter into an underwriting agreement in customary form with the underwriter(s).
|
|
2.2.2.
|
Notwithstanding any other provision of this Section 2 or Section 4, if the underwriter advises the Company that marketing factors require a limitation of the number of Eligible Registrable Securities to be underwritten then the Company shall so advise the Holder of Eligible Registrable Securities which would otherwise be underwritten pursuant hereto, and the number of shares that may be included in the underwriting shall be allocated to the Holder of such Eligible Registrable Securities; provided, however, that the number of Eligible Registrable Securities to be included in such underwriting and registration shall not be reduced unless all other securities of the Company are first entirely excluded from the underwriting and registration. Any Registrable Securities excluded or withdrawn from such underwriting shall be withdrawn from the registration.
|
|
2.3.
|
Exclusions
. The Company shall not be required to effect a registration pursuant to this Section 2 (without limiting any other provisions of this Section 2 to that effect):
|
|
2.3.1.
|
After the Company has effected two (2) registration pursuant to this Section 2, and such registrations have been declared or ordered effective by the SEC, but in no event shall the Company be required to file a Form F-1 registration statement registering less than $1 million of Registrable Securities or a Form F-3 registration statement registering less than us$500,000 of Registrable Securities;
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2.3.2.
|
During the period starting with the date of filing of, and ending on the date one hundred eighty (180) days following the effective date of a registration statement pertaining to the Company’s securities (but other than registration relating solely to employee benefit plans on Form S-8 or similar forms that may be promulgated in the future, or a registration relating solely to a SEC Rule 145 transaction on Form F-4 or similar forms that may be promulgated in the future); provided that the Company makes reasonable good faith efforts to cause such registration statement to become effective;
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|
2.3.3.
|
If within ten (10) days of receipt of a written request from the Holder pursuant to Section 2.1 the Company gives notice to the Holder of the Company’s good faith intention to file a registration statement for a public offering for a sale of the Company’s shares or securities convertible into the Company's shares for its own account within forty five (45) days, provided that the Company actually files such registration statement within such forty five (45) days and makes reasonable good faith efforts to cause such registration statement to become effective;
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2.3.4.
|
If a registration statement filed pursuant to either of Sections 3 or
4 herein is then effective and is available to the Holder for the resale of Registrable Securities and effective for the disposition of Registrable Securities proposed to be effected by them pursuant to this Section
2;
provided
, however, that such exclusion shall not apply to the Holder if the Holder is not permitted or is otherwise not able to utilize the registration statement filed pursuant to Sections 3 or 4 herein for the intended manner of distribution; or
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|
2.3.5.
|
If the Company shall furnish to the Holder an officer’s a certificate signed by order of the Board stating that in the good faith judgment of the Board, it would be seriously detrimental to the Company and its shareholders for such registration statement to be effected at such time, in which event the Company shall have the right to defer such filing for a period of not more than sixty (60) days after receipt of the request of the Holder; provided that such right to delay a request shall be exercised by the Company not more than once in any twelve (12) month period.
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3.
|
Piggyback Registrations
.
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|
3.1.
|
Notice of Registration
. The Company shall notify the Holder in writing at least twenty (20) days prior to the filing of any registration statement under the Securities Act for purposes of an offering of securities of the Company (including, but not limited to, registration statements relating to follow-on offering or secondary offerings of securities of the Company, but other than registration relating solely to employee benefit plans on Form S-8 or similar forms that may be promulgated in the future, or a registration relating solely to a SEC Rule 145 transaction on Form F-4 or similar forms that may be promulgated in the future) and will afford the Holder, if requested by the Holder to be included in such registration, in accordance with this Section
3.1, an opportunity to include in such registration statement all or part of such Eligible Registrable Securities held by the Holder. If the Holder desires to include in any such registration statement all or any part of the Eligible Registrable Securities held by it shall, within fourteen (14) days after delivery of the above-described notice by the Company, so notify the Company in writing specifying the number of Registrable Shares requested to be included. If the Holder decides not to include all of its Eligible Registrable Securities in any registration statement thereafter filed by the Company, the Holder shall nevertheless continue to have the right to include any Eligible Registrable Securities in any subsequent registration statement or registration statements as may be filed by the Company with respect to offerings of its securities, all upon the terms and conditions set forth herein. The number of occurrences of the registration pursuant to this Section
3 shall be unlimited.
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|
3.2.
|
Underwritten Offering
.
|
|
3.2.1.
|
If the registration statement under which the Company gives notice under this Section 3 is for an underwritten offering, the Company shall so advise the Holder as part of its notice made pursuant to Section 3.1. In such event, the right of the Holder to be included in a registration pursuant to this Section 3 shall be conditioned upon the Holder's participation in such underwriting and the inclusion of the Holder's Eligible Registrable Securities in the underwriting to the extent provided herein. The Holder shall enter into an underwriting agreement in customary form with the underwriter or underwriters selected for such underwriting by the Company. If the Holder disapproves of the terms of any such underwriting, the Holder may elect to withdraw therefrom by written notice to the Company and the underwriter, delivered no later than five (5) business days after the date on which the material terms of such underwriting are agreed upon and made known to the Holder in writing.
|
|
3.2.2.
|
Notwithstanding any other provision of this Agreement, if the underwriter determines in good faith that marketing factors require a limitation of the number of shares (including Registrable Securities) to be underwritten, the number of shares that may be included in the underwriting shall be allocated, first, to the Company; second, to the Holder; and third, to any shareholder of the Company (other than a Holder) pro-rata, based on the total number of shares then held by such shareholder requesting to be included in such registration; provided however, that the number of Registrable Securities to be included in such underwriting and registration shall not be below twenty five percent (25%) of the total amount of shares included in such registration. Any Registrable Securities excluded or withdrawn from such underwriting shall be excluded and withdrawn from the registration.
|
|
3.3.
|
Right to Terminate Registration.
The Company shall have the right to terminate or withdraw any registration initiated by it under this Section 3 prior to the effectiveness of such registration, whether or not the Holder has elected to include securities in such registration. The registration expenses of such withdrawn registration shall be borne by the Company in accordance with Section 6 hereof.
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4.
|
Shelf Registration Statement
.
|
|
4.1.
|
Subject to the conditions of this Section
4, at any time after six (6) months following the Closing of the Purchase Agreement, the Holder may send a written request to the Company, requesting that the Company file a registration statement for an offering to be made on a delayed or continuous basis pursuant to Rule 415 of the Securities Act registering the resale from time to time by the Holder thereof of all of the relevant Eligible Registrable Securities (the “
Shelf Registration Statement
”). The Shelf Registration Statement shall be on Form F-3 or another appropriate registration statement permitting registration of such Registrable Securities for resale by the Holder in accordance with the methods of distribution elected by it and set forth in such Shelf Registration Statement. The Company shall use its reasonable efforts to cause the Shelf Registration Statement to be declared effective under the Securities Act within three (3) months after the Holders’ initial request in accordance with this Section and to keep such Shelf Registration Statement continuously effective under the Securities Act until the earlier of (i) two years following the date such registration was declared effective and (ii) the disposition of all Registrable Securities included in such Shelf Registration Statement.
|
|
4.2.
|
Exclusions
. The Company shall not be required to effect a registration pursuant to this Section 4 (without limiting any other provisions of this Section
4 to that effect):
|
|
4.2.1.
|
For a period of 12 months after the Company has effected a registration statement pursuant to this Section 4, and such registration statements has been declared or ordered effective;
|
|
4.2.2.
|
If Form F-3 is not available for such offering by the Holders, or
|
|
4.2.3.
|
If within ten (10) days of receipt of a written request from the Holder pursuant to this Section 4, the Company gives notice to the Holder of the Company's good faith intention to file a registration statement for a public offering within thirty (30) days, provided that the Company actually files such registration statement within such thirty (30) days and makes reasonable good faith efforts to cause such registration statement to become effective;
|
|
4.2.4.
|
If the Company shall furnish to the Holder an officer’s certificate signed by order of the Board stating that in the good faith judgment of the Board, it would be seriously detrimental to the Company and its shareholders for such Shelf Registration Statement to be effected at such time, in which event the Company shall have the right to defer the filing of the Shelf Registration Statement for a period of not more than sixty (60) days after receipt of the request of the Holder under this Section 4; provided, that such right to delay a request shall be exercised by the Company not more than once in any twelve (12) month period, or
|
|
4.2.5.
|
In any particular jurisdiction in which the Company would be required to qualify to do business or to execute a general consent to service of process in effecting such registration, qualification or compliance.
|
|
4.3.
|
Suspension.
In addition to any suspension rights under this subsection 4.3 below, upon the happening of any pending corporate development, public filing with the SEC or similar event, that, in the judgment of the Company's Board, renders it advisable to suspend the use of the Prospectus or upon the request by an underwriter in connection with an underwritten public offering of the Company's securities, the Company may, on not more than two (2) occasions within a twelve-month period, for not more than thirty (30) days on each such occasion, suspend use of the Prospectus, on written notice to the Holder (which notice will not disclose the content of any material non-public information and will indicate the date of the beginning and end of the intended period of suspension, if known), in which case the Holder shall discontinue disposition of Registrable Securities covered by the registration statement or Prospectus until copies of a supplemented or amended Prospectus are distributed to the Holder or until the Holder is advised in writing by the Company that sales of Registrable Securities under the applicable Prospectus may be resumed and have received copies of any additional or supplemental filings that are incorporated or deemed incorporated by reference in any such Prospectus. The suspension and notice thereof described in this Section 4.3 shall be held by the Holder in strictest confidence and shall not be disclosed by the Holder.
|
|
4.4.
|
In the event of: (i) any request by the SEC or any other federal or state governmental authority for amendments or supplements to a registration statement or related prospectus or for additional information, (ii) the issuance by the SEC or any other federal or state governmental authority of any stop order suspending the effectiveness of a registration statement or the initiation of any proceedings for that purpose, (iii) the receipt by the Company of any notification with respect to the suspension of the qualification or exemption from qualification of any of the Registrable Securities for sale in any jurisdiction or the initiation of any proceeding for such purpose, or (iv) any event or circumstance which necessitates the making of any changes in the registration statement or Prospectus, or any document incorporated or deemed to be incorporated therein by reference, so that, in the case of the registration statement, it will not contain any untrue statement of a material fact or any omission to state a material fact required to be stated therein or necessary to make the statements therein not misleading, and that in the case of the Prospectus, it will not contain any untrue statement of a material fact or any omission to state a material fact required to be stated therein or necessary to make the statements therein, in the light of the circumstances under which they were made, not misleading, then the Company shall deliver a certificate in writing to the Holders (the “
Suspension Notice
”) to the effect of the foregoing (which notice will not disclose the content of any material non-public information and will indicate the date of the beginning and end of the intended period of suspension, if known), and, upon receipt of such Suspension Notice, the Holder will discontinue disposition of Registrable Securities covered by the registration statement or Prospectus (a “
Suspension
”) until the Holder's receipt of copies of a supplemented or amended Prospectus prepared and filed by the Company, or until the Holder is advised in writing by the Company that the current Prospectus may be used, and have received copies of any additional or supplemental filings that are incorporated or deemed incorporated by reference in any such prospectus. In the event of any Suspension, the Company will use its commercially reasonable efforts to cause the use of the Prospectus so suspended to be resumed as soon as possible after delivery of a Suspension Notice to the Holder. The Suspension and Suspension Notice described in this Section
4.3 shall be held by the Holder in strictest confidence and shall not be disclosed by the Holder..
|
|
4.5.
|
Registrations effected pursuant to this Section 4 shall not be counted as demands for registration or registrations effected pursuant to Section 2.
|
5.
|
Obligations of the Company
.
Whenever required to effect the registration of any Eligible Registrable Securities, the Company shall, without limitation of any other provision herein, as expeditiously as reasonably possible:
|
|
5.1.
|
Prepare and file with the SEC a registration statement with respect to such Registrable Securities and use its commercially reasonable best efforts to cause such registration statement to become effective, and keep such registration statement effective until the earlier of (i) two years following the date such registration was declared effective and (ii) such Eligible Registrable Securities may be sold without limitation under Rule 144, and (iii) the disposition of all Eligible Registrable Securities included in such registration statement. In case of a registration statement pursuant to Section
4, such registration statement shall include a plan of distribution in customary form.
|
|
5.2.
|
Prepare and file with the SEC such amendments and supplements to such registration statement and the prospectus used in connection with such registration statement as may be necessary to comply with the provisions of the Securities Act with respect to the disposition of all securities covered by such registration statement.
|
|
5.3.
|
Furnish to the Holder such number of copies of a prospectus, including a preliminary prospectus, in conformity with the requirements of the Securities Act, and such other documents as they may reasonably request in order to facilitate the public sale or other disposition of the Registrable Securities covered by such registration statement.
|
|
5.4.
|
Use its reasonable efforts to register and qualify the securities covered by such registration statement under such other securities or Blue Sky laws of such jurisdictions as shall be reasonably requested by the Holder; provided that the Company shall not be required in connection therewith or as a condition thereto to qualify to do business or to file a general consent to service of process in any such states or jurisdictions.
|
|
5.5.
|
Use commercially reasonable efforts to list the Registrable Securities covered by such registration statement with any securities exchange on which the Ordinary Shares of the Company is then listed or on the automated quotation system of the National Association of Securities Dealers, Inc., or if the Company does not have a class of equity securities listed on a national securities exchange or the automated quotation system of the Pink Sheets LLC, apply for qualification and use commercially reasonable efforts to qualify the Registrable Securities being registered for inclusion on such exchange or automated quotation system as is determined by the Company.
|
|
5.6.
|
In the event of any underwritten public offering, enter into and perform its obligations under an underwriting agreement, in usual and customary form, with the managing underwriter(s) of such offering.
|
|
5.7.
|
Immediately notify the Holder and each underwriter under such registration statement at any time when a prospectus relating thereto is required to be delivered under the Securities Act of the happening of any event as a result of which the prospectus included in such registration statement, as then in effect, includes an untrue statement of a material fact or omits to state a material fact required to be stated therein or necessary to make the statements therein not misleading in the light of the circumstances then existing. The Company shall prepare and furnish to each such seller a reasonable number of copies of a supplement to or an amendment of such prospectus as may be necessary so that, as thereafter delivered to the purchasers of such Eligible Registrable Securities, such prospectus shall not include any untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary to make the statements therein not misleading in the light of the circumstances then existing.
|
|
5.8.
|
Use its reasonable efforts to furnish, on the date that such Eligible Registrable Securities are delivered to the underwriters for sale, if such securities are being sold through underwriters, (i) an opinion, dated as of such date, of the counsel representing the Company addressed to the underwriters for the purposes of such registration, in form and substance as is customarily given to underwriters in an underwritten public offering, (including that (A) such registration statement has become effective under the Securities Act and, to the best knowledge of such counsel, no stop order suspending the effectiveness thereof has been issued and no proceedings for that purpose have been instituted or are pending or contemplated under the Securities Act, and (B) the registration statement, the related prospectus and each amendment or supplement thereof comply as to form in all material respects with the requirements of the Securities Act (except that such counsel need not express any opinion as to any financial data or financial statements contained therein)), and (ii) a letter, dated as of such date, from the independent certified public accountants of the Company, addressed to the underwriters and to such seller, in form and substance as is customarily given by independent certified public accountants in an underwritten public offering (including, that they are independent public accountants within the meaning of the Securities Act and that, in the opinion of such accountants, the financial statements of the Company included in the registration statement or the prospectus, or any amendment or supplement thereof, comply as to form in all material respects with the applicable accounting requirements of the Securities Act, and such letter shall additionally cover such other financial matters (including information as to the period ending no more than five business days prior to the date of such letter) with respect to such registration as such underwriters or sellers reasonably may request);
|
|
5.9.
|
Use commercially reasonable efforts to cooperate with the sellers in the disposition of the Eligible Registrable Securities covered by such registration statement, including without limitation in the case of an underwritten offering using commercially reasonable efforts to cause key executives of the Company and its subsidiaries to participate under the direction of the managing underwriter in a “road show” scheduled by such managing underwriter in such locations and of such duration as in the judgment of such managing underwriter are appropriate for such underwritten offering.
|
|
5.10.
|
In connection with the preparation and filing of each registration statement registering Eligible Registrable Securities under the Securities Act, and before filing any such registration statement or any other document in connection therewith, give the Holder and their underwriters, if any, and their respective counsel and accountants, the opportunity to (i) review any such registration statement, and (ii) provide comments to such documents if necessary to cause the description the Holder to be accurate.
|
|
5.11.
|
Otherwise use commercially reasonable efforts to comply with the Securities Act, the Exchange Act and any other applicable rules and regulations of the SEC, and make available to the Holder, as soon as reasonably practicable, an earnings statement covering the period of at least 12 months after the effective date of such registration statement, which earnings statement shall satisfy Section 11(a) of the Securities Act and any applicable regulations thereunder, including Rule 158.
|
6.
|
EXPENSES OF REGISTRATION
. All registration expenses incurred in connection with any registration, qualification or compliance pursuant to Sections 2 through 5 herein shall be borne by the Company. Registration expenses shall include all expenses incurred by the Company or incident to the Company's performance of or compliance with this Agreement with respect to any registration in complying with Sections 2, 3 and 4 hereof, including, without limitation, expenses incurred in connection with the preparation of a prospectus, printing, registration and filing fees, printing fees and expenses, fees and disbursements of counsel, accounts and other advisors for the Company, reasonable fees and disbursements of a single special counsel for the Holder, taxes, fees and expenses (including reasonable counsel fees) incurred in connection with complying with state securities or "blue sky" laws, fees of the National Association for Securities Dealers, Inc., fees of transfer agents or registrars and the expense of any special audits incident to or required by any such registration. Notwithstanding the foregoing, however, all underwriter's discounts and commissions
and expenses
in respect of the sale of Registrable Securities shall be paid by the Holder.
|
7.
|
Agreement to Furnish Information; Preconditions to Participation in Underwritten Registrations.
|
|
7.1.
|
The Holder shall furnish to the Company such relevant information regarding the Holder and the distribution proposed by the Holder as the Company may reasonably request in writing and as shall be reasonably required in connection with any registration, qualification or compliance referred to in this Agreement.
|
|
7.2.
|
The Holder may not participate in any underwritten registration hereunder unless the Holder (i) agrees to enter into a written underwriting agreement with the managing underwriter selected in the manner herein provided in such form and containing such provisions as are customary in the securities business for such an arrangement between such underwriter and companies of the Company's size and investment stature, and (ii) provides any relevant information and completes and executes all questionnaires, powers of attorney, indemnities, underwriting agreements, and other documents required under the terms of such underwriting arrangements,
provided
,
however
, that (x) the representations and warranties by, and the other agreements on the part of, the Company to and for the benefit of the underwriters shall also be made to and for the benefit of the Holder and (y) the Holder shall not be required to make, and the Company shall use reasonable efforts to ensure that no underwriter requires the Holder to make, any representations and warranties to, or agreements with, any underwriter in a registration effected pursuant to Sections 2, 3 or 4 other than customary representations, warranties and agreements relating to the Holder's title to Registrable Securities and authority to enter into the underwriting agreement.
|
8.
|
Indemnification
.
In the event any Registrable Securities are included in a registration statement under Sections 2, 3 or 4:
|
|
8.1.
|
To the extent permitted by law, the Company will indemnify and hold harmless the Holder, its affiliates, the partners, officers, directors and shareholders of the Holder, legal counsel and accountants for the Holder, underwriter (as defined in the Securities Act) in an underwritten offering for the Holder and each person, if any, who controls the Holder or underwriter within the meaning of the Securities Act or the Exchange Act,
against any losses, claims, damages, or liabilities (joint or several) to which they may become subject under the Securities Act, the Exchange Act or other federal or state law, insofar as such losses, claims, damages or liabilities (or actions in respect thereof) arise out of or are based upon any of the following statements, omissions or violations (collectively a “
Violation
”) by the Company: (i) any untrue statement or alleged untrue statement of a material fact contained in such registration statement, including any preliminary prospectus or final prospectus contained therein or any amendments or supplements thereto, (ii) the omission or alleged omission to state therein a material fact required to be stated therein, or necessary to make the statements therein not misleading, or (iii) any violation or alleged violation by the Company of the Securities Act, the Exchange Act, any state securities law or any rule or regulation promulgated under the Securities Act, the Exchange Act or any state securities law in connection with the offering covered by such registration statement; and the Company will pay as incurred to the Holder, its affiliates, partners, officers, or directors, any underwriter (as defined in the Securities Act) in an underwritten offering for the Holder and each person, if any, who controls the Holder or underwriter within the meaning of the Securities Act or the Exchange Act, for any legal or other expenses reasonably incurred by them in connection with investigating or defending any such loss, claim, damage, liability or action; provided however, that the indemnity agreement contained in this Section 8.1 shall not apply to amounts paid in settlement of any such loss, claim, damage, liability or action if such settlement is effected without the consent of the Company, which consent shall not be unreasonably withheld, nor shall the Company be liable in any such case for any such loss, claim, damage, liability or action to the extent that it arised out of or is based upon a Violation which occurs in reliance upon and in conformity with written information furnished expressly for used in connection with such registration by such Holder, partner, officer, director, underwriter or controlling person of the Holder.
|
|
8.2.
|
To the extent permitted by law, the Holder will, if Registrable Securities held by the Holder are included in the securities as to which such registration qualifications or compliance is being effected, indemnify and hold harmless the Company, each of its directors, its officers, directors and each person, if any, who controls the Company within the meaning of the Securities Act and any underwriter, against any losses, claims, damages or liabilities (joint or several) to which the Company or any such director, officer, controlling person, or underwriter may become subject under the Securities Act, the Exchange Act or other federal or state law, insofar as such losses, claims, damages or liabilities (or actions in respect thereto) arise out of or are based upon any Violation, in each case to the extent (and only to the extent) that such Violation occurs in reliance upon and in conformity with written information furnished by the Holder under an instrument duly executed by the Holder and stated to be specifically for use in connection with such registration; and the Holder will pay as incurred any legal or other expenses reasonably incurred by the Company or any such director, officer, controlling person, or underwriter in connection with investigating or defending any such loss, claim, damage, liability or action if it is judicially determined that there was such a Violation; provided, however, that the indemnity agreement contained in this Section 8.2 shall not apply to amounts paid in settlement of any such loss, claim, damage, liability or action if such settlement is effected without the consent of the Holder, which consent shall not be unreasonably withheld; provided further, that in no event shall any indemnity under this Section 8.2 exceed the net proceeds from the offering received by the Holder.
|
|
8.3.
|
Promptly after receipt by an indemnified party under this Section 8 of notice of the commencement of any action (including any governmental action), such indemnified party will, if a claim in respect thereof is to be made against any indemnifying party under this Section 8, deliver to the indemnifying party a written notice of the commencement thereof and the indemnifying party shall have the right to participate in, and, to the extent the indemnifying party so desires, jointly with any other indemnifying party similarly noticed, to assume the defense thereof with counsel mutually satisfactory to the parties; provided, however, that an indemnified party shall have the right to retain its own counsel, with the fees and expenses to be paid by the indemnifying party, if representation of such indemnified party by the counsel retained by the indemnifying party would be inappropriate due to actual or potential differing interests between such indemnified party and any other party represented by such counsel in such proceeding. The failure to deliver written notice to the indemnifying party within a reasonable time of the commencement of any such action, shall, to the extent materially prejudicial to its ability to defend such action, relieve such indemnifying party of its liability to the indemnified party under this Section 8, but the omission so to deliver written notice to the indemnifying party will not relieve it of any liability that it may have to any indemnified party otherwise than under this Section 8.
|
|
8.4.
|
If the indemnification provided for in this Section 8 is held by a court of competent jurisdiction to be unavailable to an indemnified party with respect to any losses, claims, damages or liabilities referred to herein, the indemnifying party, in lieu of indemnifying such indemnified party thereunder, shall to the extent permitted by applicable law contribute to the amount paid or payable by such indemnified party as a result of such loss, claim, damage or liability in such proportion as is appropriate to reflect the relative fault of the indemnifying party on the one hand and of the indemnified party on the other in connection with the Violation(s) that resulted in such loss, claim, damage or liability, as well as any other relevant equitable considerations. The relative fault of the indemnifying party and of the indemnified party shall be determined by a court of law by reference to, among other things, whether the untrue or alleged untrue statement of a material fact or the omission to state a material fact relates to information supplied by the indemnifying party or by the indemnified party and the parties’ relative intent, knowledge, access to information and opportunity to correct or prevent such statement or omission; provided, that in no event shall any contribution by the Holder hereunder exceed the net proceeds from the offering received by the Holder; and provided further that no party will be liable for contribution with respect to the settlement of any claim or action effected without its written consent.
|
|
8.5.
|
The obligations of the Company and the Holder under this Section
8 shall survive completion of any offering of Eligible Registrable Securities in a registration statement and the termination of this Agreement. No indemnifying party, in the defense of any such claim or litigation, shall, except with the consent of each indemnified party, consent to entry of any judgment or enter into any settlement which does not include as an unconditional term thereof the giving by the claimant or plaintiff to such Indemnified Party of a release from all liability in respect to such claim or litigation.
|
|
8.6.
|
The indemnification provisions of this Section 8 shall not be in limitation of any other indemnification provisions included in any other agreement. Notwithstanding the foregoing, to the extent that the provisions on indemnification and contribution contained in any underwriting agreement entered into in connection with an underwritten public offering are in conflict with the foregoing provisions, the provisions in such underwriting agreement shall prevail.
|
9.
|
Lock-Up Agreement
.
|
|
9.1.
|
The Holder and the Company hereby agrees that, if so requested by the representative of the underwriters (the “
Managing Underwriter
”), the Holder and Company shall not, without the prior consent of the Managing Underwriter (i) lend, offer, pledge, sell, contract to sell, sell any option or contract to purchase, purchase any option or contract to sell, grant any option, right or warrant to purchase, or otherwise transfer or dispose of, directly or indirectly, any Registrable Securities or any securities of the Company (whether such shares or any such securities are then owned by the Holder, or are thereafter acquired), or (ii) enter into any swap or other arrangement that transfers to another, in whole or in part, any of the economic consequences of ownership of the Registrable Securities, whether any such transaction described in clause (i) or (ii) above is to be settled by delivery of Registrable Securities or such other securities, in cash or otherwise, during the period specified by the Managing Underwriter (the “
Market Standoff Period
”), with such period not to exceed 120 days following the effective date of such registration statement. Any discretionary waiver or termination of the restrictions contained in any such agreement by the Company or the underwriter shall first apply to the Holder, which shall have preference over all other holders of the Company’s securities to register and sell the shares to be registered within such waiver or termination of restrictions.
|
|
9.2.
|
The Company may impose stop-transfer instructions with respect to securities subject to the foregoing restrictions until the end of such Market Standoff Period.
|
|
9.3.
|
The foregoing provisions of this Section 9 shall not apply to the sale of any shares to an underwriter pursuant to an underwriting agreement, and shall only be applicable to the Holder if all officers, directors and shareholders of the Company holding a percentage of the Company's share capital as determined by the Managing Underwriter, enter into similar agreements.
|
|
9.4.
|
The underwriters in connection with a registration statement so filed are intended to be third party beneficiaries of this Section 9 and shall have the right power and authority to enforce the provisions hereof as though they were a party hereto.
|
10.
|
Assignment of Registration Rights; Transfer of Registrable Securities
.
|
|
10.1.
|
The rights to cause the Company to register Eligible Registrable Securities pursuant to this Agreement may be assigned by the Holder to any transferee or assignee of all or part of the Registrable Securities held by the Holder, that acquires Registrable Securities (as adjusted for stock splits, combinations and other recapitalization events); provided, however, (i) the transferor shall furnish to the Company written notice of the name and address of such transferee or assignee and the securities with respect to which such registration rights are being assigned, and (ii) such transferee shall agree to be subject to all provisions and restrictions set forth in this Agreement.
|
11.
|
Rule 144 Reporting
.
With a view to making available to the Holder the benefits of certain rules and regulations of the SEC which may permit the sale of the Registrable Securities to the public without registration, the Company (at any time after it has become subject to such reporting requirements) agrees to:
|
|
11.1.
|
Make and keep available adequate current public information with respect to the Company, within the meaning Rule 144(c) under the Securities Act or any similar or analogous rule promulgated under the Securities Act, at all times after the effective date of the first registration statement filed by the Company for an offering of its securities to the general public.
|
|
11.2.
|
Furnish to the Holder forthwith upon request: (i) a written statement by the Company as to its compliance with the informational requirements of Rule 144(c) under the Securities Act (or similar rule then in effect), and of the Exchange Act (at any time after it has become subject to such reporting requirements); (ii) a copy of the most recent annual or earnings report filed under Form 6-K of the Company; and (iii) such other reports and documents as the Holder may reasonably request in availing itself of any rule or regulation of the SEC allowing it to sell any such securities without registration; and
|
|
11.3.
|
Comply with all other necessary filings and other requirements so as to enable the holders of Registrable Securities to sell Registrable Securities under Rule 144 under the Securities Act (or similar rule then in effect).
|
12.
|
Foreign Offerings
. The provisions of this Agreement will apply to the listing and registration of Registrable Securities in foreign jurisdiction or on foreign exchange, subject to the local laws and regulations of such foreign jurisdiction and foreign exchange.
|
13.
|
Subsequent Registration Rights
. Without the consent of the Holder, the Company may not grant, or enter into any other agreement with any holder or prospective holder of any securities of the Company that would grant such holder, registration rights, except for rights inferior to, or on a pari passu basis with, those granted hereunder; provided, however that the Company shall not allow such holder of securities of the Company: (i) to include such securities in any registration filed under Section 3 hereof, unless under the terms of such agreement, such holder may include such securities in any such registration only to the extent that the inclusion of such securities will not reduce the amount of the Eligible Registrable Securities of the Holder that are included; or (ii) to demand registration of their securities. Notwithstanding the foregoing, commencing 12 months after the date hereof, the Company may file a registration statement for an offering to be made on a delayed or continuous basis pursuant to Rule 415 of the Securities Act registering the resale from time to time by the holders thereof of securities of the Company, provided that such registration statement shall be treated as giving rise to the rights under Section 3 hereof and shall include all Registrable Securities requested to be included therein by the Holder thereof.
|
14.
|
Miscellaneous
.
|
|
14.1.
|
Entire Agreement
.
This Agreement constitute the full and entire understanding and agreement between the parties with regard to the subject matters hereof and supersede all prior negotiations, agreements and understandings of the parties of any nature, whether oral or written, relating thereto.
|
|
14.2.
|
Amendment of Registration Rights
. Any provision of this Agreement may be amended and the observance thereof may be waived (either generally or in a particular instance and either retroactively or prospectively), with the written consent of the Company and the Holders. By acceptance of any benefits under this Agreement, Holders of Eligible Registrable Securities hereby agree to be bound by the provisions hereunder.
|
|
14.3.
|
Governing Law; Venue
. This Agreement shall be governed by and construed under the laws of the State of Israel, without regard to the conflicts of law principles of such State, except with respect to matters that are subject to securities laws and regulations, which shall be governed by the respective laws and regulations. The parties hereto irrevocably submit to the exclusive jurisdiction of the Courts of the district of Tel Aviv-Jaffa in respect of any dispute or matter arising out of or connected with this Agreement.
|
|
14.4.
|
Successors and Assigns
. The provisions hereof shall inure to the benefit of, and be binding upon, the successors, assigns, heirs, executors, and administrators of the parties hereto and shall inure to the benefit of and be enforceable by each person who shall be a holder of Registrable Securities from time to time.
|
|
14.5.
|
Severability
. In the event one or more of the provisions of this Agreement should, for any reason, be held to be invalid, illegal or unenforceable in any respect, such invalidity, illegality, or unenforceability shall not affect any other provisions of this Agreement, and this Agreement shall be construed as if such invalid, illegal or unenforceable provision had never been contained herein.
|
|
14.6.
|
Delays or Omissions
. It is agreed that no delay or omission to exercise any right, power, or remedy accruing to the Holder, upon any breach, default or noncompliance of the Company under this Agreement shall impair any such right, power, or remedy, nor shall it be construed to be a waiver of any such breach, default or noncompliance, or any acquiescence therein, or of any similar breach, default or noncompliance thereafter occurring. It is further agreed that any waiver, permit, consent, or approval of any kind or character on the Holder’s part of any breach, default or noncompliance under the Agreement or any waiver on the Holder’s part of any provisions or conditions of this Agreement must be in writing and shall be effective only to the extent specifically set forth in such writing. All remedies, either under this Agreement, by law, or otherwise afforded to the Holder, shall be cumulative and not alternative.
|
|
14.7.
|
Aggregation of Shares
. All shares of the Company held or acquired by the Holder and any entity affiliated with the Holder, shall be aggregated together for the purpose of determining the availability of any rights under this Agreement, the applicability of any limitation under this Agreement. The term “affiliate” shall have the meaning assigned to it in Rule 405 under the Securities Act.
|
|
14.8.
|
Notices
. All notices required or permitted hereunder shall be in writing and shall be deemed effectively given: (i) upon personal delivery to the party to be notified, (ii) when sent by confirmed electronic mail or facsimile if sent during normal business hours of the recipient; if not, then on the next business day, (iii) three (3) days after having been sent by registered or certified mail, return receipt requested, postage prepaid, or (iv) two (2) days after deposit with an internationally recognized courier, specifying two day delivery, with written verification of receipt. All communications shall be sent to the party to be notified at the address as set forth below or at such other address as such party may designate by ten (10) days advance written notice to the other parties hereto.
|
|
14.9.
|
If to the Company: to the address set forth in the preamble to this Agreement.
|
|
14.10.
|
If to the Holder: to the address set forth in
Schedule 1
attached hereto.
|
|
14.11.
|
Counterparts
. This Agreement may be executed in one or more counterparts, all of which shall be considered one and the same agreement and shall become effective when one or more counterparts have been signed by each of the parties and delivered to the other party, it being understood that all parties need not sign the same counterpart and that signatures may be provided by facsimile transmission.
|
|
14.12.
|
Questionnaire
. The Holder agrees to furnish to the Company a completed Questionnaire in a customary form (a
“Selling Holder Questionnaire”
). The Company shall not be required to include the Eligible Registrable Securities of the Holder in a Registration Statement who fails to furnish to the Company a fully completed Selling Holder Questionnaire at least five business days prior to the date the Company notifies the Holder that a registration statement is being filed.
|
Rada Electronic Industries Ltd
.
|
||
Name:
|
||
Title:
|
DBSI Investments Ltd.
|
||
Name:
|
||
Title:
|
1.
|
Loan
.
|
|
1.1.
|
Loan Amount.
The Investor hereby agrees and undertakes, upon a Call Event (as defined below) and in any event not later than three (3) business days following such Call Event, to wire to the Company an aggregate amount of up to US$ 3,175,000 (the “
Principal Loan Amount
”). At the Call Event, the Investor will transfer to the Company the Principal Loan Amount, by wire transfer of immediately available United States Dollars. The Company may instruct the Investor to wire the said amount directly to the Lenders.
|
|
1.2.
|
Term
. Except if an Event of Default has occurred, the Loan Amount will be convertible during a period commencing as of the Call Event Date and ending on the Final Date (“
Term
”), in accordance with the provisions set forth herein.
|
|
1.3.
|
Interest
. The Principal Loan Amount shall bear interest at an annual interest rate of the 1-year USD LIBOR in effect from time to time plus 6% from the actual disbursement of the Principal Loan Amount and until the date of repayment or conversion thereof (the “
Interest
”, and together with the outstanding Principal Loan Amount the, “
Loan Amount
”). Interest shall be paid on a quarterly basis, and shall include VAT, as required by law, which will be paid to the Investor against duly VAT invoice issued by the Investor and delivered to the Company prior to each payment on account of Interest.
|
2.
|
Special Committee and Call Event
.
|
3.
|
Repayment.
|
|
3.1.
|
During the Term, the Company shall have the right, but not the obligation, to repay the Loan Amount in full or any part thereof. In the event that the Company wishes to repay the Loan Amount or any part thereof (the "
Repayment Amount
") before the Final Date (as defined hereinafter), the Company shall give a written notice to the Investor of its intentions to repay the Repayment Amount (the "
Repayment Notice
"). The Investor will have 10 business days following the Repayment Notice to elect to convert the Repayment Amount (the "
Conversion Amount
"), in accordance with Section
4.1 below, by giving notice to the Company of its intention to do so (the "
Conversion Notice
"). In the event that the Investor does not send the Conversion Notice, the Company may repay the portion of the Repayment Amount which was not converted by the Investor.
|
|
3.2.
|
Upon occurrence of an Event of Default prior to Final Date, the then remaining Loan Amount will be immediately due and payable in cash to the Investor (to the extent not converted theretofore) in priority over payment of any dividends or any debts due by the Company to its shareholders solely by virtue of their shareholdings in the Company.
|
4.
|
Conversion.
|
|
4.1.
|
Voluntary Conversion
. During the Term, the Investor shall have the right, but not the obligation, at its sole discretion, to convert the then remaining Loan Amount into ordinary shares, par value NIS 0.015 (the "
Ordinary Shares
"), at a price per share equal to the lower of: (i) $1.2, or (ii) a five percent (5%) discount to the FMV (as defined below) (the "
Conversion Price
"). In each case, the Conversion Price shall be adjusted from time to time to reflect any bonus shares, combinations or splits with respect to the Ordinary Shares or other similar recapitalization affecting such share. "
FMV
" shall mean the average of the closing prices of the Company's Ordinary Shares over the 5 consecutive trading days ending on the last trading day (inclusive) prior to the date of conversion.
|
|
4.2.
|
Conversion upon Final Date
. If the Loan Amount has not been converted or repaid in full by the Final Date, the then remaining Loan Amount will be due in full to the Investor on the Final Date, unless the Investor elects, prior to the Final Date, to convert the Loan Amount into Ordinary Shares at a price per share equal to the Conversion Price.
|
|
4.3.
|
No Fractional Shares
. No fractional shares shall be issued to the Investor, and the number of shares issuable upon conversion of the Loan Amount shall be rounded to the nearest whole number.
|
|
4.4.
|
Effect of Repayment or Conversion
. Upon repayment or conversion in full of the Loan Amount pursuant to and in accordance the terms of this Agreement, the Loan Amount shall be deemed to have been satisfied and repaid in full.
|
|
4.5.
|
VAT
. The VAT applicable to the conversion of the Interest shall be paid in cash by the Company to the Investor within 5 days following the Conversion and against VAT invoice duly issued by the Investor and delivered to the Company.
|
|
4.6.
|
Notwithstanding anything to the contrary, in no event shall the conversion of the Loan Amount result in the Investor holding more than 90% of the share capital of the Company.
|
5.
|
Covenants
.
|
|
5.1.
|
Use of Proceeds
.
The Company will use the proceeds of the Loan Amount solely in order to repay the Lenders under the Standstill Agreement.
|
|
5.2.
|
Fees and Expenses
.
Each party hereto shall bear and be responsible for its own expenses and the taxes attributable to it, if any, in connection with the transactions contemplated under this Agreement.
|
6.
|
Miscellaneous
.
|
|
6.1.
|
Definitions
. For purposes of this Agreement:
|
|
6.2.
|
Further Assurances
.
Each of the parties hereto shall perform such further acts and execute such further documents as may reasonably be necessary to carry out and give full effect to the provisions of this Agreement and the intentions of the parties as reflected thereby.
|
|
6.3.
|
Governing Law; Jurisdiction
.
This Agreement shall be governed by and construed solely in accordance with the laws of the State of Israel, regardless of the laws that might otherwise govern under applicable principles of conflicts of laws thereof. Each of the parties hereto irrevocably consents to the exclusive jurisdiction and venue of any competent court of the district of Tel-Aviv-Jaffa, in connection with any matter based upon or arising out of this Agreement or the matters contemplated herein, agrees that process may be served upon them in any manner authorized by the laws of the State of Israel for such persons and waives and covenants not to assert or plead any objection which they might otherwise have to such jurisdiction and such process.
|
|
6.4.
|
Successors and Assigns; Assignment
.
Neither this Agreement nor any of the rights, interests or obligations under this Agreement may be assigned or delegated, in whole or in part, by operation of law or otherwise by any party hereto without the prior written consent of the other party hereto, and any such assignment without such prior written consent shall be null and void, except that this Agreement or any of the rights, interests or obligations under this Agreement may be assigned by the Investor to any of its Affiliates. Subject to the foregoing, this Agreement shall be binding upon, inure to the benefit of, and be enforceable by, the parties hereto and their respective successors and assigns.
|
|
6.5.
|
Entire Agreement; Amendment and Waiver
. This Agreement constitute the entire agreement among the parties with respect to the subject matter hereof and supersede all prior agreements and understandings both written and oral, among the parties with respect to the subject matter hereof.
Except as otherwise stated, this Agreement may not be amended other than by a written instrument signed by the Investor and the Company. At any time prior to the Closing of the Purchase Agreement, the Investor or the Company, as the case may be, may, to the extent legally allowed, (i) extend the time for the performance of any of the obligations of the other party hereto, (ii) waive any inaccuracies in the representations and warranties made to such party contained herein or in any document delivered pursuant hereto, and (iii) waive compliance with any of the covenants, agreements or conditions for the benefit of such party contained herein. Any agreement on the part of a party hereto to any such extension or waiver shall be valid only if set forth in an instrument in writing signed on behalf of such party.
|
|
6.6.
|
Notices, etc
.
All notices and other communications hereunder shall be in writing and shall be deemed given if delivered personally or by commercial messenger or courier service, or mailed by registered or certified mail (return receipt requested) or sent via facsimile (with electronic confirmation of complete transmission) to the parties at the following addresses (or at such other address for a party as shall be specified by like notice):
|
6.7.
|
Delays or Omissions
.
No delay or omission to exercise any right, power, or remedy accruing to any party upon any breach or default under this Agreement, shall be deemed a waiver of any other breach or default theretofore or thereafter occurring. Any waiver, permit, consent, or approval of any kind or character on the part of any party of any breach or default under this Agreement, or any waiver on the part of any party of any provisions or conditions of this Agreement, must be in writing and shall be effective only to the extent specifically set forth in such writing. Except as otherwise limited herein, all remedies, either under this Agreement or by law or otherwise afforded to any of the parties, shall be cumulative and not alternative.
|
6.8.
|
Severability
.
In the event that any provision of this Agreement or the application thereof, becomes or is declared by a court of competent jurisdiction to be illegal, void or unenforceable, the remainder of this Agreement will continue in full force and effect and the application of such provision to other persons or circumstances will be interpreted so as reasonably to effect the intent of the parties hereto. The parties further agree to replace such void or unenforceable provision of this Agreement with a valid and enforceable provision that will achieve, to the extent possible, the economic, business and other purposes of such void or unenforceable provision.
|
6.9.
|
Counterparts
.
This Agreement may be executed in one or more counterparts, all of which shall be considered one and the same agreement and shall become effective when one or more counterparts have been signed by each of the parties and delivered to the other party, it being understood that all parties need not sign the same counterpart and that signatures may be provided by facsimile or other means of electronic transmission.
|
|
6.10.
|
Third Party Beneficiary
. It is hereby agreed that Faith Central Development Limited (which is one of the Lenders) ("
FCD
") shall be a third party beneficiary of this Agreement and the Company's rights hereunder. In the event that the Company has not repaid FCD the balance of the Loan Amounts (as defined in the Standstill Agreement) by August 20, 2016 then FCD shall have the right to exercise the rights granted to the Company hereunder and declare a Call Event, by giving written notice to the Company and the Investor to this effect (the
'FCD Notice")
. Except as expressly set forth herein, this Agreement shall not confer any rights or remedies upon any Person other than the parties hereto and their respective successors, assigns personal representatives, heirs and estates, as the case may be.
|
Rada Electronic Industries Ltd
.
By: ________________________________________
Name:
Title:
|
DBSI Investments Ltd.
By: ________________________________________
Name:
Title:
|
Faith Central Development Limited
By: ________________________________________
Name:
Title:
|
1.
|
Amendment of Section 4.1
|
2.
|
Effect of Amendment
|
3.
|
Counterparts
|
Rada Electronic Industries Ltd
.
By: ________________________________
Name:
Title:
|
DBSI Investments Ltd.
By: ________________________________
Name:
Title:
|
1.
|
Exercise
.
|
|
1.1.
|
Manner of Exercise
. This Warrant may be exercised, at the Holder sole discretion, during the 36 months following the Closing Date as defined in the Purchase Agreement, in whole or in part, on one or more trenches during its term, provided that the amount of each trench shall not be in an amount less than US$ 1,000,000. The Warrant may be exercised by the surrender of this Warrant, together with the Notice of Exercise in the form attached hereto, duly completed and executed by the Holder, at the principal office of the Company or at such other office or agency as the Company may designate, accompanied by payment in full of the aggregate Exercise Price payable in respect of the Warrant Shares purchasable upon such exercise. The Exercise Price may be paid by cash, check, wire transfer or by the cancellation of debt owed by the Company to the Holder.
|
|
1.2.
|
Effective Time of Exercise
. Each exercise of this Warrant shall be deemed to have been effected immediately prior to the close of business on the day on which this Warrant shall have been surrendered to the Company as provided in Section
1.1 above. At such time, the person(s) in whose name(s) any certificates representing the Warrant Shares shall be issuable upon exercise as provided in Section
1.4 below shall be deemed to have become the holder of record of such Warrant Shares represented by such certificates.
|
|
1.3.
|
Delivery to Holder
. As soon as practicable after the exercise of this Warrant in whole or in part, and in any event within ten (10) days thereafter, the Company at its expense will cause to be issued in the name of, and delivered to, the Holder, or as such Holder may direct:
|
|
1.3.1.
|
a certificate(s) for the number of Warrant Shares to which such Holder shall be entitled, and
|
|
1.3.2.
|
in case such exercise is in part only, a new warrant(s) (dated the date hereof) of like tenor, calling in the aggregate on the face(s) thereof for the number of Warrant Shares equal to the number of such shares called for on the face of this Warrant
minus
the number of such shares purchased by the Holder upon such exercise as provided in Sections
1.1.
|
|
1.4.
|
Conditional Exercise
. In case of an exercise made in connection with a public offering of the Company Shares pursuant to an effective registration statement under the Securities Act or the equivalent actions under the laws of another jurisdiction, or a Liquidity Event (as defined below), such exercise may be made conditional upon the closing of such offering or event.
|
2.
|
Adjustments
|
|
2.1.
|
Stock Splits, Dividends and Combinations.
If the outstanding Company Shares shall be subdivided into a greater number of shares or a dividend or other distribution payable in additional shares shall be paid in respect of Common Shares, the Exercise Price in effect immediately prior to such subdivision or at the record date of such dividend shall simultaneously with the effectiveness of such subdivision or immediately after the record date of such dividend be proportionately reduced. If outstanding Company Shares shall be combined into a smaller number of shares, the Exercise Price in effect immediately prior to such combination shall, simultaneously with the effectiveness of such combination be proportionately increased. When any adjustment is required to be made in the Exercise Price, the number of Warrant Shares purchasable upon the exercise of this Warrant shall be changed to the number determined by
dividing
(i) an amount equal to the number of shares issuable upon the exercise of this Warrant immediately prior to such adjustment,
multiplied
by the Exercise Price in effect immediately prior to such adjustment, by (ii) the Exercise Price in effect immediately after such adjustment.
|
|
2.2.
|
Reclassification, Etc
. In case of any reclassification or change of the outstanding securities of the Company or of any reorganization of the Company (or any other corporation the stock or securities of which are at the time receivable upon the exercise of this Warrant) or any similar corporate reorganization on or after the date hereof, then and in each such case the holder of this Warrant, upon the exercise hereof at any time after the consummation of such reclassification, change, reorganization, merger or conveyance, shall be entitled to receive, in lieu of the stock or other securities and property receivable upon the exercise hereof prior to such consummation, the stock or other securities or property to which such holder would have been entitled upon such consummation if such holder had exercised this Warrant immediately prior thereto, all subject to further adjustment as provided in Section
2; and in each such case, the terms of this Section
2 shall be applicable to the shares of stock or other securities properly receivable upon the exercise of this Warrant after such consummation.
|
|
2.3.
|
Other Transactions
. In the event that the Company shall issue shares to its shareholders as a result of a split-off, spin-off or the like, then the Company shall only complete such issuance or other action if, as part thereof, allowance is made to protect the economic interest of the Holder either by increasing the number of Warrant Shares or by procuring that the Holder shall be entitled, on economically proportionate terms, to acquire additional shares of the spun-off or split-off entities. Upon each adjustment in the number or kind of Warrant Shares purchasable hereunder, the Exercise Price shall be proportionately increased or decreased, as the case may be, in a manner that is the inverse of the manner in which the number of Warrant Shares purchasable hereunder shall be adjusted.
|
|
2.4.
|
Notice of Adjustments
. Whenever the Exercise Price or the number of Warrant Shares purchasable hereunder shall be adjusted pursuant to this Section
2, the Company shall prepare a certificate signed by an executive officer of the Company setting forth, in reasonable detail, the event requiring the adjustment, the amount of the adjustment, the method by which such adjustment was calculated, the Exercise Price and the number of Warrant Shares purchasable hereunder after giving effect to such adjustment, and shall cause copies of such certificate to be delivered to the Holder.
|
3.
|
Investment Representations
.
|
|
3.1.
|
The Holder is knowledgeable, sophisticated and experienced in making, and is qualified to make, decisions with respect to investments in securities representing an investment decision like that involved in the purchase of this Warrant and the Warrant Shares (the “
Purchased Securities
”), without limitation of the representations and warranties included herein and in the Purchase Agreement.
|
|
3.2.
|
The Holder is acquiring the Purchased Securities in the ordinary course of its business and for its own account for investment only and with no present intention of distributing any of such Purchased Securities and does not have any current arrangement or understanding with any other persons regarding the distribution of such securities (this representation and warranty not limiting the Holder’s right to sell or distribute in compliance with the Securities Act and the rules and regulations thereunder); nothing contained herein shall be deemed a representation or warranty by the Holder to hold the Purchased Securities for any period of time;
|
|
3.3.
|
The Holder will not, directly or indirectly, offer, sell, pledge, transfer or otherwise dispose of (or solicit any offers to buy, purchase or otherwise acquire or take a pledge of) any of the Purchased Securities, nor will the Holder engage in any short sale that results in a disposition of any of the Purchased Securities by the Holder, except in compliance with the Securities Act and the rules and regulations thereunder and any applicable state securities laws; and
|
|
3.4.
|
The Holder is either an “accredited investor” within the meaning of Rule 501(a) promulgated under the Securities Act or is not a "US Person" within the meaning of Rule 902(k) under the Securities Act. Neither such inquiries nor any other due diligence investigation conducted by the Holder shall modify, limit or otherwise affect the Holder’s right to rely on the Company’s representations and warranties contained herein or in the Purchase Agreement.
|
|
3.5.
|
The Holder understands that its investment in the Purchased Securities involves a significant degree of risk, including a risk of total loss of Holder’s investment. The Holder understands that no representation is being made as to the future value or market price of the Company Shares. The Holder has the knowledge and experience in financial and business matters as to be capable of evaluating the merits and risks of an investment in the Purchased Securities and has the ability to bear the economic risks of an investment in the Purchased Securities.
|
|
3.6.
|
The Holder understands that, until all of the applicable provisions of Section
3.7 hereof are satisfied, any certificates representing the Purchased Securities will bear a restrictive legend in substantially the following form:
|
|
3.7.
|
Promptly following the earlier of (i) effectiveness of a registration statement under the Securities Act with respect to the sale of Purchased Securities or (ii) Rule 144(b)(1) becoming available, the Company shall (A) deliver to the transfer agent for the Company Shares (the
“Transfer Agent”
) irrevocable instructions that the Transfer Agent shall reissue a certificate representing the Warrant Shares without legends upon receipt by such Transfer Agent of: (a) the legended certificates for such Warrant Shares; and (b) either (1) a customary written representation by the Holder that Rule 144(b)(1) applies to the Warrant Shares represented thereby or (2) a written statement by the Company that the Holder may sell the Warrant Shares represented thereby in accordance with the Plan of Distribution contained in a registration statement that was declared effective under the Securities Act (the date on which the Transfer Agent receives all of the items listed in clauses (a), and (b) above, the
“Legend Removal Date”
), and (B) if required by the Transfer Agent, cause its counsel to deliver to the Transfer Agent one or more opinions to the effect that the removal of such legends in such circumstances may be effected under the Securities Act. From and after the Legend Removal Date, upon the Holder’s written request, the Company shall promptly cause certificates evidencing the Holder’s Warrant Shares referred to in such written request to be replaced with certificates which do not bear such restrictive legends, and Warrant Shares subsequently issued upon due exercise of the Warrants shall not bear such restrictive legends, provided the provisions of clauses (a) and (b) above, as applicable, are satisfied with respect to such Warrant Shares.
|
4.
|
Exemption from Registration
. The Holder understands that the Purchased Securities are being offered and sold to it in reliance upon specific exemptions from the registration requirements of the Securities Act, the rules and regulations thereunder and state securities laws and that the Company is relying upon the truth and accuracy of, and the Holder’s compliance with, the representations, warranties, agreements, acknowledgments and understandings of the Holder set forth herein in order to determine the availability of such exemptions and the eligibility of the Holder to acquire the Purchased Securities.
|
5.
|
Transfer
|
|
5.1.
|
Subject to the restrictions on transfer provided herein and subject to Sections
3.6 and
3.7, this Warrant shall be transferable, in whole or in part, at the discretion of the Holder and the Company shall transfer this Warrant, in whole or in part, from time to time upon the books to be maintained by the Company for that purpose, upon surrender thereof for transfer accompanied by appropriate instructions for transfer and such other documents as may be reasonably required by the Company, including, if required by the Company, an opinion of its counsel to the effect that such transfer is exempt from the registration requirements of the Securities Act, to establish that such transfer is being made in accordance with the terms hereof, and a new Warrant(s) shall be issued to the transferee(s) and the surrendered Warrant shall be canceled by the Company.
|
|
5.2.
|
The Company will maintain a register containing the names and addresses of the Holder(s) of this Warrant. Until any transfer of this Warrant is made in the warrant register, the Company may treat the Holder of this Warrant as the absolute owner hereof for all purposes. Any Holder may change such Holder's address as shown on the warrant register by written notice to the Company requesting such change.
|
6.
|
No Impairment
. The Company will not, by amendment of its charter documents or through any reorganization, recapitalization, transfer of assets, consolidation, merger, dissolution, sale of assets, issue or sale of securities or any other voluntary action, avoid or seek to avoid the observance or performance of any of the terms to be observed or performed hereunder, or impair the economic interest of the Holder, but will at all times in good faith assist in the carrying out of all the provisions hereof and in taking of all such actions and making all such adjustments as may be necessary or appropriate in order to protect the rights and the economic interests of the Holder against impairment.
|
7.
|
Termination
. This Warrant and the right to purchase securities upon exercise hereof shall terminate on 5:00 P.M. Eastern Time on the third anniversary of the Closing Date.
|
8.
|
Notices of Certain Transactions
. In case:
|
|
8.1.
|
the Company shall take a record of the holders of its Company Shares (or other shares or securities at the time deliverable upon the exercise of this Warrant) for the purpose of entitling or enabling them to receive any dividend or other distribution, or to receive any right to subscribe for or purchase any shares of any class or any other securities, or to receive any other right, to subscribe for or purchase any shares of any class or any other securities, or to receive any other right, or
|
|
8.2.
|
of any capital reorganization of the Company, any reclassification of the share capital of the Company, any Liquidity Event, or
|
|
8.3.
|
of the voluntary or involuntary dissolution, liquidation or winding-up of the Company, or
|
|
8.4.
|
of a public offering of the Company Shares pursuant to an effective registration statement under the Securities Act or the equivalent actions under the laws of another jurisdiction,
|
9.
|
Reservation of Shares
. The Company will at all times reserve and keep available, solely for the issuance and delivery upon the exercise of this Warrant, such Warrant Shares and other shares, securities and property, as from time to time shall be issuable upon the exercise of this Warrant.
|
10.
|
Registration Rights
.
|
|
10.1.
|
The Company covenants and agrees that the Holder shall be entitled to registration rights pursuant to the Registration Rights Agreement of even date hereof, in respect of the Warrant Shares purchasable hereunder (and any shares issued as (or issuable upon the conversion or exercise of any warrant, right or other security that is issued as) a dividend or other distribution with respect to, or in exchange for or in replacement of, such Warrant Shares), and the Warrant Shares shall be deemed to be Registrable Securities and Original Registrable Securities thereunder.
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10.2.
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The Holder undertakes to be bound by the provisions of Section 9 of the Registration Rights Agreement of even date hereof, with respect to prohibitions to offer or sale any Warrant Shares (or any other shares exchanged therefor), if and to the extent that this Warrant has been exercised. For the purpose of this sub-section
10.2 the Holder shall be considered a “Holder”” and the Warrant Shares shall be considered “Registrable Securities”, all as defined in the Registration Rights Agreement.
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11.
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Replacement of Warrants
. Upon receipt of evidence reasonably satisfactory to the Company of the loss, theft, destruction or mutilation of this Warrant and (in the case of loss, theft or destruction) upon delivery of an indemnity agreement reasonably satisfactory to the Company, or (in the case of mutilation) upon surrender and cancellation of this Warrant, the Company will issue, in lieu thereof, a new Warrant of like tenor, dated as of the date hereof. This Warrant is exchangeable, without expense, at the option of the Holder, upon presentation and surrender hereof to the Company or at the office of its stock transfer agent, if any, for other warrants of different denominations entitling the holders thereof to purchase in the aggregate the same number of Warrant Shares purchasable hereunder.
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12.
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Notices.
Any notice required or permitted by this Warrant shall be in writing and shall be deemed sufficient upon receipt, when delivered personally or by courier, overnight delivery service or confirmed facsimile, or forty-eight (48) hours after being deposited in the regular mail as certified or registered mail (airmail if sent internationally) with postage prepaid, addressed (a) if to the Holder, to the address of the Holder most recently furnished in writing to the Company and (b) if to the Company, to the address set forth below or subsequently modified by written notice to the Holder.
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12.1.
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If to Holder:
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to the address set forth on the signature page
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12.2.
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If to Company:
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RADA Electronics Industries
Ltd.
7 Giborei Israel St.. Netanya 4250407, Israel
Attention: Chief Executive Officer
Telephone No.: (972)-(9)- 892111
Facsimile No.: (972)-(9)- 8855885
Email: Zvika.alon@rada.com
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13.
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No Rights as Shareholder
.
The Holder shall not have any rights as a shareholder of the Company with regard to the Warrant Shares prior to the exercise of this Warrant, and then with respect to such Warrant Shares purchasable upon such exercise.
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14.
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No Fractional Interest
. No fractional shares will be issued in connection with any exercise hereunder, but in lieu of such fractional shares which would otherwise be issuable the number of shares shall rounded to the nearest whole number.
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15.
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Entire Agreement
. This Warrant constitutes the entire agreement between the parties hereto with regard to the subject matters hereof, and supercedes any prior communications, agreements and/or understandings between the parties hereto with regard to the subject matters hereof.
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16.
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Amendment or Waiver
. This Warrant may be amended only by a written instrument signed by the Company and the Holder. Any term of this Warrant may be waived only by an instrument in writing signed by the party against which enforcement of the waiver is sought.
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17.
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Successors
. All the covenants and provisions hereof by or for the benefit of the Holder shall bind and inure to the benefit of its respective successors and assigns hereunder.
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18.
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Governing Law; Jurisdiction
. This Warrant shall be governed by and construed in accordance with the laws of the State of Israel, without giving effect to principles of conflicts of law. The parties hereby submit any dispute arising under or in relation to this Warrant to the exclusive jurisdiction of the competent court for the District of Tel Aviv-Jaffa.
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19.
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Headings
. The headings in this Warrant are for purposes of reference only and shall not limit or otherwise affect the meaning of any provision of this Warrant.
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20.
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Counterparts
. This Warrant may be executed in one or more counterparts, all of which shall be considered one and the same agreement and shall become effective when one or more counterparts have been signed by each of the parties and delivered to the other party, it being understood that all parties need not sign the same counterpart and that signatures may be provided by facsimile transmission.
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RADA ELECTRONICS INDUSTRIES LTD.
By: ________________________________________
Name:
Title:
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DBSI INVESTMENTS LTD.
By: ________________________________________
Name:
Title:
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Address:
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Telephone No:
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Facsimile No.:
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With a mandatory copy to
:
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Meitar Liquornik Geva Leshem Tal
16 Abba Hillel Road Ramat Gan 52506 Israel
Attention: Asaf Harel, Advocate
Telephone No.: (972)-(3)-610-3100
Facsimile No.: (972)-(3)-6103-111
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To: RADA Electronics Industries Ltd.
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Date: [_______ __, 201_] |
______________________
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_________________________
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(Date)
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(Print Name)
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_________________________
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(Signature)
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1.
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I have reviewed this annual report on Form 20-F of RADA Electronic Industries Ltd.;
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2.
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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;
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3.
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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;
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4.
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The company's other certifying officer 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)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the company and have:
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(a)
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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;
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(b)
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Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
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(c)
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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
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(d)
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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
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5.
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The company's other certifying officer 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 function):
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(a)
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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
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(b)
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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.
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1.
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I have reviewed this annual report on Form 20-F of RADA Electronic Industries Ltd.;
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2.
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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;
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3.
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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;
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4.
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The company's other certifying officer 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)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the company and have:
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(a)
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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;
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(b)
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Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
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(c)
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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
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(d)
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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
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5.
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The company's other certifying officer 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 function):
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(a)
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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
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(b)
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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.
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By:
/s/Zvi Alon
*
Zvi Alon
Chief Executive Officer
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By:
/s/Shiri Lazarovich
*
Shiri Lazarovich
Chief Financial Officer
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