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| Share Name | Share Symbol | Market | Type | Share ISIN | Share Description |
|---|---|---|---|---|---|
| Technoplast | LSE:TNP | London | Ordinary Share | IL0005410118 | ORD ILS1.0 |
| Price Change | % Change | Share Price | Bid Price | Offer Price | High Price | Low Price | Open Price | Shares Traded | Last Trade | |
|---|---|---|---|---|---|---|---|---|---|---|
| 0.00 | 0.00% | 0.00 | - |
| Industry Sector | Turnover | Profit | EPS - Basic | PE Ratio | Market Cap |
|---|---|---|---|---|---|
| 0 | 0 | N/A | 0 |
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RNS Number:7451S
Technoplast Industries Ld
2 December 2003
REF: F:/Yohay/Technoplast_ImmediateReport03/SM/11/26/03
(TRANSLATED FROM THE HEBREW)
Tel Aviv, 30th November 2003
The London Stock Exchange
Company Announcements Section
Fax: 44-207-5886057
Dear Sirs,
RE: Technoplast Industries Ltd - Immediate report
Immediate report in accordance with the Securities (Private Offer of Securities
in a Listed Company) Regulations, 5760-2000, regarding the private placement of
145,613,968 ordinary shares without nominal value of the Company
Technoplast Industries Ltd (hereinafter referred to as "the Company")
respectfully notifies you, by way of a preliminary immediate report, in
accordance with the Securities (Private Offer of Securities in a Listed Company)
Regulations, 5760-2000 (hereinafter referred to as "Private Offer Regulations"),
of a private offer of the Company's ordinary shares, as follows:
1. Introduction
The Company announced, on 30 November 2003, to the Israel Securities
Authority (ISA) and to the Tel Aviv Stock Exchange (TASE), that on 31st August
2002 the Company's board of directors resolved to approve the Company entering
into an agreement for an allotment of about 75% of the Company's shares, on full
dilution, to Kidron Management & Holdings (1961) Ltd. (hereinafter referred to
as "Kidron"), in consideration for all the shares of Kidron Plastics Ltd
(hereinafter referred to as "Plastics"), a private company which is, subject to
completion of the transaction detailed below in this report, owned by Kidron
(65%) and Michael and Sigal Susz (35%), pursuant to and in accordance with the
following private offer.
On 12th September 2002 Messrs Michael Susz (Kidron's controlling
shareholder) and his wife - Sigal Susz - gave notice of the exercise of their
option to purchase, jointly, Plastics' shares that would constitute, after their
allotment, 35% of Plastics' issued and paid up share capital. The above option's
exercise is subject to and conditional upon completion of the transaction
pursuant to the allotment agreement, as defined below.
As a result of the above mentioned option's exercise, 65% of the
shares being allotted pursuant to the allotment agreement, as defined below,
will be allotted to Kidron, whilst 35% of the shares being allotted pursuant to
the allotment agreement will be allotted to Messrs Michael and Sigal Susz, and
against these shares Kidron and Michael and Sigal Susz will transfer 100% of
Plastics' shares to the Company.
Messrs. Michael and Sigal Susz have undertaken to sell a part of the
shares to be issued to them pursuant to this private placement to third parties
immediately subsequent to the closing, as defined in paragraph 4.7 below. For
details regarding this undertaking see paragraphs 14.4 and 14.5 below.
In addition, Kidron and/or Michael Susz were given the right to
themselves invest or to transfer to others the right to invest monies in the
Company, against the allotment of additional shares in the Company. This right
was given as aforesaid to Kidron and/or Michael Susz and it was not determined
in advance between Kidron and Michael how the right to invest the above
mentioned monies would be apportioned.
On 14th September 2003, the parties signed an amendment to the above
mentioned agreement (hereinafter referred to as "the first amendment").
On 13th November 2003 the parties signed a further amendment to the
above mentioned agreement (hereinafter referred to as "the second amendment").
The principal provisions, terms and conditions of the above
mentioned agreement, including the amendments thereto, are as detailed below in
this immediate report.
(The share allotment agreement executed between the parties on 31st
August 2003, including the appendices thereto, as amended in the first amendment
and the second amendment, is hereinafter referred to as "the allotment
agreement").
The private offer is an exceptional private offer as this term is
defined in the Private Offer Regulations and a material private offer as this
term is defined in the Companies Law, 5759-1999.
2. The Offerees
- The first offeree is Kidron Management & Holdings (1961) Ltd.
Kidron is a private company under the control of Mr
Michael Susz, 80% of whose issued and paid up capital is held by Trei Zuzei Ltd
(a private company, 99% of whose shares are held by Michael Susz), a further 10%
by Mr Michael Susz directly and the remaining 10% by Mr Yaakov Meidan. Kidron is
not an interested party or controlling shareholder in the Company on the date of
publishing this immediate report; however, he will become a controlling
shareholder in the Company after the completion of this private offer.
- The second and third offerees are Mr Michael Susz and Ms Sigal Susz.
Mr Michael Susz is a 49 year old business man, and an
Israeli citizen and resident. Ms Sigal Susz is Mr Michael Susz' wife. Michael
and Sigal Susz are not interested parties or controlling shareholders in the
Company on the date of this immediate report; however, they will become
controlling shareholders in the Company in consequence of the allotment of the
shares pursuant to this private offer.
- As mentioned above, in the allotment agreement, Kidron
and/or Michael Susz were given a right, that will remain valid until the date of
completing the share allotment transaction, to invest themselves and/or join to
the allotment agreement additional investors, who are not currently interested
parties in the Company, who will purchase shares in the Company for cash as set
forth in paragraphs 3.3 and 4.3 below (the above mentioned investors (including
Kidron and Michael Susz) are hereinafter referred to as "the additional
investors"). The names of the additional investors (save for Kidron and Michael
Susz) are not known to the Company on the date of publishing this immediate
report.
With regard to the date of the closing of the share allotment transaction,
see paragraph 4.7 below.
Completion of the share allotment transaction means the
fulfillment of all the suspensory conditions set forth below and the transfer of
all Plastics' shares to the Company, against the allotment of the Company's
shares to the offerees.
3. The Offered Securities
3.1 Kidron is being offered 76,180,966 ordinary shares without nominal
value of the Company constituting, after their allotment, 50.523% of the
Company's voting rights and share capital (48.78% of the Company's voting rights
and capital on full dilution).
3.2 Michael and Sigal Susz are being offered 41,020,520 shares without
nominal value of the Company, jointly, constituting, after their allotment,
27.205% of the Company's voting rights and issued and paid up share capital
(26.27% of the Company's voting rights and capital on a fully diluted basis).
For details regarding to Messrs. Michael and Sigal Susz undertaking to sell a
15,048,360 shares of the shares to be issued to them pursuant to this private
placement immediately subsequent to the closing, as defined in paragraph 4.7
below, see paragraphs 14.4 and 14.5 below.
3.3 In addition to that set forth in paragraph 3.2 above, in the allotment
agreement Kidron and/or Michael Susz were given a right that will remain valid
until the date of completing the share allotment transaction, to purchase up to
28,412,482 additional ordinary shares of the Company (hereinafter referred to as
"the option"). The option may be assigned to third parties. The option was given
to Kidron and/or Michael Susz without any determination in respect of the manner
of apportioning the right to invest monies as aforesaid between Kidron and
Michael Susz.
If the option is exercised in full, the additional investors will be
allotted an overall sum of up to 28,412,482 additional ordinary shares without
nominal value of the Company constituting, after their allotment, on the
assumption of full exercise of the right, 15.85% of the Company's voting rights
and issued and paid up share capital (15.393% of the Company's voting rights and
capital on full dilution).
In total, within the scope of this private offer, up to 145,613,968
ordinary shares without nominal value of the Company will be allotted.
3.4 On the date of publishing this immediate report, the Company's
authorized share capital includes ordinary shares without nominal value. The
Company's share capital included shares of NIS 1 n.v. but on 30th September 2003
the general meeting of the Company's shareholders resolved to convert all the
Company's ordinary shares of NIS 1 n.v. each into ordinary shares without
nominal value. All the rights attached to the ordinary shares of NIS 1 n.v. were
attached to the ordinary shares without nominal value, without exception.
3.5 The shares allotted pursuant to this private offer to Kidron and
Michael Susz and to the additional investors shall be listed for trade on the
Tel Aviv Stock Exchange and on the London Stock Exchange.
3.6 All taxes applicable, if applicable, to a purchaser of shares in
respect of the allotment of the above securities and/or the exercise and/or sale
thereof (save for stamps tax) shall be borne by the offerees alone.
4. The Main Points Of The Contract Of Which The Offer Forms Part
4.1 On 31st August 2003, and after the board of directors gave its
approval, the Company signed the allotment agreement pursuant whereto the
Company would allot Kidron shares of the Company constituting, after the
allotment, 75% of the Company's issued and paid up share capital and of all the
rights therein on full dilution (herein referred to as "allotment shares"), as
well as the shares in respect of the option's exercise, if exercised.
On 12th September 2003 Messrs Michael and Sigal Susz notified Kidron
that they were exercising their option by virtue of an agreement between them
and Kidron of 1st May 2002, as amended on 11th September 2003, for the joint
purchase of Plastics' shares constituting, after their transfer, 35% of
Plastics' issued and paid up capital, against Kidron's debt in a sum of US$
700,000 to Michael Susz. The said option's exercise is subject to and
conditional upon completion of the transaction the subject of the allotment
agreement and the allotment of the allotment shares pursuant to this private
offer. Since the consideration for the allotment shares pursuant to this private
offer is Plastics' full issued and paid up share capital, Michael and Sigal Susz
undertook to transfer to the Company Plastics' shares that are transferred to
them upon the above mentioned option's exercise, against 35% of the allotment
shares.
Since the notice of Messrs Michael and Sigal Susz was given after
the allotment agreement's execution, on 14th September 2003 the parties signed
the first amendment, in order to adapt the allotment agreement's provisions to
the above mentioned change. In addition, in the first amendment provisions were
added concerning the agreement between Plastics and Gav-Yam Bayside Land Corp.
(see paragraph 8.5 of this immediate report) and concerning the management
agreement to be executed between the Company and Kidron (see paragraph 4.9 of
this immediate report).
On 13 November 2003 the parties signed the second amendment. In the
second amendment, the parties agreed to postpone the allotment transaction's
completion date to 31st December 2003 and that each party could request that the
date be extended to 31st January 2004, such being at any time before 31st
December 2003. In addition, in the second amendment provisions were added
concerning the management agreement to be executed between the Company and
Kidron (see paragraph 4.9 of this immediate report), concerning the management
agreement between Plastics and Kidron (see paragraph 8.1 of this immediate
report) and concerning insurance of the Company's officers (see paragraph 4.18
of this immediate report).
On 27 November 2003 Messrs. Michael and Sigal Susz
notified the Company that they have undertaken to sell, immediately subsequent
to the closing (as defined below) 15,048,360 of the company's shares. For
details regarding this undertaking see paragraphs 14.4 and 14.5 below.
4.2 In consideration for the allotment shares, Kidron and Michael and
Sigal Susz will transfer to the Company's ownership all Plastics' issued and
paid up share capital. As aforesaid, Plastics is, subject to completion of the
transaction the subject of the investment agreement, under the ownership and
control of Kidron (65%) and Michael and Sigal Susz (35%).
As clarified above, Michael Susz holds, directly and through Trei
Zuzei Ltd (under its full ownership) 90% of Kidron's share capital.
Details of Plastics, its activity, business and the like are as set
forth in the profile annexed to this immediate report.
4.3 In addition, as detailed in paragraph 3.3 above, in the allotment
agreement Kidron and Michael Susz were given (without the apportionment between
them being determined in advance) a right that will remain valid until the date
of completing the share allotment transaction, to invest up to US$ 500,000 in
the Company in consideration for additional ordinary shares of the Company at a
price of US$ 0.0175979 per share, computed in accordance with the representative
rate of the US dollar known on the date of actual payment. If the option (as
defined in paragraph 3.3 above) is exercised, then immediately after the
transaction's completion, the offerees' holdings will be as set forth in
paragraph 5 below.
It is expressed that the Company's obligations vis-a-vis Kidron
pursuant to the allotment agreement will also be valid vis-a-vis Michael and
Sigal Susz and vis-a-vis the additional investors, if any, mutatis mutandis.
4.4 Within the scope of the allotment transaction's completion, the
currently existing management agreement between Plastics and Trei Zuzei Ltd (a
private company under the full control of Mr Michael Susz) will be assigned from
Trei Zuzei Ltd to the Company, such that the management fees stipulated in the
management agreement, in a sum of US$ 100,000 a year plus VAT, will be paid to
the Company, whilst the Company will provide Plastics will management and
consulting services including strategic planning, consultancy in the management
of currency risks and routine management assistance.
In addition, the above mentioned management agreement will be
amended, a clause being added thereto to the effect that the Company shall
charge Plastics for engineering services consultancy and provision and product
development expenses.
It is noted that the management agreement between Plastics and
K.D.M. Fiber Ltd, a private company 51% of whose issued and paid up capital is
held by Mr Max Kisos (and the balance by Daniela Kisos), pursuant whereto Mr Max
Kisos will serve as Plastics' MD until 31st December 2004 (for details of the
agreement, see paragraph 8.2(1) of the profile), and the management agreement
between Plastics and Kidron (for details of the agreement, see paragraph (D)(1)
of the profile) will continue to apply after the transaction's completion.
In addition, it is noted that the agreement between Plastics and
Kidron Trade & Agencies Ltd (for details of the agreement, see paragraph 16 of
the profile, which constitutes an integral part of this immediate report) will
remain valid and continue to apply also after completion of the share allotment
transaction.
4.5 The allotment agreement is conditional upon the fulfillment of the
following suspensory conditions:
4.5.1 that the Company has performed all its obligations pursuant to the
allotment agreement (see details of the principal obligations in paragraph 4.6
below);
4.5.2 that the Company's warranties in the allotment agreement (which are
as customary in this type of transaction) are correct and accurate on the date
of the allotment agreement's execution and on the completion date;
4.5.3 that Kidron has completed a due diligence examination, including a
legal and accounting examination, into the business of the Company and its
subsidiaries, to its full satisfaction;
4.5.4 that an arrangement has been reached between the Company and its
creditors (including the tax authorities, banks and suppliers), to Kidron's full
satisfaction.
Correct as at the date of publishing this immediate report, the
debt claims against the Company by its principal creditors are as follows:
by the banks: approx. 63,500,000 shekels;
by the tax authorities: in accordance with an assessing
officer's order for the 1998 tax year, the Company was called upon to pay a tax
supplement in a sum of NIS 9,000,000 (from December 1998) amounting, correct as
at 30th September 2003, to approx. NIS 11,800,000. The Company made a provision
for taxes in its books in respect of the said call in a sum of NIS 5,000,000.
The Company was also called upon to pay NIS 100,000 to the VAT
authorities in respect of 2002-2003 and NIS 250,000 as income tax deductions in
respect of 1999-2001;
by the suppliers: approx. NIS 10,100,000.
Kidron informed the Company, merely for indication purposes,
that in relation to the banks - the Company's large creditors, the arrangement
which Kidron is discussing with the banks, which might satisfy it, involves the
writing off and conversion to participation in profits (i.e. making repayment
conditional upon a profitability rate) of about NIS 20,000,000 to NIS
25,000,000, and the long-term rescheduling of part of the balance. It should be
clarified that no agreement has yet been signed with the banks and any
arrangement with them and/or other creditors is a suspensory condition of Kidron
alone and is in its exclusive discretion.
4.5.5 that the Company's articles have been replaced or amended with
effect from the completion date;
4.5.6 that approval has been obtained from those holding fixed charges
over the Company's unissued capital for the offered shares' allotment, i.e. Bank
Leumi Le-Israel Ltd, Bank Hapoalim Ltd, United Mizrahi Bank Ltd and Israel
Discount Bank Ltd.
4.5.7 that all the approvals legally necessary from the competent
authorities for the allotment agreement's performance have been obtained, i.e.
the approval of the Tel Aviv Stock Exchange Ltd and the London Stock Exchange
and the approval of the Director of Restrictive Trade Practices, either
unconditionally or subject to conditions to Kidron's full satisfaction;
4.5.8 that approval has been obtained from the Company's general meeting
for the allotment's performance;
4.5.9 that a pre-ruling has been obtained from the Israeli tax
authorities for a merger by way of a share swap pursuant to section 103T of the
Income Tax Ordinance;
4.5.10 that approval has been obtained from the Ministry of Industry and
Trade's Investment Center to the change in the Company's control;
4.5.11 that there has been no material change for the worse in the Company's
position relative to 30th June 2003;
4.5.12 that approval has been obtained from the holder of the charges over
Plastics' shares (Max Kisos, holder of a pledge over some of Plastics' shares
that are held by Kidron);
4.5.13 that approval has been obtained from the banks which provided
Plastics with credit for a change in the control thereof (if necessary);
4.5.14 that Kidron's guarantee for Plastics' obligations that was given in
favour of First International Bank of Israel Ltd has been released, without
prejudice to the credit facilities provided by the Bank to Plastics;
4.5.15 that Kidron has performed all the obligations which it was liable to
perform pursuant to the allotment agreement up to and including the completion
date, including: arranging for Plastics to manage its business solely in the
ordinary course of business; furnishing the Company with a certified copy of a
resolution by Plastics' board of directors, that has not been altered or
cancelled, for the transfer of Plastics' shares pursuant to this agreement, and
a notice signed by someone authorized on Plastics' behalf to the Registrar of
Companies regarding the shares' transfer; signing a share transfer deed in
favour of the Company in relation to Plastics' shares; furnishing the Company
with share certificates in the Company's name in relation to the shares being
purchased, duly signed by Plastics; furnishing the Company with a copy certified
by Plastics' secretary from Plastics' register of shareholders attesting to the
Company's registration as holder of Plastics' shares; furnishing the Company
with a certified copy of a resolution by Plastics' general meeting regarding the
cancellation of article 11 of Plastics' articles; endorsing the assignment of
the currently existing management agreement between Plastics and Trei Zuzei Ltd
to the Company, all as determined in a detailed text to the reasonable
satisfaction of Kidron and the Company;
4.5.16 that Kidron's above mentioned warranties which are included in the
allotment agreement are correct and accurate on the date of executing the
allotment agreement and on the completion date;
4.5.17 that Plastics' guarantee for the performance of the obligations of
Kidron Industrial Materials Ltd, which was given in favour of Investec (Israel)
Bank Ltd, has been removed;
4.5.18 that article 11 of Plastics' articles (pursuant whereto anyone
holding one quarter of Plastics' share capital is entitled to appoint one
director in respect of each quarter of Plastics' shares) has been cancelled;
4.5.19 that there has been no material change for the worse in Plastics'
positions relative to the date of the allotment agreement's execution.
The parties have undertaken to each other to cooperate, insofar as
reasonably necessary, in order to bring about the fulfillment of the above
suspensory conditions.
4.6 The Company's principal obligations pursuant to the allotment
agreement are as follows:
4.6.1 that the Company's warranties in the allotment agreement are
correct and valid on the completion date;
4.6.2 that the offered shares shall be allotted with them being paid up
in full, clean and free of any pledge, charge, attachment, levy, lien, claim,
right of pre-emption, right of refusal or other third party right, save for a
third party right as aforesaid originating in the offerees or any of them (if
existing), and listed for trade on the Tel Aviv Stock Exchange and the London
Stock Exchange;
4.6.3 the delivery to the offerees of valid confirmation by the Tel Aviv
Stock Exchange and the London Stock Exchange that the allotment shares are
approved to be listed for trade thereon, together with the Company's notice to
each of the above mentioned Stock Exchanges regarding the allotment shares'
allotment and payment of the registration fees for them to each Stock Exchange;
4.6.4 the delivery to the offerees of a certified copy of resolutions by
the Company's board of directors and/or general meeting, that have not been
altered or cancelled as at the completion date, passed in accordance with the
Company's articles and the law, to the effect that the Company and/or its
subsidiaries (as the case may be) approve, with effect from the allotment
agreement's execution and/or the completion date, as the case may be: signature
of the allotment agreement and execution of the transaction pursuant thereto;
the allotment shares' allotment; a change in the Company's articles to the text
of the new articles; the resignation of the directors and the appointment of
directors on behalf of the offerees; a change in the signatory rights in the
Company; and a change in the articles of Smart Storage Ltd (a subsidiary of the
Company) (if the Company has managed to alter them after making the maximum
effort to do so);
4.6.5 the delivery to the offerees of letters of resignation of all the
Company's directors, with effect from the completion date, save for the external
directors;
4.6.6 the Company and Kidron shall sign a management agreement as set
forth in paragraph 4.9 below;
4.6.7 the delivery to the offerees of an opinion by an English attorney
regarding the correctness of the Company's warranties in relation to the listing
of the allotment shares for trade on the London Stock Exchange, the propriety
and validity of the listing of the offered shares for trade on the London Stock
Exchange without trading restrictions, save as set forth in the opinion, and
that the listing of the Company's shares, including the offered shares, for
trade on the London Stock Exchange does not subject the Company or the offerees
to any English law, save for the London Stock Exchange's trading rules, and that
these trading rules do not impose any restriction on the Company or the offerees
save insofar as expressly set forth in the opinion, and all to the offerees'
reasonable satisfaction;
4.6.8 not to effect, in the period between the allotment agreement's
execution and the allotment transaction's completion, any changes in the
Company's capital, save pursuant to the allotment agreement and save for the
exercise of existing warrants; not to sell any asset or activity or assume any
obligations other than in the ordinary course of business; to refrain from any
act and/or omission that is not in accordance with the allotment agreement and
not to conduct any negotiations, make any offers or discuss approaches in
respect of acts and/or transactions as aforesaid and not to allow its employees
or any representative on its behalf to act as aforesaid, save, for the avoidance
of doubt, for acts and/or transactions in the ordinary course of business.
The Company undertook to inform the offerees of any approach to
it or anyone on its behalf regarding the Company's shares or assets during the
interim period;
4.6.9 to supply the offerees, during the period between the allotment
agreement's execution and the allotment transaction's completion, with all the
data and documents requested and to cooperate with them insofar as necessary so
that the offerees will be able to formulate a business plan for the Company and
advance the possibility of bringing in a strategic partner and/or investor into
the Company's activity and/or joining financial investors;
4.6.10 to manage its business, in the period between the allotment
agreement's execution and the allotment transaction's completion, solely in the
ordinary course of business and in such context: not to pass any resolution and
not to do any act save, for the avoidance of doubt, for acts and/or transactions
in the ordinary course of business and to maintain its fixed assets in customary
and reasonable manner. The Company undertook to notify the offerees in writing
regarding any event as aforesaid;
4.6.11 the Company undertook to do everything necessary in order that by
seven days prior to the completion date, the Company will have valid business
licenses, which may not be cancelled, for the purpose of its activity. If the
aforegoing does not transpire notwithstanding the Company's efforts, the Company
shall notify the offerees in writing of the specific reasons therefore, and of
the actions taken by the Company vis-a-vis the competent authorities, and the
offerees may choose to demand further action from the Company (subject to the
completion date) or that the completion take place notwithstanding the absence
of a business license that may not be cancelled. In any event, the Company shall
update the offerees of its progress in the interim period;
4.6.12 The Company undertook to prepare and furnish the offerees with a
trial balance as at 31st October 2003 as well as written details of any change
in this balance for the period from 31st October 2003 until the completion date;
4.6.13 the Company undertook to act in accordance with the provisions of
Part Five-Two of the Income Tax Ordinance, section 103T (hereinafter referred to
as "the provisions of the Ordinance"). Throughout the "requisite period" as
defined in Chapter Five-Two of the Income Tax Ordinance or any other period
determined by the tax authorities in the scope of granting any specific
pre-ruling in respect of the transaction the subject of this agreement, the
Company will not allow or execute any act or transaction that will prejudice a
tax exemption received by the offerees and/or the Company in connection with the
allotment shares' allotment.
The Company also undertook to agree, at the offerees' request,
to the necessary changes being effected in the structure of the transaction, so
that it would be executed in a manner conforming as much as possible with the
parties' original commercial object, provided that the Company would not be
obliged to agree to changes that would cause it material damage, including the
imposition of any material financial burden (including any change in the
consideration) in comparison to its position pursuant to the structure of the
original transaction;
4.6.14 to notify the offerees, in writing, of any meeting of the Company's
shareholders or board of directors or any of its committees, at least 48 hours
in advance, and to allow the offerees' representative to participate in the said
meetings as an observer and to furnish the offerees with a copy of the minutes
of the meetings and the resolutions passed thereat;
4.6.15 to fully cooperate with the offerees and to furnish them with all the
information and documents requested by them in the scope of the due diligence
examination.
4.7 According to the allotment agreement, all the suspensory conditions
must be fulfilled by the Closing date, defined as the first business day after
the passage of seven business days from the fulfillment of all the suspensory
conditions detailed in paragraph 4.5 above (or the waiver thereof by the
relevant party). The second amendment stipulates that the Closing shall take
place by 31 December 2003 and that each party shall be entitled to demand, at
any time prior to 31 December 2003, the postponement of the Closing until 31
January 2004 (hereinafter referred to as "the Closing"). If the transaction is
not completed by the Closing, the allotment agreement will be cancelled.
Notwithstanding the aforegoing, if the allotment transaction is not
completed due to the non-fulfillment of a suspensory condition or the
non-performance of an obligation that was under the control of either of the
parties, or for which one of them was liable, the other party may call for an
extension of the above mentioned date until the fulfillment of such condition or
performance of such obligation, but, without derogating from the provisions of
any law, to no later than 31st January 2004.
4.8 Shortly before the transaction commencement date, the Company's
directors, save for the external directors, shall resign, their resignation
being valid as of the completion date, and the place of the resigning directors
being taken by directors appointed by Kidron.
In addition, all the directors appointed by the Company as directors
on its behalf in other companies shall resign, their place being taken by
directors appointed by Kidron.
4.9 As part of the allotment agreement, the Company and Kidron shall sign
a management agreement in a form of wording to the parties' reasonable
satisfaction in accordance with the following principles: Kidron shall provide
the Company with business management services, including executive chairman
services, consultations on development matters and business promotion, strategic
consultancy and assistance in the management of the Company's contacts with the
principal banks financing its activity. Kidron's intention is that Mr Michael
Susz will serve as executive chairman, even though there is no undertaking that
Mr Susz will serve as executive chairman for the entire term of the agreement.
In consideration, Kidron shall receive management fees in a sum of US$ 10,000 a
month. In addition, if the Company's profits before interest, tax and
depreciation (EBITDA) pursuant to its consolidated annual statements exceed NIS
3,000,000, Kidron shall be entitled to an aggregate annual bonus as follows:
- on a profit before interest, tax and depreciation (EBITDA)
in a sum of up to NIS 5,000,000, Kidron shall be entitled to 2% of the EBITDA;
- on a profit before interest, tax and depreciation (EBITDA)
in a sum of NIS 5,000,000 to NIS 7,000,000, Kidron shall be entitled to 3% of
the EBITDA above NIS 5,000,000;
- on a profit before interest, tax and depreciation in a sum
of NIS 7,000,000 to NIS 9,000,000, Kidron shall be entitled to 4% of the EBITDA
above NIS 7,000,000;
- on a profit before interest, tax and depreciation in a sum
of more than NIS 9,000,000, Kidron shall be entitled to 5% of the EBITDA above
NIS 9,000,000.
In the event that the allotment transaction is completed in the
middle of a calendar year, the above bonus will be computed and paid, in respect
of the first year, pro rata to that part of the year in which the management
agreement entered into force.
In the said management agreement, it was provided that the Company
will participate in the costs of maintaining Kidron's offices, including all the
costs paid by Kidron in connection with the maintenance of its offices at such
time, in the ratio which the area of the offices designated for the provision of
services to the Company bears in relation to the entire area of Kidron's
offices. In addition, the Company will pay Kidron a proportional part of
Kidron's secretarial, facsimile, telephone, photocopying, computer and
bookkeeping costs. In the second amendment, it was provided that in any event,
the Company's contribution towards Kidron's said costs will not exceed NIS
300,000 per annum, linked to the representative rate of the dollar.
4.10 The transaction the subject of the allotment agreement is being
executed through a merger by way of a share swap pursuant to the provisions of
Part Five-Two of the Income Tax Ordinance, section 103T (hereinafter referred to
as "the provisions of the Ordinance"). The parties have undertaken to each other
to act in accordance with the provisions of the Ordinance, and in particular
that throughout the "requisite period" as defined in Chapter Five-Two of the
Ordinance or any other period determined by the tax authorities in the scope of
granting any specific pre-ruling in respect of the transaction the subject of
this agreement, the Company will not allow or execute any act or transaction
that will prejudice a tax exemption received by the offerees and/or the Company
in connection with the allotment shares' allotment.
With regard to the undertaking by I.I. Patishi Investments
Ltd (a private company fully owned by Mr Itamar Patishi, active chairman of the
Company's board of directors, and his wife) not to do any act or execute any
transaction that will prejudice a tax exemption received by the offerees and/or
the Company in the framework of the merger, see paragraph 14.1(e) below.
With regard to the undertaking of Orlite Industries (1959) Ltd to
refrain from any change in rights within the meaning thereof in Part Five-Two of
the Income Tax Ordinance, see paragraph 14.2(e) below.
4.11 In the scope of the allotment agreement, the Company undertook that if
it breaches any of its obligations or any of its warranties as a result of which
the share allotment transaction is not completed, the Company shall pay Kidron
agreed damages in a sum of US$ 250,000.
4.12 The Company also undertook that if it breaches any of its warranties
after the transaction completion date, or if Kidron learns thereof after the
transaction completion date, the Company will indemnify Kidron in respect of the
losses, damages, liabilities and expenses (in money or money's equivalent)
occasioned to the Company in connection with the event the subject of the breach
(hereinafter referred to as "the damage to the Company") in an amount equal to
the damage to the Company multiplied by the rate of the offeree's holdings in
the Company on the date of the event the subject of the breach (hereinafter
referred to as "the amount of the damage"). If the breach is in connection with
the allotment shares, the Company shall indemnify Kidron in respect of all the
losses, damages, liabilities and expenses (in money or money's equivalent)
occasioned to Kidron.
Kidron's right to indemnity as aforesaid is subject to Kidron giving
the Company notice of breach regarding the cause of the indemnity within one
year of the completion date (hereinafter referred to as "the time limit").
Kidron shall be entitled to indemnity in respect of any cause included in notice
as aforesaid that is given within the time limit, even if the full amount of the
damage is only learned at a later date.
Notwithstanding the aforegoing, the time limit shall not apply in
respect of breaches of warranties by the Company in connection with its
incorporation and registration, warranties in connection with the allotment
shares, warranties in connection with the Company's employees and warranties of
the Company in connection with compulsory payments.
Kidron shall not be entitled to indemnity where the amount of the
damage to the Company is less than an aggregate sum of NIS 500,000. For the
avoidance of doubt, it is expressed that if the damage to the Company exceeds
NIS 500,000, Kidron shall be entitled to indemnity only in respect of the amount
of the damage due to it in respect of the damage to the Company exceeding the
said sum.
The overall indemnity amount shall be limited to a sum of US$
2,100,000, which constitutes Plastics' value for the purposes of the allotment
transaction, computed in accordance with the representative rate of the US
dollar published by Bank of Israel and known on the payment date.
The said indemnity limits (time and amounts) shall not apply in the
event of an intentional act or omission of the Company.
Kidron shall be entitled to receive, at its request, indemnity by
way of an allotment of shares of Plastics, in a percentage of all Plastics'
issued shares, the means of control therein, the rights in its assets on winding
up and the right to receive dividends, on full dilution, with them being paid up
in full and free of any debt, charge, pledge, attachment or third party right,
equal to the lot obtained by dividing the amount of the damage, less NIS 500,000
(insofar as this indemnity limit applies to the specific indemnity case) by
Plastics' value for the purposes of the allotment transaction (US$ 2,100,000).
It is noted that Plastics has signed an undertaking vis-a-vis Kidron for the
said shares' allotment.
4.13 The Company shall be entitled to indemnity from Kidron if Kidron
breaches any of its warranties pursuant to the agreement for the acquisition of
Plastics, where the breach is committed after the completion date or the Company
learns thereof after the completion date, in respect of the losses, damages,
liabilities and expenses (in money or money's equivalent) caused to Plastics in
connection with the event the subject of the breach, in an amount equal to the
damage to Plastics multiplied by the Company's percentage holdings in Plastics
on the date of the event the subject of the breach.
The Company's right to indemnity as aforesaid is subject to the
Company giving Kidron notice of breach regarding the cause of the indemnity
within one year of the completion date (hereinafter referred to as "the time
limit"). The Company shall be entitled to indemnity in respect of any cause
included in notice as aforesaid that is given within the time limit, even if the
full amount of the damage is only learned at a later date.
Notwithstanding the aforegoing, the time limit shall not apply in
respect of breaches of warranties by Kidron in connection with Plastics'
incorporation and share capital, warranties in connection with Plastics'
employees and warranties in connection with its compulsory payments.
The Company shall not be entitled to indemnity where the amount of
the damage to Plastics is less than an aggregate sum of NIS 250,000. For the
avoidance of doubt, it is expressed that if the damage to Plastics exceeds NIS
250,000, the Company shall be entitled to indemnity only in respect of the
amount of the damage due to it in respect of the damage to Plastics exceeding
the said sum.
The overall indemnity amount shall be limited to a sum of US$
487,500, constituting the value of the offerees' holdings in the Company, based
on the Company's value as determined in the valuation annexed to this immediate
report, computed in accordance with the representative rate of the US dollar
published by Bank of Israel and known on the payment date.
The said indemnity limits (time and amounts) shall not apply in the
event of an intentional act or omission of Kidron.
4.14 Any differences of opinion or disputes arising in connection with the
allotment agreement shall be decided in arbitration proceedings before Mr Yossi
Bachar, CPA. If Mr Yossi Bachar, CPA is unable or does not agree to serve as
arbitrator, Mr Yossi Pilus, CPA shall be appointed. If Mr Yossi Pilus, CPA is
unable or does not agree to serve as arbitrator, Yaheli Shefi, CPA shall be
appointed. If Yaheli Shefi, CPA is unable or does not agree to serve as
arbitrator, another arbitrator shall be appointed by agreement between the
parties. In the absence of agreement, the arbitrator (who shall be a well-known
CPA) shall be appointed by the President of the Manufacturers' Association.
The arbitration shall take place in accordance with the Arbitration
Law and shall be governed by the substantive Israeli law. The arbitrator shall
be subject to the substantive Israeli law, shall keep minutes of the discussions
and shall give grounds for his decision.
Notwithstanding the aforegoing, in any matter relating to assessment
of the amount of the damage and assessment of the damage to the Company, the
arbitrator shall act as expert and not as arbitrator and his decision shall bind
the parties finally and absolutely as an expert's decision.
4.15 At Kidron's request, on the date of completing the share allotment
transaction, the Company shall guarantee Plastics' obligations pursuant to the
tenancy agreement between it and Gav Yam Bayside Land Corp. Ltd (hereinafter
referred to as "Gav Yam"), directly or indirectly vis-a-vis the current
guarantors - Kidron and Max Kisos (for details of the tenancy agreement, see
paragraph 16 of the profile, which constitutes an integral part of this
immediate report).
4.16 Kidron has informed the Company that it is conducting negotiations
with Keter Plastics Ltd, for a joint venture between the Company and Keter
Plastics Ltd in the plastic products' sphere through the joint operation of the
Company's injection activity, exploiting inputs contributed by the parties as
agreed (such as making available Keter Plastics Ltd's abilities in the plastics
sphere and promoting sub-contracting works by it, on the one hand, and making
available the Company's manufacturing ability, on the other hand, in favor of a
joint entity to be established), after the transaction's completion. Any
transaction with Keter Plastics Ltd shall be subject to the approvals required
at law.
The parties have reached understandings in principle between them;
however, the details of the transaction have not yet been agreed.
4.17 The approval of the general meeting of the Company's shareholders for
this private allotment shall also constitute the general meeting's approval of
all the agreements between the Company and Kidron which are mentioned in this
immediate report, including the management agreement between Kidron and the
Company (paragraph 4.9 above).
4.18 Kidron undertook to arrange, subject to any law, for the Company to
insure those officers serving in the Company immediately before the completion
date (as defined in paragraph 4.7 above) (hereinafter referred to as "the
outgoing officers"), as of the completion date and for seven years thereafter,
within the scope of the routine insurance of the Company's officers, on terms
similar to those on which they are currently insured, or on the terms on which
the officers serving in the Company at such time are insured (at the Company's
election), in respect of the activity of the Company's outgoing officers prior
to the completion date, and in such context that the Company will act to the
best of its ability so that the said insurance would be without the addition of
significant costs. In any event, if the said insurance involves extra costs to
the Company over and beyond the insurance costs it would have paid were it not
for the additional insurance for the outgoing officers, the Company may make the
purchase thereof subject to payment of the said extra costs by the outgoing
officers or any of them. Officers' insurance as set forth above shall be brought
for the approval of the general meeting of the Company's shareholders within the
framework of the general meeting convened for the purpose of approving the
transaction the subject of this immediate report.
5. Issued And Paid Up Share Capital
The Company's issued and paid up share capital on the date of
publishing this immediate report amounts to NIS 33,583,691, divided into
33,583,691 ordinary shares without nominal value. After the completion of this
private offer, the Company's capital will amount to 150,785,177 ordinary shares
without nominal value, if the right to make an additional investment pursuant to
paragraph 3.3 above is not exercised. If the right to make an additional
investment pursuant to paragraph 3.3 above is exercised in full, the Company's
capital, after completion of the private offer, will amount to 179,197,659
ordinary shares without nominal value.
The holdings of the offerees, the Company's interested parties and
the public (on the assumption that the right mentioned in paragraph 3.3 above is
not exercised) will be as follows:
Name No. of ordinary No. of shares Percentage capital and voting
shares without offered pursuant
nominal value hereto
prior to the
private offer
Before the After the On a fully
allotment allotment of diluted
pursuant the no. of basis(1)
hereto shares
offered
pursuant
hereto
A. The offerees
Kidron - 76,180,966 -- 50.523% 48.78%
Michael and Sigal Susz (6) - 41,020,520 -- 27.205% 26.27%
B. Interested parties
Orlite Industries (1959)
Ltd (2) 9,721,878 - 28.948% 6.448% 6.419%
I.0. Patishi Investments Ltd 8,168,800 - 24.324% 5.418% 5.906%(3)
Shlomo Tisser(4) 2,092,726 - 6.231% 1.388% 1.34%
Zion Tayar(4) 1,965,000 - 5.851% 1.303% 1.258%
Dekel Hagalil Ltd(5) (4) 156,250 - 0.465% 0.104% 1.605%
C. Public 11,479,037 - 34.180% 7.613% 8.426%
The holdings of the offerees, the Company's interested parties and
the public (on the assumption that the right mentioned in paragraph 3.3 above is
assigned to additional investors and exercised in full) will be as follows:
Name No. of ordinary No. of shares Percentage capital and voting
shares without offered pursuant
nominal value hereto
prior to the
private offer
Before the After the On a fully
allotment allotment of diluted
pursuant the no. of basis(1)
hereto shares
offered
pursuant
hereto
A. The offerees
Kidron - 76,180,966 -- 42.512% 41.27%
Michael and Sigal Susz (6) - 41,020,520 -- 22.891% 22.22%
Additional investors - 28,412,482 -- 15.855% 15.393%
B. Interested parties
Orlite Industries (1959) 9,721,878 - 28.948% 5.425% 5.423%
Ltd (2)
I.O. Patishi Investments Ltd 8,168,800 - 24.324% 4.559% 4.99%(3)
Shlomo Tisser(4) 2,092,726 - 6.231% 1.168% 1.133%
Zion Tayar(4) 1,965,000 - 5.851% 1.096% 1.064%
Dekel Hagalil Ltd(5)(4) 156,250 - 0.465% 0.087% 1.358%
C. Public 11,479,037 - 34.180% 6.406% 7.128%
Notes to the tables
(1) On the assumption of the exercise of (1) 1,430,000 warrants
exercisable into 1,430,000 ordinary shares without nominal value that were
allotted to 33 of the Company's employees in accordance with the Company's
immediate report of 12th January 2000; (2) 250,000 warrants exercisable into
250,000 ordinary shares without nominal value held by the Company's former MD,
Mr Yos Shiran, in accordance with the Company's immediate report of 24th
February 2000 (in light of the fact that Mr Shiran left his position on 1st
January 2001, he will only be entitled to 250,000 warrants, as set forth in
paragraphs 3.4 and 3.5 of the Company's immediate report of 24th February 2000);
(3) 1,054,163 warrants exercisable into 1,054,163 ordinary shares without
nominal value held by Mr Itamar Patishi in accordance with the Company's
immediate report of 7th September 2001 and of 27 November 2003; (4) on the
assumption of the exercise of 303,471 warrants exercisable into 303,471 ordinary
shares without nominal value held by Orlite Industries (1959) Ltd in accordance
with the Company's immediate report of 7th September 2001 and of 15th July 2002;
(5) 2,350,000 warrants exercisable into 2,350,000 ordinary shares without
nominal value held by the Company's MD, Mr Daniel Stern, through a company under
his full control in accordance with the Company's immediate report of 13th June
2003. On 25 November 2003 it was agreed with Mr. Daniel Stern that Mr. Stern
will resign from his office with the Company by the later of 15 December 2003 or
the date of the Closing. In such an event Dekel Hagalil Ltd. shall remain with a
holding of 881,250 warrants and the remainder of the warrants issued to Dekel
Hagalil Ltd. shall expire. With the exception of the expiration of the warrants,
Mr. Sterns' resignation from office shall not effect any of Mr. Sterns's and/or
Dekel Hagalil Ltd.'s rights pursuant to the agreement between them and the
Company.
(2) Pursuant to the resolution of the Company's board of directors of
27th April 2003, Orlite Industries (1959) Ltd has a pre-emptive right in all
private offers of the Company's securities, including convertible securities,
which the Company wishes to make, on the terms prescribed by the Company's board
of directors when the time comes, for all the offerees in any private offer as
aforesaid, and all provided that the number of securities which Orlite shall be
entitled to purchase in the said private offer shall not exceed, in respect of
any class of offered securities, Orlite's percentage holdings of the Company's
issued and paid up share capital on the determining date of the relevant private
offer.
The Company's undertaking to Orlite as aforesaid is irrevocable;
however, it may not be transferred. The Company's undertaking as aforesaid shall
not prevent the Company from also making an offer, when the time comes, to all
or any of the Company's other shareholders on the date of the private offers to
take part in the said private offers, on the same terms offered to Orlite and
pro rata to the holdings of all the offerees in the Company's issued and paid up
share capital on the determining date of the relevant private offers. See
paragraph 12.2(b) of this immediate report regarding Orlite's waiver of its
pre-emptive right in connection with the transaction the subject of the
allotment agreement.
(3) Including 1,054,163 warrants held by Mr Itamar Patishi - see note (1)
above.
(4) After the private offer, they will not be interested parties in the
Company.
(5) A company fully owned by the Company's general manager, Mr Daniel
Stern. See note (1) above. Subsequent to Mr. Stern's resignation from his office
as the Company's general manager as detailed in note (1) above, Dekel Hagalil
Ltd. shall cease to be an interested party in the Company. Dekel Hagalil Ltd.'s
subsequent to the issuance of shares according to this private placement shall
be as specified in the tables above. Dekel Hagalil Ltd.'s holdings of the
Company's shares on a fully diluted basis subsequent to the issuance
contemplated herein and subsequent to the expiration of the as detailed in note
(1) above shall be 0.67% if the right mentioned in paragraph 3.3 above is not
exercised and 0.567% if the right mentioned in paragraph 3.3 above is exercised.
(6) For details regarding Messrs. Michael and Sigal Susz undertaking to
sell 15,048,360 of the shares issued to them see paragraphs 14.4 and 14.5 below.
Correct as at the date of this immediate report, and save for the
aforegoing, the Company does not have any convertible securities exercisable
into ordinary shares of the Company.
6. A Company In Difficulties
The Company is a company in difficulties.
In the accountants' review annexed to the Company's financial
statements as at 30th June 2003, an observation was added to the effect that
there is apprehension regarding the Company's continued activity as a going
concern.
The Company has commenced a recovery plan and the private offer the
subject of this immediate report is aimed at the Company's recovery, both by
transferring shares of Plastics, which is a profitable company, and by raising
monies from the additional investors (if the option is exercised), as set forth
in paragraphs 3.3 and 4.3 above.
Subsequent to the issuance of shares pursuant to this private
placement, the publics holding in the Company's share capital shall drop to
below 15% (but not less than 10%). The Company intends procuring that the
public's holdings of its issued share capital, after the allotment the subject
of this immediate report, will not be less than 15%, by having I.O. Patishi
Investments Ltd deposit 659,000 of the Company's shares held by it with a
trustee. Such trustee shall sell the deposited shares on the open market and
shall transfer the consideration received to I.O. Patishi Holdings Ltd. It is
expressly stated that excluding the consideration received as a result of the
sale of the deposited shares by the trustee, I.O. Patishi shall not be entitled
to any other or additional consideration with respect to the deposited shares.
The Trustee shall be Robert Yohay, Adv. (hereinafter referred to as "the
Trustee").
The Trustee has received instructions to sell the deposited shares
at his sole discretion and to sell the shares from the Closing date and until a
date which is 6 months after the Closing date. During such period I.O. Patishi
Investments Ltd and the Trustee shall refrain from voting in any of the
Company's general meetings with respect to the deposited shares.
In light of the aforegoing in this paragraph, the Company is
entitled to be governed by the alleviating terms and conditions prescribed in
section 3(b) of the Stock Exchange Guidelines pursuant to Chapter Twelve of the
Tel Aviv Stock Exchange Ltd's Rules, i.e. that after the allotment of the shares
pursuant to this private offer, the public's holdings will not be less than 10%
of the Company's issued share capital, provided that arrangements are made, to
the satisfaction of the Tel-Aviv Stock Exchanges board of directors, for the
publics holdings to increase to 15% or more of the Company's share capital.
7. The Consideration For The Offered Securities
In consideration for the allotment shares' allotment pursuant to
this private offer, Kidron, Michael and Sigal Susz shall transfer to Technoplast
100% of Plastics' shares.
The details relating to Plastics' activity as finding expression in
the financial statements, as of 1st January 2001 until shortly before the date
of this report, are set forth in the profile annexed to this immediate report.
The Company will also receive, in the event of full exercise of the
option by the additional investors, a sum in cash of US$ 500,000 (computed in
accordance with the representative rate of the US dollar on the payment date),
against 15.385% of the Company's issued and paid up share capital on full
dilution and after the allotment shares' allotment. The said amount reflects a
market value for the Company of about NIS 14,500,000 after the option's
exercise.
8. Details Of Agreements With Interested Parties
There are a number of agreements between Kidron and its related
companies and/or interested parties in Kidron and/or its related companies that
will remain in force after the allotment transaction's completion and/or in
which the Company replaces Kidron and/or new agreements between the Company and
Kidron, as follows:
8.1 A management agreement between Plastics and Kidron. In this agreement,
it was provided that Plastics will receive consultancy, management and office
services from Kidron. In the second amendment it was provided that the annual
management and consultancy fees would be $ 100,000 a year plus VAT and that in
consideration for the office services, Plastics would be charged a sum not
exceeding NIS 250,000 a year linked to the dollar rate. For further details of
this agreement, see paragraph (D)(1) of the profile, which constitutes an
integral part of this immediate report.
8.2 A management agreement to be executed between Kidron and the Company,
as detailed in paragraph 4.9 of this immediate report. The management fees that
shall be paid pursuant to the management agreement will be in a sum of US$
120,000 a year and in addition, if the Company's profits before interest, tax
and depreciation according to its consolidated annual statements exceed NIS
3,000,000, an aggregate annual bonus shall be paid as detailed in paragraph 4.9
above. The management agreement to be executed shall include a provision to the
effect that the Company will contribute towards the costs of maintaining
Kidron's offices in a sum not exceeding NIS 300,000 a year linked to the
representative rate of the US dollar.
8.3 A management agreement between Plastics and Trei Zuzei Ltd (a company
under the control of Michael Susz). This agreement will be assigned, in the
framework of completing the share allotment transaction, from Trei Zuzei to the
Company. The consideration for the services provided by Trei Zuzei pursuant to
the agreement is in a sum of US$ 100,000 a year plus due VAT. The agreement will
remain in force until 31st December 2004. For details of this agreement, see
paragraph (D)(2) of the profile, which constitutes an integral part of this
immediate report.
8.4 An agreement between Plastics and KDM Fiber Ltd. In the second
amendment, at the investor's request, the Company agreed to act, after the
completion date, to replace Kidron's guarantee for Plastics' undertakings to
effect some of the payments due to KDM Fiber Ltd under the management agreement
between Plastics and KDM Fiber Ltd of 1st January 2001, to KDM Fiber Ltd's
satisfaction. The above mentioned guarantee is to secure payment of a sum of US$
3,127 a month to KDM Fiber Ltd up to the end of the term of the agreement, i.e.
until 31st December 2004. The amount of the guarantee, correct as at the date of
this immediate report, is US$ 40,651. The above mentioned agreement and/or the
guarantee's replacement shall be approved by the general meeting of the
Company's shareholders in the scope of the meeting convened for the purpose of
approving the transaction the subject of this immediate report. Apart from
obtaining the general meeting's approval, there is no need to obtain any further
approval for this agreement and/or the replacement of the guarantee as
aforesaid.
For details of this agreement, see paragraph 8.2(1) of the profile,
which constitutes an integral part of this immediate report.
8.5 An agreement between Plastics and Kidron Trade & Agencies Ltd. For
details of this agreement, see paragraph 16 of the profile, which constitutes an
integral part of this immediate report. The consideration that shall be paid by
Kidron Trade pursuant to this agreement shall not be less than NIS 45,000 a
quarter.
8.6 A tenancy agreement between Plastics and Gav-Yam Bayside Land Corp.
Ltd. Max Kisos and Kidron gave a guarantee to secure the performance of
Plastics' obligations pursuant to this agreement. In the first amendment, it was
provided that on the allotment transaction's completion date, the Company would
step into the shoes of Max Kisos and Kidron regarding the above mentioned
guarantee and that if Gav Yam Bayside Land Corp. Ltd refused to assign the
guarantee as aforesaid, the Company would guarantee Kidron and Max Kisos on a
back to back basis. For details of this agreement, see paragraph 19 of the
profile, which constitutes an integral part of this immediate report. The rent
in respect of the above mentioned tenancy is about NIS 19,000 a month.
8.7 Kidron's guarantee in favor of First International Bank of Israel Ltd
to secure Plastics' debts and obligations to it. The removal of this guarantee,
without prejudicing the credit facilities provided by the said bank to Plastics,
constitutes a suspensory condition for the transaction the subject of this
immediate report. For details of this guarantee, see paragraph (D)(3) of the
profile, which constitutes an integral part of this immediate report.
9. The Way In Which The Consideration Was Determined
The consideration in this share swap transaction was determined in
accordance with a valuation of Plastics and of the Company that was carried out
by Kesselman Consulting Price Waterhouse Coopers Ltd (hereinafter referred to as
"Kesselman"), pursuant whereto Plastics' equity as at 31st July 2003 was valued
at between NIS 8,000,000 (cash flow capitalization method) and NIS 11,000,000
(price earnings ratio method), whilst the Company's equity as at 31st July 2003
was valued at between NIS 6,000,000 (cash flow capitalization method according
to an optimistic scenario) and NIS 0 (price earnings ratio method according to a
pessimistic scenario).
Having regard to the fact that carrying out a valuation is not an
exact science, Kesselman chose a value in the middle of the above mentioned
ranges as the representative value for each of the companies, and accordingly
Plastics' equity as at 31st July 2003 was valued at NIS 9,500,000 and the
Company's value as at 31st July 2003 was put at NIS 3,000,000. It is noted that
in the scope of the valuation two possible future scenarios were applied, the
expected value pursuant to both the scenarios also leading to a value situated
in the middle of the valuation range.
In light of the results of the above mentioned valuations, Kesselman
determined that the merger ratio pursuant whereto Kidron's percentage holdings
in the Company is 75% of the Company's issued and paid up capital on full
dilution (after the merger transaction) is a reasonable and fair merger ratio
from the perspective of the Company's shareholders.
It should also be noted that also pursuant to the option exercised
by Messrs Michael and Sigal Susz to purchase 35% of Plastics' issued and paid up
share capital against a debt of approx. US$ 700,000, Plastics' value comes to
approx. US$ 2,000,000 (approx. NIS 8,900,000).
It should further be noted that Plastics' value according to
Kesselman also accords with its value as determined between Kidron and Mr Max
Kisos on 1st January 2001 for the purposes of the purchase of Mr Max Kisos'
shares in Plastics by Kidron (see paragraph 24.2 of the profile regarding the
above mentioned agreement).
The valuations are annexed to this immediate report.
10. Personal Interest In Consideration
To the best of the Company's knowledge, there are no material
shareholders and/or officers in the Company with a personal interest in the
consideration received.
11. The Share Price On The Tel Aviv Stock Exchange
The average price of the share in the six months preceding the
publication of this report was NIS 0.2426.
The closing price of the share on the Tel Aviv Stock Exchange on the
trading day prior to the passing of the board of directors' resolution regarding
the approval of this private offer (28th August 2003) was NIS 0.2690.
The closing price of the share on the Tel Aviv Stock Exchange on the
trading day preceding the publication of this immediate report (27 November
2003) was NIS 0.2.
According to the closing price of the share on the Tel Aviv Stock
Exchange on the trading day preceding the publication of this immediate report,
the Company's market value was about NIS 6,717,000.
According to the closing price of the share on the Tel Aviv Stock
Exchange on the trading day preceding the passing of the board of directors'
resolution, the Company's market value was about NIS 9,000,000.
According to the average price of the share on the Tel Aviv Stock
Exchange in the six months preceding the date of publishing this immediate
report, the market value of the Company was about NIS 8,147,000.
12. The Company's Plans For Use Of The Purchased Asset
The Company intends holding Plastics and continuing its activity as
carried out to date, as described in the annexed profile, whilst expanding
Plastics' marketing and sales activity amongst small and medium customers. In
addition, Plastics will serve as an additional arm in purchases of raw materials
for the Company and its subsidiaries and related companies. The Company intends
providing Plastics with management services, product development consultancy and
engineering consultancy, for the consideration set forth in paragraph 4.4 above.
13. The Necessary Approvals
The shares' allotment to the offerees requires the approvals
mentioned in paragraph 4.5.7 of this immediate report, including the approval of
the Tel Aviv Stock Exchange for the offered shares' listing for trade. This
approval is expected to be obtained within a number of weeks.
This private offer also requires the approval of the general meeting
of the Company's shareholders. The general meeting of the Company's shareholders
shall convene on 22 December 2003 to discuss and approve the above private
offer.
14. Details Of Agreements
To the best of the Company's knowledge, the following agreements
exist between the Company's shareholders and the offerees:
14.1 An undertaking by I.I. Patishi Investments Ltd (hereinafter referred
to as "Patishi"), a private company owned by Itamar and Orna Patishi in equal
shares between them, which holds approx. 23.32% of the Company's issued and paid
up share capital prior to the implementation of the share allotment pursuant to
this immediate report, pursuant whereto Patishi undertook vis-a-vis the offerees
as follows:
(a) to support the approval of the private offer described in
this immediate report at the general meeting of the Company's shareholders, when
the private offer is brought for the general meeting's approval;
(b) not to effect, during the period up to the shares' allotment
to the offerees, any disposition with the Company's shares which are held by
Patishi and not to purchase shares of the Company;
(c) not to commit, during the period up to the shares' allotment
to the offerees, any act or omission that does not accord with the agreement of
principles executed between Kidron and the Company and not to conduct any
negotiations in connection with the Company's securities, not to make offers,
not to discuss approaches and not to allow its employees or representatives to
act as aforesaid;
(d) to bring to the offerees' knowledge, during the period up to
the shares' allotment to the offerees, any approach to the Company in connection
with the Company's shares;
(e) not to allow and to refrain from executing, throughout the
"requisite period" as defined in Chapter Five-Two of the Income Tax Ordinance
(New Version), any act or transaction that will prejudice a tax exemption
received by the offerees and/or the Company from the income tax authorities (if
and insofar as received).
14.2 Notice of 8th July 2003 from Orlite Industries (1959) Ltd (hereinafter
referred to as "Orlite"), a public company holding approx. 28.94% of the
Company's issued and paid up share capital prior to the implementation of the
share allotment pursuant to this immediate report, to the effect that:
(a) Orlite had given Mr David Shaham an irrevocable power of
attorney valid for six months from 8th July 2003 to participate and vote on
Orlite's behalf, in his full discretion, at all general meetings of the Company
at which the private offer the subject of this immediate report is brought for
approval;
Orlite gave notice that without derogating from Mr Shaham's
discretion, Orlite would not object to the above private offer.
To the best of the Company's knowledge, Mr David Shaham
notified Kidron that he would participate at the general meeting and support the
transaction's approval.
Mr David Shaham is a private businessman who engages in the
rehabilitation of companies. Mr Shaham served as the Company's deputy MD during
the period between 21st November 2001 and 31st May 2002 and as director of the
Company during the period between 15th July 2002 and 27th March 2003;
(b) Orlite had waived any pre-emptive right in connection with
the private offer the subject of this immediate report;
(c) in the five month period commencing on 8th July 2003, Orlite
will not effect any disposition with the Company's shares held by it and will
not purchase shares or other securities of the Company;
(d) in the five month period commencing on 8th July 2003, Orlite
will not conduct any negotiations in connection with the Company's securities,
will not make offers, will not discuss approaches and will not allow its
employees or representatives to act as aforesaid. Without derogating from the
aforegoing, Orlite undertook to notify Kidron of any approach to it or anyone on
its behalf received during the above period and concerning the Company's shares;
(e) Orlite will refrain from any change in rights within the
meaning thereof in Chapter Five-Two of the Income Tax Ordinance (New Version)
(hereinafter referred to as "the sale limit"), subject to the fulfillment of all
the following aggregate conditions: (1) assets/shares will be transferred to the
Company by way of a merger as part of the private offer; (2) the sale limit
constitutes a condition for a tax exemption; (3) the sale limit will apply
during the "requisite period" as such expression is defined in Chapter Five-Two
of the Income Tax Ordinance (New Version); (4) Kidron and the Company will
refrain, during the "requisite period", from any change in rights as defined in
Chapter Five-Two of the Income Tax Ordinance (New Version).
(f) Orlite's above undertakings are in force subject to Kidron
reaching understandings with the Company's leading banks by 30th September 2003
(after an extension).
Kidron gave notice to Orlite on 20th October 2003 of its
position that this condition has been fulfilled and that it hoped that the
parties would enter into a binding agreement in the near future. Orlite was
asked to notify Kidron if it had any reservations regarding Kidron's said notice
and in response Orlite notified that it requires, first, to receive addition
information. In addition Orlite was asked, on 28th October 2003 and 17th
November 2003, to extend its undertakings in sub-paragraphs (a), (c) and (d)
above to the end of January 2004 and, as a practical solution, to extend in any
event the above mentioned validity clause until such date; correct as at the
date of this immediate report, Orlite's representatives notified Kidron, orally,
that Orlite is not extending the validity of the of the above undertakings.
14.3 Kidron intends granting an option to purchase shares of the Company to
Kidron's consultant in relation to approx. 5.5% of the Company's issued capital
on full dilution, from the shares allotted to Kidron under the allotment
agreement. Kidron and the consultant have not yet reached an agreement on all
the terms.
The Company turned to Kidron and its material shareholders in order
to obtain information regarding the above agreements.
14.4 Michael and Sigal Susz signed, on 27 November 2003, an agreement with
a third party pursuant to which subsequent to the Closing the shall sell to such
third party 7,5024,180 of the Company's shares to be issued to them pursuant to
this private placement at the price set at the allotment agreement i.e. NIS 0.08
per share, a price reflecting a Company market value of NIS 12.5. The
consideration with respect to these shares will be paid in cash. The payment of
consideration with respect to these shares and the transfer of these shares will
take place immediately after the Closing date. Subsequent to the transfer the
third party shall hold 4.99% of the company's shares subsequent to the share
issuance and 4.86% of the company's shares subsequent to the share issuance on a
fully diluted basis in the event the right set forth in paragraph 3.3 is not
exercised and 4.2% of the company's shares subsequent to the share issuance and
4.1% of the company's shares subsequent to the share issuance on a fully diluted
basis in the event the right set forth in paragraph 3.3 is exercised. For
clarification purposes, the sale shall be made outside the Stock Exchange. The
said third party is no related in any way to any of the offerees. In the event
the right mentioned in paragraph 3.3 above is exercised in full, the third party
undertook to purchase 1,417,783 additional shares from Michael and Sigal Susz.
14.5 Michael and Sigal Susz signed, on 27 November 2003, an agreement with
an additional third party pursuant to which subsequent to the Closing the shall
sell to such third party 7,5024,180 of the Company's shares to be issued to them
pursuant to this private placement at the price set at the allotment agreement
i.e. NIS 0.08 per share, a price reflecting a Company market value of NIS 12.5.
The consideration with respect to these shares will be paid in cash. The payment
of consideration with respect to these shares and the transfer of these shares
will take place immediately after the Closing date. Subsequent to the transfer
the third party shall hold 4.99% of the company's shares subsequent to the share
issuance and 4.86% of the company's shares subsequent to the share issuance on a
fully diluted basis in the event the right set forth in paragraph 3.3 is not
exercised and 4.2% of the company's shares subsequent to the share issuance and
4.1% of the company's shares subsequent to the share issuance on a fully diluted
basis in the event the right set forth in paragraph 3.3 is exercised. For
clarification purposes, the sale shall be made outside the Stock Exchange. The
said third party is no related in any way to any of the offerees. In the event
the right mentioned in paragraph 3.3 above is exercised in full, the third party
undertook to purchase 1,417,783 additional shares from Michael and Sigal Susz.
15. Lock-Up Arrangements
The shares the subject of the private offer will be subject to the
lock-up arrangements prescribed in the Securities Law, 5728-1968 and in the
Securities (Details Regarding Sections 15A to 15C of the Law) Regulations,
5760-2000, as follows:
15.1 In the three month period commencing on the date of the shares'
allotment to the offerees, the offerees may not execute any transaction or
commit any act with the shares allotted to them pursuant to this private offer.
15.2 As of the end of the period of three months after the date of the
shares' allotment pursuant to this offer until the end of one year and three
months from the said date, the offerees may execute transactions on the Stock
Exchange with the shares allotted to them pursuant to this private offer,
provided that the daily number of shares that an offeree may offer shall not
exceed the daily average of the trading turnover in the Company's shares on the
Tel Aviv Stock Exchange in the eight week period preceding the offer date, and
provided that the number of shares offered in a quarter shall not exceed one
percent of the Company's issued and paid up capital at such time (in such regard
the issued and paid up capital shall not include convertible securities allotted
prior to the offer date and not yet exercised or converted).
15.3 After one year and three months have elapsed from the date of the
shares' allotment, there shall no longer be any impediment to the offerees'
executing any transaction or committing any act on the Stock Exchange with the
shares allotted to them pursuant to this private offer.
16. The Board Of Directors' Grounds
The Company's board of directors gave grounds for its resolution to
approve the exceptional private offer as follows:
- the addition of profitable activity yielding a steady and
significant cash flow constitutes an important course for the Company's
activity;
- in light of the Company's financial position and continuance of the
proceedings to raise further capital for the Company and to increase its credit
facilities at the banks to the Company's satisfaction, the introduction of a new
investor is the fastest way of reaching an agreement with the banks financing
the Company's activity and of guaranteeing that it will obtain the finance
necessary for its activity;
- the merger ratio is a fair ratio that was determined on the basis of
a valuation by an independent third party, having regard to the activity of the
Company and Kidron Plastics Ltd;
- since the current transaction is the only tangible and purposeful
transaction presently being offered to the Company;
- the transaction is necessary for the purposes of the Company's
recovery.
The following participated in the board of directors' discussion:
Itamar Patishi, Shlomo Tisser, Aviad Shachar and Shai Eshel (external director).
None of the directors had a personal interest in the private offer's
approval.
17. The Share Allotment Date
The shares will be allotted to the offerees shortly after receipt of
all the approvals necessary as set forth in paragraph 11 above, but not before
28 December 2003.
18. Annexure Of Financial Statements
Annexed hereto as an integral part hereof are financial statements
of Plastics, as follows:
(a) annual financial statements as at 31st December 2002;
(b) interim financial statements as at 30th June 2003.
The above mentioned financial statements are drawn up in accordance
with the accepted accounting standards and in accordance with the provisions of
regulation 10 of the Private Offer Regulations.
19. Annexure Of Opinion
The valuation carried out for the Company and Plastics by Kesselman
Consulting Price Waterhouse Coopers Ltd, in reliance on which the merger ratio
was determined, is annexed hereto and constitutes an integral part hereof.
20. Notice Of An Extraordinary General Meeting Of The Company's
Shareholders
Notice is hereby given that on 22 December 2003, at 09:30 hours, an
extraordinary general meeting of the Company's shareholders will take place at
the office of R. Yohay & Co., Advocates, at 50 Dizengoff Street, Migdal Al, Tel
Aviv.
On the agenda:
1. Approval of the private offer as detailed in this report,
including approval of the agreements detailed in paragraph 8 above.
2. Approval of the insurance of the Company's officers
immediately before the completion date (as defined in paragraph 4.7 above)
(hereinafter referred to as "the outgoing officers"), as of the completion date
and for seven years thereafter, in the scope of the routine insurance of the
Company's officers, on terms similar to those on which they are currently
insured, or on terms on which the officers serving the Company at such time are
insured (at the Company's election), as provided in paragraph 4.18 above.
The shareholders entitled to participate in the extraordinary
general meeting are those shareholders who are entered in the Company's register
of members at the end of the business day of 2 December 2003.
A shareholder may appoint a proxy to participate and vote on his
behalf at the extraordinary general meeting in accordance with the provisions of
the Company's articles. Proxy instruments shall be deposited at the Company's
registered office no less than 48 hours prior to the meeting or adjourned
meeting at which the proxy intends voting in the basis of the proxy instrument.
The quorum for the meeting shall be two members holding or
representing the holders of one third of all the Company's shares. If a quorum
is not present within at least half an hour, but not more than one hour, of the
time fixed for the general meeting, the general meeting shall be adjourned for
seven days. At the adjourned meeting, a quorum shall be constituted in the
presence of two members of the Company or their representatives.
The approval of the general meeting or the adjourned general meeting
of the above offers shall be given by way of a majority of votes.
21. The Securities Authority's Power
Pursuant to regulation 17 of the Private Offer Regulations, within
21 days of filing this immediate report regarding the private offer, the
Securities Authority (hereinafter referred to as "the Authority") or an employee
empowered by the Authority may order the Company to give an explanation,
details, information and documents in connection with any of the details
included in the immediate report, within such period of time as determined by
them, and they may order the Company to amend the immediate report in accordance
with the explanation, details, information and documents as aforesaid, within
such period of time as determined by them. If an order is given to amend the
immediate report as mentioned above, the Authority may order the general
meeting's adjournment to a date falling not less than three business days nor
more than 21 days from the date of publishing the amendment to the immediate
report.
22. The Company's Representative For The Purposes Of The Immediate Report
The Company's representatives for the purposes of this immediate
report are Advs. Robert Yohay and Gil Rimon of 50 Dizengoff Street, Migdal Al,
Tel Aviv 64322, Tel. 03-5253972; Fax. 03-5253983.
23. Inspection Of Documents
A shareholder wishing to inspect documents concerning the private
offer, including documents presented to the board of directors in the scope of
the proceedings for the discussion of and resolution on the private offer, may
do so at the offices of the Company's representative for the purposes of this
immediate report, on the working days up to the date of the above general
meeting and after coordination with the Company's representatives as mentioned
above.
Yours faithfully,
Technoplast Industries Ltd
By Itamar Patishi, chairman of the board of directors
and Daniel Stern, MD
Enclosures: Profile.
Valuations.
Interim financial statements as at 30th June 2003 of
Kidron Plastics Ltd as well as periodic reports.
REF: F:/YOHAY/KIDRON_PROFILE02/SM/ (TRANSLATED FROM THE HEBREW)
FIRST PART - PROFILE
(A) DESCRIPTION OF PLASTICS, ITS ACTIVITY AND ITS BUSINESS ENVIRONMENT
1. General
1.1 Kidron Plastics Ltd (hereinafter referred to as "Plastics") is a
private company limited by shares, that was incorporated on 10th August 1993 in
Israel and commenced its activity at the beginning of 1994.
1.2 Plastics engages in the import, marketing and distribution of raw
materials and products in the plastics sphere for the fiberglass-polyester
industry, in two main areas of activity:
(1) Activity as agent - the direct import method - in such
capacity, Plastics is in fact the Israeli representative of a number of foreign
suppliers and sells to customers on their behalf: a customer approaches Plastics
and orders merchandise, Plastics transfers the customer's order to the suppliers
and attends to the order of the merchandise from the supplier, the merchandise
reaches the customer directly and the customer pays the supplier directly. In
respect of this activity, Plastics receives commission from the supplier, after
the transaction's completion.
Plastics' income from its activity as agent constitutes
about 6% of its income.
(2) Activity as distributor - the distribution method - in such
capacity, Plastics purchases merchandise from various suppliers, pays them for
the merchandise and sells it to its customers in Israel - in its raw state, in
such packages as received from the supplier or after the raw material has been
broken down into smaller packages for the purpose of marketing to its customers,
or after the raw materials have been mixed and prepared for its customers using
the tailor-made method as detailed below. In respect of this activity, Plastics
receives consideration from its customers for the sale.
Plastics' income from its activity as distributor
constitutes about 94% of its income.
For further details of the Company's activity, see paragraph 2
below.
1.3 Since its foundation, and until the commencement of the period
relevant to this profile, on 1st January 2001 (hereinafter referred to as "the
relevant period"), Plastics' shares were held by two shareholders, as follows:
Kidron Management & Holdings (1961) Ltd (formerly Kidron Commercial Co. Ltd)
(hereinafter referred to as "Kidron Holdings"), a private company which held 65%
of Plastics' paid up share capital; and Mr Max Kisos - a chemist, who served and
is serving as Plastics' MD, and held 35% of Plastics' paid up share capital.
Pursuant to the agreement between Kidron Holdings and Max Kisos of
1st January 2001, Max Kisos sold all his said holdings in the Company to Kidron
Holdings.
For further details of Plastics' capital and the agreement
described, see paragraph 24 below.
1.4 Plastics operates from a structure on a rented area of about 800
square meters (200 + 600 square meters) in the Gav-Yam industrial area in Haifa,
which serves as the Company's distribution center, in and from which the Company
stores the raw materials purchased by it, mixes and prepares the raw materials
at the request of Plastics' customers (as described below) and distributes the
raw materials, in trucks, to its customers.
2. Plastics' main spheres of engagement and a description of the
principal sectors
2.1 As aforesaid, Plastics engages in the import, marketing and
distribution of raw materials and products in the plastics sphere for the
fiberglass-polyester industry, applying the direct import method and applying
the distribution method.
2.2 Plastics' products
As described in this profile, the essence of Plastics' activity is
the provision of services to the plastics industry in Israel in the sphere of
the various raw materials.
The main raw materials which the Company purchases, in Israel and/or
abroad, and markets, are: polyester, fiberglass, polyurethane-epoxy, aviation
cloth for complex materials, chemical materials used in the manufacturing
process (separators, gelcote, accelerators, hardeners and the like) and the
auxiliary materials needed in the process of manufacturing plastics in the
polyester-fiberglass sphere.
The polyester-fiberglass (GRP) sphere in the plastics industry
(which is also known as the composite materials sphere) is characterized as a
know-how intensive unique sphere of expertise.
Polyester is a liquid material which may be strengthened by
fiberglass, hardened and/or accelerated with special materials, filled with
various additives and/or pigmented in various colors - properties enabling the
manufacture, with the help thereof, of products in a wide range of forms and
sizes, of great mechanical strength, resistant to various weather conditions and
/or chemicals.
The use of polyester in all its forms is wide and varied, commencing
with infrastructure products (such as water and sewage pipes, electricity and
communication cupboards, rods and profiles), through reinforced products for
large institutions and industry (such as swimming pools and water slides,
playground facilities, light building products, artificial marble, bathtubs,
basins, vehicle and truck parts) and ending with small products (such as
statues, flower-pots, games and ornamental products).
2.3 Mixing and preparation activity
Plastics' exclusivity in its sphere of activity under the
distribution method lies in the fact that it provides mixing and preparation
services of the raw materials, using the tailor-made method, with the aim of
vesting the raw materials with special properties requested by the customer, in
accordance with the customer's requirements, such as: flexibility, resistance to
sun or fire, the addition of color and the like. Save for the fiberglass, all
the raw materials may be mixed.
The mixing takes place at Plastics' distribution center in Haifa
through two manual mixers. In the scope of the mixing, raw materials are mixed
with particular additives aimed at vesting the raw material with the additional
properties, in accordance with the customer's request, such as: an additive
vesting the material with a particular level of flexibility, an additive vesting
the raw material with resistance to the sun, an additive vesting the material
with a particular color and the like (hereinafter referred to as "the
additives"), in accordance with particular formulae for combining the additives.
It is noted that in certain cases, Kidron dictates some of these specific
requirements to the polyester supplier, which prepares the material in
accordance with Kidron's requirements.
The mixed raw materials are transferred by Plastics into small
barrels and are distributed together with the other raw materials.
2.4 The purchase of the raw materials and the work with suppliers
Most of the raw materials are purchased by Plastics from a number of
main suppliers abroad, as detailed below (hereinafter referred to as "the main
suppliers"):
(1) "A" - a polyester manufacturer. The main plant from which
Plastics imports is located in Italy; in addition, to the best of Plastics'
knowledge, this supplier has other plants in Europe and in the United States.
The cooperation with this supplier has continued for about nine years.
(2) "B" - a fiberglass manufacturer. To the best of Plastics'
knowledge, this supplier owns plants in Spain, Italy, France, China, Canada, the
United States and South Korea. The cooperation with this supplier has continued
for more than 40 years, since even before Plastics' establishment, through the
Kidron Group, and after its establishment the cooperation continued within the
framework of Plastics.
(3) "C" - a Dutch manufacturer of Peroxides. The cooperation
with this supplier has continued for about nine years.
(4) "D" - an English supplier for the purchase of pigments. The
cooperation with this supplier has continued for about six years.
Plastics purchases the fillers and solvents from local suppliers.
The main suppliers are also Plastics' main suppliers under the
direct import method.
Recently, Plastics has also been importing raw materials from other
sources, including the East, which, provides backup for the above supply of raw
materials.
2.5 Agreements with suppliers
To the best of Plastics' knowledge, Plastics in fact serves as the
main suppliers' sole distributor and agent in Israel. To the best of Plastics'
knowledge, where a particular Israeli customer tries to approach any of the main
suppliers directly, the main suppliers refer the customers to Plastics, in order
to act through it.
Plastics' contractual relationships with its suppliers are not
backed up in written agreements - save for a number of letters received by
Plastics from some of the suppliers which attest to a long-term relationship and
/or that Plastics serves as their exclusive distributor and agent in Israel -
and the work with the main suppliers is based on a relationship of many years
standing, as detailed above alongside the name of each supplier.
In such regard, it is noted that the suppliers have not given
Plastics any written undertaking for the provision of service and/or replacement
of the raw material but in fact, as at the date of this profile, merchandise
that has been found to be defective by Plastics or by the customers, in advance
or after the fact, has always been replaced by the supplier with new
merchandise, or the supplier has given a credit note in respect thereof.
Plastics has no contractual obligation to the said suppliers to
purchase a minimum quantity.
The commission and credit terms which Plastics receives from the
main suppliers:
(1) Under the direct import method - as aforesaid, Plastics is
entitled to the payment of commission in respect of its activity as agent, after
completion of the transaction between the supplier and the customers (i.e. after
the supplier receives the consideration from the customer). The amount of the
commission which Plastics receives from the main suppliers in respect of its
activity as aforesaid ranges between 4% and 5% of the amount detailed in each
transaction's invoice, payable to Plastics on a periodic basis which is, for the
most part, once a quarter.
(2) Under the distribution method - in respect of this activity,
Plastics receives consideration from its customers for the sale.
For details of Plastics' gross profit, see paragraph 2.7
below.
The average credit which Plastics receives from each main
supplier, under the distribution method, is current + 90 to 120 days.
In the scope of its purchases from the main suppliers,
Plastics does not have to furnish letters of credit.
For further details regarding Plastics' dependency on suppliers, see
paragraph 7 below.
2.6 Orders, distribution of raw materials and inventory
Within the framework of the distribution method, the customers for
the most part place their orders from Plastics by fax and/or orally.
The raw materials are generally supplied to the customer already on
the day following the placing of the order by the customer, save for supply to
remote regions, such as: Eilat or Kiriat Shemona, in respect of which the
average supply time is between two days and a week. In light of the aforegoing,
for the most part Plastics does not have a backlog of orders, and the maximum
backlog which it is likely to have, in respect of remote customers, is for a
period of one week to two weeks. As at the date of this profile, Plastics does
not have any order backlog under the distribution method.
The distribution activity itself is carried out by three Plastics'
employees, through three trucks owned by it, and is provided to the customers as
part of the services which Plastics provides to the customers, without
additional cost.
Plastics' policy is to keep a quantity of raw materials adequate for
one and a half months of sales.
Under the direct import method, there is, at the date of this
profile, a backlog of orders from customers referred by Plastics, as described
above, directly to the supplier. This backlog in itself is not material to
Plastics (since the income (commission) from the said backlog relating to 2003
and 2004 is about $ 27,000).
2.7 Data on income, purchases and gross profit deriving from each sector
(1) Breakdown of the Company's income
Set forth below is a breakdown of Plastics' income in the
first half of 2003 and 2002, in accordance with the type of method of activity
and in accordance with the type of raw material, in percentages of the total
income, as follows:
Raw material June 2003 2002
Direct Distribution Direct Distribution
import import
Polyester + 4% + 53% + 2.5% + 47%
Fiberglass + 0.8% + 13% + 2% + 13%
Others + 1.2% + 28% + 1.5% + 34%
Total income + 6% + 94%% + 6% + 94%
(2) Purchases from main suppliers
Set forth below are details of the
percentage of Plastics' total purchases from its main suppliers, during the
relevant period, in the distribution sphere:
2001 - about 72% ("A" - 51.4%,
"B" - 13.2%, "C" - 5%, "D" - 2.7%). In addition, purchases from a thinners'
suppliers came to about 5.4%.
2002 - about 67% ("A" - 45.7%,
"B" - 14.2%, "C" - 3.5%, "D" - 4.1%).
1/03 to 6/03 - about 68% ("A" -
48.7%, "B" - 13.1%, "C" - 5.2%, "D" - 1.2%).
Save as provided above, there are no
suppliers purchases from which exceeded, in any year in the relevant period, 5%
of Plastics' total purchases.
(3) Gross profit
Plastics' weighted gross profit is about
44%.
This percentage is made up of a gross profit
of about 40% (between 32% and 51%, depending on the raw material) under the
distribution method (Plastics' income from its activity under this method
constituting about 94%) and a gross profit of about 100% under the direct import
method (Plastics' income from its activity under this method constituting about
6%).
3. The branches in which Plastics is active, licensing, taxation and
government supervision aspects
3.1 Plastics is assessed in accordance with the Income Tax (Adjustments
Due To Inflation) Law, 5745-1985, which measures results for tax purposes on a
real basis, and it has final tax assessments up to and including the 1999 tax
year.
3.2 During October 2003 Plastics received a business license for the
storage of chemical materials.
This license was received after legal proceedings had been conducted
in recent months, which came to an end upon the license being obtained. For the
purpose of obtaining the above mentioned business license, Plastics invested in
improving the structure which it rents in Haifa and inter alia installed a fire
extinguishing system meeting the requirements of the firefighting authorities
and the Ministry of the Environment.
3.3 Plastics operates pursuant to a toxins permit that was granted to it
on 23rd March 2003, with effect from 2nd March 2003, by the Ministry of the
Environment (valid until 1st March 2005) pursuant to the Dangerous Substances
Law, 5753-1993. Throughout the course of its activity, Plastics has not received
any claim for compensation as a result of its activity with dangerous substances
and in its assessment, it is not exposed to claims for compensation as aforesaid
in respect of its activity prior to the date of this profile.
3.4 In addition, Plastics operates pursuant to an approval to itself carry
dangerous substances that was granted to it on 6th July 2003 by the Ministry of
Transportation (valid until 6th July 2004).
4. Characterisation of Plastics' customers and a description of material
contracts with customers
4.1 Plastics sells the raw materials it purchases to its customers, who
combine the raw materials with their final products, as follows:
(1) The direct import method - Plastics' circle of customers
under this method includes primarily large customers, amongst them industrial
entities and large manufacturers, who use the raw materials primarily for
industry and infrastructure products, in spheres such as: the manufacture of
distribution cupboards for electricity; the manufacture of profiles and rods
from polyester; the manufacturer of containers and accessories for the chemical
industry; the manufacture of marble boards; the manufacture of crates for
trucks; the manufacture of pipes.
In the scope of this method of activity, Plastics has
about 10 customers.
(2) The distribution method - Plastics' circle of customers
under this method includes about 400 customers, of which about 200 are active
customers, amongst them large customers (as mentioned above in respect of the
direct import method) constituting about 40% of the activity under this method,
and smaller customers, constituting about 60% of the activity - small
manufacturing plants, workshops, shops and artists, in spheres such as: swimming
pool manufacturers; manufacturers of playground facilities; manufacturers of
artificial marble; manufacturers of electronic facilities; manufacturers of bus
components; manufacturers of electrical equipment and military equipment and
providers of service to the chemical industry. In such regard it is noted that
most of Plastics' customers under the distribution method are the smaller
customers.
4.2 Plastics does not have written agreements with its customers, and
orders in this sector are made for the most part by direct contact between the
customers and Plastics. See paragraph 2.6 below for details regarding the order
procedure.
4.3 According to Plastics, it is not dependent on any customer. Plastics'
sales are dispersed amongst all its customers, which engage in a wide range of
spheres, and the Company does not have any purchaser whose annual purchases from
Plastics exceed 5% of its annual sales, such that the cessation of its purchases
from Plastics will materially affect Plastics.
4.4 Customer credit - the average credit which Plastics grants its
customers, in the scope of the distribution method, is current + 90 days. Some
of the customers have given Plastics personal guarantees to cover their debts.
As at the date of this profile, involved are about 2.5% of the customers' total
debts which are backed up personal guarantees; however, this percentage changes
from time to time. For details regarding the collection of unpaid debts, see
paragraph 9 below.
5. Description of Plastics' marketing activity
5.1 As a rule, Plastics' routine marketing to existing and potential
customers is carried out in Israel. The marketing is carried out by Plastics'
personnel independently, directly to the customer.
Plastics' marketing strategy is based on direct marketing to the
customer, whilst developing trust relations between the customers and Plastics,
based on Plastics' ability to offer customers the full basket of raw materials
required by them in the sphere, and based on Plastics' expertise in the mixing
sphere, which enables Plastics to provide its customers with a specific
solution.
The routine marketing efforts are centered in three parallel
channels:
(1) a first visit by senior officials at Plastics to new
customers - this marketing is carried out, for the most part, by Plastics' MD,
Max Kisos and/or Yaakov Meidan, who provides Plastics with services in the
framework of the management services which Plastics receives from Kidron
Holdings (see details in paragraph (D) below);
(2) the creation of telephonic contact between senior officials
at Plastics and customers - this marketing is also carried out, for the most
part, by Max Kisos and/or Yaakov Meidan, and by the manager of the center in
Haifa;
(3) the creation of daily contact between Plastics' drivers and
customers, within the scope of which the drivers ascertain each customer's
requirements and supply its demands immediately.
5.2 In addition to the routine marketing, Plastics takes part in
exhibitions as follows:
(1) Plastics participates in a plastics exhibition that takes
place in Israel, by putting up a raw materials pavilion at the exhibition;
(2) once a year a trade exhibition takes place in Paris, in
which Plastics' main suppliers participate. At this exhibition Plastics
introduces some of its large customers to the main suppliers.
5.3 Plastics' ability to offer its customers a range of raw materials from
the main suppliers helps it in its marketing efforts.
6. Details regarding competition, competitors and Plastics' market
position in relation to its competitors, in each of Plastics' branches of
activity
To the best of Plastics' knowledge, in its sphere of activity,
Israel does not have a large number of importers and marketers of raw materials
competing with Plastics.
(1) The direct import method - to the best of Plastics' knowledge, it is
one of the two largest agents of all the raw materials in Israel.
To the best of Plastics' knowledge, its principal competitor in the
scope of its activity as agent, especially in sales to Plastics' large
customers, is Prizma Industries Ltd, which to the best of Plastics' knowledge is
a subsidiary of Makhteshim-Agan Industries Ltd (hereinafter referred to as
"Prizma"). According to Plastics, as at the date of this profile, its market
share as supplier of raw materials under the direct import method in Israel
ranges between 30% and 40%.
(2) The distribution method - to the best of Plastics' knowledge, it is
one of the four main suppliers of raw materials in Israel.
To the best of Plastics' knowledge, Plastics' competitors in the
scope of its activity as distributor include Prizma, Almor Fiberglass and MCM.
Since, to the best of Plastics' knowledge, Prizma does not supply
raw materials in small packages, and does not carry out mixing activity for its
customers, in the scope of Plastics' activity as distributor, Prizma competes
with Plastics primarily in sales to its large customers.
To the best of Plastics' knowledge, Almor Fiberglass and MCM compete
with Plastics primarily in sales to its medium and small customers, Almor
Fiberglass, to the best of Plastics' knowledge, also providing its customers
with mixing services. To the best of Plastics' knowledge, MCM does not carry on
any material activity in the provision of mixing services. According to
Plastics, as at the date of this profile its market share as supplier of raw
materials under the distribution method in Israel ranges between 30% and 40%.
7. Dependence on suppliers, including marketers, or dependence on
sources of raw materials
7.1 Dependence on suppliers of raw materials - according to Plastics,
despite the fact that Plastics is to a certain extent dependent on the main
suppliers (described in paragraph 2.4 above) of the raw materials, the
dependence is not absolute. Plastics believes that if necessary, it will be able
to find alternative sources for both polyester and fiberglass, which are the
main raw materials with which Plastics works, such being within a relatively
short period of time.
In addition, to the best of Plastics' knowledge, all the raw
materials with which it works may also be obtained from alternative suppliers.
8. Plastics' organisational structure, noting the no. of employees
8.1 As at the date of the transaction report, Plastics engages employees
in accordance with the following organizational structure:
MD* 1
The person responsible for relations with
suppliers and key personnel** 1
Distribution center manager 1
Distribution center employees 2
Drivers 3
Clerks and bookkeeping 2
* Plastics' MD is not a Plastics' employee, but provides it
with management services pursuant to an agreement between Plastics and K.D.M.
Fiber Ltd, as described below.
** The person responsible for supplier and customer relations
is also not an employee of Plastics, but provides it with services in the scope
of the management services which Kidron Holdings provides to Plastics, as
described in paragraph (D) below.
8.2 Dependence on employees
According to Plastics, Plastics has four key personnel, as follows:
(1) Plastics' MD, Max Kisos. A chemist, with about 30 years'
experience in the sphere.
Max provides management services to Plastics pursuant to
an agreement of 1st January 2001, which was executed between Plastics and K.D.M.
Fiber Ltd, a private company 51% of whose issued and paid up capital is held by
Max Kisos and the balance by Daniela Kisos (hereinafter referred to as "KDM"),
as an independent contractor, for the provision of management and consultancy
services by Max alone. Pursuant to the agreement, Max will serve as Plastics' MD
for a term of four years commencing on 1st January 2001. Max Kisos also
personally assumed KDM's obligations pursuant to the agreement
In consideration, KDM will be entitled to monthly
management fees in a sum in new shekels equal to $ 9,342 (in accordance with the
index-linked dollar or shekel value, whichever is the higher), to an annual
bonus based on Plastics' profits as follows: 2% of the gross profit less a sum
of $ 50,000 of the gross profit, and 2% (save for 2003, in which the rate is 5%)
of the growth in the annual gross profit relative to the previous year, and to
an additional monthly payment in a sum in new shekels equal to $ 3,127. It is
noted that Kidron Holdings guaranteed this payment. (missing two sentences. See
the Hebrew version) In the allotment agreement, it was provided that the Company
would act after the completion date to replace Kidron Holdings' guarantee, to
KDM's satisfaction.
At the end of each year, the cost of KDM to Plastics will
be examined compared with the cost of Mr Yaakov Meidan's remuneration to Kidron
Holdings. If the cost of Yaakov Meidan's remuneration turns out to be higher,
KDM shall be entitled to additional management fees, such that the above
mentioned costs shall be equal. As at the date of this profile, the said costs
are equal. As at the date of this profile, there is no plan to increase Yaakov
Meidan's cost. Insofar as there is any in the future, the said revision
mechanism shall apply.
The agreement may be terminated by Plastics on 90 days'
notice, against the payment to KDM of certain compensation in a sum equal to one
month's management fees and continued payment of the additional monthly payment
until the end of the term of the agreement.
In accordance with the agreement, KDM undertook that it
and Max would maintain confidentiality, throughout the term of the agreement and
at all times thereafter, in respect of everything done at Plastics and at
affiliated entities and companies, and it undertook to ensure that during the
term of the agreement and for two years after the termination thereof for any
reason, neither KDM nor Max would compete with Plastics' business, as owner,
partner, employee or consultant. In addition, KDM undertook to ensure that
during the term of the agreement and for five years after the termination
thereof for any reason, neither KDM nor Max would maintain any relations with
any of Plastics' suppliers and/or any entity which supplies it with merchandise.
In the event of the termination of the contract with
Plastics, KDM undertook that Max Kisos would hand over his position in an
orderly manner to whomever Plastics appointed for such purpose and would train
the replacement insofar as necessary to take over the position, in accordance
with Plastics' instructions.
Within the scope of the MD services, Max Kisos is de facto
responsible for marketing and sales at Plastics and for the development of the
formula required to mix the raw materials.
According to Plastics, in the event of the cessation of
the contractual relationship between KDM and Plastics, Plastics will be able,
within not too long, to find a replacement for Max Kisos. In addition, so far as
his specific spheres of responsibility at Plastics are concerned - the other key
personnel at Plastics are also familiar with these spheres, are acquainted with
Plastics' customers and their requirements and are even familiar with the
formulae invented by him and the mixing activity.
(2) The liaison with suppliers abroad and main customers -
Yaakov Meidan. Yaakov Meidan, who serves as director of Plastics and holds about
10% of Kidron Holdings' issued and paid up capital Holdings, provides Plastics
with services within the scope of the management and consultancy services that
Kidron Holdings provides to Plastics (see a description of the agreement in
chapter (D)(1)). Yaakov Meidan has monitored Plastics' activity since its
establishment. Within the scope of the said management and consultancy services,
Yaakov Meidan is responsible for Plastics' relations with its suppliers abroad
and with some of Plastics' large customers.
(3) The Haifa distribution center manager. An employee of
Plastics since 1998, save for a period of about two years in which he did not
work for Plastics. Is familiar with the requirements of Plastics' customers and
knows the mixing work.
(4) Additional distribution center employee. Has experience of
more than 30 years in the plastics industry. Has worked at Plastics for about
six yeas, is familiar with the customers' requirements and knows the mixing
work.
According to Plastics, since there is overlapping between the duties
of Plastics' key personnel, there is no absolute dependence on employees.
9. Description of the material administrative proceedings and legal
claims to which Plastics is a party
As at the date of this profile, there are no legal proceedings being
conducted against Plastics and/or to which Plastics is a party, save for the
following proceedings:
9.1 On 15th June 2003 a statement of claim was filed by Mr Souad Fakhri, a
former Plastics' employee, in the Haifa Magistrate's Court, for compensation in
respect of physical injuries. Mr Fakhri alleged in the statement of claim that
he was employed as a diesel forklift operator for eight hours a day between 1994
and 1997, and that as a result of Plastics' negligence he sustained injury to
his ears which finds expression in constant ringing and a 10% disability. It is
noted that a National Insurance Institute certificate was annexed to the claim,
recognizing the injury sustained by Mr Fakhri as a work injury. The amount of
the claim was left for the Court's discretion. Plastics filed a defense. A date
has not yet been set for the hearing. Plastics gave notice to its insurers
regarding the claim and as at the date of this profile it has not yet received
an answer whether the claim will be covered by the insurance company.
9.2 In addition, in Plastics' ordinary course of business it takes part in
legal proceedings for the collection of routine debts of customers. For such
purpose Plastics is assisted by the services of a company that engages in the
collection of debts through an attorney, on a legal basis only, in consideration
for commission at a rate of 15% of the amount of the debt collected by the said
company, which will only be paid after the actual collection. As at the date of
this profile, the said company is handling about 15 files, which are for the
most part handled within the framework of execution proceedings, and their debts
amount to about NIS 250,000.
10. The risk factors in Plastics' activity
Set forth below are details of the main risk factors which might
affect Plastics' activity:
10.1 Cessation of the work with one of the main raw material suppliers - as
described in paragraph 7.1 above, according to Plastics so long as there is no
absolute dependence, in such a case it will only suffer short-term damage.
10.2 The prices of the raw materials - the prices of the raw materials are
international, and are subject to fluctuations on the global market, which is
open and competitive, and are primarily influenced by the energy prices and
surplus demand and supply on the global markets. The suppliers revise their
prices in accordance with global price fluctuations. In fact, so far as most of
the raw materials are concerned - generally involved are two to three price
revisions a year. Fluctuations in the prices of the raw materials affects
Plastics' profitability, but Plastics tries to deal with the said fluctuations
by revising the prices of the raw materials which it sells in consequence of
changes in the prices of the raw materials purchased. Since for the most part
the price revisions stem from changes in the manufacturers' costs, all the
manufacturers' are affected and to the best of Plastics' knowledge similar
revisions are also made by Plastics' competitors. Nonetheless, there is
potential exposure in consequence of changes in the prices of the raw materials.
10.3 Changes in the foreign currency exchange rate - most of Plastics' raw
material purchases are effected in foreign currency - dollar or Euro, and in
accordance with the credit which Plastics receives from its suppliers, which is
also in foreign currency. In order to narrow the exposure in respect of changes
in the exchange rate, Plastics tries to take bank credit in the same currency in
which it effected the sale, or to execute forward transactions with the aim of
being protected against changes as aforesaid.
10.4 Dangerous substances - Plastics works with dangerous substances and is
exposed to the risks involved in the routine handling thereof. In light of this,
Plastics operates in accordance with the approvals detailed in paragraphs 3.3
and 3.4. The toxins permit was obtained after Plastics was subjected to tests
and a long approvals process of the Ministry of the Environment. Within the
framework of the toxins permit, Plastics works in accordance with the procedures
laid down by the Ministry of the Environment and the emergency procedures of the
fire-fighting authorities. In addition, Plastics employees undergo routine
training and its warehouses contain emergency equipment and emergency procedures
in the event of a malfunction or fire.
10.5 In addition, Plastics might be exposed to external factors, which may
not be quantified, that might affect the Israeli economy in its entirety, such
as the economic situation and/or the political situation and/or the security
situation, and in such context it might be affected by government decisions
regarding cuts in the budget designated for investment in infrastructure, of
which the fiberglass-polyester component constitutes an integral part, such as:
water and sewage pipes, desalination facilities, chemical plants, building,
public gardens and the like. See also chapter (B).
11. Insurance
Plastics is insured with Arieh Israeli Insurance Co. Ltd through a
set of insurances including liabilities deriving from its routine activity. This
set of insurances includes the following cover: heavy vehicle and forklift
insurances, insurance of the business including fire and break-in, employers'
liability insurance, contents insurance including inventory, insurance of
property en route, third party liability insurance, natural damages insurance
including cover for riots and strikes, personal accident insurance. According to
Plastics, Plastics is not under-insured.
(B) INFLUENCE OF EXTERNAL FACTORS
Save as set forth below, as at the date of this profile Plastics is
not aware of the occurrence of any events and developments external to its
activity that affected or which may affect Plastics' affairs.
12. Should the Government decide upon an economic policy of increasing
investments in infrastructure, Plastics estimates that this will positively
affect the fiberglass-polyester market in Israel, which constitutes an integral
part of the infrastructure (as set forth in paragraph 2.2 above) and there will
be an increase in its sales, which cannot be quantified.
13. In addition, see above for details regarding the principal risk
factors which might affect Plastics' activity, insofar as they have occurred and
/or shall occur during the course of Plastics' current operation.
(C) MATERIAL AGREEMENTS
Save for agreements in the ordinary course of Plastics' business,
Plastics has signed the following agreements in the period described, which
might be considered material:
14. A retirement agreement between Plastics and Max Kisos of 1st January
2001, in which it was agreed that simultaneously with the sale of Max Kisos'
shares in Plastics (as described in paragraph 24(2) below), Max Kisos would
retire from his position as Plastics' general manager and cease to be an
employee of Plastics (it is noted that thereafter Plastics contracted with KDM
for the provision of management services, through Max Kisos, as an independent
contractor, as described in paragraph 8.2(1) above). In this agreement it was
provided that Max Kisos would retire from his employment at Plastics on 31st
December 2000 and that as of 1st January 2001 there would no longer be
employer-employee relations between the parties. On the date of his retirement
and thereafter, Plastics made a number of payments to Max Kisos, as detailed in
the agreement.
Upon payment of all the amounts detailed in this agreement, Max
Kisos waived all claims and demands vis-a-vis Plastics concerning
employer-employee relations, including all matters connected with severance pay.
In Plastics' assessment, it is unlikely that Max Kisos will sue
Plastics in relation to the existence of employer-employee relations between
them, such being by reason of the relationship with Max Kisos, the fact that he
chose to contract with Plastics as an independent contractor through KDM, a
company under his control, and in light of the warranties and indemnity clauses,
for which Max Kisos is liable, as provided in paragraph 8.2(1), that are
included in the agreement with KDM in such regard.
15. An agreement between Plastics and KDM of 1st January 2001, as detailed
in paragraph 8.2(1) above. It is noted that pursuant to the allotment agreement,
this agreement will remain in force.
16. An agreement of 1st January 2002, as amended with effect from 1st July
2003, between Plastics and Kidron Trade & Agencies Ltd, a private company 99% of
which issued and paid up share capital is held by Kidron Holdings and 1% of
which issued and paid up share capital is held by Michael Susz - pursuant to the
agreement, Plastics provides Kidron Trade & Agencies Ltd (hereinafter referred
to as "Trade") with services of import, storage and distribution of cleaning
materials for hi-tech - electronic systems. In consideration for the services'
provision, Trade undertook to pay Plastics a quarterly sum as follows: 17.5% of
Plastics' quarterly rental costs (rent, building maintenance, electricity,
municipal tax, water and business insurance) in respect of that part of the
warehouse used by Trade (this percentage shall change if a written agreement is
reached on a change in the part of the warehouse used by Trade), and a sum equal
to 8% of Trade's sales turnover in the preceding quarter.5% of Trade's said
turnover is intended to cover Plastics\' employees' costs in connection with the
provision of the services. In the case of an increase in the cost of living
increment at a rate higher than the relative increase in Trade's turnover in the
same quarter (in comparison with the preceding quarter), this percentage shall
be increased accordingly. For example, if the cost of living increment has
increased by 10%, and Trade's turnover has increased by 1% only, then 5% of
Trade's turnover will be increased by 9% (i.e., will be, after the increase,
5.45%). Accordingly, the percentage of Trade's turnover will be 8.45% (instead
of 8%). 3% of Trade's turnover is intended to cover Plastics' transportation
costs in connection with the provision of the services. In the case of an
increase in the transportation prices as Plastics will be notified by the Israel
Road Transport Board (Moetzet Ha'Heiseim and Ha'Movilim) in the relevant
quarter, at a rate higher than the relative increase in Trade's turnover in the
same quarter (in comparison with the preceding quarter), this percentage shall
be increased accordingly. The update shall be effected at the end of the first
quarter of each year, in relation to the previous year. In the event of a
failure to reach agreement on the manner of effecting the update, the matter
shall be decided by an expert as determined in the agreement. In any event, the
consideration shall not be less than the higher NIS 45,000 per quarter,. This
agreement shall remain in force until 31st December 2003. As of 1st January 2004
the agreement will be automatically renewed for terms of 12 months on each
occasion. A party which is not interested in the agreement's renewal may give
written notice thereof to the other party, 60 days prior to the date of the
agreement's renewal.
It is noted that pursuant to the allotment agreement, this agreement
will remain in force.
17. An agreement between Plastics and Kidron Holdings of 1st January 2001,
as detailed in paragraph (D)(1) below.
18. An agreement between Plastics and Trei Zuzei Ltd of 1st January 2001,
as detailed in paragraph (D)(2) below.
19. A tenancy agreement between Plastics and Gev-Yam for Lands. Ltd (and/
or its subsidiary, Standard Pavilions for Industry (Haifa Bay 6) Ltd
(hereinafter referred to as "the landlord"), of 27th March 1998, including the
addenda thereto of 25th March 2001, 17th May 2001 and 3rd November 2002.
Pursuant to this agreement, Plastics rents two adjacent buildings, one of an
area of 600 square meters (hereinafter referred to as "the large building") and
the other of an area of 200 square meters (hereinafter referred to as "the small
building ") in the Gev-Yam industrial area in Haifa for the purpose of holding
and operating a workshop, manufacturing and marketing and import of raw
materials for industry. The tenancy term is until 31st December 2005.
The rent for the large building is NIS 20.72 per square meter, and
the rent for the small building is NIS 17 per square meter. In addition to the
rent, there is the payment of service fees for the premises in a sum of about
NIS 360 per month, which might vary from time to time, as described in the
agreement. The said amounts are with the addition of VAT and linkage.
To secure timely payment of the rent and other payments, Plastics
gave the landlord, within the scope of this agreement, 11 promissory notes in
amounts based on the basic rent for one tenancy year plus linkage and VAT. In
addition, Plastics undertook to cause its shareholders (which at the time of the
agreement's execution were Kidron Holdings and Max Kisos) to guarantee all
Plastics' obligations to the landlord and to sign, at the landlord's request,
all the promissory notes signed by Plastics, and indeed, in the scope of this
agreement's execution, Kidron Holdings and Max Kisos guaranteed, each of them
separately, all Plastics' obligations pursuant to the agreement. It is noted
that on the date of completing the transaction with Technoplast, Technoplast
will assume the said guarantees, directly vis-a-vis the landlord or vis-a-vis
the guarantors on a 'back to back' basis.
20. Bank credit
Pursuant to a document of 14th May 2002 from the International Bank
of Israel Ltd (hereinafter referred to as the "International Bank") to Plastics,
International Bank agreed to provide Plastics with short-term credit facility in
a sum of $ 1,000,000 on certain terms and conditions. Plastics utilizes most of
its credit facility at the International Bank, for the purpose of financing its
routine activity, by taking shekel or dollar loans. As mentioned in paragraph
(D)(3) below, Kidron Holdings guarantees Plastics' obligations towards the
International Bank. The guarantee's removal constitutes a condition precedent to
the transaction's completion.
21. Charges
Plastics' obligations to the International Bank are secured by
charges. Set forth below are details of the charges registered over Plastics'
assets:
Registration Chargee Amount secured Description of charge Special terms
date
7.8.2002 International Without A first-ranking floating charge May not be
Bank limitation over the plant and all the assets, charged or
property and rights of whatsoever transferred
type, without exception, that without the
Plastics currently has and which chargee's consent
it shall have at any time in the
future in any manner and way,
including, and without prejudice,
immovable assets, movable assets,
debts, book debts, unpaid capital,
tenancy, goodwill, profits,
income, participations in other
plants, all manner of other
beneficial and proprietary rights
and the proceeds therefrom,
including over rights to indemnity
or compensation in the event of
damage or loss
10.2.2003 International Without A first-ranking floating charge May not be
Bank limitation over all the instruments, charged or
promissory notes, bills of transferred
exchange and cheques and all other without the
negotiable instruments which chargee's consent
Plastics has or in respect of
which it has a right, as payee,
beneficiary, endorsee or
otherwise, save for the
instruments deposited and/or that
shall be deposited at other banks
for security
(D) EXTRAORDINARY TRANSACTIONS WITH PLASTICS' CONTROLLING SHAREHOLDER OR IN
WHICH THE CONTROLLING SHAREHOLDER HAS A PERSONAL INTEREST, WHICH BIND PLASTICS
Set forth below are details of the extraordinary transactions
between Plastics and its controlling shareholder or in which its controlling
shareholder has a personal interest, which bind Plastics as at the date of this
profile:
(1) An agreement of 1st January 2001 between Plastics and Kidron Holdings
- in accordance with this agreement, Kidron Holdings will provide Plastics, as
independent contractor, consultancy and management services which include:
creating business relations with the Company's suppliers abroad; locating new
sources of raw materials for the Company; assisting the Company's general
manager in locating new markets, in the management of customer relations and in
contacts with financing entities for the purpose of obtaining credits needed by
the Company for its operation; administrative management and professional
back-up and assistance to the Company's general manager in the Company's current
management and operation. In addition, Kidron Holdings will provide Plastics
with office services which include: the allocation of offices at the offices of
Kidron Holdings to Plastics' general manager, and to other employees of Plastics
and the provision of secretarial, telephone, facsimile, photocopying, computer
and bookkeeping services.
In consideration for the services' provision, Plastics will pay
Kidron Holdings as follows: for the management and consultancy services - annual
management and consultancy fees in a sum of 5% of Plastics' annual sales
turnover, plus VAT in accordance with law. Nonetheless, pursuant to the
allotment agreement, as of the completion date the annual management and
consultancy fees shall be in a fixed sum of $ 100,000 a year plus VAT (instead
of 5% of the turnover); for the office services - Plastics' shall participate in
the rent and maintenance expenses of Kidron Holdings' offices pro rata, in
accordance with the space of said offices intended for the provision of the
services to Plastics, relative to the entire offices' space of Kidron Holdings.
In addition, Plastics shall reimburse Kidron Holdings for a proportional part of
its expenses for secretarial, facsimile, telephone, photocopying, computer and
bookkeeping services. Pursuant to the allotment agreement, as of the completion
date Plastics' contribution towards the rent and office services shall not
exceed NIS 250,000 per year, linked to the dollar rate. This agreement shall be
in force until 31st December 2003. As of 1st January 2004, the agreement will be
automatically renewed for terms of 12 months on each occasion. A party which is
not interested in the agreement's renewal may give written notice thereof to the
other party, three months prior to the date of the agreement's renewal.
Notwithstanding the aforegoing, it was agreed that in any event Kidron Holdings
may terminate the provision of the office services to Plastics upon a three
months' prior written notice.
(2) An agreement for the provision of consultancy and management services
of 1st January 2001 between Plastics and Trei Zuzei Ltd, a private company
almost fully owned and controlled by Michael Susz - in accordance with the
agreement, Trei Zuzei will provide management and consultancy services to
Plastics, which include: strategic planning; currency risks management
consultancy; current management assistance. In consideration for the services'
provision, Plastics shall pay Trei Zuzei annual management and consultancy fees
in a sum of $ 100,000, plus VAT in accordance with law. This agreement is valid
until 31st December 2004. As of 1st January 2005 the parties may renew the
agreement for terms of 12 months on each occasion, by the joint consent of both
the parties received 60 days prior to the date of the agreement's expiration.
It is noted that pursuant to the allotment agreement, this agreement
will be assigned from Trei Zuzei to Technoplast.
(3) An unlimited automatically renewable guarantee of 28th May 2002 that
Kidron Holdings gave in favor of First International Bank of Israel Ltd, to
secure Plastics' debts and obligations thereto.
Pursuant to the allotment agreement, the removal of this guarantee
constitutes a condition precedent to the transaction's completion.
(E) THE CORPORATION'S CAPITAL
22. Registered capital
Plastics' registered capital is NIS 22,900 divided into 22,900
ordinary shares of NIS 1 n.v. each. Since 1st January 2001, there has not been
any change in Plastics' registered capital.
23. Paid up capital
Plastics' issued and paid up capital is 100 ordinary shares of NIS 1
n.v. each. Since 1st January 2001, there has not been any change in Plastics'
issued and paid up capital.
24. Plastics' shareholders
(1) Plastics' interested parties and/or controlling shareholders
Set forth below are details, to the best of Plastics' knowledge, of
the interested parties holding shares in Plastics as of the date of the profile:
Interested party's name Current holdings Holdings on a fully diluted
basis (exercised subject to the
transaction's completion)
No. of shares Percentage in No. of shares Percentage in
capital and in capital and in
voting voting
Kidron Management & Holdings (1961) 100 100% 65 65%
Ltd. (herein: "Kidron Holdings")
Michael and Sigal Susz --- --- 35 35%
Kidron Holdings is a private company of which, to Plastics' best
knowledge, about 80% of the issued and paid up capital is held by Trei Zuzei
Ltd. (a private company 99% of which share capital is held by Michael Susz);
about 10% by Michael Susz and about 10% by Yaakov Meidan.
(2) Changes in the shareholdings during the period relevant to this
profile
As described at the beginning of this profile, since its foundation
and until the commencement of the period relevant to this profile, Plastics'
shares were held by two shareholders: Kidron Holdings (which held 65% of
Plastics' issued and paid up share capital) and Max Kisos (who held 35% of
Plastics' paid up share capital). According to an agreement between Kidron
Holdings and Max Kisos of 1st January 2001, Max Kisos sold all his holdings in
the Company - 35 ordinary shares of NIS 1 n.v. each, which constituted 35% of
Plastics' issued share capital, to Kidron Holdings, in consideration for a sum
in new shekels equal to $ 700,000. Half the consideration for these shares was
paid by Kidron Holdings on the date of the agreement and the remaining
consideration is payable in 48 equal monthly instalments (i.e. until 31st
December 2004). Nonetheless, Kidron Holdings may accelerate the said payments in
its exclusive discretion.
In the agreement it was agreed that Kidron Holdings would sign deeds
of pledge of 30 of the shares being sold in favor of Max Kisos to secure the
balance of the payment for the shares in accordance with the payment terms
stipulated in the agreement. It was also stipulated that Kidron Holdings would
be entitled to remove the charge from some of the charged shares pro rata to the
payments already performed, and that it could convert the charged shares into
other reasonable collateral to the satisfaction of both parties' attorneys. It
was further stipulated in the agreement that Kidron Holdings would be entitled
to act with Plastics' shares as if it were the owner thereof and in such context
it may perform any action in Plastics, including the passing of resolutions of
whatsoever type, and in the event of an allotment of shares in Plastics,
additional shares would be charged in favor of Max Kisos, such that the ratio of
the charged shares would be maintained.
As at the date of this profile, the balance of Kidron Holdings'
obligation to Max Kisos in the framework of the agreement has not yet been paid
in full, and therefore, there is still a charge over 30 of Plastics' shares in
favor of Max Kisos; however, Kidron Holdings has undertaken that by the date of
completion of the transaction with Technoplast, Plastics' shares will be free of
any charge, including the above mentioned charge.
To Plastics' best knowledge, according to an agreement of 1st May
2002 between Kidron Holdings and Michael Susz, as amended on 11th September
2003, Kidron Holdings granted Michael Susz and Sigal Susz (jointly hereinafter
referred to as "the entitlees"), irrevocably and so long as Kidron Holdings'
debt to Michael Susz has not been paid, the right to receive all Plastics'
shares purchased by Kidron Holdings from Max Kisos (as described above - that is
to say, 35 ordinary shares of NIS 1 n.v. each, constituting 35% of Plastics'
paid up share capital), in consideration for payment of a sum of $ 700,000 from
a debt which Kidron Holdings owed Michael Susz. According to this agreement,
immediately upon receiving the entitlees' demand in which they notify Kidron
Holdings of the exercise of the right given to them, Kidron Holdings will
transfer its said shares in Plastics into the name of Michael and Sigal Susz as
joint shareholders.
On 12th September 2003 Michael and Sigal Susz notified Kidron
Holdings of the exercise of their right to receive 35 ordinary shares of NIS 1
n.v. each of Plastics, effective as of the date of completion of the transaction
with Technoplast in accordance with the agreement between it and Technoplast. In
their notice, Michael and Sigal Susz undertook to transfer Plastics' said shares
to Technoplast in accordance with the agreement with Technoplast, against
receiving 35% of the allotment shares as defined in the allotment agreement, all
as detailed in the allotment agreement. That is to say, prior to the date of
completing the transaction between Plastics and Technoplast, on the assumption
that all the conditions for the completion of the transaction with Technoplast
are fulfilled, Plastics' shareholders will be as follows: Kidron Holdings -
which will hold 65% of Plastics' issued and paid up share capital; and Michael
and Sigal Susz - who will jointly hold 35% of Plastics' issued and paid up share
capital.
25. Bonus shares and the allotment of securities other than for full
consideration in cash
During the years 2001 and 2002 and until the date of this profile,
Plastics has not allotted and has not undertaken to allot bonus shares or
securities other than for full consideration in cash.
Explanations to the annual financial statements
A. Financial position
We present below the major changes in balance sheet items between the
balance sheet of 31 December 2002 and 31 December 2001:
At 31 December 2002, current assets amounted to NIS 6,075 thousand,
compared with NIS 5,431 thousand at 31 December 2001. The major changes were
the NIS 99 thousand decrease in cash, the NIS 216 thousand increase in trade
accounts receivable, and the NIS 182 thousand increase in accounts receivable
and NIS 345 thousand increase in inventories.
At 31 December 2002, current liabilities amounted to NIS 6,710 thousand,
compared with NIS 6,152 thousand at 31 December 2001. The major changes were
the NIS 502 thousand increase in credit from banking institutions, and the NIS
56 thousand increase in trade and other accounts payable.
At 31 December 2002, the shareholders' deficit amounted to NIS 98
thousand, comprising 1.5% of the total balance sheet, compared with a deficit of
NIS 154 thousand at 31 December 2001, comprising 2.5% of the total balance
sheet. The decrease in the shareholders' deficit derived from the net income
for the year under report.
B. Results of operations
In 2002, sales turnover amounted to NIS 10,133 thousand, compared with
NIS 10,484 thousand in 2001, and NIS 11,505 thousand in 2000, a decrease of 3%
over last year and a decrease of 12% over 2000. The decrease was mainly the
result of a slowdown in activity in the economy.
In 2002, cost of revenues amounted to NIS 5,679 thousand, compared with
NIS 5,904 thousand in 2001, and NIS 6,180 thousand in 2000, a decrease of 4%
over last year, and 8% over 2000.
In 2002, gross profit amounted to NIS 4,454 thousand, comprising 44% of
sales turnover, compared with NIS 4,580 in 2001, comprising also 44% of sales
turnover, and NIS 5,325 thousand in 2000, comprising 46% of sales turnover. The
decrease in 2002 and 2001 over 2000 derived from a decrease in sales turnover,
as explained above.
In 2002, selling, general and administrative expenses amounted to NIS
3,737 thousand, comprising 37% of sales turnover, compared with NIS 3,930
thousand in 2001, comprising also 37% of sales turnover, and NIS 3,831 thousand
in 2000, comprising 33% of sales turnover.
In 2002, income from ordinary operations amounted to NIS 717 thousand,
compared with operating income of NIS 650 thousand in 2001, and NIS 1,494
thousand in 2000. The 10% increase in 2002 over 2001 derived from savings in
the salary component of general and administrative expenses (an item which
includes, among other things, bonuses based on performance), and the 52%
decrease in 2002 over 2000 derived from the decrease in sales turnover.
In 2002, financing expenses amounted to NIS 576 thousand, compared with
financing expenses of NIS 586 thousand in 2001, and financing income of NIS 3
thousand in 2000. The increase of financing expenses in 2001 and 2002 derived
from receipt of short-term bank loans in an amount of NIS 3 million during 2001,
in order to finance the dividend distribution in 2001.
In 2002, Kidron Plastics Ltd. reported net income of NIS 56 thousand,
compared with a loss of NIS 222 thousand in 2001, and net income of NIS 925
thousand in 2000.
C. Liquidity
Cash flows used in the current operations of Kidron Plastics in 2002
amounted to NIS 492 thousand, compared with a cash outflow of NIS 1,363 thousand
in 2001 and a cash inflow of NIS 1,968 thousand in 2000.
Cash flows used in the investment activities of Kidron Plastics in 2002
amounted to NIS 55 thousand, compared with a cash inflow of NIS 704 thousand in
2001 and a cash outflow of NIS 1,007 thousand in 2000. The major changes
resulted from a loan that was granted to the parent company in an amount of NIS
869 thousand in 2000, which loan was repaid in 2001, and from changes in the
turnover of purchases of fixed assets which amounted to NIS 101 thousand, NIS
215 thousand, and NIS 220 thousand in 2001, 2002, and 2000 respectively.
C. Liquidity (cont.)
Cash flows provided by the financing activities of Kidron Plastics in
2002 amounted to NIS 448 thousand, compared with NIS 350 thousand in 2001 and a
cash outflow of NIS 861 thousand in 2000. In 2001, the Company distributed a
dividend of NIS 3.1 million, which was financed through bank loans.
The current ration increased from 0.88 on 31 December 2001 to 0.91 on 31
December 2002.
D. Sources of financing
The average turnover of short-term loans for the period ended 31 December
2002 amounted to NIS 4,198 thousand, compared with NIS 2,231 thousand during the
same period last year. The increase derived from receipt of loans amounting to
NIS 3 million during 2001.
The average turnover of supplier credit for the period ended 31 December
2002 amounted to NIS 1,798 thousand, compared with NIS 1,734 thousand during the
same period last year.
The average turnover of customer credit for the period ended 31 December
2002 amounted to NIS 4,035 thousand, compared with NIS 3,863 thousand during the
same period last year.
E. Report on exposure to and management of market risks
1. Name of responsible party
The party responsible for managing market risks at the Company is the
chairman of the board of directors, Mr. Michael Susz.
2. A detailed description of the market risks to which the Company is
exposed
The Company is exposed to changes in foreign currency exchange rates.
Most of the Company's purchases of raw materials are made in foreign currency -
either the dollar or the euro. Therefore, the credit the Company receives from
its suppliers is also in foreign currency. However, the sales of the Company
are in shekels.
3. Company policy in respect of market risk management
The Company is of the opinion that at its risk level, it does not require
a wide use of derivatives. Nevertheless, it carried out forward transactions
from time to time, in order to hedge against such changes.
4. Means of supervision and realization
Decisions regarding the type of financing are made on a regular basis by
company management.
LINKAGE TERMS
Adjusted NIS thousands
31 December 2002
Monetary balances
Foreign I.C.P.I. Unlinked Non-monetary Total
currency-linked linked balances
(1)
Assets
Cash and cash equivalents - - 14 - 14
Trade accounts receivable - - 3,938 - 3,938
Accounts receivable and other debit 205 549 - 112 866
balances
Inventories - - - 1,257 1,257
Excess of funded amounts over the - - 23 - 23
liability for severance pay, net
Fixed assets - - - 522 522
________ ________ ________ ________ ________
Total assets 205 549 3,975 1,891 6,620
------------ ------------ ------------ ------------ ------------
Liabilities
Credit from banking institutions 2,135 - 2,314 - 4,449
Suppliers and service providers 1,419 - 430 - 1,849
Accounts payable and other credit - 322 90 - 412
balances
Deferred taxes - - - 8 8
________ ________ ________ ________ ________
Total liabilities 3,554 322 2,834 8 6,718
------------ ------------ ------------ ------------ ------------
________ ________ ________ ________ ________
Excess assets (liabilities) (3,349) 227 1,141 1,883 (98)
________ ________ ________ ________ ________
________ ________ ________ ________ ________
Adjusted NIS thousands
31 December 2001
Monetary balances
Foreign I.C.P.I. Unlinked Non-monetary Total
currency-linked linked balances
(1)
Assets
Cash and cash equivalents 99 0 14 - 113
Trade accounts receivable - - 3,731 - 3,731
Accounts receivable and other debit 196 407 - 72 675
balances
Inventories - - - 912 912
Excess of funded amounts over the - - 28 - 28
liability for severance pay, net
Fixed assets - - - 593 593
________ ________ ________ ________ ________
Total assets 295 407 3,773 1,577 6,052
------------ ------------ ------------ ------------ ------------
Liabilities
Credit from banking institutions - - 3,947 - 3,947
Suppliers and service providers 1,144 - 604 - 1,748
Accounts payable and other credit - 249 208 - 457
balances
Liabilities to banking institutions - 54 - - 54
________ ________ ________ ________ ________
Total liabilities 1,144 303 4,759 - 6,206
------------ ------------ ------------ ------------ ------------
________ ________ ________ ________ ________
Excess assets (liabilities) (849) 104 (986) 1,577 (154)
________ ________ ________ ________ ________
________ ________ ________ ________ ________
(1) Mainly to the Euro.
Explanations to the interim financial statements
A. Financial position
We present below the major changes in balance sheet items between the
balance sheet of 30 June 2003 and 31 December 2002:
At 30 June 2003, current assets amounted to NIS 5,640 thousand, compared
with NIS 6,075 thousand at 31 December 2002. The major changes were the NIS 117
thousand decrease in trade accounts receivable, the NIS 165 thousand decrease in
accounts receivable (mainly the debt balance of an interested party), and the
NIS 151 thousand decrease in inventories.
At 30 June 2003, current liabilities amounted to NIS 5,938 thousand,
compared with NIS 6,710 thousand at 31 December 2002. The major changes were
the NIS 429 thousand decrease in credit from banking institutions, and the NIS
343 thousand decrease in trade and other accounts payable. These changes were
made possible by the positive cash flow from operations during the reporting
period.
At 30 June 2003, the shareholders' equity amounted to NIS 199 thousand,
comprising 3.2% of the total balance sheet, compared with a deficit of NIS 98
thousand at 31 December 2002. The increase in shareholders' equity derived from
the net income for the period under report.
B. Results of operations
In the first 6 months of the 2003 (the "Reporting Period"), sales
turnover amounted to NIS 4,948 thousand, compared with NIS 5,043 thousand in the
same period last year, a decrease of 2%.
During the reporting period, cost of revenues amounted to NIS 2,847
thousand, compared with NIS 2,738 thousand during the same period last year, an
increase of 4%
During the reporting period, gross profit amounted to NIS 2,101 thousand,
comprising 43% of sales turnover, compared with NIS 2,305 during the same period
last year, comprising 46% of sales turnover.
During the reporting period, selling, general and administrative expenses
amounted to NIS 1,703 thousand, comprising 34% of sales turnover, compared with
NIS 1,973 thousand during the same period last year, comprising 39% of sales
turnover. The decrease derived from the reduction in the salary component when
compared with the same period last year.
During the reporting period, income from ordinary operations amounted to
NIS 398 thousand, compared with operating income of NIS 332 thousand during the
same period last year.
During the reporting period, financing income amounted to NIS 80
thousand, compared with financing expenses of NIS 288 thousand during the same
period last year. The change derived mainly from the sharp upward revaluation
of the exchange rate of the dollar.
During the reporting period, Kidron Plastics Ltd. reported net income of
NIS 297 thousand, compared with net income of NIS 2 thousand during the same
period last year.
C. Liquidity
Cash flows provided by the current operations of the Company during the
reporting period amounted to NIS 456 thousand, compared with a cash outflow of
NIS 6 thousand during the same period last year. The change derived mainly from
the increase in net income during the reporting period.
Cash flows used in the investment activities of the Company during the
reporting period amounted to NIS 29 thousand, compared with a cash inflow of NIS
38 thousand during the same period last year.
Cash flows used in the financing activities of the Company during the
reporting period amounted to NIS 429 thousand, compared with NIS 99 thousand
during the same period last year. The change derived mainly from the reduction
in the net credit from banking institutions.
The current ration increased from 0.89 on 30 June 2002 to 0.95 on 30 June
2003, mainly due to the decrease in suppliers and other accounts payable.
D. Sources of financing
The average turnover of short-term loans for the period ended 30 June
2003 amounted to NIS 4,235 thousand, compared with NIS 3,918 thousand during the
same period last year.
The average turnover of supplier credit for the period ended 30 June 2003
amounted to NIS 1,601 thousand, compared with NIS 1,638 thousand during the same
period last year.
The average turnover of customer credit for the period ended 30 June 2003
amounted to NIS 4,084 thousand, compared with NIS 3,962 thousand during the same
period last year.
E. Report on exposure to and management of market risks
1. Name of responsible party
The party responsible for managing market risks at the Company is the
chairman of the board of directors, Mr. Michael Susz.
2. A detailed description of the market risks to which the Company is
exposed
The Company is exposed to changes in foreign currency exchange rates.
Most of the Company's purchases of raw materials are made in foreign currency -
either the dollar or the euro. Therefore, the credit the Company receives from
its suppliers is also in foreign currency. However, the sales of the Company
are in shekels.
3. Company policy in respect of market risk management
The Company is of the opinion that at its risk level, it does not require
a wide use of derivatives. Nevertheless, it carried out forward transactions
from time to time, in order to hedge against such changes.
4. Means of supervision and realization
Decisions regarding the type of financing are made on a regular basis by
company management.
LINKAGE TERMS
Adjusted NIS thousands
30 June 2003
Monetary balances
Foreign I.C.P.I. Unlinked Non-monetary Total
currency-linked linked balances
(1)
Assets
Cash and cash equivalents - - 12 - 12
Trade accounts receivable - - 4,009 - 4,026
Accounts receivable and other debit 17 334 7 155 496
balances
Inventories - - - 1,106 1,106
Excess of funded amounts over the - - 21 - 21
liability for severance pay, net
Fixed assets - - - 483 483
________ ________ ________ ________ ________
Total assets 17 334 4,049 1,744 6,144
------------ ------------ ------------ ------------ ------------
Liabilities
Credit from banking institutions 1,813 - 2,207 - 4,020
Suppliers and service providers 1,000 - 354 - 1,354
Accounts payable and other credit - 359 205 - 564
balances
Deferred taxes - - - 7 7
________ ________ ________ ________ ________
Total liabilities 2,813 359 2,766 7 5,945
------------ ------------ ------------ ------------ ------------
________ ________ ________ ________ ________
Excess assets (liabilities) (2,796) (25) 1,262 1,758 199
________ ________ ________ ________ ________
________ ________ ________ ________ ________
Adjusted NIS thousands
30 June 2002
Monetary balances
Foreign I.C.P.I. Unlinked Non-monetary Total
currency-linked linked balances
(1)
Assets
Cash and cash equivalents 32 0 14 - 46
Trade accounts receivable 367 - 3,631 - 3,998
Accounts receivable and other debit - 397 14 74 485
balances
Inventories - - - 1,009 1,009
Excess of funded amounts over the - - 32 - 32
liability for severance pay, net
Fixed assets - - - 489 489
________ ________ ________ ________ ________
Total assets 399 397 3,691 1,572 6,059
------------ ------------ ------------ ------------ ------------
Liabilities
Credit from banking institutions - - 3,902 - 3,902
Suppliers and service providers 1,195 - 339 - 1,534
Accounts payable and other credit - 618 145 - 763
balances
Deferred taxes - - - 12 12
________ ________ ________ ________ ________
Total liabilities 1,195 618 4,386 12 6,211
------------ ------------ ------------ ------------ ------------
________ ________ ________ ________ ________
Excess assets (liabilities) (796) (221) (695) 1,560 (152)
________ ________ ________ ________ ________
________ ________ ________ ________ ________
(1) Mainly to the Euro.
This information is provided by RNS
The company news service from the London Stock Exchange
END
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