TEL AVIV, Israel — A cash injection from Serbia and expanded equity from a patron shareholder should boost the long-languishing business of Israel-based ImageSat International, owner and operator of the Eros A and Eros B commercial imaging satellites.

The parallel deals involve a 28 million euro ($38.4 million) arbitration settlement from the government of Serbia and an agreement by Israel Aerospace Industries Ltd. (IAI) of Lod, Israel, to buy $81 million worth of ImageSat bonds held by Pegasus Capital Advisors LP, a New York-based private equity investment firm with outstanding legal claims against the satellite operating company.

According to industry sources here, the Serbian settlement will take place the week of Jan. 31 while the IAI-Pegasus deal should conclude by the end of February. Implementation of both will remove a key plaintiff in lawsuits brought by ImageSat minority shareholders claiming commercialization rights to IAI-built imaging satellites. The pending Pegasus buyout also will consolidate IAI’s already majority control of ImageSat operations and investment strategy and pave the way for a third IAI-produced satellite, the Eros C.

In a recent notice to the Tel Aviv Stock Exchange, IAI said conclusion of the pending bond transaction would void legal claims against it or ImageSat dating from 2008 as well as any future claims by the seller.

Yossi Weiss, IAI corporate vice president, declined to comment on the outstanding legal matters associated with ImageSat, as did Chaim Eshed, director of space programs for Israel’s Ministry of Defense. Nevertheless, Eshed said he fully expected government-owned IAI to begin work “in the near term” on a new Eros C satellite to be operated by ImageSat.

In a Jan. 26 interview, Eshed said strengthening Israel’s commercial and dual-use imaging satellite sector was a key pillar of a new national space program now awaiting final budgetary approval, details of which he would present publicly at the Fisher Institute’s annual Ilan Ramon International Space Conference.

“ImageSat is under new management, and IAI is strengthening its presence there. … We all want to preserve and build on the unique added value developed in this critical sector of our space industry, starting with a third-generation commercial satellite,” Eshed said.

By midweek, government and industry sources here said, Serbia will deliver a 24 million euro cash payment to ImageSat as part of an arbitrated 28 million-euro settlement stemming from a 2005 corruption case. The remaining 4 million-euro balance will be applied to Serbia’s acquisition of tactical intelligence aerostats from IAI, a founding ImageSat shareholder with holdings soon to exceed 90 percent of the commercial satellite firm.

In exchange, ImageSat will provide several hundred Eros high-resolution images to the Serbian government over a multiyear period, the sources said. Belgrade will not have tasking privileges or direct downlink capabilities like other ImageSat operating partners, but will be able to make imaging requests that ImageSat is obliged to accommodate within a predetermined timeframe, they said.

The Serbian embassy here declined to provide details of the deal, and Serbian foreign ministry officials did not return calls by press time. Borko Stefanovic, political director at the ministry, announced Dec. 30 the conclusion of a 28 million-euro settlement on what had become known as “the satellite affair,” stemming from what Belgrade considered an illegal agreement between ImageSat and the former government of Serbia-Montenegro.

Following the breakup of Serbia-Montenegro in the aftermath of the Balkan wars, new leaders of the independent Serbian state terminated the previous government’s 2005 satellite leasing contract and indicted the former defense minister on corruption charges. Serbian prosecutors charged Prvoslav Davinic with multiple irregularities in handling the deal, including improper documentation and his closure of the ImageSat deal during a weekend junket to Paris in the absence of professional staffers and witnesses.

Serbia’s termination of the so-called Satellite Operating Partner contract triggered an ImageSat lawsuit for termination liability and other damages. After protracted posturing, the parties turned to the International Court of Arbitration in Paris, which ruled in favor of ImageSat. Serbia’s appeal in a London court was rejected, and arbitrators there ordered Belgrade to compensate ImageSat to the tune of 35 million euros.

The imminent settlement of the five-year case follows intense government-to-government as well as government-to-industry negotiations involving attorneys and specialists from the Serbian defense and justice ministries as well as the state’s attorney general.

Executives from ImageSat and IAI declined to comment for the record, although details of the settlement arrangement were confirmed by multiple sources from both firms and by Israeli government officials.