EXHIBIT 10.7
THE ISRAELI AERONAUTICAL INDUSTRIES LTD. Commercial Confidentiality
Military Aviation Appliances Section-MALAT Plant Grade B and D-Enertec
CHAPTER III - CONTRACTUAL TERMS
ARTICLE 1: DEFINITIONS
The following terms shall be interpreted as defined aside, unless other meaning
shall be explicitly stated:
1.1 SUPPLIER / SELLER / CONTRACTOR - ENERTEC Ltd.
1.2 MALAT - The plant MALAT of the I.A.I. Ltd
1.3 I.A.I. - The Israeli Aeronautical Industries Ltd.
1.4 CUSTOMER - all final customers purchasing products from MALAT from time to
time.
1.5 THE SIDES - MALAT and the Supplier.
1.6 CONTRACT / THE PRESENT CONTRACT / THE AGREEMENT / THE PRESENT AGREEMENT -
These general terms, the terms of the order as well as any other document
enclosed thereto and/or that these general terms refer to and/or the
appendices of the present document refers to as well as any document to
which the present general terms is enclosed to.
1.7 MAIN CONTRACT - the contract signed from time to time by MALAT/I.A.I. and
the customer in view of purchase of the product and/or MALAT system
comprehending the product.
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1.8 THE PRODUCT / SUPPLIES - the development and/or goods and/or spare parts
and/or the product file (including documentation and literature) and/or
services that the Supplier is to develop and/or to produce and/or to supply
and/or to grant within the framework of the present contract.
1.9 SERVICES - technical assistance, maintenance of the product, training,
documentation and literature and all other services supplied by the
Supplier as detailed in the present contract and the specification of the
work.
1.10 JOBS - tasks undertaken by the Supplier to be effected in conformity with
the present contract.
1.11 SPECIFICATION OF WORK (S.O.W.) - specification of work in the present
contract, including all its parts and appendices, as updated from time to
time in conformity with the instructions in the present contract.
1.12 SPECIFICATION - chapter defining the technical requirements, among others,
the shape of the product and its performances, as these shall be updated
from time to time, in conformity with the instructions in the present
contract.
1.13 DELIVERY - Signature on receipt by MALAT after receipt of confirmation as
to suitability from the Supplier and after completion of the final control
and successful reception processes of the product as defined in the present
contract and in the S.O.W.
1.14 TIME-TABLE - the time-table appendix of the present contract, as updated
from time to time, in conformity with the instructions in the present
contract.
1.15 US DOLLAR -the Dollar of U.S.A.
1.16 EQUIPMENT CFE - the equipment, documentation and services detailed in the
appendix S.O.W. and delivered and/or to be delivered to the seller by MALAT
and/or as per its instructions and/or by the customer, for the purpose of
implementation of the present contract.
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Words at singular shall mean also plural, unless content indicates otherwise.
ARTICLE 2: MANUFACTURER'S GUARANTEE
2.1 The Supplier guarantees to I.A.I./MALAT that the product or its parts,
supplied by him, including the equipment supplied by his sub-contractors
shall operate properly and shall fulfill the performances required and the
other features, all in conformity with the technical specification, the
S.O.W. and the terms in the present contract, all subject to the details
hereinafter.
2.2 Without derogation from the generalities above, the Supplier guarantees
that the product and/or its parts shall operate properly and in combination
with all assemblies with the other systems (between them themselves), all
as detailed in the technical specification, S.O.W. and the others documents
of the present contract.
2.3 The Supplier guarantees all deficiencies, incompliance or other defects in
the job or in the product ordered, or of any part thereof, derived from the
planning or work or materials or services that are defective or do not
comply with the level of the requirements as detailed in the technical
specification, the S.O.W. and in the other conditions of the present
contract.
To avoid any doubt:
The Supplier's guarantee refers to the compliance of the work or product to
the instructions in the documents of the present contract (including the
technical specifications and other technical documents by virtue of the
present contract) or the quality or features required thereof, be it in
detail or implied, as per correct and logical meaning as it appears from
the above-mentioned documents.
2.4 PERIOD OF THE GUARANTEE
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2.4.1 The period of the guarantee as per the present contract shall be of
eighteen months (18) as of the delivery of the product to the customer
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and in any case - not less than 12 months as of the date of operation
of the product by the customer.
2.4.2 Without derogation from content in art. 1 above and in addition to
the content therein, the period of the guarantee regarding the
planning shall be of up to twenty (20) years as of the delivery of the
product to I.A.I./MALAT by the Supplier.
2.5 By virtue of the Supplier's guarantee as per the present article, the
Supplier undertakes to repair and/or to replace, as he shall be see fit,
any of the components found deficient, incompatible or having other defect
as stated above (hereinafter: "the deficiency").
2.6 The Supplier shall start the organization in view of performance of the
repairs and/or replacements as stated immediately upon having been informed
of the failure. The Supplier undertakes, further to request from
I.A.I./MALAT, to repair or replace the defective part as defined in the
S.O.W. (and in any case the period of the repair shall not exceed 17 days
as of the date of transfer of the product to the Supplier). The transport
of the items from I.A.I./MALAT to the Supplier and back shall be made by
the Supplier and on his account and liability. The Supplier shall transfer
to I.A.I/MALAT together with the updated item, a report stating the nature
of the failure, reason having caused it and steps taken further to the
repair of the failure and prevention of repetition of such failure in other
products. In addition, the Supplier shall report the failures in conformity
with the instructions of the quality control section of I.A.I./MALAT.
2.7 When the Supplier had repaired and/or replaced within the framework of his
obligations as per article 2.5 a defective component, the period of the
original guarantee for the product repaired, as determined in article 2.4
above shall be prolonged for a period as of the date when the product had
been received for repair in the Supplier's warehouse and until the supply
of the repaired product to MALAT and additional thirty (30) days. If the
period of the guarantee left as of the date of supply of the repaired
product is less than twelve (12) months, then the Supplier shall prolong on
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his account the period of guarantee for repair and/or replacement as above
to twelve (12) months regarding that same failure.
2.8 Repairs and/or replacements for the purpose of this article shall mean any
action having as purpose to bring the unit or of any of its parts to normal
operation and to have them perform it as well as the other features in
conformity with the present contract, including: location of failure,
transport, installation, connection, replacement of components, technical
amendment, tuning, test, etc. The Supplier shall receive a confirmation
from IAI/MALAT in advance and in writing on any change derived and/or
required due to the repair and/or replacement as stated above. It is hereby
clarified that subject to the maintenance regulations of the applications,
IAI/MALAT customer shall do the utmost in order to isolate the defective
product.
2.9 The transport of the items and their insurance, and in general, from the
customer's country to the site of delivery in view of repair or
replacement, as the case may be, and back to the customer's country shall
be made on the Supplier's account.
2.10 It is hereby agreed that in cases when the Supplier shall advance the
transfer of any product whatsoever, the start of the period of the
guarantee shall not be advanced thereon, and such shall start on the
planned date. To avoid doubts, changes in the time-table, including
advancement of the supply, are subject to approval, in writing and in
advance, from MALAT.
2.11 To avoid any doubt, it is hereby agreed that in case it is not possible to
repair any failure whatsoever in the product, the Supplier shall replace
the product with the defect as mentioned, by another product that shall
comply with the requirements in the specification.
2.12 Should a dispute arise between the sides if the failure in the product is
within the framework of the seller's guarantee as stated in this chapter,
MALAT shall be entitled to ask the seller to repair the failure within the
period stated in article 2.6 above and the dispute shall be transferred to
the decision of an arbitrator.
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2.13 SYSTEMATIC DEFECT
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2.13.1 The meaning of a systematic defect is an identical defect discovered
during the period of the guarantee more than 3 times in any certain
product or in more than at least 3 products in each type, even if
these have successfully passed the acceptance tests.
2.13.2 If a systematic defect is discovered, as stated, the Supplier shall
immediately act in view of "identification of the defect", i.e. shall
take all steps as required in order to identify its source and reasons
and in view of determination of the way of repair and its future
prevention (including change in the acceptance tests) and shall
transfer to IAI/MALAT a written report in the matter.
2.13.3 If a defect is identified as stated in par 2.13.1 above or if the
defect is discovered more than 10 times, the Supplier undertakes to
replace and/or repair on his account all the products at the disposal
of IAI/MALAT, the customer of IAI/MALAT and in the Supplier's
possession.
2.13.4 The Supplier shall start the organization in view of performance of
the repairs and/or replacements, as stated, immediately upon having
been informed of the systematic failure. The duration of the repair
shall be fixed by the Supplier and confirmed by IAI/MALAT. In any
case, the Supplier undertakes to complete the repair and/or
replacement within a reasonable period of time.
2.13.5 All references to the Supplier's obligations regarding the
systematic defects are in addition to his guarantee as per the other
articles in this chapter.
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2.14 To avoid any doubt, it is hereby clarified that all expenses related to the
implementation of the article on the Supplier's guarantee (article 2),
including expenses on personnel, components, transportation and other
expenses, are an integral part of the work and are included in the
consideration.
2.15 The given guarantee shall be in favor of IAI/MALAT and/or the customer of
IAI/MALAT.
ARTICLE 3: OVERALL SUPPORT FOR THE PRODUCT
During a period of twenty (20) years as of the delivery of the last item of
hardware to the customer, the Supplier undertakes to:
3.1 To supply to MALAT and/or the customer maintenance services and repair as
defined in the S.O.W. at prices agreed upon by the sides.
3.2 To sell to IAI/MALAT, at their request, and in conformity with the terms
agreed upon by the sides from time to time, additional systems and/or
sub-systems as well as additional parts and equipment. The prices and the
payment terms to be agreed shall not be worse than those granted to the
Supplier's preferential customers for these or similar items for same
quantities or similar quantities.
In addition, the Supplier undertakes that the overall price of all spare
parts, components of the product, shall not exceed in any case the present
price of one unit of the product to MALAT. All spare parts ordered by MALAT
shall be supplied to MALAT per the general delivery terms and shipment for
the products and shall be accompanied by suitable documentation.
The seller's obligation comprehends components manufactured by him and/or
by his sub-contractors as well as components purchased by him and/or his
sub-contractors as shelf components.
3.3 To execute, at the request of IAI/MALAT, changes in the product in
conformity with the terms and prices agreed upon by the sides.
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3.4 To supply to MALAT, at its request, technical assistance for the operation,
installation and maintenance of the product, as defined in the S.O.W. and
per the terms agreed upon by the sides. The prices agreed shall not exceed
those collected from the Supplier's preferential customers for the same
work. The other terms also shall not be worse than those granted by the
Supplier to his preferential customers.
3.5 The Supplier undertakes to supply to MALAT, for the customer's
representatives, training and courses and/or information and assistance as
to the "essence", or any other factor selected by MALAT to perform training
for, referring to the operation and maintenance of the products in
reference, in an extent and for terms as detailed in the S.O.W. and
specification. The training shall be performed at the Supplier's and/or
MALAT's factory and/or in the customer's country, all as detailed in S.O.W.
If the training cannot be performed for the products destined to the
customer, the Supplier undertakes to execute it by means of its training
auxiliaries. Upon completion of the training, the Supplier shall issue to
MALAT a graduation certificate signed by the Director of the Training
Program or his deputy and counter-signed also by MALAT representatives.
3.6 The Supplier undertakes to supply to MALAT documentation and literature
and/or information and assistance as to the "essence" or any other factor
selected by MALAT, to prepare the literature all as defined in the S.O.W.
and technical specifications. When the last copy of documentation and
literature had been handed over, the Supplier shall issue to MALAT a
completion certificate signed by the Director of the Training Program or
his deputy and counter-signed also by MALAT representatives. The Supplier
shall be liable entirely for the documentation during a period of five (5)
years as of the date of issue of the completion certificate.
3.7 To inform IAI/MALAT on due time of any information in the Supplier's
knowledge or at least two years in advance (the earliest among them) as to
end of production of any component, sub-system and/or technologies required
for the production and/or current maintenance of the product. Such notice
shall be granted in order to enable IAI/MALAT a reasonable period of time
for estimate of the situation and selection of the possibilities to
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purchase a suitable quantity of the said component or to replace it by a
new component or development and production of new sub-system/s.
3.8 Without prejudice to the other instructions in the present contract, in
case the Supplier shall not be able to continue the production of the
product and its supply to MALAT due to reasons independent of him, the
Supplier shall inform MALAT forty eight (48) month at least before the
planned date when the Supplier intends to stop the work. In such a case the
Supplier shall supply to MALAT or to MALAT proxies in Israel all the
drawings, information, technical documentation (hereinafter: "the
know-how') as well as the training and technical support required by MALAT
or its proxies in order to manufacture the product in Israel. The Supplier
undertakes to grant MALAT and/or its proxies permanent irrevocable right
(proprietary right) and the license to manufacture the product and the
spare parts in Israel, taking advantage of the know-how, and to sell the
product and spare parts in Israel and in other countries in the world.
ARTICLE 4: COMPENSATION DUE TO BREACH OF PATENT
4.1 The Supplier declares and undertakes that during the performance of the
present contract he shall not breach any patent or third party whatsoever
right, be it proprietary or other, by virtue of the law or by virtue of a
contract.
4.2 The Supplier declares and undertakes that if a claim should be filed
against IAI/MALAT and/or any person on behalf of IAI/MALAT (hereinafter:
"IAI/MALAT and their customers") due to breach of patent or right that a
third party claims as his in relation with the present contract, the
Supplier undertakes to ascertain the drop of this claim as soon as possible
so that not to delay the performance of his obligations, in totality or
partly, as per the present contract and/or to obtain permit to use the
product and/or to replace immediately the product forbidden to use by an
alternative product whose use is permitted and that shall comply with the
requirements in the present contract.
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4.3 The Supplier shall compensate and/or indemnify IAI/MALAT for any damage
caused and derived to IAI/MALAT further to the breach of the Supplier's
obligations as stated in art. 4.1 above.
4.4 IAI/MALAT shall inform the Supplier on any claim and/or argument derived
from the breach of the Supplier's obligations as stated in art. 4.1 above,
immediately after its first receipt by IAI/MALAT. The Supplier shall have
the sole competence to conduct the defense against any claim and/or
argument as stated. IAI/MALAT shall assist the Supplier in the conduct of
the defense. The Supplier shall cover the expenses of IAI/MALAT in the
grant of such assistance.
4.5 The content above refers to elements of the product that are not defined in
the specification and that the Supplier had added on his own opinion only.
ARTICLE 5: ARBITRATION
5.1 All disputes and arguments raised between the sides in relation with the
instructions and the execution of the contract, except breach of
confidentiality and safety, shall be transferred to the decision of one
single arbitrator to be nominated by the Deputy Director of the Military
Aviation Section.
5.2 The law of this article is identical to the law of an arbitration agreement
as per the Law on Arbitration, 1968.
5.3 The sides undertake to continue and fulfill their obligations as per the
contract also at the time of the arbitration and all its phases, but if
otherwise instructed by the arbitrator.
5.4 The arbitrator shall decide in the dispute brought to his decision in
conformity with the valid substantive law but shall not be beholden to
conduct it as per the procedures and law of evidence fixed per any law. The
decision of the arbitrator shall be final and definitive and shall commit
both sides.
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ARTICLE 6: MALAT'S RIGHTS ON THE PRODUCT
6.1 To avoid any doubt, the Supplier is hereby transferring to MALAT/I.A.I. all
rights that he had had and/or has and/or shall have on the product and on
the file of the product, including the license to manufacture, copyright,
intellectual assets, and/or any other right and MALAT/I.A.I. shall be
entitled to make use of the product and its rights as well as to transfer
any right whatsoever of a third party per its sole and definite discretion.
ARTICLE 7: TECHNOLOGICAL IMPROVEMENTS
7.1 The Supplier undertakes to inform MALAT as to any technological improvement
that the Supplier is developing on the product. After approval by the
competent factors at MALAT, the Supplier undertakes to perform such
improvements on the product per conditions determined by the sides.
ARTICLE 8: BANK GUARANTEE
8.1 According to the policy at MALAT/I.A.I. and in order to ascertain any
advance payment if paid to the Supplier before the performance of the
Supplier's obligations as per the present contract, the Supplier shall
deposit with MALAT/I.A.I. an irrevocable, unconditional bank guarantee on
the whole sum of the advance payment and in conformity with the customary
terms at MALAT/I.A.I. This bank guarantee shall be in supplement to the
performance bond to be deposited by the Supplier with MALAT/I.A.I. as
defined in the terms of the order.
ARTICLE 9: MANAGEMENT OF THE PROJECT
9.1 Within 30 days after the signature of the present contract, the sides shall
select the Directors of the projects for the period of execution of the
present contract, in order to ascertain the efficient application of all
terms in the contract. Should disputes arise between the two Project
Directors as to the performance of the contract, the issue shall be jointly
solved by meetings of both sides.
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9.2 The Supplier shall transfer monthly to MALAT a detailed report to
comprehend most of the particulars on the progression of performance of the
contract and related to various problems occurring during its running.
ARTICLE 10: MISCELLANEOUS
10.1
10.1.1 The Supplier declares and undertakes that there is no prevention
and/or restriction, per law or other, to execute his obligations as
per the present contract and that as well, there is no prevention
and/or restriction, per law or other, to sell the products and any
part thereof and/or to use these in Israel as well as abroad.
To avoid any doubt, the Supplier hereby declares and undertakes that
he shall develop and manufacture for I.A.I./MALAT products for which
there is no end-users restriction as well as there is no restriction
of use by end-users in conformity with the content in SOW, after
having successfully been tested as defined in the SOW, and above in
quantities and per time-tables detailed in the present contract.
10.1.2 Should any prevention or restriction as stated in art. 10.1.1 above
be created after the date of signature of the present contract, the
Supplier shall inform it to I.A.I./MALAT immediately upon
acknowledgement.
10.2 The Supplier undertakes not to sell and/or not to offer for sale and/or not
to transfer in any way whatsoever to a customer and/or to any third party,
directly or indirectly, the product, improved product, derivation of the
product, parts and/or any service related thereof, when these are destined
for MALAT systems. In view of the execution of this content, the Seller
undertakes not to conduct any trade connections with the customer, by his
initiative or through the initiative of the customer, but upon approval in
advance and in writing from MALAT. If MALAT had approved the connections
and/or the sale as stated above, the Seller shall act according to the
instructions and terms fixed in the framework of the approval, including
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regarding the payment of remuneration to MALAT for the sale to the
customer, in a rate fixed by MALAT in the said approval.
10.3 To avoid any doubt, it is hereby clarified that "indirect sale" as stated
in art. 10.2 above, comprehends sale by the Supplier to a third party of
the products/services detailed in the present contract, and sale of these
products/services by that same third party to the customer.
10.4 The sides hereby declare that the wording of the present contract is the
final and beholding form of the contract and such had been expressed
jointly and on consent by both sides.
10.5 These contractual terms are in addition to any other terms in the present
contract. Whenever there is contradiction between these contractual terms
and the terms of the order, these contractual terms shall prevail.
10.6 Information, approval, instruction, supervision and/or test by MALAT to any
of the operations performed by the Supplier and/or his sub-contractors as
well as MALAT's participation and/or the customer's participation in the
performance of the Supplier's tasks, by himself or through his
sub-contractors, shall not exclude and/or derogate from the Seller's
obligations, but if agreed upon in advance and in writing.
10.7 Delays by the Supplier in the performance of his obligations as per the
present contract shall grant MALAT the right to change the time-table
defined in the present contract. MALAT shall not be liable for any
additional payment caused further to the Supplier's delay. The Supplier
shall cover all banks and other costs derived from the incompliance with
the time-table.
10.8 MALAT/I.A.I. shall be entitled to deduct and/or to offset any sum due to
MALAT from the Supplier as per the present contract or by virtue of any
other contract whatsoever or per law from the amounts that the Supplier is
entitled to as per the present contract and/or from any defined debt due
from I.A.I. to the Supplier.
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10.9 It is hereby agreed that all the Supplier's obligations as per the
instructions in art. 2, 3, 4, 5, 6, 10.2, 10.3 of these contractual terms
and art. 10,17 of the orders terms shall continue to be cast also after the
completion of all the Seller's works as per the present contract and/or
full receipt of the consideration by him and/or in case of termination of
the present contract prior to its completion.
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