JOINT VENTURE AGREEMENT BY AND AMONG ORBOTECH LTD. AND VALOR COMPUTERIZED SYSTEMS LTD.

 
 
 
 
BY AND AMONG
 
ORBOTECH LTD.
 
AND
 
 

 
 
 
 
XXXXX XXXXX - XXXXX XXXXX
X. XXXXXXXXX & CO.
LAW OFFICES
ADVOCATES
00 XXXX XXXXXX XXXX
00 ROTHSCHILD BLVD.
RAMAT-GAN 52506
TEL-AVIV 65784

 
seven hundred thirty-sixth
CONSOLIDATED AMENDMENT TO THE JOINT VENTURE AGREEMENT
 
This Consolidated Amendment to the Joint Venture Agreement (this “Amendment”), made and entered into as of the ___ day of September, 1999
 
BY AND BETWEEN
 
ORBOTECH LTD. with an address at New Industrial Zone, Yavne, Israel
(hereinafter: “Orbotech”)
of the one part
 
AND
 
VALOR COMPUTERIZED SYSTEMS LTD. with an address at New Industrial
Zone, Yavne, Israel
(hereinafter: “Valor”)
of the second part
 
AND
 
FRONTLINE P.C.B. SOLUTIONS LIMITED PARTNERSHIP with an address at Xxx Xxxxxxxxxx Xxxx, Xxxxx, Xxxxxx
(hereinafter: “Frontline”)
of the third part
 
AND
 
FRONTLINE P.C.B. SOLUTIONS (1998) LTD. with an address at Xxx Xxxxxxxxxx Xxxx, Xxxxx, Xxxxxx
(hereinafter: “Frontline Ltd.”)
of the fourth part
(collectively the “Parties”, each a “Party”)
 
WHEREAS:
Orbotech and Valor entered into a Joint Venture Agreement as of August 10, 1998 which Frontline and Frontline Ltd. subsequently became parties to and which the Parties subsequently amended and/or agreed to amend (such Joint Venture Agreement as amended, the “JV Agreement”); and
 
WHEREAS:
the Parties desire to consolidate the various amendments made to the JV Agreement to date and further amend the terms thereof, as hereinafter set forth.
 
NOW, THEREFORE, in consideration of the mutual promises and covenants set forth herein the parties hereto agree as follows:
 


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1.
Effective as of the date hereof, the binding version of the JV Agreement, incorporating all amendments thereto made or agreed to by the parties to date, shall be the Consolidated Version attached hereto as Exhibit A.
 
 
IN WITNESS WHEREOF, the parties hereto have executed this Consolidated Amendment as of the day and year first above written.
 
/s/ Xxxxx Xxxxx
  
/s/ X. Xxxxxxx [COMPANY SEAL]
ORBOTECH LTD.
  
     
By: _____________________________
  
By: X. Xxxxxxx
Title:____________________________
  
Title: C.E.O.
     
Date:____________________________
  
Date: 8/10/99

 
     
FRONTLINE P.C.B SOLUTIONS LIMITED PARTNERSHIP
  
FRONTLINE P.C.B. SOLUTIONS (1998) LTD.
     
By: /s/ X. Xxxxx                
  
By: /s/ X. Xxxxx                
Frontline P.C.B. Solutions (1998) Ltd., general partner
    
     
By: _____________________________
    
     
Title:____________________________
  
Title: _________________
     
Date:____________________________
  
Date: _________________
 

 

 
CONSOLIDATED VERSION

 
 

 
BY AND AMONG

ORBOTECH LTD.

AND




 

CONSOLIDATED VERSION

TABLE OF CONTENTS
 
    PAGE NO.
SECTION 1 - Definitions
7
     
SECTION 2 - General
12
2.1.
Purpose of the Joint Venture.
12
2.2.
JV Entities.
12
     
SECTION 3 - Formation, Ownership and Capitalization of the JV Entities
12
3.1.
Formation of JV Entities.
12
3.2.
Initial Shareholdings in the JV Company.
12
3.3.
Initial Interests in the JVLP.
13
3.4.
Equity Investments in JV Entities.
13
3.5.
Additional Working Capital.
13
3.6.
Distributions.
14
     
SECTION 4 - JV Assets
15
4.1.
Availability of Assets.
15
4.2.
Cooperation.
16
     
SECTION 5 - Transfer of Employees, Equipment and Inventory, Purchase Orders and Warranties
16
5.1.
Designated Employees.
16
5.2.
Transfer of Designated Employees.
16
5.3.
Refusal of Designated Employee.
17
5.4.
Termination of Prior Employment.
17
5.5.
Satisfaction and Waiver of all Prior Undertakings.
17
5.6.
Release by Founding Shareholder.
17
5.7.
Indemnification by the Founding Shareholder.
17
5.8.
Indemnification by the JV.
17
5.9.
Transfer of Equipment and Other Inventory.
18
5.10.
Purchase Orders and Warranty Commitments.
18
5.11.
Transferred Warranties - Local Service Provider and
  
 
Transfer of Purchase Price.
18
5.12.
Bundled Purchase Orders.
18
5.13.
“Effective” Transfer or Assumption.
18
     
SECTION 6 - JV Development Principles
19
6.1.
General Principles.
19
6.2.
Support for Orbotech’s Products.
20
6.3.
Support for Valor’s Products.
20
6.4.
Interfaces for Other Products.
21
     
 
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CONSOLIDATED VERSION

   
PAGE NO.
     
6.5.
Additional Developments Benefiting Orbotech or Valor.
21
6.6.
JV Development Products.
21
6.7.
Termination.
21
     
SECTION 7 - Sales and Customer Support
21
7.1.
Sales and Customer Support Agents.
21
7.2.
Conditions to Maintain Sales Rights.
22
7.3.
Interfaces for Other Products.
22
7.4.
JV/Orbotech Interface Products.
23
7.5.
Valor Subsidiaries.
23
7.6.
Assignment of Sales, Agency and Customer Agreements.
23
7.7.
Service Continuity.
23
7.8.
“Effective” Assignment.
23
7.9.
OEM Arrangements.
24
7.10.
Inconsistent Arrangements.
24
7.11.
Agency Agreements Warranty.
24
7.12.
Marketing Subsidiaries.
25
     
SECTION 8 - Representations, Warranties and Undertakings of the Parties
24
     
8.1.
Due Incorporation.
25
8.2.
Due Authorization.
25
8.3.
Ownership of the JV Assets.
25
8.4.
Liabilities.
25
8.5.
Actions.
26
8.6.
IP Rights.
26
8.7.
Material Assets.
27
8.8.
1997 Revenue.
27
8.9.
No Misleading Statement.
27
8.10.
Founding Shareholder Cooperation.
27
8.11.
No Assumption of Liability.
27
     
SECTION 9 - Governance of the JV Entities
28
9.1.
General Principles.
28
9.2.
Board of Directors; Executive Committee.
28
9.3.
Budget.
30
9.4.
General Managers.
30
9.5.
Management and Officers.
30
9.6.
Major Decisions — Shareholders.
31
9.7.
Major Decisions — Board of Directors.
32
9.8.
Reports.
33
     
SECTION 10 - Intellectual Property
35
10.1.
Intellectual Property Owned/Retained by Orbotech
  
 
and Valor.
35
     
 
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CONSOLIDATED VERSION

   
PAGE NO.
     
10.2.
Intellectual Property Developed by the JV.
35
10.3.
Enforcement of Rights.
35
10.4.
Further Agreements.
36
10.5.
Chief Scientist Funding.
36
     
SECTION 11 - Non-Competition, Corporate Opportunities
36
11.1.
Non-Competition of Founding Shareholders with the
  
 
Joint Venture.
36
11.2.
Non-Competition of the JV Entities with Founding
  
 
Shareholders.
37
11.3.
Deleted
37
11.4.
Purchase of EIT and other CAM Opportunities by the
  
 
Parties.
37
11.5.
“directly or indirectly”.
38
11.6.
Corporate Opportunities.
39
11.7.
Remedies.
39
11.8.
Employees.
39
11.9.
Termination upon Liquidation
39
     
SECTION 12 - Dispute Resolution
40
12.1.
Dispute.
40
12.2.
Appointment of Arbitrator.
40
12.3.
Court Jurisdiction.
40
     
SECTION 13 - Term
41
13.1.
Term.
41
13.2.
Breach.
41
13.3.
Survival.
41
     
SECTION 14 - Closing
41
14.1.
Conditions Precedent.
41
14.2.
Each Founding Shareholder’s Conditions to the Closing.
42
14.3.
Closing.
42
14.4.
Transactions at Closing.
42
14.5.
Outside Closing Date.
43
     
SECTION 15 - Post Closing Covenants
43
15.1.
Transition.
43
15.2.
Access to Information.
44
     
SECTION 16 - Transfer of Shares; Exit Arrangements
44
16.1.
Transfer of Shares.
44
16.2.
Right of First Negotiation; Open Negotiation Period.
45
16.3.
Right of First Refusal; Right to Tag Along.
46
16.4.
Right of Approval.
47
     
 
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CONSOLIDATED VERSION

   
PAGE NO.
     
16.5.
Certain Permitted Transfers.
48
16.6.
Change in Control.
50
16.7.
Sell-Buy Procedure.
51
16.8.
Closing; Directors.
52
16.9.
Selling Shareholder’s Obligations.
53
   
 
SECTION 17 - Indemnification
53
17.1.
Indemnification by Orbotech.
53
17.2.
Indemnification by Valor.
54
   
 
SECTION 18 - Confidentiality
54
18.1.
Publicity.
54
18.2.
Confidentiality.
54
   
 
SECTION 19 - Waiver of Claims
55
19.1.
Waiver by Founding Shareholders.
55
19.2.
No Claims Assigned.
55
19.3.
Claims Affiliates Defined.
55
   
 
SECTION 20 - General Provisions
56
20.1.
Relationship of the Parties.
56
20.2.
Assignment.
56
20.3.
Taxes.
56
20.4.
Force Majeure.
56
20.5.
Notice.
56
20.6.
Entire Agreement and Amendment.
56
20.7.
Severability.
56
20.8.
Governing Law.
57
20.9.
Non-waiver of Rights.
57
20.10.
Headings.
57
20.11.
Counterparts.
57
20.12.
Further Assurances.
57
20.13.
Expenses.
57
20.14.
No Third Party Beneficiary.
57

APPENDICES


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CONSOLIDATED VERSION




This Joint Venture Agreement (this “Agreement”),
made and entered into as of the 10th day of August, 1998

BY AND BETWEEN

ORBOTECH LTD. with an address at New Industrial Zone, Yavne, Israel

(hereinafter: “Orbotech”)
of the one part

AND

VALOR COMPUTERIZED SYSTEMS LTD. with an address at New Industrial
Zone, Yavne, Israel

(hereinafter: “Valor”)
of the other part
(collectively the “Parties”, each a “Party”)
 


WHEREAS:
Orbotech is engaged, inter alia, in the development, manufacturing, marketing, sale and after sales support of automated optical inspection (“AOI”) systems, computer aided manufacturing (“CAM”) and archiving systems, plotters and direct imaging systems for use in the manufacture of printed circuit boards (“PCBs”) and of AOI systems for use in the manufacture of multi-chip modules and flat panel displays and in the processes involved in the mounting of PCBs with electronic components; and
 
WHEREAS: 
Valor is engaged, inter alia, in the development, manufacturing, marketing, sale and after sales support of data management and archiving systems for use in the design of PCBs, design for manufacturing, simulation and analysis tools for use in PCB layout, CAM and archiving systems for use in the manufacture of PCBs and CAM systems for use in the mounting of PCBs with electronic components; and

WHEREAS:
The Parties derive revenue from their CAM and archiving activities from sales and after sales support; and

WHEREAS:
Each Party’s CAM and archiving systems for use in the manufacture of PCBs are based on intellectual property which is subject to claims of ownership by the other Party, which claims have been brought before courts in Israel and the United States and the Parties have resolved to acknowledge that their respective CAM and archiving systems for use in the manufacture of PCBs

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CONSOLIDATED VERSION
 
are based on intellectual property which is jointly owned and to waive and dismiss their respective claims with respect thereto, all subject and pursuant to the terms of this Agreement; and

WHEREAS:
Orbotech and Valor desire to enter into a joint venture (the “Joint Venture”) to consolidate their efforts in the development, manufacturing, marketing, sale and after sales support of CAM and archiving systems for use in the manufacture of PCBs so as to become a world leader in such field while retaining all their respective rights relating to all other uses and all other developments and products in which each of them is or may become engaged, all upon the terms and conditions set forth below.

NOW, THEREFORE, in consideration of the mutual promises and covenants set forth herein the parties hereto agree as follows:


SECTION 1
Definitions

The following terms in this Agreement shall have the meaning ascribed to them as follows:

1.1. “Action” - as set forth in Section 8.5 hereof.

1.2. “Additional Working Capital” - as set forth in Section 3.5 hereof.

1.3. “Affiliates” - with respect to any Party, an entity controlled by, controlling, or under common control with such Party. For purposes hereof, “control” of an entity shall mean the ownership of: (1) more than 50% of the equity securities (or similar interests) of the entity; and (2) more than 50% of the right to participate in the entity’s profits and assets upon liquidation or winding-up; and (3) the right to appoint more than 50% of the members of the board of directors (or similar governing body) of such entity.

1.4. “AOI” - automated optical inspection.

1.5. “Appraiser” - as set forth in Section 16.5.3.2 hereof.

1.6. “Arbitrator” - as set forth in Section 12.2 hereof.

1.7. “Authority” - as set forth in Section 8.5 hereof.

1.8. “Beneficial Interests” - as set forth in Section 16.1.1 hereof.

1.9. “Board” - as set forth in Section 9.2.1 hereof.


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CONSOLIDATED VERSION

1.10. “Budget” - as set forth in Section 9.3 hereof.

1.11. “Buy Offer” - as set forth in Section 16.7.3 hereof.

1.12. “CAM” - computer aided manufacturing.

1.13. “Change in Control” - as set forth in Section 16.6.3 hereof.

1.14. “Changed Shareholder” - as set forth in Section 16.6.1 hereof.

1.15. “Claims Affiliates” - as set forth in Section 19.3 hereof.

1.16. “Closing” - the closing of the transactions hereunder.

1.17. “Closing Date” - the seventh (7th) business day following the day in which both Founding Shareholders have confirmed in writing that all Conditions Precedent pursuant to Section 14 hereof have either been satisfied or waived.

1.18. “CMs” - contract manufacturer.

1.19. “Confidential Information” - as set forth in Section 18.2 hereof.

1.20. “Conditions Precedent” - as set forth in Section 14.1 hereof.

1.21. “Controlling Group of Valor” - as set forth in Appendix 16.6.3

1.22. “Designated Employees” - as set forth in Section 5.1 hereof.

1.23.  Deleted
1.24. “directly or indirectly” - as set forth in Section 11.5 hereof for purposes of Section 11.

1.25. “Directors” - as set forth in Section 9.2.1 hereof.

1.26. “Dispute Notice” - as set forth in Section 12.1 hereof.

1.27. “EIT” - Electronic Imaging Technologies Co. Ltd.

1.28. “Executive Committee” - as set forth in Section 9.2.3 hereof.

1.29. “Execution Date” - the date set forth above in the preamble to this Agreement.

1.30. “Exercise Notice” - as set forth in Section 16.3.2 hereof.

1.31. “First Negotiation Notice” - as set forth in Section 16.2.1 hereof.


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CONSOLIDATED VERSION

1.32. “First Negotiation Period” - as set forth in Section 16.2.2 hereof.

1.33. “Founding Shareholder(s)” - as set forth in Section 2.2 hereof.

1.34. “Founding Shareholder Conditions” - as set forth in Section 14.2 hereof.

1.35. “Founding Shareholder Holding Period” - as set forth in Section 11.1 hereof.

1.36. “Founding Shareholder NC Period” - as set forth in Section 11.1 hereof.

1.37. “Independent Director” - as set forth in Section 9.2.6 hereof.

1.38. “IP Developments” - as set forth in Section 10.2 hereof.

1.39. “IP Rights” - as set forth in Section 10.1 hereof.

1.40. “Joint Venture” - as set forth in the Preamble hereof.

1.41. “JV Activities” - as set forth in Section 2.1 hereof.

1.42. “JV Assets” - as set forth in Section 4.1 hereof.

1.43. “JV Company” - as set forth in Section 2.2 hereof.

1.44. “JV Development Products” - as set forth in Section 2.1 hereof.

1.45. “JV Entities/JV/JV Entity” - as set forth in Section 2.2 hereof.

1.46. “JV Existing Products” - as set forth in Section 2.1 hereof.

1.47. “JV Future Products” - as set forth in Section 2.1 hereof.

1.48. “JVLP” - as set forth in Section 2.2 hereof.

1.49. “JV/Orbotech Formats and Interfaces” - as set forth in Section 6.2.1 hereof.

1.50. “JV Products” - as set forth in Section 2.1 hereof.

1.51. “JV/Valor Formats and Interfaces” - as set forth in Section 6.3.1. hereof.

1.52. “Minimum Distribution Amount” - as set forth in Section 3.6.3.
 
1.53.  Deleted
 
1.54. “No Sale Period” - as set forth in Section 16.1.1 hereof.

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CONSOLIDATED VERSION


1.55. “OCS” - as set forth in Section 10.5 hereof.

1.56. “OEM” - original equipment manufacturer.

1.57. “Orbotech Indemnified Persons” - as set forth in Section 17.1 hereof.

1.58. “Other Founding Shareholder” - as set forth in Section 16.2.1 hereof.

1.59. “Other Shareholder” - as set forth in Section 16.6.1 hereof.

1.60. “Open Negotiation Period” - as set forth in Section 16.2.3 hereof.

1.61. “Party/Parties” - as set forth in the Preamble and Section 3.1 hereof.

1.62. “PCB” - printed circuit board.

1.63. “PCB Assembly” - the mounting of bare PCBs with electronic components and all processes involved therewith. For the removal of doubt, “PCB Assembly” does not include the assembly and/or packaging of bare wafers in the “back-end” of the semiconductor industry.

1.64. “PCB Assembly Entities” - any business, entity or division within the electronics and/or manufacturing industry, which is engaged in PCB Assembly activities and/or services, including, but not be limited to, PCB Assembly departments in electronic original equipment manufacturers (“OEMs”), PCB Assembly operations or departments of independent contract manufacturers (“CMs”), PCB Assembly departments or subsidiaries of PCB Fabrication Entities and service bureaus engaged in PCB Assembly activities and/or services such as solder paste stencil design and fabrication. However, PCB Fabrication Entities or PCB Design Entities owned by OEMs and/or PCB Assembly Entities shall not be considered PCB Assembly Entities.

1.65. “PCB Design” - the physical layout design of PCBs, commencing with the reception of PCB schematic data and ending with the generation of layout data for PCB Fabrication and PCB Assembly.

1.66. “PCB Design Entities” - any business, entity or division within the electronics and/or manufacturing industry which is engaged in PCB Design activities and/or services, including, but not limited to, PCB Design departments in electronic OEMs, independent PCB layout service bureaus, PCB Design departments of CMs and PCB Design departments or subsidiaries of PCB Fabrication Entities. However, PCB Fabrication Entities or PCB Assembly Entities owned by OEMs and/or PCB Design

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CONSOLIDATED VERSION
 
Entities shall not be considered PCB Design Entities.
 
1.67. “PCB Fabrication” - all manufacturing processes of a bare PCB, commencing with preparation and optimization of the bare board production data (also known as pre-production and/or planning and/or engineering and/or CAM processes) and ending with delivery of the finished and tested bare PCB.

1.68. “PCB Fabrication Entities” - any business, entity or division within the electronics and/or manufacturing industry which is engaged in PCB Fabrication activities and/or services, including but not limited to PCB Fabrication departments in electronic OEMs, PCB Fabrication departments of CMs, PCB Fabrication departments or subsidiaries of PCB Design and/or PCB Assembly Entities or of entities which also have PCB Design and/or PCB Assembly departments or subsidiaries. In addition, any business, entity or division engaged in the provision of services to PCB Fabrication Entities, such as, film plotting service bureaus, testing or AOI service bureaus, drill and rout service bureaus, shall be considered a PCB Fabrication Entity. However, PCB Assembly Entities or PCB Design Entities owned by OEMs and/or PCB Fabrication Entities shall not be considered PCB Fabrication Entities.

1.69. “Permitted Transferee” - as set forth in Section 16.5.1 hereof.

1.70. “R&D” - research and development.

1.71. “Right of Approval” - as set forth in Section 16.4.1 hereof.

1.72. “Right of First Refusal” - as set forth in Section 16.3 hereof.

1.73. “Rights Notice” - as set forth in Section 16.3.1 hereof.

1.74. “Right to Tag Along” - as set forth in Section 16.3 hereof.

1.75. “Sale” - as set forth in Section 16.9.1 hereof.

1.76. “Secondment Agreement” - as set forth in Section 5.2 hereof.

1.77. “Sell-Buy Notice” - as set forth in Section 16.6.2 hereof.

1.78. “Selling Shareholder” - as set forth in Section 16.8 hereof.
 
1.79. “Terms Agreement” - as set forth in Section 16.3 hereof.

1.80. “Transferee” - as set forth in Section 16.3 hereof.

1.81. “Transferor” - as set forth in Section 16.2.1 hereof.

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CONSOLIDATED VERSION


1.82. “Valor Indemnified Persons” - as set forth in Section 17.2 hereof.

1.83. “Valuation” - as set forth in Section 16.5.3.2 hereof.


SECTION 2
General

2.1.
Purpose of the Joint Venture. Subject to the provisions of this Agreement, the purpose of the Joint Venture shall be to develop, manufacture, assemble and integrate, market, distribute, service and support and provide related services (e.g., customization, consulting and audits) with respect to, (a) all of the existing (including earlier generation) CAM and archiving products of the Parties listed in Appendix 2.1(a) for use in PCB Fabrication (the “JV Existing Products”); (b) all of the CAM and archiving products of the Parties under development (including new releases and updates and additional, next generation and more advanced products) which are listed in Appendix 2.1(b) for use in PCB Fabrication (“JV Development Products”); and (c) any and all other CAM and archiving systems which may be developed in the future for use in PCB Fabrication (“JV Future Products”) (collectively, the “JV Products”) and to become a world leader in activities related to CAM and archiving systems for use by PCB Fabrication Entities in PCB Fabrication, all pursuant to the terms of this Agreement (collectively, the “JV Activities”); and (d) to engage in such other activities as may be agreed subject to Section 11.2 hereunder.

2.2.
JV Entities. The JV and the JV Activities shall be undertaken by a limited partnership (the “JVLP”) and a private limited company (the “JV Company”), each to be registered and incorporated in Israel at or prior to the Closing, as more fully described in Section 3 hereof. (The parties are sometimes referred to collectively as the “Founding Shareholders”, and each as a “Founding Shareholder”. The JV Company and the JVLP are referred to herein collectively as the “JV Entities” or the “JV”, and each as a “JV Entity”.)


SECTION 3
Formation, Ownership and Capitalization of the JV Entities

3.1.
Formation of JV Entities. At or prior to the Closing, the Parties shall form the JV Company and the JVLP by executing and registering the formation documents set forth in Section 14.4 hereof. Upon such formation, each of the JV Entities shall become a party to this Agreement by executing the JV Entities’ signature page annexed hereto, (each of the JV Entities are hereinafter sometimes referred to as a “Party”; and, collectively with the Founding Shareholders, the “Parties”).

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CONSOLIDATED VERSION


3.2.
Initial Shareholdings in the JV Company. The initial shareholdings of the JV Company shall be as follows:

SHAREHOLDER
CLASS
NUMBER
OF SHARES
PERCENTAGE
Orbotech
Ordinary
50
50%
Valor 
Ordinary
50
50%

3.3.
Initial Interests in the JVLP. The initial partnership interests in the JVLP shall be follows:

ENTITY
STATUS
PARTNERSHIP
INTEREST
JV Company
General partner
1.0%
Orbotech
Limited partner
49.5%
Valor
Limited partner
49.5%

3.4.
Equity Investments in JV Entities. At the Closing, the Founding Shareholders shall purchase shares and partnership interests in the JV Entities and the JV Company will purchase a partnership interest in the JVLP for such nominal consideration as will be agreed between the Founding Shareholders. In the event additional equity investments are required in the future in order to comply with the requirements of the Israeli Investment Center with respect to Approved Enterprises, such investments shall be made pro-rata by the Founding Shareholders.

3.5.
Additional Working Capital. To the extent that the JV Entities shall require working capital in excess of that provided from the operations of the JV (“Additional Working Capital”), the JV shall acquire such Additional Working Capital by means of a bank loan or a line of credit. If required, such bank loan or line of credit shall be secured, pro-rata, against the Founding Shareholders’ holdings in the JV. In the event that it shall not be reasonably commercially possible for the JV to acquire a bank loan or line of credit as aforesaid, Orbotech shall provide an acceptable guarantee of all of such bank loan or line of credit provided that:

3.5.1.
Orbotech shall be granted a security interest in Valor’s interests in the JV superior to and with priority over any other security interest; provided however, that Orbotech’s security interest shall not have priority over a security interest granted to a financial institution which previously provided any of Valor’s share of Additional Working Capital, or as shall otherwise be agreed upon by Orbotech and Valor;

3.5.2.
Orbotech’s obligations hereunder with respect to Additional Working Capital shall in no event exceed $3 Million in the aggregate and with respect to Valor’s pro-rata interest in the Additional Working Capital shall in no event exceed $1.5 Million in the

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CONSOLIDATED VERSION
 
 
aggregate; and
 
3.5.3.
Valor shall repay any such loan and/or release Orbotech from any such guarantee with respect to Valor’s pro-rata interest in the Additional Working Capital on or before the earlier to occur of: (a) the third (3rd) anniversary of the Closing Date; or (b) sixty (60) days from the closing of a public offering of securities of Valor in Israel or abroad. In the event that Valor shall fail to do so, Orbotech shall be free to execute the above security interest on Valor’s interest in the JV.
 
 
In the event the JV Entities shall require working capital in excess of that provided for above (after full utilization of the bank loan or line of credit guaranteed by Orbotech), the Founding Shareholders will contribute or otherwise provide, pro-rata, the Additional Working Capital; provided however, that in the event that the amount so contributed by any Founding Shareholder pursuant to the above shall exceed $750,000 in the aggregate, such Founding Shareholder shall (notwithstanding the provisions of Section 11.9 below but subject to the next following sentence) be entitled to apply for dissolution or liquidation of the JVLP and upon such application shall not be required to make any further contributions. Such application may be made only after written notification to the other Founding Shareholder and only if such other Founding Shareholder has not agreed within 20 business days of such notice, by written notice, to make or otherwise provide for such excess contribution.

3.6.
Distributions. All of the JVLP’s revenues, profits and losses belong to the partners thereof and will be allocated among them. Cash or approved credit available for distribution will be distributed to the partners on an on-going quarterly basis subject to the following:

3.6.1.
The retention by the JVLP of sufficient cash or approved credit to cover the expenses of the JV (disregarding any expected income) through the end of the immediately succeeding three months period as set forth in the Budget;

3.6.2.
During the first six months following the Closing, a monthly distribution of $600,000 will be made, subject to the provisions of Section 3.6.1 above, as an advance on the quarterly distribution; and

3.6.3.
Any amount available for distribution in any quarter in excess of the “Minimum Distribution Amount” shall be used to repay

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any outstanding loans or credit facilities not extended or guaranteed in equal pro-rata amounts by Orbotech and Valor.
 
 
“Minimum Distribution Amount” shall mean, $4,000,000 per quarter provided that the Minimum Distribution Amount for any quarter shall be increased (or decreased) by the excess (or deficiency) of the aggregate of all prior Minimum Distribution Amounts over all prior distributions to partners.

 
For the removal of doubt it is hereby clarified that the above is solely for the purpose of defining the terms of repayment of outstanding loans or credit facilities not extended or guaranteed in equal pro-rata amounts by Orbotech and Valor and is not intended to serve as an indication of the Budget of the JV or of any distribution.


SECTION 4
JV Assets

4.1.
Availability of Assets. Effective as of the Closing Date, subject to the terms and conditions herein set forth, each Party shall make available to the JV the following assets, properties and business and the following obligations with respect to the JV Existing Products and JV Development Products (the “JV Assets”), in an orderly fashion so as to enable the JV Entities to begin immediate operation and full use thereof in the JV Activities, and each Party shall retain all other rights with respect to such items subject only to its non-compete obligations set forth in Section 11 hereof:

4.1.1.
Its customer and supplier lists, records and files (including, without limitation, regulatory approvals, testing and quality assurance records, complaint and return histories, sales and marketing plans, price lists repair or service manuals, business plans, fire, safety or environmental reports).

4.1.2.
Trademarks or applications for trademarks of the JV Existing Products or JV Development Products, including names which it has a contractual right to use.

4.1.3.
Its “IP Rights”, as defined in, and to the extent and in the manner set forth in Section 10.1 hereof.

4.1.4.
Its outstanding purchase orders and warranty agreements, as more fully described in Sections 5.10 - 5.13 below.

4.1.5.
Its agency, distribution and other marketing agreements, to the extent and in the manner set forth in Sections 7.6 - 7.11

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hereof.
 
4.1.6.
Its interest in any license or other agreement with respect to technology used in connection with the JV Existing Products and/or the JV Development Products, provided that if it shall be impossible or impracticable to obtain any necessary consent, then the Parties shall act with respect to any such interest in the manner described in Section 5.13 hereof.

4.2.
Cooperation. The Parties shall cooperate to obtain all the necessary licenses, permits and consents in order to make available to the JV all of the JV Assets prior to or at the Closing Date.


SECTION 5
Transfer of Employees, Equipment and
Inventory, Purchase Orders and Warranties

5.1.
Designated Employees. The Parties acknowledge that the JV will require the services of qualified employees to conduct its business. The Parties currently anticipate that between 15 to 20 research and development (“R&D”) personnel with appropriate skills will be required immediately to continue supporting the JV Existing Products and to form a development team for the JV Development Products and JV Future Products. Such number of R&D personnel does not include employees who may be transferred directly or indirectly from Electronic Imaging Technologies Co. Ltd. (“EIT”) (as set forth in Section 11.4) as may be needed by the JV to support EIT’s existing products. Accordingly, immediately after the Closing, the Parties shall jointly determine: (a) the R&D employees of each Founding Shareholder (the “Designated Employees”) to be transferred to the JV (in the manner described below) which shall number seven (7) employees of each Founding Shareholder; and (b) the salary, employment period and other terms of employment (including undertakings of confidentiality and non-competition) of each Designated Employee. Designated Employees who are officers and key employees shall be eligible to participate in option plans to purchase shares of both of the Founding Shareholders subject to applicable law and as shall be agreed between the Founding Shareholders.

5.2.
Transfer of Designated Employees. Each Founding Shareholder shall use its commercially reasonable best efforts (and each of the other Parties shall cooperate with such Founding Shareholder) to ensure that, promptly after the Closing, each of its Designated Employees shall enter into an employment agreement with the JV pursuant to the terms of employment jointly determined by the Parties. In the event that any Designated Employee shall not agree to become an employee of the JV despite the Parties’ commercially reasonable best efforts, and only in such event, such

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Designated Employee shall remain in the employ of the relevant Party but be seconded to the JV for two years pursuant to a secondment agreement to be determined by the Parties (“Secondment Agreement”).
 
5.3.
Refusal of Designated Employee. In the event that a Designated Employee shall refuse to become an employee of the JV and shall also refuse to be seconded to the JV, the relevant Founding Shareholder shall terminate its employment of such Designated Employee. Any Designated Employee so terminated shall be deemed transferred by the relevant Founding Shareholder for the purposes of Section 5.1(a) above.

5.4.
Termination of Prior Employment. Upon the transfer of each Designated Employee as set forth above, the relevant Founding Shareholder shall cease to employ such Designated Employee except as otherwise provided in any applicable Secondment Agreement.

5.5.
Satisfaction and Waiver of all Prior Undertakings. Each Founding Shareholder shall: either (a) (i) pay to its Designated Employees that become direct employees of the JV: all wages and all ancillary expenses, including for accrued leave, recuperation allowance, pension (including manager’s insurance policies), commissions and bonuses and severance pursuant to existing employment agreements, custom, law or as otherwise required with respect to the period prior to the transfer; and (ii) obtain from such Designated Employee a waiver and release of the JV with respect thereto; or (b) provide full funding to the JV with respect to its Designated Employees that become direct employees of the JV of all such amounts.

5.6.
Release by Founding Shareholder. Each Founding Shareholder shall release each of its Designated Employees who shall execute employment agreements with the JV from any non-competition and confidentiality undertaking to such Founding Shareholder included in his or her current agreement to the extent such undertaking shall conflict with his employment by the JV with respect to the JV Activities and shall sign any document which is required in order to achieve the same.

5.7.
Indemnification by the Founding Shareholder. Each Founding Shareholder shall fully indemnify the JV Entities and the other Founding Shareholder against any and all claims, proceedings and liabilities imposed upon any of the JV Entities or the other Founding Shareholder in relation to the employment by the JV of its Designated Employee (or other former employee), previously employed by it or in relation to any employees seconded by it to the JV, the cause of action of which is in respect to the period prior to their transfer.

5.8.
Indemnification by the JV. The JV Entities shall fully indemnify each Founding Shareholder against any and all claims, proceedings and liabilities imposed upon any Founding Shareholder in relation to any

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Designated Employee (or other former employee) employed by the JV, the cause of action of which is in respect of the period after their transfer.
 
5.9.
Transfer of Equipment and Other Inventory. Immediately after the Closing, the Founding Shareholders and the JV shall jointly determine the equipment and other inventory of each Founding Shareholder currently used in its CAM and archiving operations to be transferred or leased to the JV. Promptly thereafter, the relevant Founding Shareholder shall transfer or lease the relevant equipment and other inventory to the JV in consideration for payment by the JV of the fair market value of such equipment or the lease thereof.

5.10.
Purchase Orders and Warranty Commitments. As of the Closing Date, each Founding Shareholder shall assign, and shall cause its subsidiaries to assign, to the JVLP, to the extent related to the JV Existing Products and the JV Development Products, all purchase orders and outstanding warranty commitments which were accepted and/or made prior to the Closing Date with respect to which delivery, service or other fulfillment remains outstanding. All receivables shall be allocated between the JVLP and such assigning Party based on the delivery, service or other fulfillment remaining to be performed under such agreement. To the extent necessary, any such receivables which are received by the JVLP or such Founding Shareholder will be transferred to the JVLP or such Founding Shareholder so entitled.

5.11.
Transferred Warranties - Local Service Provider and Transfer of Purchase Price. Notwithstanding the provisions of Section 5.10 above, the local service provider which provided warranty service on behalf of the transferring Founding Shareholder with respect to any warranty commitment shall continue to provide such service (and receive a commission with respect thereto) until the expiration of such commitment. In connection with each warranty obligation transferred, the transferring Party shall also transfer a portion of the sales price of the applicable JV Existing Product to the JV at a rate of 0.83% of the sales price for each remaining month of the warranty (e.g., 10% of the sales price in the case of 12 months).

5.12.
Bundled Purchase Orders. To the extent that fulfillment of any transferred order shall require bundling with other products of such Founding Shareholder which are not JV Existing Products, such Founding Shareholder shall remain liable for the fulfillment of such order. In such event, the relevant Founding Shareholder shall pay the JV for the JV Existing Product included in the bundle the price therefor as set forth in the order or, if no price is stated therein, a portion of the sale price pro-rata to the Founding Shareholder’s list prices for the items included in the bundle or as otherwise agreed between the JV and such Party.


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5.13.
“Effective” Transfer or Assumption. For purposes of the foregoing Section 5.10 and as otherwise applicable in this Agreement, if it is impossible or impracticable to obtain the consent of a third party, or the Parties shall otherwise agree not to seek such consent, which is necessary in connection with: (a) the effective transfer of an asset to be transferred hereunder; (b) the effective assumption of a liability or obligation to be assumed hereunder; or (c) the effective transfer of a contractual relationship or contractual offer; then the JV and the other relevant Party will, for the purposes of their internal relationship, behave and conduct themselves as if the transfer or assumption had effectively taken place on the Closing Date. In any such case, (i) the other relevant Party will, in respect of its external relationships, remain the party to the relevant liability, obligation or contractual relationship but will hold and be responsible for the relevant contract in the internal relationship between the other relevant Party and the JV for the account of the JV; and (ii) each of the JV and the other relevant Party shall indemnify and hold harmless the other with respect to its conduct hereunder.


SECTION 6
JV Development Principles
 
6.1. General Principles. The JV will, (a) continue to provide development support for the JV Existing Products; (b) determine, according to its best interests, whether to continue to develop the JV Development Products; (c) invest significant research and development resources in the development of JV Future Products; and (d) promote the concept of open systems to PCB Fabrication Entities, PCB Design Entities and PCB Assembly Entities. The format and the interface to the database of the JV’s Products will be open to all PCB Fabrication Entities PCB Design Entities and PCB Assembly Entities and their suppliers. Any format changes shall be subject to the prior approval of the Executive Committee. The JV shall provide the Founding Shareholders with prior notice of these changes and full early access to the details thereof.
   
6.2.
Support for Orbotech’s Products.

6.2.1.
The Parties acknowledge that the interfaces between the JV Products and Orbotech’s AOI and other PCB Fabrication products, including interfaces to plotters and direct imaging and electrical testing products manufactured or sold by Orbotech and the formats defined by Orbotech for these interfaces (“JV/Orbotech Formats and Interfaces”) are strategic to Orbotech’s PCB Fabrication business. Therefore, all JV Products will support the JV/Orbotech Formats and Interfaces as the preferred interface formats between the JV’s Products and AOI and such other PCB Fabrication products,

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including plotters and direct imaging and electrical testing products.
 
6.2.2.
The JV will give priority to development of, and improvements in, JV/Orbotech Formats and Interfaces, both in terms of timing and functionality, compared to other interface products that the JV may develop or sell. These priorities will not be subject to the 10% special allocation set forth in Section 6.5 below.

6.3.
Support for Valor’s Products.

6.3.1.
The Parties acknowledge that the promotion of the ODB++ format and the development of interfaces between the JV Products to Valor’s Enterprise 3000, Star 1000 and Universal Viewer products (“JV/Valor Formats and Interfaces”) are strategic to Valor’s PCB Design business. Therefore, all JV Products will support the JV/Valor Formats and Interfaces as the preferred transfer format and interface between PCB Design and PCB Fabrication.

6.3.2.
The JV will give priority to development of, and improvements in, the JV/Valor Formats and Interfaces both in terms of timing and functionality, compared to the JV’s support for other data transfer formats and interfaces between PCB Design and PCB Fabrication. These priorities will not be subject to the 10% special allocation set forth in Section 6.5 below.

6.4.
Interfaces for Other Products. Subject to the foregoing priorities, the JV may, according to its best interests, develop, promote and support formats and software interfaces, including CAD translators (i.e., transfer formats and solutions between design and manufacturing), interfaces to archiving systems and interfaces to AOI systems, plotters and direct imaging and electrical testing products of other entities, including interfaces to products which compete with Valor’s PCB Design products and Orbotech’s PCB Fabrication products provided that the JV shall give prior written notice to the Founding Shareholders of any such developments.

6.5.
Additional Developments Benefiting Orbotech or Valor. In addition to the priorities set forth above, each Founding Shareholder may request the JV to allocate up to 10% (in equal parts between them (5% each)) of the JV’s research and development resources for development of JV Products which support the products of such Founding Shareholder. The rights to such developments shall be deemed “IP Developments” as set forth in Section 10.2 hereof.


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6.6.
JV Development Products. In the event that a Founding Shareholder has undertaken or promised (including by way of a promise or other understanding and whether or not a legally enforceable obligation) to any customer to develop and/or supply a customization, update, interface, future version or other development related to any JV Existing Product or JV Development Product and the JV will determine, according to its best interests, not to (continue to) develop such item, the JV shall assume and undertake such obligation and the Parties shall cooperate and use all reasonable commercial efforts to satisfy such obligation by providing a software substitute or other solution available to the JV in the minimum acceptable to such customer, it being agreed that such cooperation will include providing the responsible Founding Shareholder with reasonable access to the relevant customer together with the agent who otherwise services such customer pursuant to Section 7 below. Notwithstanding the above, any monetary penalty which may nevertheless be payable by the JV in connection with such undertaking shall remain the obligation of the responsible Founding Shareholder.

6.7.
Termination. Each Founding Shareholder’s rights under Sections 6.2 - 6.5 hereof as well as its right to enforce the performance of the JV pursuant to Sections 6.1 and 6.6 hereof, shall terminate upon the date that it together with its Permitted Transferees shall no longer hold at least 30% of the interests in the JV.


SECTION 7
Sales and Customer Support

7.1.
Sales and Customer Support Agents. The JV shall determine, which of the JV Existing Products and which of the JV Development Products to sell and to offer for sale and the respective marketing and distribution channels and procedures therefor, all in its own best interests. Subject to the provisions of this Section 7, the JV Entities shall initially employ directly or through their marketing subsidiaries (as provided below) the agents set forth below in the manner and in the territories provided for marketing, sales, installation, training and service (including warranty service) of the JV Products:

 
In Europe, Orbotech SA, as exclusive agent;

 
In Far East, not including Japan, Orbotech Far East Ltd., as exclusive agent;

 
In Japan, Valor Japan will act as exclusive agent with respect to certain specified accounts, as will be determined by the Parties, and Orbotech Japan will act as exclusive agent with respect to all other accounts in Japan.


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In North America, Orbotech Inc. will act as exclusive agent with respect to the accounts listed in Appendix 7.1(i), and Valor Inc. will act as exclusive agent with respect to all other accounts in the North America.

 
The principal terms and conditions of the JV’s arrangements with such agents including commissions payable to them shall be as set forth in Appendix 7.1(ii).

7.2.
Conditions to Maintain Sales Rights. The Board shall determine performance criteria for all of the JV’s sales and customer support agents, such as defined annual revenue, annual market share, maintaining of captive accounts using JV Products, etc. The Board may, in accordance with the best interests of the JV, replace any agent which shall not meet the defined performance criteria, with another agent or sales channel, including a subsidiary of another Founding Shareholder, a third party distributor, agent or VAR (Value Added Reseller), etc. or an independent sales department within the JV Entity. The replacement of any Founding Shareholder’s subsidiary pursuant to this Section 7.2 shall be without charge and the Founding Shareholder shall cause its subsidiary to give its consent to such replacement. Such Founding Shareholder shall indemnify the other Founding Shareholder and the JV from and against any claims made by any of its subsidiaries in this respect.

7.3.
Interfaces for Other Products. Notwithstanding the provisions of Section 7.1, the JV may, according to its best interests, sell the software interfaces described in Section 6.4 hereof on an OEM basis provided that the JV shall in all events give prior written notice to the Founding Shareholders of all such arrangements such that a Founding Shareholder may have the opportunity to request that such agreement be approved by the Founding Shareholders in accordance with the provisions of Section 9.6.9.

 
However, for the purpose of Section 9.6.9 the mere fact that a third party OEM is a competitor of one of the Founding Shareholders shall not in and of itself be considered reasonable grounds for withholding approval of the transaction with such third party OEM, as set forth in Section 9.6.9.

7.4.
JV/Orbotech Interface Products. Notwithstanding the provisions of Sections 7.1 and 7.2, Orbotech (directly or through its Affiliates) shall be the exclusive worldwide agent (or other reseller) for the JV/Orbotech Formats and Interface products.

7.5.
Valor Subsidiaries. It is the expectation of the Parties that by the year 2001 Valor’s PCB Design and PCB Assembly businesses shall develop to a level such that Valor, in its discretion, may cease the business of marketing the JV Products. In such event, the JV shall: (a) terminate the sales, agency and customer support agreements with Valor’s subsidiaries without charge to the JV (and Valor shall cause such subsidiaries to give

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their consent thereto and shall indemnify Orbotech and the JV from and against any claims made by any of its subsidiaries in this respect); and (b) enter into exclusive arrangements with Orbotech’s subsidiaries whereby such subsidiaries shall serve as the JV’s exclusive worldwide sales and customer support agents, subject to the provisions of Section 7.2 hereof. For the removal of doubt, it is hereby clarified that the provisions of this Section 7.5 are not intended to create a binding obligation upon Valor to cease the marketing of the JV Products but are meant to serve as a general declaration of intent only.
 
7.6.
Assignment of Sales, Agency and Customer Agreements. Except as otherwise set forth below or in Section 5 above or as may be agreed between the Parties, as of the Closing Date, each Party shall assign and shall cause its subsidiaries to assign, to the JVLP, to the extent related to the JV Existing Products and the JV Development Products, all sales, agency and customer support agreements (including the undertakings and other understandings described in Section 6.6 hereof) which were accepted and/or made prior to the Closing Date with respect to which service or other fulfillment remains outstanding. A list of all sales, agency and customer support agreements of each Founding Shareholder shall be provided at the Closing and attached hereto as Appendix 7.6.

7.7.
Service Continuity. Notwithstanding the foregoing, the local service provider which provided service on behalf of the transferring Founding Shareholder with respect to any service contract shall be engaged to continue providing such service for the remainder of the term thereof; it being understood that each of the Founding Shareholders shall use all reasonable efforts, including all legal or contractual remedies available, to cause such agreements to be terminated at the earliest possible date and/or renewed with the JV.

7.8.
“Effective” Assignment. If it is impossible or impracticable to obtain the consent of an agent or other third party to an assignment hereunder, or the Parties shall otherwise agree not to seek such consent, the provisions of Section 5.13 shall apply.
 
7.9.
OEM Arrangements. The Parties acknowledge that, as of the Closing Date, each of the Founding Shareholders and/or its subsidiaries shall have OEM agreements in effect as set forth in a list to be attached hereto at the Closing as Appendix 7.9 with respect to JV Existing Products. The provisions of Sections 7.6 and 7.8 hereof shall apply to such OEM agreements as well. To the extent not assigned, the relevant Founding Shareholder shall use all reasonable efforts, including all legal or contractual remedies available, to cause such agreements to be terminated at the earliest possible date and/or renewed with the JV. A Founding Shareholder (or its subsidiary) shall in no event renew any such OEM agreement without the consent of the other Founding Shareholder.

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CONSOLIDATED VERSION


7.10.
Inconsistent Arrangements. The Parties acknowledge that, as of the Closing Date, Valor shall have agency agreements in effect in Europe and North America which are not consistent with the territorial or account assignments set forth in this Section 7 above. The JV and Valor shall take such steps as are necessary to terminate such inconsistent agreements as soon as possible (taking into account any active negotiations), at the JV’s expense, by making termination payments to the relevant agent against commissions which would otherwise have been payable following the termination date. The JV may also make lump sum termination payments with the consent of both of the Parties. Such payments shall not affect the commissions otherwise payable to the JV’s agents.

7.11.
Agency Agreements Warranty. Each Party represents and warrants that all of its agency agreements with respect to the JV Existing Products: (a) expire on or before December 31, 1999 (or are cancellable prior to such date without penalty); and (b) are non-exclusive except for Valor’s agreements with AMS and Xxxx Xxxxx Associates which are exclusive with respect to certain geographical areas in the United States. Valor will take such steps as are necessary to terminate these agreements immediately following the Execution Date in the manner set forth in Section 7.10 above.

7.12.
Marketing Subsidiaries. Following the Closing, as and when the JVLP determines it advisable, taking into account legal, financial and other business considerations, the JVLP shall form and incorporate wholly-owned subsidiaries in the following jurisdictions: the United States, Europe, Far East (excluding Japan) and Japan.


SECTION 8
Representations, Warranties and Undertakings of the Parties

 
Without derogating from the representations, warranties and undertakings of the parties contained elsewhere in this Agreement, each of Valor and Orbotech hereby represents, warrants and undertakes to the other, and acknowledges that the other is entering into this Agreement in reliance thereon, that, except as otherwise specified in the Schedule of Exceptions annexed hereto as Appendix 8:

8.1.
Due Incorporation. It is a corporation duly organized and validly existing under the laws of Israel, has all requisite corporate power and authority to carry on its business as now being conducted and to enter into and perform its obligations under this Agreement. It is duly qualified to transact business and is in good standing in each jurisdiction in which the nature of its business or the ownership or leasing of its properties make such qualification necessary, and has all powers, authorities, licenses, authorizations and approvals necessary to carry on its business

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as now conducted other than in such jurisdictions where the failure to be so qualified and other than for such powers, authorities, licenses, authorizations and approvals the absence of which, would not have a material adverse effect on the JV, the JV Activities or the ability of the JV or such Founding Shareholder to perform its obligations and consummate the transactions provided for herein.
 
8.2.
Due Authorization. The execution, delivery and performance of this Agreement and the consummation of the transactions provided for herein, have been duly authorized by all necessary corporate action of such Founding Shareholder. This Agreement constitutes a valid and legally binding obligation of such Founding Shareholder, enforceable in accordance with its terms. The execution and delivery by such Founding Shareholder of this Agreement, and the consummation by it of the transactions contemplated hereby in accordance with the terms of this Agreement, do not and shall not as of the Closing Date contravene or conflict with (or constitute a violation of or breach of or default under or give to others any rights, including rights of termination, cancellation or acceleration): (i) its Memorandum or Articles of Association or other incorporating or corporate documents; (ii) any provision of any law, regulation, judgment, injunction, order or decree binding upon or applicable to such Founding Shareholder; or (iii) any agreement, contract, lease or commitment to which it is a Founding Shareholder.

8.3.
Ownership of the JV Assets. Other than such assets which are owned jointly by the Founding Shareholders and subject to claims of ownership of the other Founding Shareholder, it is the sole legal owner of the JV Assets being made available by it hereunder. The JV Assets being made available by it hereunder are free and clear of any liens, claims, restrictions, encumbrances or any other rights in favor of third parties, and there is no legal or other impediment to making available its rights in, and possession of, the JV Assets to the JV in such state, pursuant to this Agreement.

8.4.
Liabilities. Other than undertakings or promises as set forth in this Agreement, it has no liabilities, debts or obligations, whether accrued, absolute or contingent, which could in any way adversely affect the JV Activities or hinder or adversely affect the consummation of the transactions provided for herein.

8.5.
Actions. There is no action, claim, proceeding or governmental inquiry or investigation (collectively, “Action”) either pending or, to the best of its knowledge, threatened in connection with the JV Activities or the JV Assets being made available by it and/or its Designated Employees before any court, arbitration board or tribunal or administrative or other governmental or local authority (collectively, “Authority”), nor is it or any of its directors or officers aware that there is any basis for any such Action. Neither it nor any Affiliate, director or officer, is a party to or

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subject to the provisions of any order, writ, injunction, judgment or decree of any Authority which is connected to the JV Activities, the JV Assets and/or its Designated Employees nor are any of them aware of any pending or threatened Action (or of any basis for same) against any of them by any Authority which is connected to the JV Activities, the JV Assets and/or its Designated Employees. To its best knowledge, there is no Action by it or by any Affiliate, director or officer, currently pending or that any such entity or person intends to initiate which is connected to the JV Activities, the JV Assets and/or its Designated Employees.
 
8.6.
IP Rights. With respect to the IP Rights being made available by such Founding Shareholder or the use thereof, including the rights of manufacture, sale and/or use of the JV Existing Products and JV Development Products of such Founding Shareholder:

8.6.1.
the above are, to the best of its knowledge, free from the infringement of patents and any and all other intellectual property rights of third parties;

8.6.2.
the above are exclusive and free and clear of all liens, claims, royalty obligations, licenses, encumbrances, security interests or other rights of, or granted to, third parties (other than the right to use granted to end users in the ordinary course of business), and it is not and the JV Entities will not be obliged, under any liability whatsoever to make any payments by royalties, fees or otherwise to any owner or licensee of, or other claimant with respect thereto;

8.6.3.
its current business operations relating to the JV Existing Products do not require the use of any intellectual property rights (other than the rights of, or claimed by, the other Founding Shareholder in such know-how or off-the-shelf software) not included in the above nor is it dependent thereon. None of such IP Rights is being challenged by third parties or, to the best of its knowledge, infringes any third party rights. The conduct of its current business operations relating to the JV Existing Products does not, to the best of its knowledge, violate the intellectual property rights or copyrights of any third party.

8.6.4.
it has not received any communication, and is not aware that there is any basis for any such communication, alleging that by conducting the JV Activities, the JV Entities will violate any intellectual property rights of any other person or entity.

8.6.5.
it has taken reasonable measures to maintain the confidentiality of the intellectual property and processes and formulas, research and development results and other

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know-how underlying such IP Rights.
 
8.7.
Material Assets. The JV Assets, including the IP Rights, made available by such Founding Shareholder, constitute all of the material assets and rights upon which its business with respect to the JV Existing Products and the JV Development Products functions, other than such assets and rights which are readily commercially available (e.g., off-the-shelf software). Following the consummation of the transactions contemplated by this Agreement and the execution of all documents contemplated by this Agreement, the JV shall have full use of the JV Assets for use in the JV Activities, free and clear of any liens, claims, restrictions, encumbrances or any other rights in favor of third parties and without incurring any penalty or other adverse consequence, and without payment of any fee or royalties.

8.8.
1997 Revenue. The 1997 revenue figures with respect to sales of JV Existing Products and related services by such Founding Shareholder is as set forth in Appendix 8.8 attached hereto.

8.9.
No Misleading Statement. Its representations contained herein contain no untrue or misleading statement of a material fact and do not omit to state a material fact required to be stated herein or necessary to make the statements herein not misleading, in light of the circumstances under which they were made and the nature of the transactions anticipated by this Agreement.

8.10.
Founding Shareholder Cooperation. Each Founding Shareholder shall cooperate with the JV and the other Founding Shareholder in the performance of this Agreement and do every act and sign every document reasonably necessary or desirable to perform this Agreement, and to consummate the transactions contemplated herein.

8.11.
No Assumption of Liability. It acknowledges and agrees that other than as expressly provided herein, the JV Entities are not assuming and shall bear no liability with respect to any responsibilities and/or liabilities of either Founding Shareholder to any third parties.


SECTION 9
Governance of the JV Entities

9.1.
General Principles. The JV Company shall oversee, administer and manage the JVLP in its capacity as general partner, and the JVLP shall carry out the JV Activities. Except as otherwise agreed by the Parties, the administration and R&D activities of the JV Entities shall initially be conducted at premises located and leased by the JV Entities in proximity to Valor’s location.


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CONSOLIDATED VERSION

9.2.
Board of Directors; Executive Committee.

9.2.1.
Board of Directors. The Board of Directors of the JV Company (the “Board”) shall initially consist of four directors (“Directors”). For as long as the holdings of the Founding Shareholders (together with the holdings of their respective Permitted Transferees) in the JV Entities are equal, each Founding Shareholder shall have the right to appoint (and shall have right to remove and replace) two Directors. Directors shall be appointed, removed and replaced by the Founding Shareholders by written notice to the JV Company. Any Founding Shareholder entitled to appoint more than one Director hereunder shall also have the right to designate that a Director appointed by it shall have more than one vote provided that the aggregate number of votes held by all Directors appointed by any such Founding Shareholder shall not exceed the aggregate number of Directors that such Founding Shareholder is entitled to appoint hereunder.

9.2.2.
Chairman. The Chairman of the Board shall be elected by the Directors. For as long as the holdings of the Founding Shareholders (together with the holdings of their respective Permitted Transferees) in the JV Entities are equal, there shall be two Co-Chairmen, one elected by the Directors appointed by Orbotech from among themselves and one elected by the Directors appointed by Valor from among themselves.

9.2.3.
Executive Committee. The Board shall appoint an executive committee to define the strategic business direction of the JV Entities, which committee shall consist of four members (the “Executive Committee”). For as long as the holdings of the Founding Shareholders (together with the holdings their respective Permitted Transferees) in the JV Entities are equal, two of the members of the Executive Committee shall be appointed by the Directors appointed by Orbotech from among themselves and two shall be appointed by the Directors appointed by Valor from among themselves. In the event the Executive Committee is unable to reach a decision on any matter, such matter shall revert to the Board.

9.2.4.
Committees and Boards of Subsidiaries. The composition of all committees of the Board and all boards of directors (and committees thereof) of any subsidiaries of the JV Entities and the management of any other entity in which the JV Entities hold or will hold an equity or partnership interest, shall resemble that of the Board.

9.2.5.
Quorum. The quorum for meetings of the Board shall be

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CONSOLIDATED VERSION
 
 
at least two Directors. For as long as the holdings of the Founding Shareholders (together with the holdings of their respective Permitted Transferees) in the JV Entity are equal, such quorum must include at least one Director appointed by each Founding Shareholder. In the event that none of the Directors appointed by a Founding Shareholder is present, the meeting shall automatically be postponed 3 days to the same time and place (or in the event such day is not a business day in Israel, the first business day thereafter). At such postponed meeting, any two of the Directors then in office shall constitute a quorum, whether or not Directors appointed by both Founding Shareholders are present.
 
9.2.6.
Majority; Independent Director. Resolutions shall be passed by a simple majority of Directors present and voting at a meeting of the Board at which a quorum is present, and it is the intention of the Parties that the Board function with an even number of Directors as aforesaid. However, at any time after the first (1st) anniversary of the Closing provided that the holdings of the Founding Shareholders (together with the holdings of their respective Permitted Transferees) are equal, each of the Founding Shareholders shall be entitled to request the appointment of an additional, independent, Director in the event it believes that the proper functioning of the Board requires such appointment. Any such request shall be made in writing. In the event the other Founding Shareholder agrees with such request then a fifth member of the Board (the “Independent Director”) will be appointed by both of the Founding Shareholders acting jointly. In the event the other Founding Shareholder disagrees it shall so notify the requesting Founding Shareholder in writing within seven (7) days of receipt of the request and the Founding Shareholders shall meet to discuss the matter. In the event that the requesting Founding Shareholder has not withdrawn such request in writing within thirty (30) days of such request, then the Independent Director will be appointed effective as of the termination of such thirty day period. The making of any request and/or the withdrawal of any such request by a Founding Shareholder shall not preclude such Founding Shareholder (or the other Founding Shareholder) from making any further or subsequent request. A person recommended by the requesting Founding Shareholder and reasonably acceptable to the other Founding Shareholder shall serve as the Independent Director. Any Independent Director appointed may be removed at any time by the Founding Shareholders, acting jointly, and another may be appointed in his or her place.


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CONSOLIDATED VERSION

9.3.
Budget. The Board shall prepare a budget for the JV on a yearly basis prior to October 31 of each year (the “Budget”). All of the JV Activities (including those implemented by each of the JV Entities), shall be conducted pursuant to the Budget as shall be in effect from time to time. Until such time as a new Budget has been adopted, the prevailing Budget shall remain in force. The initial Budget (i.e., through December 31, 1998) of the JV, which shall include a projected balance sheet for the JVLP, shall be determined jointly by the Parties immediately after the Closing.

9.4.
General Managers. The General Manager(s) shall be appointed by the Board. Initially, and for as long as the holdings of the Founding Shareholders (together with the holdings of their respective Permitted Transferees) in the JV Entities are equal, the JV shall be managed by two joint General Managers, one of whom shall be appointed by the Directors appointed by Orbotech, and one of whom shall be appointed by the Directors appointed by Valor (who may thereafter remove such General Manager and appoint another in his or her place) provided such appointees are reasonably acceptable to both of the Founding Shareholders. The initial General Manager to be nominated by Orbotech shall be Xx. Xxx Xxxxxxx and the initial General Manager to be nominated by Valor shall be Xx. Xxxxxx Xxxxx. At such time as the holdings of the Founding Shareholders (together with the holdings of their respective Permitted Transferees) are not equal or the Founding Shareholders shall mutually agree upon a suitable candidate, the two General Managers shall be replaced with a single General Manager. Such General Manager shall be empowered with all the same rights and authorizations, and subject to the same duties, as the two General Managers. Subject to the provisions of Sections 9.6 and 9.7 below, the General Managers shall have full authority to manage and execute all day-to-day business decisions relating to the JV Entities.

9.5.
Management and Officers. The internal management structure of the JV Company and the JVLP shall be reflected in a management plan and organizational chart to be prepared by the Parties prior to or immediately after the Closing, in accordance with the principles set forth in the Budget. The General Managers will recommend internal rules of procedure to be approved by the Board. The Board shall nominate and appoint personnel to fill senior managerial functions. Initially, such senior functions shall be equally apportioned between personnel recommended by each of the Founding Shareholders. It is hereby agreed that Xx. Xxxx Elhanan shall be the initial Vice President, Research and Development of the JV and that Xx. Xxxx Xxxxxx or another candidate to be nominated by Orbotech, shall be the initial Vice President, Marketing and Sales of the JV.

9.6.
Major Decisions — Shareholders. For as long as the holdings of the Founding Shareholders (together with the holdings of their respective Permitted Transferees) in the JV are equal, any of the following matters

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in respect of the JV Entities may only be determined with the approval of both of the Founding Shareholders regardless of whether such matter might otherwise be deemed to be part of the day-to-day management of either of the JV Entities and regardless of whether such matter might otherwise be deemed to be within the competence of the Board:
 
9.6.1.
Any change in the number or composition of the Board or the method prescribed for appointing the members to the Board.

9.6.2.
Any addition to, amendment, revision or other change of or to the organizational or charter documents of any of the JV Entities.

9.6.3.
Any change in the capital structure of either of the JV Entities, including, but not limited to, any split or subdivision of stock, the creation of new stock or separate classes of stock, the alteration of rights associated with any class of stock, or the issue of any debenture or loan stock of either of the JV Entities and any recapitalization or reduction in capital structure of either of the JV Entities or any changes in the authorized capital stock of either of the JV Entities and/or any increase in the issued and outstanding shares of capital stock of either of the JV Entities, issuance of any new or additional shares in the JV Company, issuance or authorization for issuance or sale of any of the capital stock of either of the JV Entities. For purposes hereof, the term “stock” shall also mean “partnership interest” as applicable, mutatis mutandis.

9.6.4.
The merger, reorganization, or consolidation of either of the JV Entities or the sale or other transfer of all or substantially all of the assets of the JV or obligating itself to do so with or into any other entity.

9.6.5.
The making, entry into, or agreement to make or enter into, or amendment of any contract or arrangement between either of the JV Entities or their subsidiaries and any shareholder, officer or director or any entity controlled by, controlling, or under common control with any shareholder, officer or director (other than as provided for in this Agreement).

9.6.6.
The appointment and removal of the auditors of any of the JV Entities and the fixing of their remuneration.

9.6.7.
The formal approval of the actions by the Board and General Managers as shall be required pursuant to the applicable Articles of Association or Limited Partnership Agreement of the JV Entities.

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CONSOLIDATED VERSION


9.6.8.
The approval of a Budget or change thereto which shall allocate to annual marketing or research and development amounts which are more than 20% or 30% of annual forecasted sales, respectively.

9.6.9.
The JV shall give prior notice to the Founding Shareholders of any agreements with an entity which competes, directly or indirectly, with either Founding Shareholder (other than an agreement solely for the sale, license and/or service of the JV Products to or by such entity as an end user) and the key terms thereof. In the event a Founding Shareholder so requests by written notice to the JV and the other Founding Shareholder within 15 days of the JV’s notice, such agreement shall not be effective unless approved by both Founding Shareholders, which approval will not be unreasonably withheld.

9.6.10.
Any matter which if not approved, or any matter which if approved, would result in a freeze of either of the JV Entities’ business or lead to a cessation or termination of either of the JV Entities’ business.

9.6.11.
The taking by either of the JV Entities of any loan, or the granting by either of the JV Entities of any security in any of the assets of either of the JV Entities, which, in the aggregate, shall be in excess of 20% of the revenues of the JV for the previous year. For the removal of doubt, this provision shall not derogate from Orbotech’s obligations with respect to Additional Working Capital as set forth in Section 3.5 above.

9.6.12.
Entering into any contract, agreement, arrangement or commitment relating to the JV which provides for a cost or obligation to the JV in excess of US$1,000,000.

9.7.
Major Decisions — Board of Directors. For as long as the holdings of the Founding Shareholders (together with the holdings of their respective Permitted Transferees) in the JV Entities are equal, any of the following matters in respect of the JV may only be determined by the Board regardless of whether such matter might otherwise be deemed to be part of the day-to-day management of the JV Entities:

9.7.1.
The entry by any of the JV Entities into any business not described in, or any material deviation from, the Budget.

9.7.2.
Any sale of any substantial asset of any of the JV Entities, or contract or agreement to sell, or removal, abandonment, or other disposition of, any substantial asset of any of the JV Entities.

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CONSOLIDATED VERSION


9.7.3.
The making and/or effecting of any change in any accounting principles or practices of either of the JV Entities or the method in which the books and records of either of the Joint Entities are maintained.

9.7.4.
The taking by either of the JV Entities of any loan, or the granting by either of the JV Entities of any security in any of the assets of either of the JV Entities if not approved in the Budget.

9.7.5.
Entering into any contract, agreement, arrangement or commitment relating to either of the JV Entities which provides for a cost or obligation to either of the JV Entities in excess of US$200,000, if not included in the Budget.

9.7.6.
The approval, amendment or modification of the Budget, or the adoption of an annual plan and budget for either of the JV Entities (apart from the Budget).

9.8.
Reports.

 
The Parties acknowledge the existing reporting requirements of Orbotech as a company whose shares are publicly traded on the Nasdaq National Market System and of the potential reporting requirements of Valor, which intends to conduct an initial public offering in the United States (and/or Israel) and to list its shares for trading on the Nasdaq National Market System, the Tel-Aviv Stock Exchange or any other recognized stock exchange. Accordingly, the following shall apply:

9.8.1.
Each of the JV Entities shall maintain a system of accounting established and administered in accordance with Israeli and United States Generally Accepted Accounting Principles consistently applied, shall keep full and complete financial records, and shall furnish to the Parties the following reports in NIS and in U.S. Dollars and in the English language:

9.8.1.1.
within 15 days after the end of each month, an unaudited profit and loss statement, balance sheet and schedule as to cash flow, in reasonable detail, and a report by management with respect to the previous month (which report shall include any other statements produced for internal managerial purposes and events of importance to the JV Entity’s business activities).

9.8.1.2.
within 20 days after the end of each fiscal quarter, an income statement through the end of such quarter

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and a balance sheet as at the end of such quarter (prepared on a consolidated basis, if applicable), and related statements of changes in shareholder’s equity, together with a cash flow statement, all for each such quarter and for that part of the fiscal year of the JV Entity then ended, reviewed by the independent certified public accountants of the JV.
 
9.8.1.3.
within 20 days after the end of each fiscal year, an income statement for such fiscal year, a balance sheet of the JV Entity and statement of shareholder’s equity as of the end of such year, and a statement of cash flow for such year, including notes and disclosure according to United States securities regulations and, if requested by one of the Founding Shareholders, according to Israeli securities regulations as well, such year-end financial reports to be audited by the independent certified public accountants of the JV.

9.8.1.4.
as soon as reasonably practicable, such other information relating to the financial condition, business, prospects or corporate affairs of the JV Entity, or material developments related thereto, as a Party may from time to time reasonably request.

9.8.2.
The obligation of any JV Entity to provide monthly reports as aforesaid shall expire from the date such JV Entity becomes subject to the reporting requirements of the United States Securities Exchange Act of 1934, as amended, or the Israeli Securities Law, 5728-1968, as amended, or any other comparable securities laws in other jurisdictions.

9.8.3.
After the Closing and upon request, each of Orbotech and Valor shall use reasonable efforts to provide the other with proforma information concerning its prior revenue performance with respect to the JV Existing Products and prior direct R&D expenses with respect to JV Existing Products and JV Development Products to the extent required by the U.S. Securities and Exchange Commission or the Israel Securities Authority.


SECTION 10
Intellectual Property

10.1.
Intellectual Property Owned/Retained by Orbotech and Valor. Each of Orbotech and Valor shall as of the Closing Date, jointly make available

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CONSOLIDATED VERSION
 
 
the IP Rights to the JV, subject to their retaining an irrevocable, perpetual, non-exclusive, right to use and develop the IP Rights in other fields of operations, all subject to the non-competition provisions of Section 11 of this Agreement. “IP Rights” of the Founding Shareholders shall mean all of their intellectual property rights to CAM and archiving systems for PCB Fabrication (including the graphical part of software interfaces between AOI and CAM systems for PCB Fabrication), including but not limited to source codes, documentation, database formats and trade names.
 
 
Neither of the Founding Shareholders will be making available to the JV any right whatsoever in any other intellectual property right belonging to it other than as expressly specified in this Section 10.1. Without derogating from the foregoing, all intellectual property rights for all current products of Valor and of Orbotech (other than with respect to the JV Existing Products and the JV Development Products) will remain the sole property of the respective Founding Shareholder. No intellectual property rights are granted hereunder by one Founding Shareholder to the other.

10.2.
Intellectual Property Developed by the JV. Any and all intellectual property developed by the JV (“IP Developments”) shall be the property of the JV, and subject to the following sentence, of the Founding Shareholders, but shall be subject to the non-competition undertakings provided in Section 11 below. For so long as each of the Founding Shareholders and/or its Permitted Transferees shall hold at least a 30% interest in the JV, IP Developments shall be available to such Founding Shareholder for the use by it or its Affiliates subject to the non-competition undertakings provided in Section 11 below, such use to be without charge.

10.3.
Enforcement of Rights. If any Party becomes aware of any product or activity of any third party that involves infringement or violation of the IP Rights or the IP Developments, it shall promptly notify the other Parties of such infringement or violation. The restraining or enjoining of any infringement or violation of any IP Rights or IP Developments shall be the sole responsibility and expense of the JV (and any amounts awarded by way of judgment, settlement, or compromise shall be paid to the JV), and the JV shall promptly take all such actions as the Board shall determine to protect such rights. However, in the event that the JV decides not to pursue or defend an action relating to such intellectual property, either of the Founding Shareholders shall have the right to pursue or defend such action at its own cost in order to protect such rights for itself or the JV and, unless the JV’s determination not to protect such rights derives only from such Founding Shareholder’s vote or the vote of the directors nominated by such Founding Shareholder, any amounts awarded by way of judgment, settlement or compromise shall be paid to such Founding Shareholder. The Founding Shareholders and the JV shall provide all reasonable cooperation in any action hereunder.

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CONSOLIDATED VERSION


10.4.
Further Agreements. Each of the Parties shall, promptly upon the request of any other Party, execute and deliver such documents or agreements (including, without limitation, powers-of-attorney and licenses) as such Party shall reasonably request to implement the provisions of this Section 10 from time to time.

10.5.
Chief Scientist Funding. Orbotech represents that the research and development of the IP Rights (with respect to both JV Existing Products and JV Development Products) to be made available by Orbotech were funded through the Office of the Chief Scientist at the Ministry of Industry and Trade of the State of Israel (the “OCS”) and that the products and intellectual property of EIT which will be made available to the JV pursuant to Section 11.4 below were also funded by the OCS. Valor represents that none of the IP Rights made available by Valor were so funded. Accordingly, the availability and use of such IP Rights and other rights shall be subject to the approval of the OCS and the terms and conditions thereof and of the Law for the Encouragement of Industrial Research and Development, 5744-1984 and the Regulations promulgated thereunder. Orbotech shall apply to the OCS for its approval to the transactions contemplated herein, and the Parties shall cooperate as may reasonably be required with respect thereto. The receipt of the approval of the OCS in form and substance satisfactory to the Founding Shareholders shall be a condition to Closing. Subject to the Closing, the JV shall pay all royalties due to the OCS with respect to the JV Products with respect to the period subsequent to the Closing and shall indemnify the other Parties against any failure by the JV to pay such royalties.


SECTION 11
Non-Competition, Corporate Opportunities

Each of the Parties hereby undertakes to each of the other Parties as follows:

11.1.
Non-Competition of Founding Shareholders with the Joint Venture. Unless otherwise set forth herein, each of the Founding Shareholders shall not, anywhere in the world, engage either “directly or indirectly” (as defined in Section 11.5 below), in any activity which is one of the JV Activities or one of the activities approved pursuant to Section 11.2 below: for (a) a period which shall commence upon the Closing and shall continue for the period that such Founding Shareholder and/or its Permitted Transferees shall hold an interest in the JV (the “Founding Shareholder Holding Period”); and (b) an additional period equal to the Founding Shareholder Holding Period provided that such additional period shall not be more than thirty-six (36) months or less than eighteen (18) months (the Founding Shareholder Holding Period together with such additional period, with respect to each Founding Shareholder, is hereinafter called the “Founding Shareholder NC Period”).

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CONSOLIDATED VERSION
 
 
Notwithstanding the above, no Founding Shareholder may use any IP Developments in any activity which is one of the JV Activities whether during its Founding Shareholder NC Period or thereafter.
 
11.2.
Non-Competition of the JV Entities with Founding Shareholders. For as long as both Founding Shareholders and/or their respective Permitted Transferees hold interests in the JV, none of the JV Entities shall engage, anywhere in the world, directly or indirectly in any activity which is not one of the JV Activities without the consent of both Founding Shareholders. Thereafter, the JV will not compete with any of the products or services which were provided by a Founding Shareholder upon termination of its Founding Shareholder Holding Period, for the remainder of its Founding Shareholder NC Period.

11.3.
Deleted

11.4.
Purchase of EIT and other CAM Opportunities by the Parties.

11.4.1.
Orbotech has represented that it has entered into an agreement with EIT and Toyo Ink. Mfg., Co. Ltd. (“Toyo”) for the purchase of EIT’s assets and with respect to certain commitments to support Toyo and its customers. Upon the later of the closing of such purchase or the Closing, Orbotech shall make available to the JV all rights and intellectual property acquired from EIT with respect to the JV Activities, including but not limited to, products, source codes, documentation and the like, as well as the obligations to EIT and Toyo undertaken pursuant to such agreement against: (a) an immediate payment of US$*; and (b) additional quarterly payments equal to *% * derived from the sales of EIT products (not including support or service income) during the * years following the date that such assets become available to the JV, payable within 30 days of the end of each quarter, provided that such additional consideration shall not exceed US$*, in the aggregate (i.e., US$* in all). V.A.T. shall be added by the JV to all payments hereunder. Unless otherwise specified, the provisions of this Agreement shall also apply mutatis mutandis to the above rights and obligations made available to the JV as aforesaid. Notwithstanding anything to the contrary contained herein (other than as set forth in Section 10.5 hereof and in Appendix 11.4.1 attached hereto), Orbotech makes no representation or warranty, express or implied, with respect to any rights or assets of EIT made available in accordance with the provisions hereof, all of which are provided “as is”. Orbotech shall indemnify and hold harmless the JV from and against any damages resulting from any breach by Orbotech of the agreement with EIT and Toyo and the JV shall indemnify
 
* Omitted pursuant to a confidential treatment request. The confidential portion has been filed separately with the SEC.
 
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CONSOLIDATED VERSION

 
and hold harmless Orbotech from and against any damages resulting from any non compliance by the JV with any obligation to EIT or Toyo assumed or to be performed hereunder by the JV.
 
11.4.2.
In the event any of the Founding Shareholders or their Permitted Transferees will otherwise purchase or receive rights with respect to CAM or archiving products for use by PCB Fabrication Entities during their respective Founding Shareholder Holding Period, then such Founding Shareholder shall give the JV and the other Founding Shareholder prompt notice thereof and if the JV or the other Founding Shareholder shall so request, then: the acquiring Founding Shareholder shall transfer and sell such purchased rights, business or products to the JV at cost (or if the same shall not be permitted, behave with respect thereto in the manner set forth in Section 5.13 hereof). In the event that such transfer (including in the manner set forth in Section 5.13 hereof) is prohibited by any law or agreement, or in the event rights as aforesaid with respect to CAM or archiving products for use by PCB Fabrication Entities are purchased or acquired by a Founding Shareholder or its Permitted Transferee after the Founding Shareholder Holding Period, then for the remainder of such Founding Shareholder’s Founding Shareholder NC Period the relevant Founding Shareholder shall not use such assets in a manner which shall violate its non-competition obligations set forth in Section 11 hereof or sell such assets (or otherwise make such assets available) to a competitor of the JV Entities without the prior written consent of the other Founding Shareholder.

11.5.
“directly or indirectly”. Defined. For purposes of this Section 11, “directly or indirectly” shall mean - either as principal, agent, contractor, director, manager, shareholder, investor, guarantor, consultant or partner in any business, firm, partnership or corporation, either individually or in partnership or in conjunction with any person or persons, firm, business, association or corporation, in any way or manner, or any interest in or concern with or the assisting of any person or persons, firm, association, business or corporation engaged which has as an objective, partial or otherwise, or is engaged with, in any manner of activity, in any of the activities specified in the relevant subsection of this Section 11.

11.6.
Corporate Opportunities. In addition to their obligations under Sections 11.1 through 11.5 above, each of the Founding Shareholders shall notify the other Founding Shareholder and the JV Company of any matter that might create a potential conflict with its obligations pursuant to this Agreement. The Founding Shareholders and the JV Company will discuss the consequences and implications of such issues or matters and

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CONSOLIDATED VERSION
 
 
attempt to resolve them amicably.
 
11.7.
Remedies. The Founding Shareholders and the JV expressly agree and acknowledge that the detriment caused by any violation of any provision of Section 10 above and this Section 11, among other sections of this Agreement, could be so severe and fundamental as to be impossible to quantify in monetary damages. Accordingly, the Founding Shareholders agree that the JV Company and each Founding Shareholder shall be entitled to obtain an order for specific performance, by a temporary or permanent injunction against a violation, of any and all provisions of Section 10 above and this Section 11 or any other appropriate equitable relief. Nothing in this Section 11.7 shall be interpreted to limit in any way any other legal or equitable remedies which may be or become available as a result of a breach of any portion of Section 10 above and this Section 11, including monetary damages.

11.8.
Employees. Until the first to expire of the Founding Shareholder NC Periods with respect to either Founding Shareholder, neither of the Founding Shareholders shall solicit for employment, or hire, until the lapse of one year from the termination of the employment of such employee by the JV or the other Founding Shareholder, whether directly or indirectly, any of the Designated Employees or any other employee of the JV or of the other Founding Shareholder or of any of its Affiliates, and, in the event this Agreement is signed but the Closing does not occur, neither Founding Shareholder shall, for a period of one (1) year following the date hereof, hire or solicit for employment, whether directly or indirectly, any of the employees of the other Founding Shareholder or its Affiliates without its written consent.

11.9.
Termination upon Liquidation: Notwithstanding anything contained in this Section 11 to the contrary, the Founding Shareholders’ obligations under this Section 11 shall terminate upon completion of the dissolution or liquidation of the JVLP pursuant to the Partnerships Ordinance (New Version) 1975. The Founding Shareholders hereby agree and undertake not to take any action including applying to any competent court or judicial body, for the liquidation or dissolution of the JVLP prior to the expiration of 18 months from the Closing, other than as set forth in Section 3.5.3 above. Furthermore, upon such dissolution or liquidation, each of the Founding Shareholders shall be free to employ any of the Designated Employees or any other employee of JV regardless of any undertaking of non-competition any such employee may have to the other Founding Shareholder, and no claim may be made by such other Founding Shareholder against such employee or the first Founding Shareholder.


SECTION 12
Dispute Resolution


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CONSOLIDATED VERSION

12.1.
Dispute. In the event of a dispute that arises between the Parties based on an alleged breach or default of this Agreement, any question of interpretation relating to this Agreement, or any other question, conflict, or dispute relating hereto or to the Parties’ rights or obligations hereunder, the disputing Parties shall meet and negotiate in good faith to settle the matter amicably. If the disputing Parties are unable to settle such matter within 3 days after either Party has given the other written notice of the dispute, either disputing Party may initiate the arbitration procedure set forth below by notice in writing to the other Party (the “Dispute Notice”). The Dispute Notice shall set forth the subject matter of the dispute, the notifying Party’s proposed resolution of the dispute and, to the best of the notifying Party’s knowledge and understanding, the other Party’s proposed resolution of the dispute.

12.2.
Appointment of Arbitrator. Within thirty (30) days following delivery of the Dispute Notice, the Parties in dispute shall appoint a single arbitrator (the “Arbitrator”) to finally resolve issues hereunder. The Arbitrator shall resolve disputes within 60 days of receipt of the Dispute Notice or within a time frame as shall otherwise be agreed by the disputing Parties. The governing law which the Arbitrator shall apply shall be the laws of the State of Israel, the Arbitrator shall be exempt from the rules of civil procedure and evidence, but shall be required to make his or her decision in accordance with substantive law and shall be required to give reasons for his decision. The decision of the Arbitrator shall legally bind the disputing Parties and may be enforced by a court of competent jurisdiction. The arbitration proceedings shall be conducted in Hebrew.

12.3.
Court Jurisdiction. Should the disputing Parties be unable to agree upon the Arbitrator or neither disputing Party shall elect to initiate arbitration within 30 days following the Dispute Notice, then the matter shall be subject to the sole and exclusive jurisdiction of the competent courts of Tel-Aviv and each disputing Party shall have the right to file and submit their claims with such court against the other disputing Party.

 
SECTION 13
Term

13.1.
Term. The term of this Agreement shall expire at such time in which none of the Founding Shareholders (or their Permitted Tranferees) shall hold any Beneficial Interests.

13.2.
Breach. It is the intention of the Founding Shareholders that none of the Parties shall have the right to terminate this Agreement and that the sole remedies for a violation by any party hereto of any of its obligations under the terms of this Agreement or if any representation or warranty made by

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CONSOLIDATED VERSION
 
 
either Party shall no longer be correct shall be specific enforcement or damages. Notwithstanding the foregoing, in the event that a Party shall commit a violation such that a court shall determine that the Parties would not have intended that this Agreement remain in effect, then, any other Party shall have the right to terminate this Agreement upon 90 days’ prior written notice, and such notice of termination shall become effective unless the violation shall be completely remedied in the 90 day period (or, in case of violations which may not be cured within 90 days, if the defaulting Party shall not within such 90 day period undertake to cure such violation and to complete such cure within an additional 90 days).
 
13.3.
Survival. Without derogating from the effect of specific provisions in this Agreement regarding term or survival of certain Sections, the following provisions shall survive the expiration or other termination of this Agreement: Sections 1, 5.6-5.8, 11.7, 12, 17 (other than indemnification of the JV), 19 and 20.


SECTION 14
Closing

14.1.
Conditions Precedent. The Founding Shareholders’ obligations to consummate their obligations hereunder are contingent upon the receipt of the following documents in form and substance acceptable to the Founding Shareholders (“Conditions Precedent”), on or before the Closing Date (the receipt of any or all of which may be waived by agreement between the Founding Shareholders):

14.1.1.
Approval of the transactions contemplated hereunder by the Israel Restrictive Trade Practices Commissioner.

14.1.2.
The pre-ruling of the Israel Income Tax Authorities, stating that the transactions contemplated hereunder and the establishment of the JV may be executed without any detrimental tax result.

14.1.3.
The approval of the Investment Center to the transactions contemplated hereunder.

14.1.4.
The approval of the OCS.

14.1.5.
The approval by the United States Securities and Exchange Commission confirming and approving the presentation of Valor’s interests in the JV (including the proportionate JV sales turnover), in Valor’s financial statements and in a prospectus for an IPO of Valor, in the “proportionate consolidation” method.


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CONSOLIDATED VERSION

14.2.
Each Founding Shareholder’s Conditions to the Closing.

 
Valor’s obligation to consummate its obligations hereunder is subject to the fulfillment, prior to or at the Closing Date, of each of the conditions set forth in Sections 14.2.1 and 14.2.2 below and Orbotech’s obligation to consummate its obligation hereunder is subject to the fulfillment, prior to or at the Closing Date, of each of the conditions set forth in Sections 14.2.1 - 14.2.3 below (collectively the “Founding Shareholder Conditions”) (any or all of which may be waived by the relevant Founding Shareholder):

14.2.1.
all representations and warranties of the other Founding Shareholder contained herein are true and correct in all material respects at the Closing Date.

14.2.2.
all obligations, representations, warranties, covenants, agreements and conditions contained in this Agreement to be made, performed or complied with by the other Founding Shareholder at or prior to the Closing Date shall have been made, performed or complied with in all material respects.

14.2.3.
Receipt of the written consent of the banks set forth in Appendix 8 hereto in form and substance acceptable to Orbotech to the consummation of the transactions contemplated herein.

14.3.
Closing. The Closing shall take place at the offices of Xxxxx Xxxxx-Xxxxx Xxxxx, 14 Abba Hillel Road, Ramat Gan, at 12:00 on the Closing Date, or at such other date, time or place as the Parties hereto shall mutually agree upon in writing.

14.4.
Transactions at Closing. Subject in each case to the terms and conditions contained in this Agreement, the following documents shall be executed and delivered by the Parties prior to or concurrently with the Closing, except as otherwise expressly stated; such documents shall be deemed to have been executed and delivered simultaneously and no documents shall be deemed to have been executed or delivered until all such documents have been executed and delivered:

14.4.1.
The JVLP Agreement, in the form attached hereto as Appendix 14.4.1.

14.4.2.
Notification to Registrar of Partnerships, in the form attached hereto as Appendix 14.4.2.

14.4.3.
Memorandum of Association of the JV Company, in the form attached hereto as Appendix 14.4.3.


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CONSOLIDATED VERSION

14.4.4.
Articles of Association of the JV Company, in the form attached hereto as Appendix 14.4.4.

14.4.5.
Notification to Companies Registrar, in the form attached hereto as Appendix 14.4.5.

14.4.6.
Nomination of Directors, in the form attached hereto as Appendix 14.4.6.

14.4.7.
Share Certificates in the form attached hereto as Appendix 14.4.7.

14.5.
Outside Closing Date. In the event that as of October 31, 1998, any of the Conditions Precedent or Founding Shareholder Conditions shall not have occurred and the same shall not have been expressly waived by the Founding Shareholders, then the Founding Shareholders shall discuss the extension of such date as well as their conduct during any such extension period provided that this Agreement may be cancelled at any time after October 31, 1998 upon written notice by either Founding Shareholder to the other. In the event that this Agreement shall be so cancelled, this Agreement shall be null and void and none of the declarations, representations, warranties or undertakings set forth herein (including the Preamble and the Appendices hereto), other than that set forth in Section 11.8 hereof, shall be of any force or effect and, except as aforesaid, no Party shall have any further obligation to the other.


SECTION 15
Post Closing Covenants

15.1.
Transition. During the Founding Shareholder’s NC Period, (a) such Founding Shareholder shall refrain from taking any action that is designed or intended to have the effect of discouraging any lessor, licensor, customer, supplier or other business associate of the Founding Shareholders from maintaining the same business relationships with the JV Entities (or their sales channels) after the Closing Date as it maintained with the Founding Shareholders (or their sales channels) prior to the date hereof or is otherwise reasonably expected to have a detrimental effect on the JV Activities; and (b) during the Founding Shareholder’s Holding Period, such Founding Shareholder will refer to the JV Entities (or their sales channels) all inquiries by its current or former customers (as of the Closing Date) relating to the JV Activities.

15.2.
Access to Information. Until the eighth (8th) anniversary of the Closing, each Founding Shareholder shall: (a) retain or otherwise provide for the retention and safe keeping of all of its books and records that are not transferred to the JV Entities pursuant to this Agreement and which relate to the JV Existing Products or JV Development Products during


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CONSOLIDATED VERSION
 
 
periods prior to the Closing Date; and (b) upon reasonable notice, afford or otherwise provide or enable the officers, employees and authorized agents and representatives of the JV Entities reasonable access (including the right to make photocopies at JV Entities’ expense), during normal business hours, to such books and records.
 
SECTION 16
Transfer of Shares; Exit Arrangements

16.1.
Transfer of Shares.

16.1.1.
Except as otherwise provided in this Section 16 below, no shareholder or partner shall be permitted to transfer any shares or other equity or partnership interest in any of the JV Entities (but not including the right to distributions from the JV) (the “Beneficial Interests”) without the prior written permission of both Founding Shareholders for a period of 5 years from the Closing (the “No Sale Period”). The provisions of this Section 16 shall also be set forth in the respective Articles of Association and Limited Partnership Agreement of the JV Entities. Additionally, the JV Company shall not transfer any of its partnership interests in the JVLP without the consent of the holders of seventy-five percent (75%) the outstanding shares of the JV Company.

16.1.2.
Except as otherwise expressly provided herein, at no time during the term of this Agreement shall any shareholder or partner of any of the JV Entities pledge, charge, hypothecate, encumber, grant any security interest in, or otherwise grant any rights to any third party concerning any Beneficial Interests without the prior written permission of both Founding Shareholders unless: (i) the pledgee is a “bank” (as such term is used in the Israel Banking (Licensing) Law 1981-5741); and (ii) the pledgee undertakes and agrees, in writing, that its rights in such Beneficial Interests shall be subject to all the restrictions regarding transfer of Beneficial Interests contained in this Section 16.

16.1.3.
Subsequent to the No Sale Period, any transfer of Beneficial Interests shall be in accordance with the provisions set forth in this Section 16.

16.1.4.
Unless otherwise agreed by the Founding Shareholders, a Founding Shareholder may not, at any time, transfer any Beneficial Interest in any JV Entity unless it transfers at the same time and to the same Transferee the corresponding Beneficial Interest in all JV Entities.

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CONSOLIDATED VERSION
 
16.1.5.
A Permitted Transferee may not transfer its Beneficial Interests other than in connection with a transfer by a Founding Shareholder or as set forth in Section 16.5 hereof.

16.2.
Right of First Negotiation; Open Negotiation Period.

16.2.1.
At any time after the No Sale Period, either Founding Shareholder (the “Transferor”) desiring to transfer all or any portion of its Beneficial Interests (other than pursuant to the Permitted Transferee or Forced Exit provisions set forth in Sections 16.5 and 16.6 below) shall send to the JV Entities and to the other Founding Shareholder (the “Other Founding Shareholder”) a written notice (the “First Negotiation Notice”) stating the Transferor’s intention to transfer its Beneficial Interests.

16.2.2.
For a period of up to thirty (30) business days after the delivery of the First Negotiation Notice (the “First Negotiation Period”), the Transferor shall negotiate exclusively with the Other Founding Shareholder with respect to the Other Founding Shareholder’s purchase of all of the Transferor’s Beneficial Interests offered for transfer, subject to any restrictions in law, free of any charge, pledge, lien or any other third party right.

16.2.3.
In the event that the Founding Shareholders do not execute a definitive agreement with respect to the Other Founding Shareholder’s purchase of all of the Transferor’s Beneficial Interests offered for transfer within the First Negotiation Period, then, the Transferor may, within ninety (90) days after the First Negotiation Period, offer for sale such Beneficial Interests (the “Open Negotiation Period”) (subject to the Right of First Refusal, Right to Tag Along and Right of Approval set forth below).

16.2.4.
In the event that the Transferor shall not execute an agreement with a bona fide purchaser upon the terms of the transfer of its Beneficial Interests during the Open Negotiation Period, the Transferor shall not continue to offer or otherwise seek to transfer its Beneficial Interests without again complying with the first negotiation procedure set forth above (and the Right of First Refusal, Right to Tag Along and Right of Approval set forth below).

16.3.
Right of First Refusal; Right to Tag Along. At any time during the Open Negotiation Period, the Transferor may enter into an agreement (the “Terms Agreement”) with a bona fide proposed purchaser (the

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CONSOLIDATED VERSION
 
 
“Transferee”) with respect to the terms of sale of all or such portion of the Transferor’s Beneficial Interests offered for transfer during the First Negotiation Period provided the Transferor shall first offer to the Other Founding Shareholder: (a) the right to purchase all or such portion of the Transferor’s Beneficial Interests, pursuant to the Terms Agreement (“Right of First Refusal”); and (b) the right to join the Transferor in its sale of Beneficial Interests to the Transferee, such that if the other Founding Shareholder so elects (as an alternative to the Right of First Refusal), the Transferor may not sell its Beneficial Interests unless the Transferee agrees to purchase the same percentage of Beneficial Interests from the Other Founding Shareholder as it is purchasing from the Transferor, pursuant to the Terms Agreement (“Right to Tag Along”). Any transfer of Beneficial Interests by the Transferor to the Transferee shall also be subject to the Right of Approval set forth in Section 16.4 below.
 
16.3.1.
Rights Notice. The Transferor shall offer the Right of First Refusal and the Right to Tag Along to the other Founding Shareholder pursuant to a written notice to the JV Entities and to the Other Founding Shareholder providing details of the Transferee and a copy of the Terms Agreement (the “Rights Notice”).

16.3.2.
Exercise Notice. The Other Founding Shareholder may exercise its Right of First Refusal or Right to Tag Along by giving the Transferor and the JV Entities a written notice to that effect within thirty (30) days after being served with the Rights Notice subject to an additional 90 day period to permit the Other Founding Shareholder to obtain all necessary approvals in connection with such purchase (and the other Parties shall provide all reasonable assistance to the Other Founding Shareholder in connection therewith) (the “Exercise Notice”).
 
16.3.3.
Purchase by the Other Founding Shareholder. If the Other Founding Shareholder shall timely exercise its Right of First Refusal, then the Transferor’s Beneficial Interests will be sold and transferred to the Other Founding Shareholder, in accordance with the provisions of the Terms Agreement and this Section 16.

16.3.4.
Purchase by Transferee; Tag Along. If, (a) the Transferor shall properly give the First Negotiation Notice and the Rights Notice, as set forth above; and (b) the Other Founding Shareholder shall not timely exercise its Right of First Refusal, then: (i) none of the Transferor’s Beneficial Interests will be

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CONSOLIDATED VERSION
 
 
sold to the Other Founding Shareholder; and (ii) subject to the Other Founding Shareholder’s Right of Approval, the Transferor shall, within sixty (60) days after the last date on which the Exercise Notice may be submitted, sell to the Transferee, all of the Transferor’s Beneficial Interests pursuant to the Terms Agreement provided that if the Other Founding Shareholder shall have timely exercised its Right of Tag Along, then none of the Transferor’s Beneficial Interests will be sold unless the Transferee purchases (pursuant to the Terms Agreement) all of the Beneficial Interests offered by the Other Founding Shareholder pursuant to its Right to Tag Along.
 
16.3.5.
In the event that the Transferor’s Beneficial Interests are not sold by the Transferor as set forth in Section 16.3.4 above (including by reason of the Transferee’s refusal to satisfy the Other Founding Shareholder’s exercise of its Right to Tag Along) within such sixty (60) day period, then the Transferor’s Beneficial Interests may not be offered or otherwise transferred unless the Transferor shall again comply with all of the provisions of Section 16.2 and this Section 16.3.

16.4.
Right of Approval.

16.4.1.
Notwithstanding the foregoing provisions of this Section 16, any transfer of Beneficial Interests to a Transferee which is not a Permitted Transferee of the Transferor shall also be subject to the approval of the identity of the Transferee by the Other Founding Shareholder, which approval may not be unreasonably withheld and without providing a written detailed explanation (“Right of Approval”) provided that: (a) in the event that the Transferee is a competitor of the Other Founding Shareholder, then the Other Founding Shareholder may refuse to grant such approval, in its sole discretion, by giving written notice of such competitive relationship and without further explanation; and (b) no such approval shall be required in the event that the Other Founding Shareholder shall exercise its Right to Tag Along.

16.4.2.
The Transferor may at any time request the Other Founding Shareholder’s approval of the identity of the Transferee by giving written notice of name of the Transferee (including by providing written notice thereof in the Rights Notice). The Other Founding Shareholder shall respond to the Transferor’s request within ten (10) days after delivery of the Transferor’s notice and such other information as the Other Founding Shareholder may reasonably request. Such approval shall

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CONSOLIDATED VERSION

 
be deemed granted in the event that the Other Founding Shareholder shall fail to respond within such 10 day period.
 
16.4.3.
If the Transferor believes that the other Founding Shareholder is unreasonably withholding its approval, then, within 10 days of delivery of the Other Founding Shareholder’s written explanation, the Transferor may submit the matter to the dispute resolution procedure set forth in Section 12 above.

16.5.
Certain Permitted Transfers.

16.5.1.
Notwithstanding the foregoing provisions of this Section 16, each of the Founding Shareholders may transfer a portion of its Beneficial Interests to an entity in which the Founding Shareholder beneficially holds, directly or indirectly (including through other such wholly-owned entities), all of the voting and equity interests in such entity (each, a “Permitted Transferee”) and Permitted Transferees may transfer Beneficial Interests to other Permitted Transferees and the Founding Shareholders in the manner set forth in Section 16.5.2 below, and the Other Founding Shareholder’s Right of First Refusal, Right to Tag Along and Right of Approval shall not apply, provided, however, that all such Beneficial Interests transferred by a Founding Shareholder or its Permitted Transferee shall continue to be subject to such rights as if such Beneficial Interests were still owned by the transferring Founding Shareholder.

16.5.2.
A Founding Shareholder or a Permitted Transferee may transfer all or any portion of its Beneficial Interests to one or more Permitted Transferees provided, however, that as a condition to the validity of any such transfer:

16.5.2.1.
the Founding Shareholder or transferring Permitted Transferee shall have given written notice to the JV Entities and the Other Founding Shareholder of details of the transfer, including the Founding Shareholder’s certification that the transferee is a Permitted Transferee and that all necessary approvals in connection with such transfer have been obtained and providing appropriate supporting documents;

16.5.2.2.
such Permitted Transferee shall agree in writing to be bound by all the terms and provisions of this Agreement and to assume all of the obligations hereunder to the same extent as the transferring

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CONSOLIDATED VERSION

 
Founding Shareholder; and
 
16.5.2.3.
the transferring Founding Shareholder shall acknowledge in writing that it is not released from any of its obligations hereunder and that it shall be liable for and guarantees the performance by the Permitted Transferee of its obligations and undertakings hereunder.

16.5.3.
Change in Permitted Transferee Relationship.

16.5.3.1.
Notwithstanding any provision of this Agreement to the contrary, in the event that a transferee of Beneficial Interests pursuant to Sections 16.5.1 and 16.5.2 ceases to be a “Permitted Transferee” of a Founding Shareholder during the term of this Agreement, then: (i) the transferring Founding Shareholder (or if such transferring Founding Shareholder shall no longer hold any Beneficial Interests, the Permitted Transferee thereof) shall notify the Other Founding Shareholder (or the Permitted Transferee thereof) and the JV Entities of the change within ten (10) business days thereof.

16.5.3.2.
Within 7 days of delivery of the foregoing notice, the Other Founding Shareholder and the Founding Shareholder (or if any of the Founding Shareholders shall no longer hold any Beneficial Interests, such Permitted Transferee) shall appoint a mutually agreed professional third party appraiser (the “Appraiser”) to determine the value of the Permitted Transferee’s Beneficial Interests (the “Valuation”). In the event that the Founding Shareholders (and/or their Permitted Transferees) shall fail to agree upon an appraiser, the same shall be appointed by the District Court in Tel-Aviv upon the application of either Founding Shareholder (or its Permitted Transferee). The Founding Shareholder whose transferee ceased to be a Permitted Transferee (or if the Founding Shareholder shall no longer hold any Beneficial Interests, such Permitted Transferee) shall pay the expenses of the Appraiser.

16.5.3.3.
The Appraiser shall complete the Valuation and shall provide both Founding Shareholders with a signed written original thereof. The Valuation shall be final for purposes of this Section 16.5.3.

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CONSOLIDATED VERSION


16.5.3.4.
The Other Founding Shareholder shall have 30 days from the date of receipt of the Valuation to purchase the Beneficial Interests of such transferee who ceased to be a Permitted Transferee at a price which shall be equal to 80% of the value of such Beneficial Interests set forth in the Valuation.

16.6.
Change in Control.

16.6.1.
In the event that there is a “Change in Control” (as defined below) of either Founding Shareholder (herein, “Changed Shareholder”) during the period in which such Founding Shareholder and its Permitted Transferees holds any Beneficial Interests, the Changed Shareholder shall give written notice thereof to the other Founding Shareholder (the “Other Shareholder”) within 10 days thereof provided the Other Shareholder (together with its Permitted Transferees) holds at such time, at least a 30% interest in the JV. Within 30 days of the Changed Shareholder’s notice, the Other Shareholder may give written demand to the Changed Shareholder to negotiate exclusively with the Other Shareholder for a period of thirty (30) business days with respect to the Other Shareholder’s purchase of all of the Changed Shareholder’s Beneficial Interests.

16.6.2.
In the event that the Founding Shareholders do not execute a definitive agreement with respect to the Other Shareholder’s purchase of all of the Changed Shareholder’s Beneficial Interests within such negotiation period, then, the Other Shareholder may, within 15 days thereafter, give written notice to the Changed Shareholder invoking the “Sell-Buy Procedure” set forth in Section 16.7 below (the “Sell-Buy Notice”.)

16.6.3.
Change of Control of a Founding Shareholder. For purposes of this Section 16.6, a “Change in Control” of a Founding Shareholder shall be deemed to have occurred: (i) with respect to Valor, until the closing of the initial public offering of its shares to the public pursuant to a prospectus or similar document in Israel or abroad, if the “Controlling Group of Valor” (as defined in Appendix 16.6.3), directly or indirectly, owns beneficially or of record less than 50.01% of the combined voting power of the outstanding voting securities of Valor; or (ii) with respect to either Founding Shareholder if the board of directors of such Founding Shareholder (or, if approval of the shareholders is required, the shareholders of the Founding Shareholder) shall approve: (a) any

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CONSOLIDATED VERSION
 
 
consolidation or merger of the Founding Shareholder in which the Founding Shareholder is not the continuing or surviving corporation or pursuant to which shares of such Founding Shareholder would be converted into cash, securities or other property, other than a merger of the Founding Shareholder in which the holders of shares of such Founding Shareholder immediately prior to the merger have the same proportionate ownership of shares of the surviving corporation immediately after the merger; or (b) the adoption of any plan or proposal for the liquidation or dissolution of the Founding Shareholder; or (iii) during any period of two consecutive years, individuals who at the beginning of such period constituted the entire board of directors of such Founding Shareholder cease for any reason to constitute a majority thereof unless the election, or the nomination for election by such Founding Shareholder’s shareholders, of each new director was approved by a vote of at least two-thirds of the directors then still in office who were directors at the beginning of the period; or (iv) if a competitor of the other Founding Shareholder shall acquire, directly or indirectly, beneficially or of record, 10% or more of the combined voting power of the outstanding voting securities of such Founding Shareholder.
 
16.7.
Sell-Buy Procedure.
 
16.7.1.
In the event that the Other Shareholder shall give the Sell Buy Notice as set forth above then within 7 days of delivery of such notice, the Founding Shareholders shall appoint an Appraiser to provide a Valuation of all of the Beneficial Interests of both Founding Shareholders and their Permitted Transferees pursuant to the procedures set forth in Sections 16.5.3.2 and 16.5.3.3 except that the JV shall pay the expenses of the Appraiser.

16.7.2.
The Valuation shall be final for purposes of the remainder of this Section 16.7.

16.7.3.
Each of the Founding Shareholders shall have 30 days from the date of receipt of the Valuation to make an offer to the other Founding Shareholder to purchase the other Founding Shareholder’s Beneficial Interests at a price which shall at least equal the value of such Beneficial Interests as set forth in the Valuation (a “Buy Offer”).

16.7.4.
In the event only one of the Founding Shareholders makes a Buy Offer, the other Founding Shareholder shall be obliged to sell its Beneficial Interests to the offering Founding Shareholder at the price offered.

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CONSOLIDATED VERSION


16.7.5.
In the event that both Founding Shareholders wish to buy the other Founding Shareholder’s Beneficial Interests, the Founding Shareholders shall bid against each other by means of sending Buy Offers and counter Buy Offers to each other. The Founding Shareholder offering the highest amount shall be entitled to buy all of the other Founding Shareholder’s Beneficial Interests and such other Founding Shareholder shall be obliged to sell the same at the price offered. Counter Buy Offers shall be made within 15 days of receipt of a Buy Offer. If an offeree Founding Shareholder fails to respond to a Buy Offer (i.e., to give a counter Buy Offer) within 15 days of receipt of the Buy Offer, the Buy Offer shall be deemed to have been accepted by the offeree Founding Shareholder for all purposes herein.

16.7.6.
In the event that neither of the Founding Shareholders makes a Buy Offer within 30 days of receipt of the Valuation or neither Founding Shareholder agrees to purchase the other Founding Shareholder’s Beneficial Interests based upon a price at least equal to that reflected in the Valuation, the Parties shall dissolve the JV Entities and all subsidiaries thereof pursuant to applicable law.

16.8.
Closing; Directors. Once it is determined which Founding Shareholder will be transferring its Beneficial Interests in the JV to the other Founding Shareholder or another purchaser (the “Selling Shareholder”), the Founding Shareholders shall negotiate a closing date for the transfer of such Beneficial Interests to the purchasing Founding Shareholder or its designee for a date no later than 45 days from the date of the acceptance (or deemed acceptance) of the Buy Offer. All members of the Board of Directors of the JV Entities who were designated by virtue of the Beneficial Interests so transferred shall be deemed to be dismissed from their positions as of the date of the closing of such transfer, and such open directorships shall be filled by the remaining Founding Shareholder.

16.9.
Selling Shareholder’s Obligations. The Selling Shareholder shall comply with the following provisions:

16.9.1.
For a period of one (1) year following the sale of all of its Beneficial Interests in the JV Entities in accordance with the provisions of Sections 16.1 - 16.6 (the “Sale”), each of the Selling Shareholder and the JV shall continue to supply the other with the type of goods and services that it supplied in the six month period prior to the Sale under a supply agreement to be entered into at arms length prices. The Selling Shareholder and the JV shall also continue to provide any support for the products it provided prior to the Sale, and shall, for the same

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CONSOLIDATED VERSION
 
 
period of time, continue to provide the same type and level of support, if any, that it previously provided to the other for the products produced by it. Notwithstanding the foregoing, the JV shall have the right to terminate any sales, agency or customer support agreement with any subsidiary of the Selling Shareholder without charge and the Selling Shareholder shall cause its subsidiary to give its consent to any such termination. The Selling Shareholder shall indemnify the other Founding Shareholder and the JV from and against any claims made by any of its subsidiaries in this respect.
 
16.9.2.
The Selling Shareholder and/or the JV shall provide to the other a list of the suppliers of goods and services used and/or utilized by it in the procurement of raw or finished goods and materials that it sold to the other prior to the Sale.

16.9.3.
All rights to IP Rights or other intellectual property granted by the Selling Shareholder to the JV Entities hereunder, and granted by the JV Entities to the Selling Shareholder, under and during the course of this Agreement, including rights to IP Developments granted under Section 10.2 shall remain in effect after the Sale.

16.9.4.
The Buying Shareholder shall be obliged to assume all outstanding loans which were granted by the Selling Shareholder to the JV Entities.


SECTION 17
Indemnification

17.1.
Indemnification by Orbotech. Orbotech will indemnify Valor and the JV Entities and each of their officers, directors, employees, and agents (collectively, “Orbotech Indemnified Persons”) against, and hold each of them harmless from, any and all damage, loss, liability and expense (including, without limitation, reasonable expenses of investigation and reasonable attorneys’ fees and expenses in connection with any action, suit or proceeding) incurred or suffered by any Orbotech Indemnified Person arising out of any breach of any representation, warranty, undertaking or agreement made or to be performed by Orbotech pursuant to this Agreement.

17.2.
Indemnification by Valor. Valor will indemnify Orbotech and the JV Entities, and each of their officers, directors, employees, and agents (collectively, “Valor Indemnified Persons”) against, and hold each of them harmless from, any and all damage, loss, liability and expense (including, without limitation, reasonable expenses of investigation and reasonable attorneys’ fees and expenses in connection with any action, suit

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CONSOLIDATED VERSION
 
 
or proceeding) incurred or suffered by any Valor Indemnified Person arising out of any breach of any representation, warranty, undertaking or agreement made or to be performed by Valor pursuant to this Agreement.

SECTION 18
Confidentiality

18.1.
Publicity. None of the Parties shall release any information or issue or cause the publication of any press release, other than the press release annexed hereto as Appendix 18.1 and at such time as shall be agreed by the Founding Shareholders, with respect to the JV or the subject matter of this Agreement without the consent of the other Parties, except as required by regulatory bodies having jurisdiction over such Party, and except as deemed necessary by a Party, in connection with reporting requirements applicable to its status as a publicly-traded company, or by the JV in connection with the business of the JV or as required pursuant to applicable securities laws and regulations for the purposes of preparing or filing a prospectus with respect to the offering to the public of shares of either Founding Shareholder, provided that such Founding Shareholder shall request, and use reasonable efforts to procure, that this Agreement be kept confidential and not made available for public inspection or review. For so long as Valor’s shares are not publicly traded, all press releases with respect to the JV or this Agreement as aforesaid will be made by Orbotech, and, at such time as both Founding Shareholders’ shares are publicly traded, will be coordinated and made by both Founding Shareholders.

18.2.
Confidentiality. Each of the Founding Shareholders shall hold in strict confidence and shall cause its directors, shareholders, employees, consultants and advisors to hold in strict confidence, all documents and information concerning the JV Entities and the JV Products furnished to it or its representatives at any time (collectively, the “Confidential Information”) and will use the Confidential Information only in connection with its capacity as a shareholder of the JV Company; except as deemed necessary by such Founding Shareholder, in connection with reporting requirements applicable to its status as a publicly-traded company, or to protect its rights hereunder or as otherwise required by law or as required pursuant to applicable securities laws and regulations for the purposes of preparing or filing a prospectus with respect to the offering to the public of shares of either Founding Shareholder, provided that such Founding Shareholder shall request, and use reasonable efforts to procure, that this Agreement be kept confidential and not made available for public inspection or review.


SECTION 19
Waiver of Claims

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CONSOLIDATED VERSION


19.1.
Waiver by Founding Shareholders. Provided that all Conditions Precedent and Founding Shareholder Conditions specified in Section 14 have been fully met or waived in writing, (a) the Founding Shareholders hereby release and forever discharge each other and any Claims Affiliates (as defined in Section 19.3 hereof), of and from any and all claims, debts, liabilities, damages, lost profits, property damages, losses of services, expenses, compensation, demands, obligations, costs, actions and causes of action of every nature, character and description, known and unknown, vested and contingent, which they now own or hold, or have at any time owned or held, against each other arising from any of the Founding Shareholders’ activities, lack of activities or from any reason whatsoever prior to the Closing; and (b) each Founding Shareholder shall cancel and withdraw, immediately after the Closing, all proceedings, complaints etc., initiated by it (and shall cause the same with respect to proceedings initiated by its Claims Affiliates) against the other Founding Shareholder or its Claims Affiliates pending before any Authority, person or corporation, whether in Israel or anywhere in the world.

19.2.
No Claims Assigned. Each of the Founding Shareholders represents and warrants that it has not assigned or transferred or purported to assign or transfer to any person, firm or corporation whatsoever, any claim, debt, liability, demand, obligation, cost, expense, action or cause of action herein released. If there is any claim, debt, liability, demand, obligation, cost, expense, action or cause of action based on or arising out of or in connection with any such transfer or assignment or purported transfer or assignment, the transferring or assigning Founding Shareholder agrees to indemnify and hold the other Founding Shareholder and the JV harmless against such assigned or purportedly assigned claim, debt, liability, demand, obligation, cost, expense, action or cause of action, including reasonable attorneys’ fees and costs incurred in connection therewith.

19.3.
Claims Affiliates Defined. For the purpose of this Section 19 only, “Claims Affiliates” of a Founding Shareholder shall mean its direct and indirect shareholders, subsidiaries, representatives, agents, employees, attorneys, officers and directors.


SECTION 20
General Provisions

20.1.
Relationship of the Parties. The Parties are strictly independent contractors and shall so represent themselves to all third parties. No Party has the right to bind any other in any manner whatsoever and nothing in this Agreement shall be interpreted to make any Party the agent or legal representative of any other.

20.2.
Assignment. This Agreement and its appendices shall not be assigned by

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any Party without the prior written consent of the other Parties.
 
20.3.
Taxes. Each Party shall be solely responsible for any income, sales, use, service or other tax levied or incurred on account of the Agreement or the activities hereunder. If required by law, each Party may withhold at the source any withholding tax based on the income received by the other Party under this Agreement.

20.4.
Force Majeure. No Party shall be held responsible for any delay or failure in performance hereunder caused in whole or in part by fires, strikes, floods, embargoes, labor disputes, acts of sabotage, riots, accidents, voluntary or mandatory compliance with any governmental act, regulation or request, acts of God or public enemy, war acts, or omissions or other causes beyond its control and without its fault or negligence.

20.5.
Notice. Notice as required herein shall be delivered by courier service with receipt of delivery at the address stated above. A notice shall be effective as of the date so delivered.

20.6.
Entire Agreement and Amendment. This Agreement and the Preamble and Appendices hereto, constitute the entire agreement between the Parties with respect to the subject matter hereof and contain all of the promises, undertakings, and other representations made by the Parties to each other prior to its execution, all of which are merged herein.
 
 
This Agreement and the Appendices hereto override and supersede any prior agreement, understanding, promise or undertaking of the Parties with respect to the subject matter hereof, all of which are merged herein. No subsequent amendment to this Agreement shall be of any effect unless executed in writing and signed by the Parties.

20.7.
Severability. Should any term or provision of this Agreement be or become invalid or unenforceable or should this Agreement contain an omission, the validity or enforceability of the remaining terms or provisions shall not be affected. In such case, subject to the next following sentence, the Parties shall immediately commence to negotiate in good faith in order to replace the invalid or unenforceable term or provision by such other valid or enforceable term or provision which comes as close as possible to the original intent and effect of the invalid or unenforceable term or provision, or respectively, to fill the omission by inserting such term or provision which the parties would have reasonably agreed to, if they had considered the omission at the date hereof. In the event that any term or provision as aforesaid is invalid, void or unenforceable by reason of its scope, duration or area of applicability or some similar limitation as aforesaid, then the court making such determination shall have the power to reduce the scope, duration, area or applicability of the term or provision so that they shall be enforceable to the maximum scope, duration, area or

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applicability permitted by applicable law which shall not exceed those specified in this Agreement or to replace such term or provision with a term or provision that comes closest to expressing the intention of the invalid or unenforceable term or provision, provided that the Parties would have entered into this Agreement as so amended.
 
20.8.
Governing Law. This Agreement shall be governed and construed in accordance with the laws of the State of Israel.

20.9.
Non-waiver of Rights. A waiver by a Party hereto of a breach or non performance of one or more of the other Party’s obligations pursuant hereto, shall not constitute a precedent and shall not be used as an inference for another case. The failure to exercise any right available to a Party pursuant to this Agreement or by law shall not be construed as a waiver of such rights in any other instance and this behavior shall not be seen as any waiver of rights and obligations pursuant to this Agreement.

20.10.
Headings. The headings, titles and subtitles contained in this Agreement are for the convenience of the parties only and shall not affect the construction or interpretation of any provision hereof.

20.11.
Counterparts. This Agreement may be executed in multiple counterparts, each of which shall be deemed an original but all of which shall constitute but one instrument.

20.12.
Further Assurances. Each Party agrees to cooperate fully with the other party and to execute such further instruments, documents and agreements and to give such further written assurances, as may be reasonably requested by the other Party to evidence and reflect better the transactions described herein and contemplated hereby and to carry into effect the intents and purposes of this Agreement.

20.13.
Expenses. Each of the Parties shall be solely responsible for all of its respective costs and expenses incurred, either directly or indirectly, with respect to this Agreement and the transactions contemplated hereby. In the event that the Parties agree to use the same consultant with respect to an agreed matter relating to this Agreement, the costs of such consultant shall be shared equally between the Parties.

20.14.
No Third Party Beneficiary. This Agreement is made solely for the benefit of the Parties and no other party shall acquire any right hereunder.
 
 
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APPENDICES
 
Appendix 2.1(a)
JV Existing Products
   
Appendix 2.1(b)
JV Development Products
   
Appendix 7.1(i)
Sales and Customer Support Agents in North America
   
Appendix 7.1(ii)
Basic Terms of Sales and Customer Support Arrangements
   
Appendix 7.6
List of Sales, Agency and Customer Support Agreements.
   
Appendix 7.9
List of OEM Agreements
   
Appendix 8
Schedule of Exceptions
   
Appendix 8.8
Revenues of JV Existing Products and Related Services for 0000
   
Xxxxxxxx 11.3.2(1)
Deleted
   
Appendix 11.3.2(2)
Deleted
   
Appendix 11.4.1
Certain Representations with Respect to EIT
   
Appendix 14.4.1
The JVLP Agreement
   
Appendix 14.4.2
Notification to Registrar of Partnerships
   
Appendix 14.4.3
Memorandum of Association
   
Appendix 14.4.4
Articles of Association of the JV Company
   
Appendix 14.4.5
Notification to Companies Registrar
   
Appendix 14.4.6
Nomination of Directors
   
Appendix 14.4.7
Share Certificates
   
Appendix 16.6.3
Controlling Group of Valor
   
Appendix 18.1
Press Release
 
 
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APPENDIX 2.1(a)
 
JV Existing Products
 
All existing (and prior generation) CAM and archiving software products for use in PCB Fabrication now being offered and sold, namely:
 
STAR 1000
 
Genesis 2000 (including all options and interface packages, such as interfaces to AOI, direct imaging and electrical testing systems but excluding direct read from CAD/EDA data bases)
 
Genesis 1800 (including all options and interface packages as set forth above)
 
VUV (Valor Universal Viewer)
 
Xpert 1000 (including all options and interface packages as set forth above)
 
Xpert 1700 (including all options and interface packages as set forth above)
 
Xplan
 
Xplore
 
CDR - graphic component only (specifically excluding all non-CAM aspects and interfaces (e.g., Ref Manager))
 
 
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APPENDIX 2.1(b)