|The Company:||Parnasa Basad Ltd, an Israel limited company (the “Company”).|
|Investment Objective:||The Company’s investment objective will be to generate superior long-term capital appreciation through private equity investments in early-stage private companies based in Israel (each such investment, a “Portfolio Investment”, and each company in which a Portfolio Investment is made, a “Portfolio Company”).|
|Investment Amount:||Each investor meeting certain qualifications as set forth below (each, an “Investor” and collectively, the “Investors”) will irrevocably subscribe for one or more Units consisting of non-voting shares of the Company (the “Shares”). Each Unit consists of 3,000 non-voting Shares of the Company. Subscription amounts must be paid in readily available funds by wire transfer or by bank check delivered to the Investment Manager (as defined below) and must be received prior to the Closing Date (as defined below). The subscription for Units of Shares is subject to acceptance or rejection by the Company, in whole or in part in its sole discretion. No Investor will be admitted to the Company unless the Company receives such Investor’s entire subscription amount prior to the Closing Date. The price of each Unit is $10,625 and the minimum number of Units offered by the Company for Subscription by any Subscriber is two(2). Subscribers will subscribe for a whole number of Units. No fractions of Units will be offered by the Company for Subscription.|
|Investment Manager:||Parnasa Nihul Basad Ltd, an Israeli limited liability company (the “Investment Manager”), is the investment manager of the Company. The Investment Manager is controlled by Baruch Eliezer Gross (the “Principal”) and holds all the voting shares of the Company (6,001 shares). The Principal holds directly or indirectly 83.5% of the initial capital of the Company. The Investment Manager will be responsible for the investment objectives of the Company and will also perform certain
administrative functions for the Company.
|Board of Directors:||The Company currently has one director, the Investment Manager, which is represented by the Principal. All investments are subject to the approval of the Board of Directors. The Board of Directors shall decide whether to enter into a potential investment based on information provided to it with respect to any such potential investment by the Investment Manager. The Board of Directors shall approve investments that it finds, in its sole discretion, to be in the best interests of the Company. There is no expectation that such structure would change in the foreseeable future.|
|Investor Qualification:||Only Investors that are “accredited investors”, as such term is defined in Rule 501 of Regulation D under the Securities Act of 1933, as amended may acquire Shares in the Company. The Company reserves the right to reject any subscription for Shares in its sole discretion.|
|Term:||The term of the Company will terminate on the tenth anniversary of the initial Closing Date (as defined below), subject to up to two consecutive one-year extensions in the sole discretion of the Board of Directors.|
|Drawdown:||All of each Investor’s subscription amount will be drawn down (each such drawdown, a “Capital Contribution”, and the aggregate amounts drawn down from all Investors, the “Capital Contributions”) as of the closing of each Investor’s subscription to the Company (the date of each such closing, a “Closing Date”).|
|Management Fee:||The Investment Manager will not be entitled to receive a management fee from the Company.|
|Indebtedness:||The Company has previously incurred and in the future may incur, at the sole discretion of the Board of Directors, indebtedness to finance operations of the Company or to make new or follow-on investments in Portfolio Investments. In addition, the Company may enter into short-term indebtedness for the purpose of extending bridge financing to Portfolio Investments (such financing not to exceed 180 days in duration). Payments of principal and interest as well as any payments in respect of any Lender’s Excess (as defined below) will be payable by the Company and shall constitute Company Expenses (as defined below).|
|Prior Loans:||In addition, the lender under each Prior Loan (a “Prior Lender”) is entitled on the stated maturity of such Prior Loan to receive, in addition to the principal and interest payable thereon on such date, a portion (determined as described below) of twenty percent (20%) of the excess of (i) the fair value of the Company’s assets as of such date (as determined by a third party appraiser experienced in appraising the value of such assets) over (ii) 9,000,000 NIS (the “Lender Excess”). For the purposes of determining the amount of any Lender Excess (if applicable) payable to a Prior Lender on the stated maturity date of the related Prior Loan, (x) such Prior Lender shall be deemed to hold as of the stated maturity date of such Prior Loan a number of shares of the Company equal to the principal amount of the related Prior Loan divided by the fair value per share of the Company’s assets as of such date (the “PriorLender’s Shares”), and (y) the percentage of the Lender Excess attributable to any Prior Lender’s Shares shall be equal to the number of Prior Lender’s Shares attributable to such Prior Lender divided by the aggregate number of all Prior Lender’s Shares deemed to exist as of such stated maturity date.
All Prior Loans are subject to early repayment at the sole discretion of the respective Prior Lenders thereunder. Upon a demand for early repayment by a Prior Lender, the Company will pay the principal and accumulated interest on such Prior Loan within ninety (90) days of such demand; provided that no Prior Lender who demands early repayment of a Prior Loan shall be eligible to receive any portion of any Lender Excess to which it may otherwise be entitled. In addition, the Company may redeem any Prior Loan prior to the stated maturity date thereunder at any time in its sole discretion, and upon any such early redemption the Company will repay the principal and accumulated interest on such Prior Loan within ninety (90) days; provided that if all Prior Loans are repaid within one year after any such early redemption by the Company, the Prior Lender on a Prior Loan prepaid by the Company will be entitled to its share of any Lender Excess determined as if such Prior Loan were being repaid as of the date on which the final outstanding Prior Loan is being repaid.
|Distributions:||(“Distributable Proceeds”), will be distributed to the Investors at least annually, but not later than forty-five (45) days following the end of any fiscal year in which the Distributable Proceeds are received by such Portfolio Investment.
Distributions of Distributable Proceeds relating to a Portfolio Investment will be apportioned and distributed to the Investors along with the rest of the Company’s shareholders pro rata based on their respective ownership of the Shares and subject to the allocation described below.
Amounts so apportioned to each Investor will be distributed to such Investor, on the one hand, and the Investment Manager, on the other hand, as follows:
(i) first, one hundred percent (100%) to such Investor until it has received cumulative distributions pursuant to this clause (i)
in an amount equal to its aggregate Capital Contribution;
(ii) second, one hundred percent (100%) to such Investor until it has received cumulative distributions pursuant to this clause (ii) in an amount representing a four percent (4%) return on its aggregate Capital Contribution;
(iii) third, twenty five percent (25%) of the amounts distributable pursuant to this clause (iii) to the Investment Manager, and seventy five percent (75%) of such distributable amounts to such Investor (the amounts payable to the Investment Manager: the “Carried Interest”).
|Offering Expenses:||The Company will bear all costs and expenses incurred in connection with the offering of the Shares (collectively, the “Offering Expenses”).|
|Company Expenses:||The Company will be responsible for (a) all expenses relating to its own operations and (b) all expenses relating to Portfolio Investments (“Company Expenses”).|
|Transfer of Shares:||Transfer of shares shall be subject to approval to do so by the Board of Directors of the Company. A request to transfer the shares shall not be unreasonably denied. Each Investor shall be personally responsible to find a buyer for its Shares.|
|Taxes:||The Company is being treated as a corporation under the Israeli tax laws and regulations and as a partnership for the purposes of United States tax laws and regulations. Please see “Certain Tax Considerations” for further information.|
|Indemnification:||The Company will indemnify and hold harmless each of the Investment Manager, its affiliates and its respective members, managers, quotaholders, partners, officers, directors, shareholders, agents, employees and other related parties (each, an “Indemnified Party”) in connection with any actions that arise out of or in connection with the affairs of the Company (other than an internal dispute among the interest holders of the Investment Manager), but only to the extent that such person’s conduct did not constitute fraud, willful misconduct, the commission of a felony, a violation of applicable securities laws or gross negligence.
Expenses incurred by an Indemnified Party in defense or settlement of any claim that will be subject to a right of indemnification may be advanced by the Company prior to the final disposition thereof upon receipt of a written undertaking by or on behalf of the Indemnified Party to repay such amount to the extent that it will be determined ultimately that such Indemnified Party is not entitled to be indemnified, provided that the foregoing advancement of expenses will not be available to any Indemnified Party with respect to a claim filed by a majority in interest of the owners of the Shares. No advances will be made by the Company without the prior written approval of the Investment Manager.
|Fiscal Year End:||The Company’s fiscal year ends on December 31.|
|Legal Counsel:||DLA Piper LLP (US) (“DLA”) will act as special U.S. counsel to the Company and the Investment Manager. DLA has not acted as counsel to the Company or the Investment Manager with respect to Israeli law. Please refer to “Risk Factors—Representation by DLA Piper LLP (US)” for additional information.
No independent counsel has been retained to represent Investors.
|Independent Auditors:||The Company engaged Weinstein & Co., a U.S. Public Company Accounting Oversight Board (PCAOB) member in good standing. Weinstein & Co. is a member of TIAG – The International Accounting Group, a worldwide network of independent accounting firms. www.wcpa.co.il|
|Voting and Reports:||Shares purchased by Investors in this offering do not have voting rights. Therefore, Investors in this offering will not be entitled to vote on proposals brought before the general assembly of shareholders of the Company. Investors will receive within 120 days of the end of each fiscal year (subject to reasonable delays in the event of the late receipt of any necessary financial statements from the Portfolio Investment), an annual financial report of the Company audited by the independent auditors. Financial information provided in the audited reports to Investors will include the valuation of illiquid investments based on a generally acceptable method under the standard by which the financial statements of the Company will be audited.|
|Liquidation:||Upon liquidation and winding up of the Company, each holder of Shares of the Company shall have the right, after receiving cumulative distributions in an amount equal to the sum of (i) such holder’s Capital Contributions and (ii) an amount equal to a four percent (4%) return on such holder’s aggregate Capital Contributions, to participate, on a pro rata basis, in 75% of the Company’s profits and excess assets distributable upon liquidation of the Company. The balance of 25% will be distributed to the Investment Manager.|