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ELECTRA Consumer Products

Re: Immediate Report with Regards to Engagement of a Subsidiary in an Agreement to Sale Operations 

The Company hereby announces that today, Electra Consumer Products (1951) Ltd., a wholly owned and controlled subsidiary of the Company (Subsidiary), engaged with Mey Eden Bar – First Class Service Ltd., a third party that is not related to the Company or to its controlling interests (The Buyer) in an agreement to sell its operations in the water bar sector (Engagement Agreement). Below are the highlights of the agreement: 

1. The Subsidiary will sell and transfer to the Buyer the merchandise as defined in the Agreement that includes, inter alia, the inventory of water bars (of types set forth in the Engagement Agreement), inventory of spare parts, rights and obligations in accordance with the customers agreements, intellectual property rights that exist, intellectual property rights in patents and samples, manufacturers agreements and licenses; as specified in the Engagement Agreement (The Merchandise). The Merchandise will be sold with the rights to it being clear and free of any lien, mortgage, encumbrance, debt, claim, lawsuit, restriction, etc. with the exception of third party rights in accordance with the agreements include in the operations that are the subject of the sale. 

2. Completion of the transaction is contingent upon compliance with the contingent terms set forth in the Engagement Agreement including Anti-trust Commissioner approval, manufacturing agreements to transfer their agreements with the Subsidiary to the Buyer, and the absence of any critical finding as defined in the Engagement Agreement in the due diligence of the buyer with regards to the operations, by 28 February 2016 or any other date to be agreed upon in writing between the parties, if agreed. In this context, it should be noted that the Agreement sets forth a period of approximately 6 weeks (or longer under the terms set forth in the Engagement Agreement) during which the Buyer will carry out due diligence on the merchandise. 

3. In consideration for the merchandise (other than the inventory), the Buyer will pay the Subsidiary a total sum of NIS 21.3 million plus VAT as required by law, subject to the mechanism for reconciling the consideration set forth in the Agreement with regards to the findings of the due diligence test mentioned in Section 2 above. Half of the consideration will be paid on the date of completion of the transaction and the balance of the consideration will be paid (without incurring interest or linkage) in monthly payments for the period and in a manner as to be determined in the Agreement. Furthermore, in consideration for the acquired inventory, the Buyer will pay the Subsidiary the cost of the inventory acquired less the depreciation to be set forth in the Agreement. 

4. The Subsidiary will provide the Buyer for a period of up to one year from the date of completion of the transaction (The Services Period), support and maintenance services for all active customers as will be during the Services Period, including all obligations of the Buyer to provide services and warranty as specified in the Services Agreement, for the consideration set forth in the Agreement. 

5. Commencing on the date of completion of the transaction, undertake the Company, the Subsidiary and any corporation controlled by the Company, to avoid importing, manufacturing, marketing, selling and distributing in Israel water filtration devices for a period of 4 years, with the exception of, inter alia, sale and marketing of water bars that are not branded as Electra Bar that are acquired from third parties, in various marketing channels operated by the Company. Furthermore, the Agreement includes standard declarations and presentations, items on compensation and indemnity, and restrictions on the Subsidiary during the interim period between the signing of the Agreement and its completion or termination. 

6. As a result of the sale of operations and in accordance with GAAP, some of the results of the transaction will be deferred and will be recognized in the financial statements over the course of the period of compliance with all of the Company's undertakings in accordance with the Agreement and will be included in the Company's operating results up to and including 2018. The impact on the net profit is not expected to be material for Company results. Said data will be measured on the date of completion of the transaction, due, inter alia, in accordance with the valuation of the measurement of components in the transaction in accounting terms. This information is forward looking information that might not materialize, or that might materialize differently than expected, inter alia, if the transaction is not completed, if the consideration is updated, etc