SUBSCRIPTION AGREEMENT
Exhibit
10.1
SUBSCRIPTION
AGREEMENT (“Agreement”),
dated
as of July 2, 2007, by and between ACCBT Corp., a corporation duly
incorporated under the laws of the British Virgin Islands (“ACCBT”),
and
Brainstorm Cell Therapeutics Inc., a corporation duly incorporated under the
laws of the State of Delaware, USA (“Company”).
WHEREAS,
the
Investor (as defined below) wishes to subscribe for and purchase, and the
Company wishes to issue and sell, upon the terms and conditions stated in this
Agreement, (i) up to 27,500,000 shares of the Company’s common stock, par value
0.00005 per share (“Common
Shares”),
at an
aggregate subscription price of up to $5.0 million (“Maximum
Subscription Price”)
for
all possible subscription shares hereunder (“Subscription
Shares”),
and
(ii) warrants in substantially the form attached hereto as Exhibit
A
(“Warrants”),
to
acquire up to such additional number of Common Shares as provided below (as
exercised, collectively, the “Warrant
Shares”).
WHEREAS,
contemporaneously with the execution and delivery of this Agreement, the parties
hereto are executing and delivering a Registration Rights Agreement,
substantially in the form attached hereto as Exhibit
B
(the
“Registration
Rights Agreement”)
pursuant to which the Company will provide certain registration rights with
respect to the Registrable Securities (as defined in the Registration Rights
Agreement) under the 1933 Act (as defined below) and the rules and regulations,
promulgated thereunder and applicable state securities laws.
NOW,
THEREFORE, the
Company and the Investor hereby agree as follows:
| 1. |
DEFINITIONS
|
Other
than certain capitalized terms defined in the body of this Agreement, the
following terms will have the meaning ascribed to them below:
| 1.1 |
“$”
means United States Dollars.
|
| 1.2 |
“1933
Act”
means the United States Securities Act of 1933, as amended.
|
| 1.3 |
“1934
Act”
means the United States Securities Exchange Act of 1934, as amended.
|
| 1.4 |
“Affiliate”
means with regard to an entity (“X”),
any entity that directly or indirectly (i) is under Control of X,
(ii) has
Control over X, or (iii) is under common Control with X. For this
purpose,
“Control”
shall mean ownership of more than fifty percent (50%) of the equity
or
voting power of an entity or the right to appoint at least fifty
percent
(50%) of the members of the Board of Directors of such entity.
|
| 1.5 |
“Business
Day”
means any day other than Saturday, Sunday or other day on which commercial
banks in the state of Delaware generally remain
closed.
|
| 1.6 |
“Bylaws”
means the Company’s Bylaws as in effect on the date hereof.
|
| 1.7 |
“Certificate
of Incorporation”
means the Company’s Certificate of Incorporation as in effect on the date
hereof.
|
| 1.8 |
“Contingent
Obligation”
means, as to any Person, any direct or indirect liability, contingent
or
otherwise, of that Person with respect to any Indebtedness, lease,
dividend or other obligation of another Person if the primary purpose
or
intent of the Person incurring such liability, or the primary effect
thereof, is to provide assurance to the obligee of such liability
that
such liability will be paid or discharged, or that any agreements
relating
thereto will be complied with, or that the holders of such liability
will
be protected (in whole or in part) against loss with respect
thereto.
|
| 1.9 |
“First
Closing”
means the closing for the first purchase referred to in the table
included
in §2.2 below.
|
| 1.10 |
“First
Closing Date”
means the date of the First
Closing.
|
| 1.11 |
“GAAP”
means United States Generally Accepted Accounting
Principles.
|
| 1.12 |
“Indebtedness”
of any Person means, without duplication (A) all indebtedness for
borrowed
money, (B) all obligations issued, undertaken or assumed as the deferred
purchase price of property or services (other than trade payables
entered
into in the ordinary course of business), (C) all reimbursement or
payment
obligations with respect to letters of credit, surety bonds and other
similar instruments, (D) all obligations evidenced by notes, bonds,
debentures or similar instruments, including obligations so evidenced
incurred in connection with the acquisition of property, assets or
businesses, (E) all indebtedness created or arising under any conditional
sale or other title retention agreement, or incurred as financing,
in
either case with respect to any property or assets acquired with
the
proceeds of such indebtedness (even though the rights and remedies
of the
seller or bank under such agreement in the event of default are limited
to
repossession or sale of such property), (F) all monetary obligations
under
any leasing or similar arrangement which, in connection with GAAP,
consistently applied for the periods covered thereby, is classified
as a
capital lease, (G) all indebtedness referred to in clauses (A) through
(F)
above secured by (or for which the holder of such Indebtedness has
an
existing right, contingent or otherwise, to be secured by) any mortgage,
lien, pledge, charge, security interest or other encumbrance upon
or in
any property or assets (including accounts and contract rights) owned
by
any Person, even though the Person which owns such assets or property
has
not assumed or become liable for the payment of such indebtedness,
and (H)
all Contingent Obligations in respect of indebtedness or obligations
of
others of the kinds referred to in clauses (A) through (G)
above.
|
| 1.13 |
“Investor”
means ACCBT Corp. and any other Person designated thereby to hold
any or
all of the Securities.
|
| 1.14 |
“Knowledge
of the Company”
or the “Company’s
Knowledge”
means the actual knowledge of the executive officers of the Company,
after
due inquiry.
|
| 1.15 |
“Last
Closing”
means the closing for the last purchase referred to in the table
included
in §2.2 below.
|
| 1.16 |
“Last
Closing Date”
means the date of the Last Closing.
|
| 1.17 |
“Material
Adverse Effect”
means a material adverse effect on the business, properties, assets,
operations, results of operations, condition (financial or otherwise)
or
prospects of the Company, or on the authority or ability of the Company
to
perform its obligations under the Transaction Documents (as defined
below). Any adverse effect having a gross value of US$50,000 or a
market
price per Share of 10% less than the bid price per Share hereunder
as of
the closing on any trading day between 30 and 10 days prior to a
given
Closing shall be deemed a Material Adverse
Effect.
|
-2-
| 1.18 |
“Person”
means an individual, a partnership, a corporation, a limited liability
company, an association, a joint stock company, a trust, a joint
venture,
an unincorporated organization, or a governmental entity (or any
department, agency, or political subdivision
thereof).
|
| 1.19 |
“Principal
Market”
means the NASD’s OTC Bulletin
Board.
|
| 1.20 |
“Regulation
D”
means Regulation D under the 1933 Act.
|
| 1.21 |
“SEC”
means the United States Securities and Exchange
Commission.
|
| 1.22 |
“Second
Closing”
means the closing for the second purchase referred to in the table
included in §2.2 below.
|
| 1.23 |
“Second
Closing Date”
means the date of the Second Closing.
|
| 1.24 |
“Securities”
means the Common Shares, the Warrants and the Warrant Shares,
collectively.
|
| 2. |
BASIC
TRANSACTION
|
| 2.1 |
Purchase
of Common Shares and Warrants.
Subject to the satisfaction (or waiver) of the conditions set forth
in
Sections 6 and 7 below, and the Investor’s right to not make any further
payments on account of the Maximum Subscription Price in accordance
with
Section 2.2 below, the Company shall issue and sell to the Investor,
and
the Investor agrees to subscribe for and purchase from the Company
on (or,
at the election of the Investor, before) the dates and for the
consideration set forth below up to 27,500,000 Subscription Shares
as
provided below. Further, at such dates, and for no additional
consideration, if the Investor subscribes for and purchases the relevant
Subscription Shares, then the Company shall issue to the Investor
Warrants
to acquire up to 30,250,0000 additional Common Shares as provided
below.
For such Warrants representing the first 10,083,333 Common Shares
issuable
upon exercise, the Exercise Price (as defined in the Warrant) shall
be -
$0.20 (twenty cents) per share; for such Warrants representing the
next
10,083,333 Common Shares issuable upon exercise, the Exercise Price
(as
defined in the Warrant) shall be - $0.29 (twenty nine cents) per
share;
and for such Warrants representing the next 10,083,334 Common Shares
issuable upon exercise, the Exercise Price (as defined in the Warrant)
shall be - $0.36 (thirty six cents) per share.
|
|
Purchase
Date
|
Purchase
Price
|
Number
of
Subscription
Shares
|
Number
of
Warrant
Shares
|
|||
|
August
30, 2007:
|
$1,250,000
(of which $250,000
was
paid on May 6, 2007)
|
6,875,000
|
7,562,500
|
|||
|
November
15, 2007:
|
$750,000
|
4,125,000
|
4,537,500
|
|||
|
February
15, 2008:
|
$750,000
|
4,125,000
|
4,537,500
|
|||
|
May
15, 2008:
|
$750,000
|
4,125,000
|
4,537,500
|
|||
|
July
30, 2008:
|
$750,000
|
4,125,000
|
4,537,500
|
|||
|
November
15, 2008:
|
$750,000
|
4,125,000
|
4,537,500
|
-3-
| 2.2 |
Closings.
Separate closings of the purchase and sale of the Subscription Shares
and
the Warrants (each, a “Closing”
and together the “Closings”)
shall occur on each of the purchase dates set forth above (each,
a
“Closing
Date”)
and shall take place at such time and place as the Company and the
Investor shall agree. Notwithstanding the above, the Investor may
elect to
advance any Closing Date; provided,
however,
that such date will not be earlier than 7 days following such notice.
At
each Closing, the Company shall deliver to the Investor the number
of
Subscription Shares and Warrants set forth above upon the delivery to the
Company by the Investor of a certified check or wire transfer of
funds in
the amount set forth opposite each purchase date above. The Subscription
Shares deliverable to the Investor hereunder at each Closing will
be
evidenced by a single certificate registered in the Investor’s name
(including, for the avoidance of doubt, a nominee as ACCBT may specify)
and, when issued in accordance with the terms of this Agreement for
the
consideration expressed herein, will be duly authorized, validly
issued,
fully paid, nonassessable and free and clear of all preemptive or
similar
rights, taxes, liens and charges with respect to the issue
thereof.
|
| 2.3 |
Investor’s
Right to Cease Payments.
Notwithstanding the foregoing, with respect to any payment other
than the
payment payable by the Investor on the First Closing Date and without
derogating from the provisions of Section 7 below, the Investor shall
have
the right, upon 45 days notice to the Company prior to the next scheduled
Closing Date, to not make the next scheduled or any further payments
on
account of the Maximum Subscription Price (and, accordingly, the
Company
will not be required to issue any further Subscription Shares and
Warrants), without incurring any liability. Upon such notice, this
Agreement as it pertains to the transactions contemplated in connection
with a subsequent Closing (and, at the election of the Investor,
also in
connection with other or all subsequent Closings) shall terminate,
whereupon the Company shall have no claim against or recourse to
the
Investor and may not alter or cancel any of the Investor’s rights (other
than the Investor’s rights to make further investments in the Company) or
obtain any compensation from the
Investor.
|
| 3. |
INVESTOR’S
REPRESENTATIONS AND
WARRANTIES
|
The
Investor represents and warrants to the Company that the statements contained
in
this Section 3
are, on
the date of this Agreement, and, as of each Closing Date, correct and complete
(as though made then and as though each Closing Date were substituted for the
date of this Agreement throughout this Section 3), except as set forth in Annex
I attached hereto.
-4-
| 3.1 |
Organization
of the Investor.
The Investor is a corporation duly organized, validly existing and,
if
applicable, in good standing under the laws of the British Virgin
Islands.
|
| 3.2 |
Authorization;
Enforcement; Validity.
The
Investor has the requisite power and authority to enter into and
perform
its obligations under this Agreement. The execution and delivery
of this
Agreement by the Investor and the consummation by the Investor of
the
transactions contemplated hereby have been duly authorized by the
Investor’s Board of Directors and no further filing, consent, or
authorization is required by the Investor, its Board of Directors
or its
shareholders. This Agreement has been duly executed and delivered
by the
Investor, and shall constitute the legal, valid and binding obligations
of
the Investor, enforceable against the Investor in accordance with
its
terms, except as such enforceability may be limited by general principles
of equity or applicable bankruptcy, insolvency, reorganization,
moratorium, liquidation or similar laws relating to, or affecting
generally, the enforcement of applicable creditors’ rights and
remedies.
|
| 3.3 |
Brokers’
Fees.
The Investor has no liability or obligation to pay any fees or commissions
to any broker, finder, or agent with respect to the transactions
contemplated by this Agreement for which the Company could become
liable
or obligated.
|
| 3.4 |
No
Public Sale or Distribution.
The Investor is (i) acquiring the Subscription Shares and the Warrants
and
(ii) upon the exercise of the Warrants (other than pursuant to a
Cashless
Exercise (as defined in the Warrants)) will acquire the Warrant Shares
issuable upon exercise of the Warrants, for its own account and not
with a
view towards, or for resale in connection with, the public sale or
distribution thereof, except pursuant to sales registered or exempted
under the 1933 Act; provided,
however,
that by making the representations herein, the Investor does not
agree to
hold any of the Securities for any minimum or other specific term
and
reserves the right to dispose of the Securities at any time in accordance
with, or pursuant to, or a registration statement or an exemption
under
the 1933 Act.
|
| 4. |
REPRESENTATIONS
AND WARRANTIES OF THE
COMPANY
|
The
Company (which for purposes of the representations and warranties under this
Section 4 is deemed to include any subsidiary of the Company, unless the context
otherwise requires) represents and warrants to the Investor that the statements
contained in this Section 4 are correct and complete as of the date of this
Agreement and will be correct and complete as of each Closing Date (as though
made then and as though each Closing Date were substituted for the date of
this
Agreement throughout this Section 4), except as set forth in the disclosure
schedule delivered by the Company to the Investor on the date hereof, attached
hereto (“Disclosure
Schedule”).
Nothing in the Disclosure Schedule shall be deemed adequate to disclose an
exception to a representation or warranty made herein, however, unless the
Disclosure Schedule identifies the exception with reasonable particularity.
The
Disclosure Schedule will be arranged in paragraphs corresponding to the lettered
and numbered paragraphs contained in this Section 4.
| 4.1 |
Organization
and Qualification.
The Company is duly organized, validly existing and, if applicable
under
the laws of its place of incorporation, in good standing under such
jurisdiction, and has the requisite power and authority to own its
properties and to carry on its business as now being conducted. The
Company has one subsidiary, which subsidiary is identified in Section
4.1
of the Disclosure Schedule.
|
-5-
| 4.2 |
Authorization;
Enforcement; Validity.
The Company has the requisite power and authority to enter into and
perform its obligations under this Agreement, the Warrants, the
Registration Rights Agreement, and each of the other agreements entered
into by the parties hereto in connection with the transactions
contemplated by this Agreement (collectively, the “Transaction
Documents”)
and to issue the Securities in accordance with the terms hereof and
thereof. The execution and delivery of the Transaction Documents
by the
Company and the consummation by the Company of the transactions
contemplated hereby and thereby, including, without limitation, the
issuance of the Warrants, the issuance of the Warrant Shares upon
exercise
of the Warrants, have been duly authorized by the Company’s Board of
Directors and no further filing, consent, or authorization is required
by
the Company, its Board of Directors or its shareholders. This Agreement
and the other Transaction Documents of even date herewith have been
duly
executed and delivered by the Company, and shall constitute the legal,
valid and binding obligations of the Company, enforceable against
the
Company in accordance with their respective terms, except as such
enforceability may be limited by general principles of equity or
applicable bankruptcy, insolvency, reorganization, moratorium, liquidation
or similar laws relating to, or affecting generally, the enforcement
of
applicable creditors’ rights and
remedies.
|
| 4.3 |
Issuance
of Securities.
The issuance of the Subscription Shares and the Warrants is duly
authorized and is free from all taxes, liens and charges with respect
to
the issue thereof. As of each Closing, a number of Common Shares
shall
have been duly authorized and reserved for issuance which equals
at least
110% of the maximum number of Common Shares issuable upon exercise
of the
Warrants. Upon issuance or exercise in accordance with the Warrants,
and
payment of the consideration set forth in this Agreement, the Warrants
and
the Warrant Shares, respectively, will be validly issued, fully paid
and
nonassessable and free from all preemptive or similar rights, taxes,
liens
and charges with respect to the issue thereof, with the holder being
entitled to all rights accorded to a holder of Common
Shares.
|
| 4.4 |
No
Conflicts.
The execution, delivery and performance of the Transaction Documents
by
the Company and the consummation by the Company of the transactions
contemplated hereby and thereby (including, without limitation, the
issuance of the Warrants, and the issuance of the Warrant Shares)
will not
(i) result in a violation of the Certificate of Incorporation or
the
Bylaws or (ii) conflict with, or constitute a default (or an event
which
with notice or lapse of time or both would become a default) under,
or
result in termination, amendment, acceleration or cancellation of,
any
agreement, indenture or instrument to which the Company is a party,
or
(iii) result in a violation of any law, rule, regulation, order,
judgment
or decree applicable to the Company or by which any property or asset
of
the Company is bound or affected.
|
| 4.5 |
Consents.
The Company is not required to obtain any consent, authorization
or order
of, or make any filing or registration with, any court, governmental
agency or any regulatory or self-regulatory agency or any other Person
in
order for it to execute, deliver or perform any of its obligations
under
or contemplated by the Transaction Documents, in each case in accordance
with the terms hereof or thereof. All consents, authorizations, orders,
filings and registrations which the Company is required to obtain
pursuant
to the preceding sentence shall have been obtained or effected on
or prior
to the First Closing Date.
|
-6-
| 4.6 |
Dilutive
Effect.
The Company understands and acknowledges that the number of Warrant
Shares
issuable upon exercise of the Warrants may increase beyond the initially
anticipated amounts in certain circumstances. The Company further
acknowledges that its obligation to issue the Warrant Shares upon
exercise
of the Warrants in accordance with this Agreement and the Warrants,
in
each case, is absolute and unconditional regardless of the dilutive
effect
that such issuance may have on the ownership interests of other
shareholders of the Company.
|
| 4.7 |
Application
of Takeover Protections; Rights Agreement.
The Company and its board of directors have taken all necessary action,
if
any, in order to render inapplicable any control share acquisition,
business combination, poison pill (including any distribution under
a
rights agreement) or other similar anti-takeover provision under
the
Certificate of Incorporation or the laws of the jurisdiction of its
formation which is or could become applicable to the Investor as
a result
of the transactions contemplated by this Agreement, including, without
limitation, the Company’s issuance of the Securities and the Investor’s
ownership of the Securities. The Company has not adopted a shareholder
rights plan or similar arrangement relating to accumulations of beneficial
ownership of Common Shares or a change in control of the
Company.
|
| 4.8 |
SEC
Documents; Financial
Statements
|
| 4.8.1 |
During
the two (2) years prior to the date hereof, the Company has filed
all
reports, schedules, forms, statements and other documents required
to be
filed by it with the SEC pursuant to the reporting requirements of
the
1934 Act with respect to such time period (all of the foregoing filed
prior to the date hereof and all exhibits included therein and financial
statements, notes and schedules thereto and documents incorporated
by
reference therein being hereinafter referred to as the “SEC
Documents”).
As of their respective filing dates, the SEC Documents complied in
all
material respects with the requirements of the 1934 Act and the rules
and
regulations of the SEC promulgated thereunder applicable to the SEC
Documents, and none of the SEC Documents, at the time they were filed
with
the SEC, contained any untrue statement of a material fact or omitted
to
state a material fact required to be stated therein or necessary
in order
to make the statements therein, in the light of the circumstances
under
which they were made, not misleading. Except for registration statements
on Form S-8, the Company has not filed any registration statements
and any
amendment thereto or any prospectus pursuant to Rule 424(b) under
the 1933
Act since January 1, 2004.
|
| 4.8.2 |
As
of their respective filing dates, the financial statements of the
Company
included in the SEC Documents complied in all material respects with
applicable accounting requirements and the published rules and regulations
of the SEC with respect thereto. Such financial statements have been
prepared in accordance with GAAP, consistently applied, during the
periods
involved (except (i) as may be otherwise indicated in such financial
statements or the notes thereto, or (ii) in the case of unaudited
interim
statements, to the extent they may exclude footnotes or may be condensed
or summary statements) and fairly present in all material respects
the
financial position of the Company as of the dates thereof and the
results
of its operations and cash flows for the periods then ended (subject,
in
the case of unaudited statements, to normal year-end audit adjustments).
No other information provided by or on behalf of the Company to the
Investor in connection with the transactions contemplated hereby
which is
not included in the SEC Documents, contains any untrue statement
of a
material fact or omits to state any material fact necessary in order
to
make the statements therein, in the light of the circumstance under
which
they are or were made, not
misleading.
|
-7-
| 4.9 |
Absence
of Certain Changes.
Since March 31, 2007, there has been no event which has had, or could
reasonably be expected to result, in a Material Adverse Effect on
the
Company. Without derogating from the generality of the above, since
March
31, 2007, except in connection with the transactions contemplated
herein,
there has not been:
|
| 4.9.1 |
any
change in the consolidated assets, liabilities, financial condition
or
operating results of the Company from that reflected in the financial
statements included in the Company’s Quarterly Report on Form 10-QSB for
the quarter ended March 31, 2007, except for changes in the ordinary
course of business which have not had and could not reasonably be
expected
to have a Material Adverse Effect, individually or in the
aggregate;
|
| 4.9.2 |
any
declaration or payment of any dividend, or any authorization or payment
of
any distribution, on any of the share capital of the Company, or
any
redemption or repurchase of any securities of the
Company;
|
| 4.9.3 |
any
material damage, destruction or loss, whether or not covered by insurance
to any assets or properties of the
Company;
|
| 4.9.4 |
any
waiver, not in the ordinary course of business, by the Company of
a
material right or of a material debt owed to
it;
|
| 4.9.5 |
any
satisfaction or discharge of any lien, claim or encumbrance or payment
of
any obligation by the Company, except in the ordinary course of business
and which is not material to the assets, properties, financial condition,
operating results or business of the Company (as such business is
presently conducted and as it is proposed to be
conducted);
|
| 4.9.6 |
any
change or amendment to Certificate of Incorporation or the Bylaws,
or
material change to any material contract or arrangement by which
the
Company is bound or to which any of its assets or properties is
subject;
|
| 4.9.7 |
Any
change in the number of directors of the Company or a change in the
minimum or maximum possible seats which may constitute the board.
|
| 4.9.8 |
any
material labor difficulties or labor union organizing activities
with
respect to employees of the
Company;
|
-8-
| 4.9.9 |
the
loss of the services of any key employee, or material change in the
composition or duties of the senior management of the Company; or
|
| 4.9.10 |
any
steps taken to seek protection pursuant to any bankruptcy law, or
receipt
of any notice in writing that its creditors intend to initiate involuntary
bankruptcy proceedings.
|
| 4.10 |
No
Undisclosed Events, Liabilities, Developments or
Circumstances.
No material event, liability, development or circumstance has occurred
or
exists, or is contemplated to occur with respect to the Company,
its
business, properties, prospects, operations or financial condition,
that
would be required to be disclosed by the Company under applicable
securities laws and which has not been publicly
announced.
|
| 4.11 |
Conduct
of Business; Regulatory Permits.
The Company is not in violation of any term of or in default under
its
Certificate of Incorporation or Bylaws. The Company is not in violation
of
any judgment, decree or order or any statute, ordinance, rule or
regulation that are currently necessary or applicable to the operation
of
the Company as currently conducted and as proposed to be conducted,
except
to the extent that any such violation would not have a Material Adverse
Effect.
|
| 4.12 |
Xxxxxxxx-Xxxxx
Act; Internal Controls.
The Company is in compliance with any and all applicable requirements
of
the Xxxxxxxx-Xxxxx Act of 2002 that are effective and applicable
to the
Company as of the date hereof, and any and all applicable rules and
regulations promulgated by the SEC thereunder that are effective
and
applicable to the Company as of the date hereof, except where such
noncompliance would not have, individually or in the aggregate, a
Material
Adverse Effect. The Company maintains a system of internal accounting
controls sufficient to provide reasonable assurance that (i) transactions
are executed in accordance with management's general or specific
authorizations, and (ii) transactions are recorded as necessary to
permit
preparation of financial statements in conformity with GAAP and to
maintain asset accountability. The Company maintains and will continue
to
maintain a standard system of accounting established and administered
in
accordance with GAAP and the applicable requirements of the 1934
Act.
|
| 4.13 |
Transactions
With Affiliates.
None of the officers, directors, shareholders or employees of the
Company
is presently, directly or indirectly, a party to any transaction
with the
Company (other than for ordinary course services as employees, officers
or
directors), including any contract, agreement or other arrangement
providing for the furnishing of services to or by, providing for
rental of
real or personal property to or from, or otherwise requiring payments
to
or from any such officer, director, shareholder or employee or, to
the
Knowledge of the Company, any corporation, partnership, trust or
other
entity in which any such officer, director, shareholder or employee
has a
substantial interest or is an officer, director, shareholder, trustee
or
partner.
|
| 4.14 |
Equity
Capitalization.
|
| 4.14.1 |
The
authorized share capital of the Company consists of: (i) 800,000,000
Common Shares, of which as of the date hereof, 25,302,066 are issued
and
outstanding, and (ii) no shares of preferred shares. The Company
has not
authorized any other class or type of securities. All of such outstanding
shares have been validly issued and are fully paid and nonassessable.
None
of the Company’s share capital is subject to preemptive rights or any
other similar rights or any liens or encumbrances suffered or permitted
by
the Company. There are no outstanding options, warrants, scrip, rights
to
subscribe to, calls or commitments of any character whatsoever relating
to, or securities or rights convertible into, or exercisable or
exchangeable for, any share capital of the Company, or contracts,
commitments, understandings or arrangements by which the Company
is or may
become bound to issue additional share capital of the Company or
options,
warrants, scrip, rights to subscribe to, calls or commitments of
any
character whatsoever relating to, or securities or rights convertible
into, or exercisable or exchangeable for, any share capital of the
Company. There are no outstanding debt securities, notes, credit
agreements, credit facilities or other agreements, documents or
instruments evidencing Indebtedness of the Company or by which the
Company
is or may become bound. There are no agreements or arrangements under
which the Company is obligated to register the sale of any of its
securities under the 1933 Act (except the Registration Rights Agreement).
There are no outstanding securities or instruments of the Company
which
contain any redemption or similar provisions, and there are no contracts,
commitments, understandings or arrangements by which the Company
is or may
become bound to redeem it securities.
|
-9-
| 4.14.2 |
The
issuance and sale of the Securities hereunder will not obligate the
Company to issue Common Shares or other securities to any other Person
(other than the Investor) and will not result in the adjustment of
the
exercise, conversion, exchange or reset price of any outstanding
security.
|
| 4.14.3 |
The
Company has furnished to the Investor true, correct and complete
copies of
the Certificate of Incorporation and the Bylaws, and the terms of
all
securities convertible into, or exercisable or exchangeable for,
Common
Shares and the material rights of the holders thereof in respect
thereto.
|
| 4.14.4 |
The
Disclosure Schedule contains a true and complete table summarizing
the
capitalization of the Company as of the date hereof and as of the
First
Closing, both on an outstanding basis and on a fully diluted as converted
basis.
|
| 4.15 |
Indebtedness.
The Company (i) has no outstanding Indebtedness, (ii) is not a party
to
any contract, agreement or instrument, the violation of which, or
default
under which, by the other party(ies) to such contract, agreement
or
instrument would result in a Material Adverse Effect, (iii) is not
in
violation of any term of or in default under any contract, agreement
or
instrument relating to any Indebtedness, except where such violations
and
defaults would not result, individually or in the aggregate, in a
Material
Adverse Effect, and (iv) is not a party to any contract, agreement
or
instrument relating to any Indebtedness, the performance of which,
in the
judgment of the Company’s officers, has or is expected to have a Material
Adverse Effect.
|
| 4.16 |
Contracts
|
Section
4.16
of
the Disclosure Schedule lists all material contracts to which the Company is
a
Party. Without derogating from the generality of the above, the following
contracts and other agreements are deemed material:
| 4.16.1 |
any
agreement (or group of related agreements) for the lease of personal
property to or from any Person providing for lease payments in excess
of $
10,000 per annum;
|
-10-
| 4.16.2 |
any
agreement (or group of related agreements) for the purchase or sale
of raw
materials, commodities, supplies, products, or other personal property,
or
for the furnishing or receipt of services, the performance of which
will
extend over a period of more than one year, result in a loss to the
Company, or involve consideration in excess of $
10,000;
|
| 4.16.3 |
any
agreement concerning a partnership or joint
venture;
|
| 4.16.4 |
any
agreement (or group of related agreements) under which it has created,
incurred, assumed, or guaranteed any Indebtedness in excess of
$10,000;
|
| 4.16.5 |
any
agreement concerning
non-competition;
|
| 4.16.6 |
any
agreement with any Person that is not at arm’s length to the Company, its
directors, officers, employees or shareholders (or any of their respective
Affiliates);
|
| 4.16.7 |
any
profit sharing, share option, share purchase, share appreciation,
deferred
compensation, severance, or other plan or arrangement for the benefit
of
its current or former directors, officers, and
employees;
|
| 4.16.8 |
any
collective bargaining agreement;
|
| 4.16.9 |
any
agreement for the employment of any individual on a full-time, part-time,
consulting, or other basis providing annual compensation in excess
of $
40,000 or providing severance
benefits;
|
| 4.16.10 |
any
agreement under which it has advanced or loaned any amount to any
of its
directors, officers, and employees;
|
| 4.16.11 |
any
agreement under which the consequences of a default or termination
could
have an adverse effect on the business, financial condition, operations,
results of operations, or future prospects of the Company;
or
|
| 4.16.12 |
any
other agreement (or group of related agreements) the performance
of which
involves consideration in excess of
$40,000.
|
| 4.17 |
The
Company has delivered to the Investor a correct and complete copy
of each
written agreement listed in Section 4.16 of the Disclosure Schedule
(as
amended to date). With respect to each such agreement:
|
| 4.17.1 |
the
agreement is legal, valid, binding, enforceable, and in full force
and
effect;
|
| 4.17.2 |
the
agreement will continue to be legal, valid, binding, enforceable,
and in
full force and effect on identical terms following the consummation
of the
transactions contemplated hereby;
|
| 4.17.3 |
no
party is in breach or default, and no event has occurred which with
notice
or lapse of time or both would constitute a breach or default, or
permit
termination, modification, or acceleration, under the agreement;
and
|
-11-
| 4.17.4 |
no
party has repudiated any provision of the
agreement.
|
| 4.18 |
Absence
of Litigation.
There is no material action, suit, proceeding, inquiry or investigation
before or by any court, public board, government agency, self-regulatory
organization or body pending or, to the Knowledge of the Company,
threatened in writing against or affecting the Company, the Common
Shares,
any of the Company’s officers or directors or the transactions
contemplated by the Transaction Documents.
|
| 4.19 |
Employee
Relations.
|
| 4.19.1 |
The
Company is not a party to or bound by any collective bargaining agreements
or other agreements with labor organizations. The Company has not
violated
in any material respect any laws, regulations, orders or contract
terms,
affecting the collective bargaining rights of employees, labor
organizations or any laws, regulations or orders affecting employment
discrimination, equal opportunity employment, or employees’ health,
safety, welfare, wages and hours.
|
| 4.19.2 |
(i)
There are no labor disputes existing, or to the Company’s Knowledge,
threatened, involving strikes, slow-downs, work stoppages, job actions,
disputes, lockouts or any other disruptions of or by the Company’s
employees, (ii) there has been no demand for recognition or certification
heretofore made by any labor organization or group of employees is
pending
with respect to the Company, (iii) to the Company’s best Knowledge, the
Company enjoys good labor and employee relations with its employees
and
labor organizations, (iv) the Company is, and at all times has been,
in
compliance in all material respects with all applicable laws respecting
employment (including laws relating to classification of employees
and
independent contractors) and employment practices, terms and conditions
of
employment, wages and hours, and immigration and naturalization and
(vi)
the Company is not a party to, or bound by, any employment or other
contract or agreement that contains any severance, termination pay
or
change of control liability or
obligation.
|
| 4.20 |
Title.
The Company owns no real property and has good and marketable title
to all
personal property owned by it which is material to the business of
the
Company, free and clear of all liens, encumbrances and defects except
such
as do not materially affect the value of such property and do not
interfere with the use made and proposed to be made of such property
by
the Company. Any real property and facilities and personal property
held
under lease by the Company are held by it under valid, subsisting
and
enforceable leases with such exceptions as are not material and do
not
interfere with the use made and proposed to be made of such property
and
buildings by the Company.
|
| 4.21 |
Intellectual
Property.
There is no claim, previously asserted, pending, threatened or which,
to
the Knowledge of the Company, may otherwise be asserted (“Claim”)
that would interfere with, or adversely impact upon, the Company's
unencumbered right to use, make, sell, license, distribute, promote,
apply, develop and make derivative works of (“Use”),
the patents, patent rights, permits, licenses, trade secrets, trademarks
(registered or unregistered), trademark rights, trade names, trade
name
rights, franchises, copyrights (registered or unregistered), inventions
(regardless of whether patentable or not), software, confidential
information, innovations and other intellectual property rights being
used
to conduct its business as now operated and as now proposed to be
operated, or in the development, manufacture, use, distribution or
licensing of the Company's proprietary technology, information, products,
processes, or services (collectively, the “Intellectual
Property Rights”).
The Disclosure Schedule contains a list of all pending applications
and
registrations of any Intellectual Property Rights used by the Company.
To
the Knowledge of the Company, there is no reason to believe that
the Use
of the Intellectual Property Rights infringes, conflicts or will
conflict
with valid rights of any other Person. To the Knowledge of the Company,
there is no pending or threatened claim to the effect that, and the
Company has no reason to believe that, any such Intellectual Property
Right is invalid or unenforceable by the Company or its licensor.
The
Company has no obligation known by the Company to compensate any
Person
for the use of any such Intellectual Property Rights, and the Company
has
not granted any Person any license or other rights to use in any
manner
any of the Intellectual Property Rights of the Company, whether requiring
the payment of royalties or not.
|
-12-
| 4.22 |
Tax
Status.
The Company (i) has made or filed all income and all other tax returns,
reports and declarations required by any taxing authority, (ii) has
paid
all taxes and other governmental assessments and charges that are
material
in amount, shown or determined to be due on such returns, reports
and
declarations, except those being contested in good faith and (iii)
has set
aside on its books provision reasonably adequate for the payment
of all
taxes for periods subsequent to the periods to which such returns,
reports
or declarations apply. There are no unpaid taxes in any material
amount
claimed to be due by any taxing authority, and the officers of the
Company
know of no basis for any such claim. All taxes and other assessments
and
levies that the Company is required to withhold or to collect for
payment
have been duly withheld and collected and paid to the proper governmental
entity or third party when due. There are no tax liens or claims
pending
or, to the Company’s Knowledge, threatened against the Company or any of
its assets or property.
|
| 4.23 |
Insurance
Coverage.
The Company maintains in full force and effect insurance coverage
that is
customary for comparably situated companies for the business being
conducted and properties owned or leased by the Company, and the
Company
reasonably believes such insurance coverage to be adequate against
all
liabilities, claims and risks against which it is customary for comparably
situated companies to insure.
|
| 4.24 |
Off
Balance Sheet Arrangements.
There is no transaction, arrangement, or other relationship between
the
Company and an unconsolidated or other off balance sheet entity that
is
required to be disclosed by the Company in its 1934 Act filings and
is not
so disclosed or that otherwise would be reasonably likely to have
a
Material Adverse Effect.
|
| 4.25 |
Form
S-1 Eligibility.
The Company is eligible to register the Subscription Shares and the
Warrant Shares for resale by the Investor using Form S-1 promulgated
under
the 1933 Act.
|
-13-
| 4.26 |
Disclosures.
The Company confirms that neither it nor any other person acting
on its
behalf has provided the Investor or its agents or counsel with any
information that constitutes or might constitute material, non-public
information. The written materials including the Company's representations
herein and the Disclosure Schedules do not contain any untrue statement
of
a material fact or omit to state a material fact necessary in order
to
make the statements contained therein, in light of the circumstances
under
which they were made, not misleading.
|
| 4.27 |
Board
Composition.
The whole Board of Directors of the Company may be comprised of six
directors. As of the date hereof, 3 seats are occupied and 3 seats
are
vacant.
|
| 5. |
COVENANTS
|
| 5.1 |
Pre-Closing
Covenants.
The following shall apply between the date of execution of this Agreement
and the First Closing:
|
| 5.1.1 |
The
Company will give any notices to third parties, and will use its
best
efforts to obtain any third party consents, that the Investor may
reasonably request or is required or advisable in connection with
the
matters referred to in Section 4.5 above. Each of the parties hereto
will
give any notices to, make any filings with, and use its reasonable
best
efforts to obtain any authorizations, consents, and approvals of
governments and governmental agencies as may be required to execute
and
deliver the transactions contemplated by the Transaction
Documents;
|
| 5.1.2 |
The
Company shall not engage in any practice, take any action, or enter
into
any transaction outside the ordinary course of business. Without
limiting
the generality of the foregoing, the Company shall not engage in
any
practice, take any action, or enter into any transaction of the sort
described in Section 4.9 above;
|
| 5.1.3 |
The
Company will permit representatives of the Investor to have full
access to
all premises, properties, personnel, books, records, contracts, and
documents of or pertaining to the Company during normal business
hours
upon prior notice to the Company, provided
that
the Company may withhold material non-public information of the Company
if
required to protect confidentiality of such information, except if
the
Investor agrees to maintain confidentiality of such information upon
reasonable terms and conditions, which the Company shall propose;
and;
|
| 5.1.4 |
The
Company shall keep its business and properties substantially intact,
including its present operations, physical facilities, working conditions
as well as its relations with financial institutions, suppliers,
prospective customers, and employees. The business of the Company
shall
not be conducted in violation of any law, ordinance or regulation
of any
governmental entity.
|
| 5.2 |
Adjustment
of the Number of Shares and Price Per Share.
In the event that at any time prior to the First Closing Date, the
Company
issues more Common Shares or other securities convertible into,
exercisable or exchangeable for Common Shares, then the number of
Subscription Shares and the price per share (but not the payment
amounts
or Maximum Subscription Price) will be adjusted to ensure that the
Investor shall have the right to acquire up to 52.35% of the equity
of the
Company on a fully diluted as converted basis (assuming the Investor
purchases all of the Subscription Shares and exercises in full all
of the
Warrants) and 50.02% of the issued and outstanding shares of the
Company
assuming the Investor invests the Maximum Subscription Price. In
case the
Investor invests less then the Maximum Subscription Price, the calculation
will be “pro-rata” to the actual investment made by the
Investor.
|
-14-
| 5.3 |
Pre-emptive
Right
|
| 5.3.1 |
For
so long as the Investor holds (taking into account, for the avoidance
of
doubt, a designee of ACCBT) at least 5% of the Company’s issued and
outstanding Common Shares, if any additional shares or other securities
of
the Company, or options or rights to purchase shares of the Company
or
other securities directly or indirectly convertible into or exercisable
for shares of the Company (including for greater certainty, shares
of any
newly created class or series) (collectively referred to in this
Section
as “Additional
Securities”),
are to be issued, the Company will offer the Investor to purchase
its Pro
Rata Share (as defined below) of such Additional Securities by notice
given to it of the Company’s intention to issue Additional Securities, the
aggregate and per Additional Security payable, and the number of
such
Additional Securities to be so issued. The Investor’s “Pro
Rata Share”
of
the Additional Securities shall be equal to the total number of Additional
Securities so offered, multiplied by the quotient of X/Y, where X
is equal
to the number of Common Shares beneficially owned on a fully-diluted
as
converted basis by the Investor (including, for the avoidance of
doubt, a
designee of ACCBT), and Y is equal to aggregate number of outstanding
Common Shares beneficially owned on a fully-diluted as converted
basis by
all of the shareholders of the Company, all as at the date notice
is given
of such offer. The Investor will have 30 days from the date such
notice is
given to give a notice to the Company (the “Notice
of Subscription”)
of its intention to purchase all or any of the Additional Securities
to
which it is entitled and will indicate in such notice the maximum
number
of Additional Securities that it is willing to purchase (which number
may
be greater than or less than its Pro Rata Share). Should the Investor
wish
to
subscribe for Additional Securities in excess of its Pro Rata Share,
it
shall, in the Notice of Subscription, specify the number or dollar
amount,
as the case may be, of Additional Securities in excess of its Pro
Rata
Share that the Investor wishes to purchase.
Any Additional
Securities remaining unsubscribed for following such 30 days shall
be used
to satisfy the subscription of the Investor for Additional Securities
in
excess of its Pro Rata Shares but the Investor shall not be bound
to take
any Additional Securities in excess of the maximum amount it requested
to
purchase in its Notice of Subscription. The
transaction of purchase and sale by the Company to the Investor pursuant
to this Section 5.3 will be completed on the date specified by the
board of directors of the Company, but not later than 30 days from
the
Notice of Subscription (as such date may be delayed by the duration
necessary to obtain any regulatory approvals or consents). Any Additional
Securities not taken up by the Investor may be issued within 90 days
of
such Additional Securities having been first offered to the Investor,
at
not less than the price and on terms no more favorable than the terms
originally offered to the Investor, to such Persons as the board
of
directors of the Company determines.
|
-15-
| 5.3.2 |
The
Company may issue Additional Securities without complying with the
provisions of Section 5.3.1 above if such Additional Securities are
permitted to be issued under sub-clauses (i) and (iii) of Section
5.7.2
below.
|
| 5.4 |
Board
Composition.
The Company shall cause the following to take place timely:
|
| 5.4.1 |
Immediately
following the First Closing and thereafter (subject to Investor’s right to
appoint 50.1% of the Board pursuant to Section 5.4.2 below), the
Investor
will be entitled to appoint 40% of the members of the Board of Directors
of the Company and its subsidiary (fractions to be rounded up to
the
nearest whole number (and the same proportion shall apply to any
committee), unless the rules of the SEC or any applicable securities
exchange prohibit such. In order to effect this provision, then on
or
before the First Closing, the Company will have caused the election
two
nominees of the Investor to the Board of Directors of the Company,
which
shall number no more than 5, subject only to such Closing.
|
| 5.4.2 |
Upon
payment of the first $2 million of the Maximum Subscription Price,
the
Investor shall be entitled to appoint 50.1% of the Board of Directors
of
the Company and its subsidiary (fractions to be rounded up to the
nearest
whole number) (and the same proportion shall apply to any committee),
unless the rules of the SEC or any applicable securities exchange
prohibit
such. In order to effect this provision, on or before the Second
Closing,
the Company will have caused the election 3 nominees of the Investor
to
the Board of Directors of the Company, which shall number no more
than 5,
subject only to such Closing..
|
| 5.4.3 |
Following
the First Closing Date, if the Investor elects to exercise its right
to
not make further payments toward the Maximum Subscription Price to
the
Company as set forth in Section 2.3 above and at when so ceasing
it shall
have paid less than US$4 million of the Maximum Subscription Price,
then
the Investor will be entitled to appoint only 40% of the members
of the
Board of Directors of the Company and its subsidiary (fractions to
be
rounded up to the nearest whole number) (and the same proportion
shall
apply to any committee).
|
| 5.4.4 |
The
Investor's right to designate members of the Board of Directors shall
automatically terminate at such time as the Investor holds less than
5% of
the issued and outstanding share capital of the Company. In addition,
the
Investor's rights under this §5.4 are subject to the rules and regulations
of any applicable securities
exchange.
|
-16-
| 5.5 |
Cancellation
of Certain Issued Warrant and Debenture.
Upon the First Closing, the Investor will surrender to the Company
the
form of promissory note and warrants issued to the Investor on May
6,
2007, whereupon such promissory note and warrants will be deemed
null and
void. The parties hereto agree that the amount of $250,000 paid by
the
Investor in connection with the aforementioned issuance will be considered
a payment made on the First Closing Date towards the payment due
on such
date (i.e., $1.25 million).
|
| 5.6 |
Security
Holders Agreement.
(i) The Investor, and (ii) certain security holders of the Company
holding
at least 31% of the issued and outstanding shares of the Company
as at the
date hereof shall have entered into a security holders agreement
with the
Investor in the form attached hereto as Exhibit
C.
|
| 5.7 |
Protective
Provisions.
For so long as the Investor holds (taking into account, for the avoidance
of doubt, a designee of ACCBT) at least 5% of the issued and outstanding
share capital of the Company, no obligation of the Company (which,
for
purposes of this Section is deemed to include any subsidiary of the
Company) will be entered into, no decision will be made, and no action
will be taken by or with respect to the Company, either directly
or
indirectly (including by merger, consolidation or reclassification,
or
through the making of any shareholder proposal by any of its shareholder),
with respect to the following matters without the written consent
of the
Investor:
|
| 5.7.1 |
any
change in the Certificate of Incorporation or the Bylaws, or alteration
of
the capital structure of the Company through any reclassification
or
consolidation;
|
| 5.7.2 |
the
allotment or issuance of any shares or other securities (including
convertible debt) of the Company (or the entering into of any agreement
or
the making of any offer or the granting of any right capable of becoming
an agreement to allot or issue any shares or other securities of
the
Company), except for: (i) shares issuable pursuant to (A) the Warrants,
this Agreement and outstanding share options, convertible debt or
warrants
existing as of the date hereof, (B) up to 2,180,000 shares issuable
to
Company’s service providers under existing arrangements, and Common Shares
under the Company’s equity incentive plans (where applicable), and (C)
shares issuable as an introduction fee for the transaction contemplated
hereby acceptable to the Investor, at its sole discretion; (ii) where
the
Investor has given notice of its declination, or otherwise fails,
to make
further payments toward the Maximum Subscription Price; and (iii)
where
prior to the First Closing the Company accepts any offer for investment
in
the Company of up to $500,000, in the same terms of the investments
made
by Xxxx Xxxxxxxxx as of March 14, 2007;
|
-17-
| 5.7.3 |
the
redemption, repurchase or other acquisition by the Company of any
of its
shares (or the payment into or setting aside of a fund for such
purpose);
|
| 5.7.4 |
the
declaration or payment of any dividend or the making of any distributions
to any holders of any shares in the capital of the
Company;
|
| 5.7.5 |
any
dealings with, or the making of any payments to, any Person that
is not at
arm’s length to the Company, its directors, officers, employees or
shareholders (or any of their respective Affiliates), except for
those
outstanding obligations existing as of the date
hereof;
|
| 5.7.6 |
the
sale, lease, exchange or other disposition granting of a security
interest
in, or exclusive license of, any material part of or all or substantially
all of the property or assets (including intellectual property) of
the
Company or the incurrence of any Indebtedness or capital expenditures
greater than $25,000 (except in the ordinary course of business or
for a
debt investment in the Company up to $500,000 prior to the First
Closing
Date);
|
| 5.7.7 |
the
taking of any steps to voluntarily liquidate, dissolve, wind-up or
otherwise terminate the corporate existence of the
Company;
|
| 5.7.8 |
the
creation, acquisition or disposition of any subsidiary, the purchase
or
acquisition of any partnership interest or securities issued by,
or other
equity or ownership interest in, any other entity, participation
in any
joint venture or strategic
alliance;
|
| 5.7.9 |
any
material change to the direction of the business of the Company or
the
related business plan as described in the SEC
Documents;
|
| 5.7.10 |
engage
in any share sale or exchange, merger, consolidation, amalgamation,
arrangement, asset acquisition or any other similar transaction the
effect
of which is to place control of the business of the Company in the
hands
of an arm’s length third party;
|
| 5.7.11 |
any
acquisition of at least the majority of shares or all, or substantially
all, of the assets of any other
Person;
|
| 5.7.12 |
pay
any compensation to any officer, director or employee involving a
cash or
cash equivalent commitment of more than US$60,000 per annum (not
taking
into account any share-based awards pursuant to a board approved
plan or
existing arrangements); or
|
| 5.7.13 |
any
commitment or agreement to do any of the
foregoing.
|
| 5.8 |
Best
Efforts.
Each party hereto shall use its best efforts timely to satisfy each
of the
applicable conditions to be satisfied by it as provided in Sections
6 and
7 of this Agreement.
|
-18-
| 5.9 |
Form
D and Blue Sky.
The Company agrees to file a Form D with respect to the Securities
as
required under Regulation D and to provide a copy thereof to the
Investor
promptly after such filing. The Company shall, on or before the First
Closing Date, take such action as the Company shall reasonably determine
is necessary in order to obtain an exemption for or to qualify the
Securities for sale to the Investor at the First Closing pursuant
to this
Agreement under applicable securities or “Blue Sky” laws of the states of
the United States (or to obtain an exemption from such qualification),
and
shall provide evidence of any such action so taken to the Investor
on or
prior to the First Closing Date. The Company shall make all filings
and
reports relating to the offer and sale of the Securities required
under
applicable securities or “Blue Sky” laws of the states of the United
States following the First Closing
Date.
|
| 5.10 |
Reporting
Status.
Until the date on which the Investor shall have sold all the Subscription
Shares and the Warrant Shares and none of the Warrants is outstanding,
the
Company shall file all reports required to be filed with the SEC
pursuant
to the 1934 Act, and the Company shall not terminate its status as
an
issuer required to file reports under the 1934 Act even if the 1934
Act or
the rules and regulations thereunder would otherwise permit such
termination.
|
| 5.11 |
Listing.
The Company shall promptly secure the listing of all of the Registrable
Securities upon each national securities exchange and automated quotation
system, if any, upon which the Common Shares are then listed and
shall
maintain such listing of all Registrable Securities from time to
time
issuable under the terms of the Transaction Documents. The Company
shall
maintain the Common Shares’ authorization for quotation on the Principal
Market. Neither the Company nor any of its Subsidiaries shall take
any
action which would be reasonably expected to result in the delisting
or
suspension of the Common Shares on the Principal Market. The Company
shall
pay all fees and expenses in connection with satisfying its obligations
under this Section.
|
| 5.12 |
Reservation
of Common Shares.
Subject to Section 2.3 above, the Company shall at all times reserve
and
keep available out of its authorized but unissued Common Shares,
solely
for the purpose of providing for the issuance of the Subscription
Shares
and the exercise of the Warrants, such number of Common Shares as
shall
from time to time equal the number of all possible Subscription Shares
not
yet issued and Warrant Shares issuable upon the due exercise of the
Warrants in accordance with their respective
terms.
|
| 5.13 |
Notice
of Developments.
The Company will give prompt written notice to the Investor of any
material adverse development causing a breach of any of the
representations and warranties in Section 4 above. No disclosure
pursuant
to this Section 5.13, however, shall be deemed to amend or supplement
the
Disclosure Schedule or to prevent or cure any misrepresentation,
breach of
warranty, or breach of covenant.
|
| 5.14 |
No
Conflicting Agreements.
The Company will not take any action, enter into any agreement or
make any
commitment that would conflict or interfere in any material respect
with
the Company’s obligations to the Investor under the Transaction
Documents.
|
| 5.15 |
Compliance
with Laws.
The Company will comply in all material respects with all applicable
laws,
rules, regulations, orders and decrees of all governmental
authorities.
|
-19-
| 5.16 |
Use
of Proceeds.
The net proceeds of the sale of the Subscription Shares and Warrants
hereunder shall be used by the Company for working capital and general
corporate purposes.
|
| 5.17 |
Exclusivity.
Between the date of execution of this Agreement and the First Closing,
the
Company shall not:
|
| 5.17.1 |
solicit,
initiate, or encourage the submission of any proposal or offer from
any
Person relating to the acquisition of any Securities or other voting
securities, or any substantial portion of the assets, of the Company
(including any acquisition structured as a merger, consolidation,
or share
exchange); or
|
| 5.17.2 |
participate
in any discussions or negotiations regarding, furnish any information
with
respect to, assist or participate in, or facilitate in any other
manner
any effort or attempt by any Person to do or seek any of the foregoing.
The Company will notify the Investor immediately if any Person makes
any
proposal, offer, inquiry, or contact with respect to any of the
foregoing.
|
| 6. |
CONDITIONS
TO THE COMPANY’S
OBLIGATION TO ISSUE
|
The
obligation of the Company hereunder to issue and sell the applicable
Subscription Shares to the Investor at each Closing is subject to the
satisfaction, at or before the relevant Closing Date, of each of the following
conditions (if such remain relevant in a subsequent Closing), provided that
these conditions are for the Company’s sole benefit and may be waived by the
Company at any time in its sole discretion by providing the Investor with prior
written notice thereof:
| 6.1 |
The
representations and warranties of the Investor shall be true and
correct
in all material respects as of the date when made and as of the relevant
Closing Date as though made at that time (except for representations
and
warranties that speak as of a specific date), and the Investor shall
have
performed, satisfied and complied in all material respects with the
covenants, agreements and conditions required by this Agreement to
be
performed, satisfied or complied with by the Investor at or prior
to the
relevant Closing Date;
|
| 6.2 |
The
Investor shall have executed and delivered to the Company each of
the
Transaction Documents to be delivered by the Investor hereunder together
with the applicable proceeds of the investment;
and
|
| 6.3 |
All
of the terms, covenants and conditions
of
this Agreement to be performed and/or complied with by the Investor
at or
prior to the relevant Closing Date shall have been performed or complied
with.
|
| 7. |
CONDITIONS
TO THE
INVESTOR’S OBLIGATION TO SUBCSCRIBE
|
Without
derogating from the provisions of Section 2.3 above, the obligation of the
Investor to purchase the relevant Subscription Shares at each Closing is subject
to the satisfaction, at or before the relevant Closing Date, of each and all
of
the following conditions (if such remain relevant in a subsequent Closing),
provided that these conditions are for the Investor’s sole benefit and may be
waived by the Investor at any time in its sole discretion by providing the
Company with prior written notice thereof:
| 7.1 |
The
Company shall have executed and delivered to the Investor: (A) each
of the
Transaction Documents, and (B) the Warrants;
|
-20-
| 7.2 |
(i)
The Investor and (ii) certain security holders of the Company,
representing at least 31% of the issued and outstanding shares of
the
Company as at the date hereof, shall have entered into the security
holders agreement set forth in Exhibit C.
|
| 7.3 |
The
Company shall have taken such actions under the Company's Certificate
of
Incorporation and Bylaws and rights plan as may be necessary in the
reasonable opinion of the Investor’s counsel to permit the purchase of the
Subscription Shares and the Warrant Shares and to establish the rights
of
the Investor as contemplated under the Transaction Documents.
|
| 7.4 |
The
representations and warranties of the Company shall be true and correct
as
of the date when made and as of each Closing Date as though made
at that
time (except for representations and warranties that speak as of
a
specific date), the Company shall have performed, satisfied and complied
in all respects with the covenants, agreements and conditions required
by
the Transaction Documents to be performed, satisfied or complied
with by
the Company at or prior to each Closing Date,
and no event has occurred which has had, or could reasonably be expected
to result, in a Material Adverse Effect on the
Company;
|
| 7.5 |
The
Company shall have obtained all governmental, regulatory or third
party
consents and approvals, if any, necessary for the sale and issuance
of the
Securities;
|
| 7.6 |
No
action, suit, or proceeding shall be pending or threatened before
any
court or quasi-judicial or administrative agency or before any arbitrator
wherein an unfavorable injunction, judgment, order, decree, ruling,
or
charge would:
|
| 7.6.1 |
prevent
consummation of any of the transactions contemplated hereby and by
the
other Transaction Documents,
|
| 7.6.2 |
cause
any of the transactions contemplated hereby and by the other Transaction
Documents to be rescinded following consummation,
or
|
| 7.6.3 |
affect
adversely the right of the Investor to own the Subscription Shares
and/or
the Warrant Shares.
|
| 7.7 |
The
Investor shall have received a certificate, executed by the Chief
Executive Officer (or principal executive officer) of the Company,
dated
as of each Closing Date, to the effect that each of the applicable
conditions specified in Sections 7.2 through 7.6 above is satisfied
in all
material respects;
|
| 7.8 |
The
Company shall have delivered to the Investor a certificate, executed
by
the Chief Executive Officer (or principal executive officer) of the
Company and dated as of the First Closing Date, attaching and confirm
the
due passage and in-effect status of (i) resolutions adopted by the
Company’s Board of Directors to approve the transactions contemplated by
this Agreement and the other Transaction Documents, (ii) the Certificate
of Incorporation and (iii) the Bylaws, each as in effect at the First
Closing;
|
| 7.9 |
By
the First Closing the relevant parties shall have entered into the
Registration Right Agreement;
|
-21-
| 7.10 |
The
Company and Ramot at Tel Aviv University Ltd. shall have (A) amended
(i)
the Research and License Agreement between them dated March 30, 2006,
and
(ii) the related Warrants, and (B) Ramot shall have waived all breaches
of
the Company under such Agreement and/or Warrants until the First
Closing
Date, all of the foregoing to the satisfaction of the
Investor;
|
| 7.11 |
The
Company's subsidiary shall have obtained written approval of the
transactions contemplated hereby from Kiryat HaMada Ve'Hatechnologiya
and
others, the lessors of the Company's subsidiary's offices in Petach
Tikva,
to the satisfaction of Investor.
|
| 7.12 |
The
Company shall have obtained Directors and Officers liability insurance
to
the Investor's satisfaction.
|
| 7.13 |
The
Company shall have delivered to the Investor such other customary
documents relating to the transactions contemplated by this Agreement
as
the Investor or its counsel may reasonably request.
All actions to be taken by the Company in connection with consummation
of
the transactions contemplated hereby and all certificates, instruments,
and other documents required to effect the transactions contemplated
hereby will be reasonably satisfactory in form and substance to the
Investor.
|
| 8. |
INDEMNIFICATION
|
| 8.1 |
Company’s
Obligation to Indemnify.
The Company shall defend, protect, indemnify and hold harmless the
Investor (including, for the avoidance of doubt, each other holder
of the
Securities) (collectively, the “Indemnitees”)
from and against any and all actions, causes of action, suits, claims,
losses, costs, penalties, fees, liabilities and damages, and expenses
(“Claim”)
in connection therewith (irrespective of whether any such Indemnitee
is a
party to the action for which indemnification hereunder is sought),
and
including reasonable attorneys’ fees and disbursements and the reasonable
cost of enforcement of this indemnity (“Indemnified
Liabilities”),
incurred by any Indemnitee as a result of, or arising out of, or
relating
to (a) any misrepresentation or breach of any representation or warranty
made by the Company in the Transaction Documents, or any other
certificate, instrument or document contemplated hereby or thereby,
or (b)
any breach of any covenant, agreement or obligation of the Company
contained in the Transaction Documents or any other certificate,
instrument or document contemplated hereby or
thereby.
|
| 8.2 |
Indemnification
Procedure.
Promptly after receipt by an Indemnitee under this Section 8 of notice
of
the commencement of any action or proceeding (including any governmental
action or proceeding) involving a Claim, such Indemnitee shall, if
a Claim
in respect thereof is to be made against the Company under this Section
8,
deliver to the Company a written notice of the commencement thereof
including the factual basis for the Claim (if known) and the amount,
and
the Company shall have the right to participate in, and, to the extent
the
Company so desires, to assume control of the defense thereof with
counsel
mutually satisfactory to the Company and the Indemnitee. The Indemnitee
shall cooperate fully with the Company in connection with any negotiation
or defense of any such action or proceeding by the Company and shall
furnish to the Company all information reasonably available to the
Indemnitee which relates to such action or proceeding. The Company
shall
keep the Indemnitee reasonably apprised at all times as to the status
of
the defense or any settlement negotiations with respect thereto.
The
Company shall not be liable for any settlement of any action, claim
or
proceeding effected without its prior written consent (excluding
where the
Company has not elected to assume control of the defense), provided,
however,
that the Company shall not unreasonably withhold, delay or condition
its
consent. The Company shall not, without the prior written consent
of the
Indemnitee, consent to entry of any judgment or enter into any settlement
or other compromise which does not include as an unconditional term
thereof the giving by the claimant or plaintiff to such Indemnitee
of a
release from all liability in respect to such action, proceeding
or
litigation, and such settlement shall not include any admission as
to
fault on the part of the Indemnitee. Following indemnification as
provided
for hereunder, the Company shall be subrogated to all rights of the
Indemnitee with respect to all insurance proceeds, third parties,
firms or
corporations relating to the matter for which indemnification has
been
made. The failure by an Indemnitee to deliver written notice to the
Company within a reasonable time of the commencement of any such
action
shall not relieve the Company of any liability to the Indemnitee
under
this Section 8 except to the extent that the Company is prejudiced
in its
ability to defend such action, in which event the liability of the
Company
to such Indemnitee shall be reduced by the amount of any losses incurred
by the Company resulting from the Indemnitee’s failure to give such notice
on a timely basis.
|
-22-
| 9. |
TERMINATION
|
In
the
event that any of the Closings shall not have occurred on or before the Closing
Date designated for such Closing as set forth in Section 2.1 above due to the
Company’s or the Investor’s failure to satisfy the conditions set forth in
Sections 6 and 7 above (and the non-breaching party’s failure to waive such
unsatisfied condition(s)), the non-breaching party shall have the option to
terminate this Agreement at the close of business on such date as it pertains
to
the transactions contemplated in connection with the relevant Closing (and,
at
the non-breaching party’s election also in connection with all subsequent
Closings) without liability of a party to the other party. Nothing in this
Section 9 shall be deemed to release a party from any liability for any breach
by such party of the applicable terms and provisions of this Agreement or the
other Transaction Documents or to impair the right of a party to compel specific
performance by the other party of its obligations under this Agreement or the
other Transaction Documents.
| 10. |
Miscellaneous
|
| 10.1 |
Governing
Law; Consent to Jurisdiction.
This Agreement shall be governed by, and construed in accordance
with, the
internal laws of the State of Israel without regard to the choice
of law
principles thereof. Each of the parties hereto irrevocably submits
to the
jurisdiction of the courts located in Israel (but not elsewhere)
for the
purpose of any suit, action, proceeding or judgment relating to or
arising
out of this Agreement and the transactions contemplated hereby. Service
of
process in connection with any such suit, action or proceeding may
be
served on each party hereto anywhere in the world by the same methods
as
are specified for the giving of notices under this Agreement. Each
of the
parties hereto irrevocably consents to the jurisdiction of any such
court
in any such suit, action or proceeding and to the laying of venue
in such
court. Each party hereto irrevocably waives any objection to the
laying of
venue of any such suit, action or proceeding brought in such courts
and
irrevocably waives any claim that any such suit, action or proceeding
brought in any such court has been brought in an inconvenient
forum.
|
-23-
| 10.2 |
Counterparts.
This Agreement may be executed in two or more identical counterparts,
all
of which shall be considered one and the same agreement and shall
become
effective when counterparts have been signed by each party and delivered
to the other party; provided that a facsimile signature shall be
considered due execution and shall be binding upon the signatory
thereto
with the same force and effect as if the signature were an original,
not a
facsimile signature.
|
| 10.3 |
Construction
|
| 10.3.1 |
The
recitals hereto constitute an integral part hereof.
|
| 10.3.2 |
The
exhibits to this Agreement are incorporated herein by reference and
made a
part hereof.
|
| 10.3.3 |
The
headings of this Agreement are for convenience of reference and shall
not
form part of, or affect the interpretation of, this
Agreement.
|
| 10.3.4 |
The
word including shall mean including but not limited
to.
|
| 10.3.5 |
This
Agreement shall be construed as if drafted jointly by the parties
hereto
and no presumption or burden of proof shall arise favoring or disfavoring
any party by virtue of the authorship of any of the provisions of
this
Agreement.
|
| 10.4 |
Severability.
If any provision of this Agreement shall be invalid or unenforceable
in
any jurisdiction, such invalidity or unenforceability shall not affect
the
validity or enforceability of the remainder of this Agreement in
that
jurisdiction or the validity or enforceability of any provision of
this
Agreement in any other
jurisdiction.
|
| 10.5 |
Entire
Agreement; Amendments.
This Agreement and the other Transaction Documents supersede all
other
prior oral or written agreements between the Investor, the Company,
their
Affiliates and Persons acting on their behalf with respect to the
matters
discussed herein and therein, and this Agreement, the other Transaction
Documents and the instruments referenced herein contain the entire
understanding of the parties with respect to the matters covered
herein
and therein. No provision of this Agreement may be amended other
than by
an instrument in writing signed by the Company and the Investor and
any
amendment to this Agreement made in conformity with the provisions
of this
Section 10.5 shall be binding on the Investor and holders of Securities,
as applicable. No provision hereof may be waived other than by an
instrument in writing signed by the party against whom enforcement
is
sought.
|
| 10.6 |
Notices.
Any notices, consents, waivers or other communications required or
permitted to be given under the terms of this Agreement must be in
writing
and will be deemed to have been delivered: (i) upon receipt, when
delivered personally; (ii) upon receipt, and when sent by facsimile
(provided confirmation of transmission is mechanically or electronically
generated and kept on file by the sending party); or (iii) one Business
Day after deposit with an overnight courier service, in each case
properly
addressed to the party to receive the same. The addresses and facsimile
numbers for such communications shall
be:
|
If
to Company:
Brainstorm
Cell Therapeutic Inc.
00
Xxxxx
Xx. Xxxxxx Xxxxx
Tel:
x000-0-0000000
Fax:
x000-0-0000000
Atten.:
Xxxxx Xxxxxxx
-24-
With
a Copy to:
BRL
Law
Group LLC
00
Xx.
Xxxxx Xxxxxx, Xxxxx 000
Xxxxxx,
XX 00000
Attention:
Xxxxxx X. Rosedale
If
to Investor:
ACCBT
Corp.
Xxxxxx
& Xxxxxx Building
Pasea
Estate, Road Town, Tortola
BVI
Tel:
Fax:
Atten.:
Xx. Xxxxx Xxxxxxxxx
With
a Copy to:
Caspi
& Co.
00
Xxxxxx
Xx
00000
Xxx
Xxxx, Xxxxxx
Tel:
x000-0-0000000
Fax:
x000-0-0000000
Atten.:
Xxxxxx Xxxxxxxx Xxxxx
or
to
such other address and/or facsimile number and/or to the attention of such
other
Person as the recipient party has specified by written notice given to the
other
party five (5) Business Days prior to the effectiveness of such change. Written
confirmation of receipt (A) given by the recipient of such notice, consent,
waiver or other communication, (B) mechanically or electronically generated
by
the sender’s facsimile machine containing the time, date, recipient facsimile
number and an image of the first page of such transmission or (C) provided
by an
overnight courier service shall be rebuttable evidence of personal service,
receipt by facsimile or receipt from an overnight courier service in accordance
with clause (i), (ii) or (iii) above, respectively.
| 10.7 |
Successors
and Assigns.
This Agreement shall be binding upon and inure to the benefit of
the
parties hereto and their respective successors and assigns. The Company
may not assign this Agreement or any rights or obligations hereunder
without the prior written consent of the holders of Securities issued
and
issuable hereunder and under the Warrants including by way of a merger,
consolidation, sale of all or substantially all of the Company’s assets
and like transactions. The Investor may assign any of its rights
or
obligations hereunder.
|
-25-
| 10.8 |
No
Third Party Beneficiaries.
This Agreement is intended for the benefit of the parties hereto
and their
respective permitted successors and assigns, and is not for the benefit
of, nor may any provision hereof be enforced by, any other
Person.
|
| 10.9 |
Survival.
The representations and warranties of the Investor and the Company
contained in Sections and 3 and 4 above and the applicable agreements
and
covenants set forth in Sections 4.25 above shall survive for four
years
after the Company makes such representations and warranties. Sections
2.3,
5, 8 and 10 shall survive termination or expiration of this Agreement.
|
| 10.10 |
Further
Assurances.
Each party shall do and perform, or cause to be done and performed,
all
such further acts and things, and shall execute and deliver all such
other
agreements, certificates, instruments and documents, as any other
party
may reasonably request in order to carry out the intent and accomplish
the
purposes of this Agreement and the consummation of the transactions
contemplated hereby.
|
| 10.11 |
Nature
of Representations.
The parties intend that each representation, warranty, and covenant
contained herein shall have independent significance. If any party
has
breached any representation, warranty, or covenant contained herein
in any
respect, the fact that there exists another representation, warranty,
or
covenant relating to the same subject matter (regardless of the relative
levels of specificity) which the party has not breached shall not
detract
from or mitigate the fact that the party is in breach of the first
representation, warranty, or
covenant.
|
| 10.12 |
Confidentiality.
Subject to Section 10.13 below, neither the Transaction Documents,
the
fact of their existence, nor their respective terms shall be disclosed
to
any party other than the Company and its advisors without the prior
written consent of the Investor. In addition, the Company will not
release
and shall cause any of its shareholders not to release any information
to
the public regarding the Transaction Documents without the mutual
agreement of both the Investor and the
Company.
|
| 10.13 |
Press
Releases and Public Announcements.
No party hereto shall issue any press release or make any public
announcement relating to the Transaction Documents, the fact of their
existence and their respective terms without the prior written approval
of
the other party hereto; provided,
however,
that the Company may make any disclosure it believes in good faith
is
required by applicable law or any listing or trading agreement concerning
its publicly-traded securities. In such case, the Company will, prior
to
making such disclosure, advise the Investor as promptly as practicable
of
its intent to make such disclosure, allow the Investor reasonable
time to
comment on such disclosure and consider the views of the Investor
in
respect of such disclosure.
|
IN
WITNESS WHEREOF,
the
parties hereto have caused this Agreement to be duly executed and delivered
as
of the day and year first written above.
|
ACCBT
Corp.
|
Brainstorm
Cell Therapeutic Inc.
|
|
|
By:
/s/ Xxxxx Xxxxxxxx
Title: Director
|
By:
/s/ Xxxxx Xxxxxxx
Title:
Chief Operating
Officer
|
|
|
|
-26-
