MEMORANDUM OF UNDERSTANDING BETWEEN THE GOVERNMENT OF THE REPUBLIC OF LATVIA AND THE GOVERNMENT OF THE STATE OF ISRAEL REGARDING DEFENCE INDUSTRIAL COOPERATION

Now therefore the Parties have reached the following understandings:

Article 1 - PREAMBLE

1. The preamble of this MOU form an integral part hereof and shall be binding upon the Parties.

2. In the event of any controversy bet­ween these terms and conditions and the Implementing Agreements, unless other­wise expressed in the Implementing Agreements - the terms and conditions of this MOU shall take precedence and the controversy shall be settled according to the procedures set out in this MOU.

3. It is agreed by the Parties that a Party which finds any conflict between these terms and conditions shall inform the other Party in order to settle the conflict as soon as possible.

Article 2 - OBJECTIVES OF THE UNDERSTANDING

1. Both Parties to this Memorandum of Understanding (hereinafter referred to as: "the Parties" and as "the MOU", respectively) have agreed to set up the principles of cooperation in the defence areas, thus enabling them to increase their respective defence capabilities.

2. The aforementioned cooperation shall enable the Parties to mutually benefit from selected projects which may satisfy each Party's needs in a cost effective manner, to increase sale of systems and components, and to exchange selected technologies between the Parties (Governmental and/or Private entities in their respective countries) and transfer thereof to Third Countries or Third Parties for the benefit of both Parties, subject to mutual approvals and consents.

Article 3 - PRINCIPLES GOVERNING THE PARTIES' COOPERATION

1. The Parties intend to facilitate the accomplishment of the aforementioned aims through the exchange of technical data, information and hardware leading to understanding of military requirements and their technological solutions by cooperation in research, production and marketing.

2. The Parties shall encourage their Industries to search for projects and equipment with mutual interest on behalf of both Parties. Such cooperation shall be carried out for production and marketing. The cooperation shall take into account the relative advantages of each Party regarding the marketing efforts and after sale services.

3. As used in this MOU, "technical information" means all technical or commercial data and operating information, including but not limited to trade secrets, proprietary information, customer information, know-how, patents and computer software.

4. Each Party, consistent with its national laws and regulations, will accord appropriate treatment to offers of defence equipment, services and know-how to be supplied by the other Party.

5. Technical information, including Technical Data Packages (TDPs), furnished to the other Party for the purpose of offering or bidding on, or performing a defence contract, shall not be used for any other purpose without the prior written consent of the originating Party as well as the prior written consent of those owning or controlling proprietary rights in such technical information, and shall be treated with the same degree of care as such Party would apply to its own technical information.

6. In no event shall such technical information, TDPs or products derived therefrom, be transferred to any Third Country or any Third Party, without the prior written consent of the Originating Party. The transfer to Third Countries or Third Parties of material and/or technical information and/or articles derived therefrom, generated by this MOU or purchased pursuant to this MOU, are subject to case by case agreements between the Parties.

7. The Parties will exert their best efforts to assist in negotiating licenses, royalties and technical information, exchanged with their respective industries, when required. The Parties will also facilitate the necessary export licenses needed for the submission of bids or proposals required for the performance of this MOU, all subject to the respective National Laws and regulations of the Parties.

8. The terms and conditions of specific and defined activities that are designated to take place under this MOU shall be separately agreed upon in the framework of "Implementing Agreements". This General MOU shall apply to any such future, or existing, Implementing Agreements between the Parties.

9. This MOU does not refer to issues beyond the competence of either Party.

Article 4 - MUTUAL ASSISTANCE

1. The Parties intend to share the efforts and to support each other in performing activities which are covered by this MOU and the Implementing Agreements to be signed in the future.

2. The Parties shall agree, in advance, on case by case basis, upon the specific terms concerning such assistance.

Article 5 - MARKETING OF PRODUCTS

1. The Parties intend to share the efforts and to support each other in marketing the Products covered by this MOU.

2. The Parties shall agree in advance, on case by case basis, upon the specific terms of marketing and share of efforts concerning such marketing.

3. The Parties shall agree in advance upon the share of the market when cooperating, on case by case basis. The cooperation shall be performed both by the Parties and by the respective Industries in each country.

4. The Parties shall use their marketing channels all over the world in order to penetrate new markets and to increase the sale of the Products according to this MOU. It is understood that the marketing to countries which may be problematic for one of the Parties, from the security point of view, shall be performed only after the written consent of the other Party is obtained.

Article 6 - COVERAGE OF EXPENSES

Each Party shall bear its own expenses relating to this MOU and to its performance, unless otherwise is agreed by the Parties on a case by case basis.

Article 7 - SECURITY ARRANGEMENTS

1. The existence of this MOU shall be considered as unclassified. The existense of some activities/projects between the Parties shall be considered as classified on case by case basis.

2. If any activity to be performed under this MOU is considered as classified it will be subject to the Security Agreement that will be signed by the relevant security authorities of the Parties.

Article 8 - PERIODICAL MEETINGS

1. The Parties have agreed to hold periodical meetings in order to follow up the implementation of this MOU. During these meetings the representatives shall mutually seek new fields of potential cooperation.

2. The Parties shall also encourage meetings between representatives of governmental or private entities, Armed Forces of both countries as well as exchange of delegations.

3. The topics to be discussed during the periodical meetings, the number of participants and the exact date of the meetings, shall be agreed through the Points of Contact mentioned in Article 11.

Article 9 - DURATION OF THE MOU

1. The MOU shall become effective after its signing by both Parties.

2. This MOU will remain in effect for a five year period, following its signing and will be extended for a successive five year periods, unless either of the Parties informs the other of its intention not to prolong this MOU.

3. If, however, either Party considers it necessary for compelling national reasons, to terminate its participation under this MOU before the end of the five year period, or any extension thereof, written notification of its intention will be given to the other Party six months in advance of the effective date of termination.

4. Such notification of intent shall become a matter of immediate consultations with the other Party to enable the other Party to fully evaluate the consequences of such termination and, in the spirit of cooperation, to take such actions as necessary to alleviate problems that may result from the termination. In this connection, although the MOU may be terminated by each Party, any contract entered into, consistent with the terms of this MOU, shall continue to remain in effect, if it is so specified in the terms of the specific contract.

5. This MOU is subject to amendments in writing proposed by each Party. The amendments, when approved, shall form an integral part of the MOU.

Article 10 - DISPUTE SETTLEMENT AND ARBITRATION

1. In the event of any dispute arising between the Parties to this MOU whether such dispute relates to the interpretation of the MOU or to the execution of the terms arising therefrom, the Parties shall, in the first instance, make every reasonable effort to reach an amicable settlement.

2. In the event, however, of the Parties failing to reach such settlement, the Parties agree to submit the dispute to the arbitration of the Director General of IMOD and the representative of LMOD. Any decision given or award made pursuant to any such arbitration shall be final and binding on the Parties to this MOU.

3. During the dispute, controversy and/or arbitration, both Parties shall continue to fulfill all their obligations in accordance with this MOU.

4. All arbitration proceedings shall be held in English.

5. The Parties agree that any arbitration proceedings hereunder shall be conducted on confidential basis, and shall be subject to the security provisions of this MOU.

6. Each Party shall be responsible for its respective costs incurred due to the arbitration procedures.

7. In case of dispute or interpretation this MOU shall not be subject to any National or International Law nor to any National or International Tribunal.

Article 11 - NOTICES

1. All communications generated by either Party shall be in writing and in English.

2. The points of contact to this MOU shall be the following:

Article 12 - ENTIRE MOU

1. This MOU consists of the entire agreement signed between the Parties.

2. This MOU is done by The Parties in Telaviv on 16 of February, 2005 in two authentic copies in English.

In witness whereof the duly authorized Representatives of the Parties have set their hands and signature the day hereinafter mentioned.