FILED: NEW YORK COUNTY CLERK 02/19/ :36 AM INDEX NO /2015 NYSCEF DOC. NO. 4 RECEIVED NYSCEF: 02/19/2015

Transcription

1 FILED: NEW YORK COUNTY CLERK 02/19/ :36 AM INDEX NO /2015 NYSCEF DOC. NO. 4 RECEIVED NYSCEF: 02/19/2015

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3 Translated from the Hebrew Sharf Translations Founders' Agreement Made and entered into on the 17 th of December 2009 By and Between: Aura Investments Ltd. Public Company No Of 72 Pinchas Rosen St., Tel Aviv (itself or through a related company) (hereinafter: "Aura") of the first part And: U-Trend Ltd. Whose temporary address for the purpose of this Agreement is: 94 Em Hamoshavot Street, Petach Tivka (hereinafter: "U-Trend") of the second part WHEREAS: the parties wish to purchase a real-estate asset which constitutes a residential building situated at 440 West 41 st Street, New York, NY (hereinafter: the "Asset") and to operate it as an apartment hotel, and to act as described in "Appendix A of the Engagement Agreement", attached herewith to th is Agreement as Appendix A; and WHEREAS: it has been agreed that the purchase shall be implemented through a joint company, which shall be set up in Luxembourg and which shall be held in equ al shares (Hospitality Suite International SA) (hereinafter: the " Joint Company") by a co mpany wholly-owned by Aura, and the P artnership as defined below, and w hich shall purchase, inter alia, the Asset through a co mpany which shall be registered in Delaware, USA, as an ordinary company, and it shall be 100%-owned by the Joint Company (US Suite Corporation) (hereinafter: the "Venture Company") and a project company which shall be registered as an LL C in Delaware USA (US Suite LLC) (hereinafter: the "Project Company"), which shall be set up jointly with Livorno Properties L LC or a related company or

4 2 another company controlled by Mr. Ben Zion Suky or any entity on his behalf (hereinafter: "Livorno") and in s uch a manner that the Venture Company shall hold 70% of the Project Company, whereas Livorno shall hold 30% of the Project Company; and WHEREAS: WHEREAS: WHEREAS: WHEREAS: Aura has engaged in a Memorandum of U nderstanding with Livorno in connection with the founding of the Project Co mpany, and the manner of management thereof, which is attached herewith to this Agreement as Appendix B and forms an integral part hereof; and Livorno has engaged in an agreement for the purchase of the Asset, which is attached herewith to this Agreement as Appendix C and forms an integral part hereof; and U-Trend is acting to r aise 10.5 million dollars from investors, who shall be incorporated in a foreign partnership (here inafter: the "Partnership"), of which U-Trend shall be appointed as the general partner; the Partnership shall invest in the Joint Company and in the Project Company, by way of loans, as described in this Agreement; and the parties wish to formalize the relationship between them inter se, and between them and the Joint Company, the manner of the management of the Joint Co mpany, the financi ng of the Joint Company's activities, and so on and so forth, including during the interim period up until the actual founding of the Joint Company, all as set forth in this Agreement below; The following has therefore been agr eed, declared and stipu lated between the parties: 1. The Joint Company and the Management Thereof: 1.1 The Joint Company shall b e set up by Aura, i n such a manner that Aura and the Partnership shall each hold 50% of the s hares of the company. Aura shall be entrusted with th e responsibility and the authority for the management of the day-to-day business of the Joint

5 3 Company, and in consideration of the full reimbursement of expenses, and of management fees as shall be agreed upon between the parties, subject to the instructions of the Board of Directors of the Company, at which each of the parties shall have a right to appoint an equal number of directors. 1.2 It is agreed that unless otherwise decided by U-Trend, the representatives of the Partnership on the Board of Directors of the Joint Company shall be Mr. Naftali Mandalovitz, and any person who shall be appointed by him. 1.3 The Joint Company shall submit to its shareholders audited annual financial statements and quarterly financial statements reviewed by the Joint Company's auditing firm. The financial statements of the Join t Company, both annual and quarterly, shall be stated in US dollars, and they shall be prepared in accordance with the International Financial Reporting Standards ("IFRS"), and also in accordance with all of the other accounting standardization rules as the Joint Company shall be so required pursuant to any law and as it shall require. 1.4 Aura shall be responsible for and shall perform all of the management and operation pertaining to and/or arising from this Agreement, including the management of the Project Company, subject to the resolutions of the Board of Directors. 2. Initial Financing: 2.1 U-Trend shall use its best endeavors to raise, through the Partnership, the initial financing as required in a total amount of $10,500,000 (ten million, five hundred thousand US dollars) (hereinafter: the "Total Loan Amount"), out of which: an amount of $2,000,000 (two million US dollars) shall be provided as a loan of the Partn ership, to the Joint Company, which shall invest it in the Project Company (this amount shall be invested in the Project Company in such manner and upon such terms and conditions as are identical to those of Livorno) (hereinafter: the "Loan to the Joint Company");

6 an amount of $8,500,000 (eight million, five hundred thousand US dollars) shall be provided as a loan to the Project Company (hereinafter: the "Loan to the Project Company"). Aura and Livorno shall use their best endeavors to raise the balance of the capital as required for the purchase of the As set, and for th e adjustment thereof, out of bank s ources. In the event that the Partnership fails to r aise the af orementioned amounts, it shall participate in the Proje ct Company pro rata to the agreed rate of its holding, and Aura shall use its best endeavors to raise the remainder of the investment from other entities. Should the capital required for the purchase of the Asset not require shareholders' equity in the sum of the Total Loan Amount, U-Trend's commitment shall be reduced in accordance with the reduced Total Loan Amount, without this constituting any modification of the rate of its holdings and/or of any right, ou t of U-Trend's rights as currently exist and/or as arise out of this Agreement. In such an event, or in the ev ent that U-Trend failed to raise the full sum of the Total Loan Amount, Aura shall be entitled to instruct the Partnership, in its discretion, as to which p art of the loan will be transferred as the Loan to the Joint Company, and which part of th e loan will be transferred as the Loan to the Project Company. 2.2 It is agreed between the parties that the Partnership shall be entitled to dollar-denominated interest on the Total Loan Amount, at a rate of 9% per annum, commencing from the expiration of 12 months after th e date of the Total Loan Amount, and up until the date of repayment of the Total Loan Amount or any part thereof (should t his be repaid in installments). The f irst payment of the interest shall be made at the expiration of the second year after the p rovision of the Total Loan Amount. It is agreed that in the event that the fin ancing shall be provided near the end of the calendar year, the calculation of th e interest shall be performed on a calendar basis for each year. 2.3 Given that, pursuant t o the agreements reached between Aura and Livorno, the loan to the Project Company shall bear interest at a rate of

7 5 11% per annu m, insofar as the interest which the Partnership shall receive from the Project Company shall exceed an amount equal to 9% per annum on the Total Loan Amount, then the Partnership shall transfer to Aura half of the difference that was paid to it in excess, and insofar as the interest which the Partnership shall r eceive from the Project Company shall be less than an amount equal to 9% per annum on the Total Loan Amount, then the Joint Company shall be liable to the Partnership for the amount of the difference which shall be paid to it from the Joint Company out of the initial funds distributable at the Joint Company. U-Trend has transferred, on behalf of the Partnership, through Aura, an a mount of 875 thousand dollars (hereinafter: the "Security"), which was deposited with a trust company for the purpose of the execution of the agreement for the purchase of th e Asset. The Security shall be returned to U-Trend, in its entirety, by Aura, in the event that by December 14, 2009, U-Trend shall give notice of its wish to cancel its participation. Should U-Trend not give notice of its wish to cancel its participation, and should the purchase be implemented, the Security shall be deemed to be an advance payment on account of U - Trend's loan. U-Trend confirms that it is aware that Aura and Livorno are conducting an examination of the Asset. Should it be decided by the parties not to go a head with the purchase, the Se curity shall be returned, in full, to U-Trend, immediately upon receipt of the money from the trust company. 3. Repayment of Shareholders' Loans, Payment of Interest, and Distribution of Dividends: It is agreed that out of the in itial excess amounts which shall exist at the Project Company after its op erating and management expenses, the Project Company shall pay the interest of 11% (on t he amount of the loan to the Project Company) to the Partnership; and thereafter, should th ere be any excess funds in t he Project Company, a dividend shall be paid, or a d ividend equivalent, in the amount of 11% on the investment of Livorno and the Joint Company, Pari-Paso [Translator's Note: apparent error in the original; should read "pari passu"]; and thereafter, the "principal" of th e Loan to th e Project Company shall be paid, and of the inv estments of Livorno and the Jo int Company, pro rata to the amounts of the "principal"; and only after repayment of the initial

8 6 investment and the interest in respect thereof, profits shall be withdrawn from the Project Company in accordance with the ratios of ownership thereof. Any change to this order of repayment shall be made solely with the approval o f the general partner of the Partnership. 4 The Grant of a PUT Option to the Partnership at the End of Four Years: 4.1 Should no Event of Exercise (as defined below) take place within four years from the date of purchase of the Asset, the Partnership is given a PUT option to sell to Aura all of its shares (together with any other right with respect to the Company, including the assignment of the shareholders' loans) or a ny part of its sh ares (together with th e proportionate share of an y other right with respect to the Company, including the assignment of the shareholders' loans) in consideration of shares of Aura Invest ments, according to the formula as set forth below: A/B = C A = B = The balance of th e shareholders' loan of U -Trend or t he pro rata part sold to Aura; The average price for th e share of Aura in tr ading on the Tel Aviv Stock Exchange in the three months which preceded the date of the sale, but not less than a rate of 500 linked to the index from the date of commencement of the investment; C = The total number of shares of Aura which shall be issued to U- Trend in consideration of shares of the J oint Company (together with any other right with respect to the Company, including the assignment of the shareholders' loans). 4.2 In this secti on 4, the term "Event of Exercise" means one of the following events: (a) the sale of the Joint Company or the sale of its assets; (b) th e merger of the Joint Co mpany or the Proje ct Company with another company; (c) a public offering of the Jo int Company or the Project Company; (d) the rep ayment of more than 75% of the balance of the Partnership's loans.

9 7 4.3 The option granted to U-Trend pursuant to this section 4 shall be exercisable commencing from the expiration of four years from the date of purchase of the Asset and up to 90 days thereafter. 5. The Grant of a PUT Op tion to the Partnership at the End of T wo Years (up to 25%): 5.1 Commencing from the expiration of t wo years after th e date of purchase of the Asset for a period of 90 days, the Partnership is hereby granted the option to sell to A ura up to 25% of its investment (for the entire quantity as the Partnership sh all decide at one t ime), in consideration of shares of Aura Investments, according to the formula as set forth below: A/B = C A = B = C = The part sold to Aura up t o one quarter of the loans and investments of the Partnership pursuant to this Agreement, after offsetting any benefit or repayment that was made according to the amount of the debt as appears in the books of the joint companies; NIS 5, linked to the Index from the date of the making of the investment; The total number of shares of Aura which shall be issued to the Partnership, in consideration of the pro rata share of their rights. 6. The Grant of a CALL Option to Aura at the En d of Two Years (up to 25%): 6.1 Commencing from the expiration of two years after the date of th e purchase of the Asset and up to the end of the fourth y ear, Aura is hereby granted the option to purchase up to 25% of the Partnership's rights pursuant to this Agreement in consideration of an amount equal to the pro rata share of the shareholders' loans which were provided by the Partnership, plus 20% per annu m, after offsetting any benefit or repayment that was made.

10 8 6.2 Such a purchase by Aura may be made in cash or in consideration of shares of Aura, in Aura's sole discretion. In the event that the payment for the purchase of shares of the Joint Company shall be made in shares of Aura, then the price of each share of Aura shall be calculated according to the average price of the share in trading on the Tel Aviv Stock Exchange in the three months preceding the date of the purchase. 7. Adjustment in the Event of a Sub-Division or Consolidation of Shares: The price of the Aura share for the purpose of sections 4, 5 and 6 above shall be adjusted in the event of a sub-division, consolidation or any other similar change to the shares of Aura Investments Ltd. 8. Condition Precedent: This Agreement is subject to the approval of the Board of Directors of Aura Investments Ltd. 9. Agreement in Favor of a Third Party Aura's obligations in this Agreement shall confer on the Partnership, once it shall be set up, th e right to demand same, and this Agreement shall apply thereto accordingly. 10. Jurisdiction: The exclusive jurisdiction in any matter pertaining to and/or arising from this Agreement shall rest with the competent courts in T el Aviv-Jaffa. This Agreement shall be governed solely by the laws of the State of Israel.

11 Translated from the Hebrew Sharf Translations In Witness Whereof The Parties Hereto Have Hereunto Set Their Hands: U-Trend Ltd. Aura Investments Ltd.

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