INVESTMENT AGREEMENT
INVESTMENT AGREEMENT (this
“Agreement”), dated as of December 18, 2008, between PCMT Corporation, a
Delaware corporation (the “Company”) and Suspect Detection Systems Ltd., an
Israeli corporation (“SDS”) (the Company and SDS collectively shall be referred
to herein, for convenience purposes only, as the "Parties" and each of them as a
"Party").
WHEREAS, the Parties desire that as
consideration for the aggregate sum of US$820,000 previously submitted by the
Company to SDS (the "Previous Sum") pursuant to the Letter Agreements dated
October 18, 2007, November 14, 2007, January 10, 2008, May 18, 2008 and October
20, 2008 (collectively, the “Letter Agreements”) and an additional payment to be
made by the Company to SDS in the amount of US$280,000 (the "Additional
Payment"), SDS shall issue to the Company such amount of ordinary shares of SDS,
par value NIS 0.01 per share, ("Ordinary Shares") which shall represent 51% of
the issued and outstanding share capital of SDS pursuant to the terms and
provisions of this Agreement;
WHEREAS, the Parties desire to
terminate the Stock Purchase Agreement dated April 30, 2008, by and among the
Company, SDS, the Principal (as defined below) and the other parties thereto
(the “SPA”) simultaneous with the execution and delivery of this Agreement, and
all of the parties to the SPA have executed and signed the termination agreement
attached hereto as Exhibit
A;
NOW, THEREFORE, for good and valuable
consideration, the receipt and adequacy of which are hereby acknowledged, the
Parties hereto hereby agree as follows:
1. Issuance of Shares to the
Company. In consideration for the Previous Sum and the
Additional Payment, at the First Closing (as defined below), SDS shall issue to
the Company 1,218,062 Ordinary Shares (the “Shares”), which shall represent 51%
of the then issued and outstanding share capital of SDS.
2. Employment Agreement.
Following the execution and delivery of this Agreement, the Employment Agreement
between SDS and Xx. Xxxxxxx Xxxxxx (the "Principal") attached hereto as Exhibit
B (the "Employment Agreement") will be signed.
For purposes of clarification, after
the First Closing the Principal shall remain the Chief Executive Officer of SDS
pursuant to the terms of the Employment Agreement.
3. The First Closing: Time of
the First Closing. The consummation of the transaction described in
Sections 1 and 2 above shall take place at such time and place as the Parties
hereto may agree (the “First Closing”) and in any case within 7 days after the
satisfaction of all the conditions or actions to be preformed on or prior to the
First Closing under the terms of this Agreement and delivery of all of the items
specified in Section 4 below, provided, however, that the
Closing shall not occur before the completion of the Company’s current report on
Form 8-K regarding the transactions contemplated by this Agreement including,
without limitation, the requisite financial statements, which the Company hereby
undertakes to make its best efforts to complete in a timely manner.
4. First Closing:
Deliverables. At the First Closing, the delivery of the
following documents shall occur simultaneously, and no document shall be deemed
to have been delivered until all required documents are delivered:
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(1)
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SDS
shall deliver to the Company (i) a stock certificate representing the
Shares, (ii) an updated share register of SDS showing the issuance of the
Shares to the Company and the ownership of the Company thereof, and (iii)
the documents and forms to be filed with the Israeli Registrar with
respect to the issuance of the
Shares;
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(2)
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The
Company shall deliver to SDS and the Principal an executed Guarantee
Agreement substantially in the form attached hereto as Exhibit
C pursuant to which the Company guarantees the performance of all
of SDS's obligations under the Employment
Agreement;
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(3)
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The
Israeli Office of the Chief Scientist (the "OCS") shall have approved the
transaction contemplated by this Agreement and the Company shall deliver
to SDS an executed undertaking, addressed to OCS, substantially in the
form of Exhibit
D hereto;
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(4)
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PCMT
shall pay SDS the Additional Payment by a wire transfer of immediately
available funds in US dollars to SDS's bank account, details of which
shall be provided by SDS to the Company at least 3 days prior
to the First Closing;
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(5)
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To
the extent necessary, SDS shall deliver to the Company a waiver, executed
by NG – The Northern Group LP ("NG") and in form and substance
satisfactory to the Company, with respect to any right or rights of NG
under the Amended and Restated Articles of Association of SDS (the “SDS
Articles”) or otherwise associated with the Series A Preferred Shares of
SDS held by NG, including rights of first refusal, the exercise of which
may interfere with the consummation of the transaction as contemplated by
this Agreement. Prior to or upon the First Closing, NG shall have
converted its said Series A Preferred Shares of SDS into Ordinary Shares
in SDS on a one-to-one ratio;
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(6)
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The
shareholders of SDS shall have approved replacing the SDS Articles with
Amended and Restated Articles of Association in the form attached hereto
as Exhibit
E;
and
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(7)
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The
7,000,000 shares of Common Stock owned by Xxxxxx Xxxxxxxxx shall have been
cancelled and returned to the Company and the Company shall deliver to SDS
evidence to such effect satisfactory to
SDS.
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5. Representations and
Warranties of SDS. As further inducement to the Company to enter into
this Agreement and to consummate the transaction contemplated herein, SDS hereby
represents and warrants to the Company that as of the First
Closing:
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5.1 Organization and Good
Standing. SDS is duly organized and validly existing under the
laws of the State of Israel, with full power and authority to own, lease, use
and operate its properties and to carry on its business as and where now owned,
leased, used, operated and conducted. SDS does not own, directly or
indirectly, any capital stock of any corporation or any equity, profit sharing,
participation or other interest in any corporation, partnership, limited
liability company, joint venture or other entity.
5.2
Capitalization. Immediately
prior to the First Closing and subject to the delivery of an executed waiver by
NG pursuant to Section 4(5) above and the conversion of NG's Series A Preferred
Shares of SDS into ordinary shares, the authorized share capital of SDS will
consist of (a) 20,000,000 Ordinary Shares, NIS 0.01 par value per share,
authorized, 1,170,295 of which shares are issued and outstanding, fully paid and
non-assessable, (i) with each holder thereof being entitled to cast one vote for
each share held on all matters properly submitted to the shareholders for their
vote, and (ii) there being no pre-emptive or similar rights and no cumulative
voting. Other than as set forth in Schedule 5.2, SDS has no shares reserved for
issuance pursuant to a stock option plan or agreement or pursuant to securities
exercisable for, or convertible into or exchangeable for shares of its capital
stock. The issuance of the Shares, and all issuances by SDS of shares
of its capital stock in past transactions have been legally and validly
effected. The issuance of the Shares and all past issuances of shares
of SDS were conducted in full compliance with the requirements of Israeli law
and the then effective Articles of Association of SDS. Other than as
set forth on Schedule 5.2 to this Agreement, there are (i) no outstanding
options, warrants, scrip, rights to subscribe for, puts, calls, rights of first
refusal, agreements, understandings, claims or other commitments or rights of
any character whatsoever relating to, or securities or rights convertible into
or exchangeable for any shares of capital stock of SDS or arrangements by which
SDS is or may become bound to issue additional shares of capital stock, (ii) no
agreements or arrangements under which SDS is obligated to register for resale
any of its securities under the US Securities Act of 1933, as amended, and (iii)
no anti-dilution or price adjustment provisions contained in any security issued
by SDS (or in any agreement providing any such rights).
Upon the
First Closing, the Company will own 51% of the then issued and outstanding share
capital of SDS. The Shares are duly authorized and will be duly and
validly issued, fully paid and nonassessable, free and clear of all Encumbrances
and in full compliance with Israeli securities laws.
5.3 Authorization. SDS
has the requisite corporate power and authority to enter into and perform its
obligations under this Agreement and the documents ancillary hereto and to issue
the Shares; (b) the execution and delivery of this Agreement and the documents
ancillary hereto by SDS and the consummation by it of the transaction
contemplated hereby and thereby have been duly authorized by all necessary
corporate action and assuming the receipt of the consent of the Office of Chief
Scientist and NG, no further consent or authorization of SDS or any other party
is required; and (c) this Agreement and the documents ancillary hereto has been
duly executed and delivered by SDS and constitutes a valid and binding
obligation of SDS enforceable against it in accordance with their respective
terms except as such enforceability may be limited by bankruptcy, insolvency,
reorganization, debtor relief or similar laws affecting the rights of creditors
generally and by general principles of equity. Assuming the receipt of the
consent of the Office of Chief Scientist and NG, all consents, approvals,
authorizations and orders, required for the consummation by SDS of the
transaction on its part contemplated under this Agreement and the documents
ancillary hereto, have been obtained.
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5.4 No
Conflict. Assuming the receipt of the consent of the Office of
Chief Scientist and NG, none of the execution, delivery, or performance of this
Agreement and any documents ancillary hereto, and the consummation of the
transaction contemplated hereby and thereby, conflicts or will conflict with, or
(with or without notice or lapse of time, or both) result in a termination,
breach or violation of (i) to the best of SDS's knowledge, any instrument,
contract or agreement to which SDS is a Party or by which it or its assets is
bound; (ii) the SDS Articles, or (iii) to the best of SDS's knowledge, any
federal, state, local or foreign law, ordinance, judgment, decree, order,
statute, or regulation, or that of any other governmental body or authority,
applicable to SDS.
5.5 Intellectual
Property.
(a) Schedule
5.5(a) annexed hereto is a complete and accurate list of all the patents, patent
applications, patent rights, inventions, know-how, trade secrets, trademarks,
trademark applications, service marks, service names, trade names and copyrights
(the “Intellectual Property”) registered by SDS, or with respect to which SDS
has any rights, and it specifies, where applicable, the jurisdictions in which
each such item of Intellectual Property has been issued or registered or in
which an application for such issuance and registration has been filed. Prior to
the date hereof, the Company has been provided with the respective registration
or application numbers. Other than as set forth in Schedule 5.5(a), all of the
Intellectual Property is valid and subsisting, all necessary registration,
maintenance and renewal fees currently due in connection with such Intellectual
Property have been made and all necessary documents, recordations and
certificates in connection with such Intellectual Property have been filed with
the relevant patent, copyright, trademark or other authorities in Israel and or
in foreign jurisdictions, as the case may be, for the purposes of maintaining
such Intellectual Property. Other than as set forth in Schedule
5.5(a), there is no claim or action by any person pertaining to, or proceeding
pending or threatened, which challenges the right of SDS with respect to any of
the Intellectual Property. Other than as set forth on Schedule
5.5(a), SDS owns and has good and exclusive title to, or has a license
(sufficient for the conduct of its business as currently conducted and as
proposed to be conducted) to, each item of the Intellectual Property free and
clear of any Encumbrances (excluding licenses and related
restrictions). Other than as set forth in Schedule 5.5(a), none of
the Intellectual Property is subject to any law, rule or regulation of the
Israeli government, the United States government or any agency thereof, and
there is no outstanding order of any governmental authority of competent
jurisdiction in Israel or in the United States, restricting the use or licensing
of any of the Intellectual Property. For the purposes of this
Agreement, the term “Encumbrances” shall mean all liens, pledges,
hypothecations, charges, adverse claims, options, preferential arrangements or
restrictions of any kind, including, without limitation, any restriction of the
use, voting, transfer, receipt of income or other exercise of any attributes of
ownership.
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(b) Other
than as set forth in Schedule 5.5(b), all employees, consultants and
subcontractors of SDS, and any other individual or entity, that took any part in
the development of the Intellectual Property, have executed valid and subsisting
agreements duly assigning and transferring all of their rights in the
Intellectual Property to SDS.
(c) Other
than as set forth in Schedule 5.5(c), SDS is not obligated under any law, rule,
regulation or order of the Israeli government, the United States government or
any agency thereof, or any stipulation or agreement of any kind, to pay any
royalty or other payment to any third party with respect to the marketing, sale,
distribution, manufacture, license or use of any of the Intellectual
Property.
(d) Other
than as set forth in Schedule 5.5(d), SDS has not violated and is not currently
violating or infringing on any Intellectual Property of any other person or
entity, and SDS has not received any communication alleging any such violation
or infringement.
(e) Other
than as set forth in Schedule 5.5(e), all providers of services to SDS, and all
persons and entities engaged by SDS that would have access to SDS’s Intellectual
Property, have executed valid and subsisting non-disclosure agreements with SDS
with respect to SDS’s Intellectual Property.
(f) SDS
has taken reasonable security measures to protect the confidentiality and value
of all of its Intellectual Property.
(g) Except
as set forth in Schedule 5.5(g), to SDS's knowledge the Principal is not
obligated under any agreement (including licenses, covenants or other
commitments) or subject to any judgment, decree or order of any court or
governmental agency, that would interfere in a material manner with his ability
to carry out his duties to SDS as contemplated by the Employment
Agreement.
(h) Except
as set forth in Schedule 5.5(h), SDS has not received any grant or other benefit
from the United States government or the Israeli government, through the office
of the Chief Scientist under the Encouragement of Research and Development in
Industry Law, 5744-1984, or otherwise.
5.6 No Loan
Agreements. SDS is not a party to any contract, arrangement or
agreement, whether oral or in writing, including without limitation, loan
agreements, credit lines, promissory notes, mortgages, pledges, guarantees,
security agreements, factoring agreements, letters of credit, powers of attorney
or other arrangements to loan or borrow money or extend credit.
5.7 Taxes. SDS
has made or filed all income and all other tax returns, reports and declarations
required by any jurisdiction to which it is subject and 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. There
are no unpaid taxes claimed to be due by the taxing authority of any
jurisdiction, and SDS knows of no basis for any such claim. SDS has
not executed a waiver with respect to the statute of limitations relating to the
assessment or collection of any foreign, federal, state or local
tax. None of SDS’s tax returns is presently being audited by any
taxing authority.
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5.8 Licenses. SDS
is in possession of all franchises, grants, authorizations, licenses, permits,
easements, variances, exemptions, consents, certificates, approvals and orders
necessary to own, lease and operate its properties and to carry on its business
as it is now being conducted (collectively, the “Permits”), and there is no
action pending or threatened regarding suspension or cancellation of any of the
Permits. SDS is not in conflict with, or in material default or
violation of, any of the Permits. SDS has not received any
notification with respect to possible conflicts, defaults or violations of
applicable laws, except for notices relating to possible conflicts, defaults or
violations that have not been resolved.
5.9 Real
Property. SDS does not own any real property.
5.10 Information. All
information relating to or concerning SDS that has been provided to the Company
by SDS and all of the representations and warranties of SDS set forth in this
Agreement and otherwise in connection with the transaction contemplated hereby,
are true and correct in all material respects and SDS has not omitted to state
any fact necessary in order to make the statements made herein or therein, in
light of the circumstances under which they were made, not
misleading. No event or circumstance has occurred or exists with
respect to SDS or its business, properties, prospects, operations or financial
conditions, which, under applicable law, rule or regulation, requires public
disclosure or announcement by SDS but which has not been so publicly announced
or disclosed. There is no fact known to SDS that has specific
application to SDS or the Shares and that materially adversely affects or, as
far as can be reasonably foreseen, materially threatens SDS or the Shares that
has not been set forth in this Agreement.
6. Representations and
Warranties of the Company. As further inducement to SDS to
enter into this Agreement and to consummate the transaction contemplated herein,
the Company hereby represents and warrants to SDS that as of the First
Closing:
6.1 Organization and Good
Standing. The Company is duly organized, validly existing and
in good standing under the applicable laws of the state of its incorporation and
has full power and authority to own, lease, use and operate its properties and
to carry on its business as and where now owned, leased, used, operated and
conducted.
6.2 Authority. The
execution and delivery of this Agreement and the documents ancillary hereto, and
the transaction contemplated hereby and thereby, have been duly approved by the
board of directors of the Company and does not require the approval of the
shareholders of the Company. This Agreement and the documents
ancillary hereto constitute the legal, valid and binding obligations of the
Company, enforceable against the Company in accordance with the terms hereof and
thereof except as such enforceability may be limited by bankruptcy, insolvency,
reorganization, debtor relief or similar laws affecting the rights of creditors
generally and by general principles of equity.
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6.3 Consents. All consents, approvals,
authorizations and orders, required for the consummation by the Company of any
of the transactions on its part contemplated under this Agreement and the
documents ancillary hereto, have been obtained, and all reports required by the
Company with any governmental authority prior to the execution of this Agreement
and the First Closing have been made, other than the Current Report on Form 8-K
which shall be filed by the Company within four days from the First
Closing.
6.4 No
Conflict. None of the execution, delivery, or performance of
this Agreement and the documents ancillary hereto, and the consummation of the
transaction contemplated hereby and thereby, conflicts or will conflict with, or
(with or without notice or lapse of time, or both) result in a termination,
breach or violation of (i) to the best of the Company’s knowledge, any
instrument, contract or agreement to which the Company is a party or by which it
or its assets is bound; (ii) the certificate of incorporation and by-laws of the
Company, or (iii) to the best of the Company’s knowledge, any federal, state,
local or foreign law, ordinance, judgment, decree, order, statute, or
regulation, or that of any other governmental body or authority, applicable to
the Company.
6.5 Company
Reports. The Company has timely filed all reports, schedules,
forms, statements and other documents required to be filed by the Company with
the Securities and Exchange Commission pursuant to the requirements of the
Securities Exchange Act of 1934, as amended (the “Exchange Act”). To
the best knowledge of the Company, as of their respective dates, all reports,
schedules, forms, statements and other documents filed by the Company with the
Securities and Exchange Commission (the “SEC Documents”) complied in all
material respects with the requirements of the Exchange Act and applicable rules
and regulations as in effect at the time of filing, and none of the SEC
Documents, at the time they were filed, 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 light of the
circumstances under which they were made, not misleading.
6.6 Company Fund
Raising. The Company has actually received an aggregate
amount of at least US$ 1,493,700 through the sale of non-debt equity securities
of the Company during the period commencing October 2, 2007 and ending on
December 1, 2008 and the use of such monies by the Company is not restricted in
any manner.
6.7 Litigation. There
is no civil, criminal or administrative suit, claim, hearing, inquiry, action,
proceeding or investigation pending, to which the Company is a party, or to the
best of the Company’s knowledge, threatened in writing to the Company, against
the Company, except as would not, individually or in the aggregate, reasonably
be expected to have a material adverse effect on the Company and its business.
The Company is not subject to any outstanding order, writ, injunction or decree,
except as would not, individually or in the aggregate, reasonably be expected to
have a material adverse effect on the Company or its business. There has not
been, and to the best knowledge of the Company, there is no pending or
contemplated, civil, criminal or administrative suit, claim or investigation,
including by the Securities and Exchange Commission, in which the Company or any
current or former officer or director of the Company, in his or her capacity as
such, is a party or the subject thereof.
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6.8 Listing and Maintenance
Requirements. The shares of Common Stock of the Company
("Common Stock") are registered pursuant to Section 12(g) of the Exchange Act,
and the Company has taken no action designed to, or which to its knowledge is
likely to have the effect of, terminating the registration of the Common Stock
under the Exchange Act nor has the Company received any notification that the
Commission is contemplating terminating such registration. The
Company has not, in the 12 months preceding the date hereof, received notice
from the OTC Bulletin Board to the effect that the shares of Common Stock
will not continue to be listed for trade on the OTC Bulletin Board. The Company
is, and has no reason to believe that the shares of Common Stock will not in the
foreseeable future continue to be listed for trade on the OTC Bulletin
Board.
6.9 As
of the date of this Agreement, there were 72,689,668 issued and outstanding
shares of Common Stock.
6.10 Securities
Representations. The Company understands and acknowledges that
the Shares are not being offered pursuant to a prospectus or similar document
and have not been registered under the United States Securities Act of 1933, as
amended (the "Securities Act"), the Israeli Securities Law - 1968, as amended,
or of any other state or jurisdiction, and the Company acknowledges that the
Shares are “restricted securities” and are not, and will not be, tradable unless
they are subsequently registered under applicable securities laws or an
exemption from such registration is available.
The
Company is purchasing the Shares for investment purposes, for its own account as
principal and not with a view to or for distributing or reselling the Shares or
any part thereof, and agrees that it will not divide its interest in the Shares
with others, resell, or otherwise distribute the Shares in violation of federal
or state securities laws. The Company does not have any contract, undertaking,
agreement or arrangement with any person to sell, transfer or grant
participations to such person or to any third person, with respect to the
Shares.
The
Company is able, by reason of the business and financial experience of its
officers and professional advisors (who are not affiliated with or compensated
in any way by the Company or any of its affiliates or selling agents), to
protect its own interests in connection with the transactions described in the
Agreement and the documents ancillary thereto.
The
Company understands that (i) there is and will be no market for the Shares, (ii)
the sale of the Shares has not been and will not be registered under the
Securities Act in reliance, inter alia, on the exemption for non-public
offerings provided by Section 4(2) of the Securities Act and Regulation D
promulgated thereunder and must be held indefinitely unless it is subsequently
registered under the Securities Act or an exemption from such registration is
available, (iii) SDS is under no obligation to register the Shares on the
Company's behalf or to assist the Company in complying with any exemption from
registration or to qualify for any such exemption.
The
Company has been provided with an opportunity for a reasonable period of time
prior to the date of the Agreement to obtain additional information concerning
the Shares and SDS and all other information to the extent SDS possesses such
information or can acquire it without unreasonable effort or expense and has had
the opportunity to ask such questions as it has deemed necessary of, and to
receive answers from, representatives of SDS concerning the terms and conditions
of the Shares and the merits and risks of investing in the Shares.
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The
Company understands that no federal or state agency has passed upon the Shares
or made any finding or determination as to the fairness of the investment or any
recommendation or endorsement of the Shares.
The
Company understands and acknowledges that: (i) the Shares are being offered and
sold to it without registration under the Securities Act in a private placement
that is exempt from the registration provisions of the Securities Act and (ii)
the availability of such exemption depends in part on, and SDS will rely upon
the accuracy and truthfulness of, the foregoing representations and the Company
hereby consents to such reliance.
The
Company understands and agrees that each certificate representing the Shares may
be endorsed with an appropriate restrictive legend in SDS’s reasonable
discretion.
6.11 SDS Financial
Condition. The Company is fully aware of SDS' financial condition,
results of operations and prospects and acknowledges and agrees that
neither SDS, nor its representatives, directors, officers, shareholders, agents
and affiliates made any representations or warranties to the Company with
respect to the same, including prior to the execution of this Agreement,
other than as expressly set forth in this Agreement and in any document
ancillary hereto.
7. Indemnification;
Survival.
7.1 Indemnification. SDS
shall indemnify and hold harmless the Company, its agents, beneficiaries,
affiliates, representatives and their respective successors and assigns
(collectively, the “Company Indemnified Persons”) from and against any and all
damages, losses, liabilities, taxes, costs and expenses (including, without
limitation, attorneys’ fees and costs) (collectively, “Losses”) resulting
directly or indirectly from (a) any inaccuracy, misrepresentation, breach of
warranty or non-fulfillment of any of the representations and warranties made by
SDS and contained in this Agreement, or any actions, omissions or statements of
fact inconsistent in any material respect with any such representation or
warranty, (b) any failure on the part of SDS to perform or comply with any
agreement, covenant or obligation in this Agreement; provided, however, that (i) the
indemnification pursuant to this Section 7.1 shall terminate on the second
anniversary of this Agreement, and it shall have no further force or effect
thereafter, notwithstanding anything to the contrary contained in any provision
of this Agreement or applicable law; and (ii) the indemnification provided under
this Section 7.1 shall be limited, in that SDS’s total liability to the Company
and to any other Company Indemnified Person, in the aggregate, for all claims
made under this Section 7.1, by the Company and any other Company Indemnified
Person, at any time or from time to time, shall not exceed an aggregate maximum
amount of US$10,000.
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The
Company shall indemnify SDS, its agents, beneficiaries, affiliates,
representatives, shareholders and their respective successors and assigns, and
hold each of them harmless from and against any and all damages, losses,
liabilities, taxes, costs and expenses (including, without limitation,
attorneys’ fees and costs) resulting directly or indirectly from (A) any
inaccuracy, misrepresentation, breach of warranty or non-fulfillment of any of
the representations and warranties of the Company in this Agreement, or any
actions, omissions or statements of fact inconsistent in any material respect
with any such representation or warranty, (B) any failure by the Company to
perform or comply with any agreement, covenant or obligation in this Agreement;
provided, however, that (1) the
indemnification provided by the Company pursuant to this Section 7.1 shall
terminate on the second anniversary of this Agreement, and it shall have no
further force or effect thereafter, notwithstanding anything to the contrary
contained in any provision of this Agreement or applicable law; and (2) the
indemnification provided by the Company under this Section 7.1 shall be limited,
in that the Company’s total liability to SDS, its agents, beneficiaries,
affiliates, representatives, shareholders and their respective successors and
assigns, in the aggregate, for all claims made under this Section 7.1 at any
time or from time to time, shall not exceed an aggregate maximum amount of
US$10,000. Notwithstanding the aforementioned, the limitations set forth in the
previous sentence shall not apply to Section 6.9.
The
provisions of this Section 7.1 shall be the sole and exclusive remedy for
breaches of the matters set forth in said Section.
7.2 Survival. Unless
otherwise stated in this Agreement, all covenants and agreements of the Parties
contained herein or in any other certificate or document delivered pursuant
hereto shall survive the date hereof until the later of the expiration of the
applicable statute of limitations or the second anniversary of the date
hereof.
8. Voting on Future Investments
in SDS.
The
Company agrees and undertakes to vote all of its Ordinary Shares to approve
and/or, to the fullest extent permitted by applicable law, to take all other
actions necessary, appropriate or desirable (including, but not limited to,
amending the SDS Articles and procuring that all of the directors appointed by
it vote in favor thereof) to ensure the consummation of, future financings in
SDS as may be presented to SDS from time to time by the current shareholders of
SDS as of the date hereof (the “Current Shareholders”), provided that (i) the
Current Shareholders of SDS holding 15% (fifteen percent) of the issued and
outstanding Ordinary Shares at such time approve said financing, and (ii) the
terms and conditions of such financing in SDS are reasonable. The aforementioned
shall not derogate from the Company’s rights of pre-emption under the then
effective Articles of Association of SDS, if any and if applicable to such
financing.
Notwithstanding
the above, if a reasonable offer to make an equity investment in SDS (a
“Financing”) is made by a third party which is a viable source of
financing other than a source introduced or initiated by the Company or its
affiliates or representatives (a “Third Party”), then prior to accepting such
funds (in SDS’ sole discretion) the Company shall have a right of first refusal
to make an equity investment on the same terms and conditions as the Financing
(subject, for the removal of doubt, to any rights of pre-emption afforded to the
other shareholders of SDS under the then effective Articles of Association of
SDS, if any) and consummate such Financing within 30 days from receipt by
SDS of the proposal made by the Third Party. If the Company fails
to consummate such Financing within such 30 day period, the Company agrees
and undertakes to vote all of its Ordinary Shares to approve and/or, to the
fullest extent permitted by applicable law, to take all other actions necessary,
appropriate or desirable (including, but not limited to, amending the SDS
Articles and procuring that all of the directors appointed by it vote in favor
thereof) to ensure the consummation of such Financing by the Third Party. For
the removal of doubt, SDS shall be under no obligation to accept or agree to any
offer from a Third Party.
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9. Put Option and Second
Closing.
9.1 Upon
execution and delivery of this Agreement, the Parties hereto will promptly
negotiate in good faith the terms and conditions of an agreement (the "Second
Agreement") implementing the below understandings between the Parties and will
make all reasonable efforts to have the other persons contemplated below to
agree to the same. The Second Agreement shall also include customary terms and
conditions, covenants, and representations and warranties satisfactory to the
Parties.
(a) The
Company shall grant, without consideration, to each of the following
three shareholders of SDS: (i) the Principal, (ii) Mr. Ishayahu
(Sigi) Xxxxxxxx ("Xxxxxxxx") and (iii) NG (the "Major Shareholders"), put
options exercisable at any time, at their sole discretion, during a period of
three (3) years commencing from the date of the Second Closing (as defined
below) to exchange all of their respective Ordinary Shares into shares of Common
Stock of the Company ("Put Options Shares"). The Principal and Xxxxxxxx shall
agree that they will exercise their respective put options
together.
(b) The
Company shall grant, without consideration, to each of the holders of SDS
convertible securities at the date of the First Closing (excluding any
Additional SDS Options) ("SDS Options"), a list of which detailing the amount of
SDS Options held by each of the holders shall be provided to the Company by SDS
at the First Closing, the right exercisable at any time, at their sole
discretion, during a period of three (3) years commencing from the date of the
Second Closing to exchange all (or part) of the SDS Options into options to
purchase shares of Common Stock ("PCMT Options"). The terms of the PCMT Options
shall include an exercise price equal to $0.0001, a ten-year exercise period and
shall provide for cashless exercise. The holders of at least 80% of the
aggregate amount of the SDS Options and Additional SDS Options (as defined
below) shall have agreed to exchange such convertible securities for the PCMT
Options and Additional PCMT Options, as applicable, upon the exercise of the put
option by the Principal and Xxxxxxxx.
(c) The amount of the
shares of Common Stock constituting Put Option Shares and underlying the PCMT
Options shall equal an aggregate of 29,089,922 shares of Common Stock. Each of
the Major Shareholders and holders of SDS Options shall be entitled to their
pro-rata portion of the Put Options Shares and PCMT Options, respectively,
according to their holdings of the share capital of SDS on a fully diluted basis
immediately prior to the First Closing, excluding Additional SDS
Options.
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(d) On
or prior to the Second Closing, SDS shall grant, for no consideration, to each
of the Principal, Xxxx Xxxxxxxx and Gal Peleg options to purchase Ordinary
Shares (the "Additional SDS Options") such that upon exchange of the same, as
contemplated by Section 9.1(e) below, on the basis of the same ratio of the
exchange of the Ordinary Shares and SDS Options, taken together, for the
securities in the Company to be issued or issuable as contemplated by Sections
9.1(a) – (c) above, they shall receive options to purchase an aggregate maximum
amount of 19,771,176 shares of Common Stock ("Additional PCMT
Options").
(e) The Company
shall grant, without consideration, to each of the Principal, Xxxx Xxxxxxxx and
Gal Peleg, the right exercisable at any time, at their sole discretion, during a
period of three (3) years commencing from the date of the Second Closing to
exchange all (or part) of their Additional SDS Options into the Additional PCMT
Options, according to their pro-rata portion of the Additional SDS Options. The
terms of the Additional PCMT Options shall include an exercise price equal to
$0.15 per share, a ten-year exercise period and shall provide for cashless
exercise.
(f) The
consummation of the Second Agreement (the "Second Closing") shall be subject to
the following conditions:
(i) The
Company, the Major Shareholders, Xx. Xxxxxxxx and Xx. Xxxxx shall have delivered
to each other a duly executed Registration Rights Agreement, to cover the
registration for resale of all the shares of Common Stock to be issued or
issuable as contemplated by Sections 9.1(a) – (e) above. Such agreement shall
provide for unlimited piggyback rights and demand rights, provided such demand
rights shall be available only if the Company shall have cash and
cash-equivalents in an amount equal to or exceeding $500,000;
(ii) A
pre-ruling from the Israeli Tax Authority shall have been received approving the
exchange of the Ordinary Shares, SDS Options and Additional SDS Options to the
securities to be issued or issuable as contemplated by Sections 9.1(a) – (e)
above, on such terms and conditions satisfactory to the Major Shareholders, the
holders of SDS Options, Xx. Xxxxxxxx and Xx. Xxxxx; The Company shall undertake
to abide by such ruling.
10. Termination. This
Agreement may be terminated at any time prior to the First Closing, by the
Company or by SDS, if (a) the First Closing shall not have been consummated
by February 20, 2008, or (b) any injunction or order of any governmental
authority permanently restraining, enjoining or otherwise prohibiting
consummation of the transaction contemplated by this Agreement shall have become
final and non-appealable; provided, however, that the
right to terminate this Agreement pursuant to this Section 10 shall not be
available to any Party that has breached its obligations under this Agreement in
any manner that shall have proximately contributed to the failure to consummate
the transaction contemplated by this Agreement.
Neither
Party shall have any claim, suit or demand against the other Party in the event
of termination of this Agreement pursuant to the provisions of this Section 10
above.
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11. Miscellaneous.
11.1 Further
Assurances. From time to time, whether at or following the
First Closing, each Party shall make reasonable commercial efforts to take, or
cause to be taken, all actions, and to do, or cause to be done, all things
reasonably necessary, proper or advisable, including as required by applicable
laws, to consummate and make effective as promptly as practicable the
transaction contemplated by this Agreement.
11.2 Notices. All
notices or other communications required or permitted hereunder shall be in
writing and shall be deemed duly given (a) if by personal delivery, when so
delivered, (b) if mailed, three (3) business days after having been sent by
registered or certified mail, return receipt requested, postage prepaid and
addressed to the intended recipient as set forth below (or ten (10) business
days if the address to which such notice is addressed is not in the same country
in which such notice is mailed), or (c) if sent through an overnight delivery
service in circumstances to which such service guarantees next day delivery, the
second day following being so sent to the addresses of the Parties as indicated
on the signature page hereto. Any Party may change the address to which notices
and other communications hereunder are to be delivered by giving the other Party
notice in the manner herein set forth.
11.3 Choice of
Law. This Agreement shall be governed, construed and enforced
in accordance with the laws of the State of New York, without giving effect to
principles of conflicts of law.
11.4
Jurisdiction. The
Parties hereby irrevocably consent to the in personam jurisdiction and venue of
the courts of the State of New York and of any federal court located in such
State in connection with any action or proceeding arising out of or relating to
this Agreement, any document or instrument delivered pursuant to, in connection
with or simultaneously with this Agreement, or a breach of this Agreement or any
such document or instrument. EACH PARTY HERETO WAIVES TRIAL BY
JURY IN ANY ACTION, SUIT OR PROCEEDING ARISING OUT OF THIS AGREEMENT OR ANY
BREACH OR ALLEGED BREACH HEREOF.
11.5 Entire
Agreement. This Agreement sets forth the entire agreement and
understanding of the Parties in respect of the transaction contemplated hereby
and supersedes all prior and contemporaneous agreements, arrangements
and understandings of the Parties relating to the subject matter
hereof. No representation, promise, inducement, waiver of rights,
agreement or statement of intention has been made by any of the Parties which is
not expressly embodied in this Agreement.
11.6 Assignment. Each
Party's rights and obligations under this Agreement shall not be assigned or
delegated, by operation of law or otherwise, without the other Party’s prior
written consent, and any such assignment or attempted assignment without the
other Party’s prior written consent shall be void, of no force or effect, and
shall constitute a material default by such Party.
11.7 Amendments. This
Agreement may be amended, modified, superseded or cancelled, and any of the
terms, covenants, representations, warranties or conditions hereof may be
waived, only by a written instrument executed by the Parties
hereto.
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11.8 Waivers. The
failure of any Party at any time or times to require performance of any
provision hereof shall in no manner affect the right at a later time to enforce
the same. No waiver by any Party of any condition, or the breach of
any term, covenant, representation or warranty contained in this Agreement,
whether by conduct or otherwise, in any one or more instances shall be deemed to
be or construed as a further or continuing waiver of any such condition or
breach or a waiver of any other term, covenant, representation or warranty of
this Agreement.
11.9 Counterparts. This
Agreement may be executed simultaneously in two or more counterparts and by
facsimile, each of which shall be deemed an original, but all of which together
shall constitute one and the same instrument.
11.10 Severability. If
any term, provision, covenant or restriction of this Agreement is held by a
court of competent jurisdiction or other authority to be invalid, void or
unenforceable, the remainder of the terms, provisions, covenants and
restrictions of this Agreement shall remain in full force and effect and shall
in no way be affected, impaired or invalidated so long as the economic or legal
substance of the transaction contemplated hereby is not affected in any manner
materially adverse to any Party. Upon such determination, the Parties shall
negotiate in good faith to modify this Agreement so as to give effect the
original intent of the Parties as closely as possible in an acceptable manner in
order that the transaction contemplated hereby are consummated as originally
contemplated to the fullest extent possible.
11.11 Interpretation. (a)
The Parties agree that this Agreement shall be deemed to have been jointly and
equally drafted by them, and that the provisions of this Agreement therefore
shall not be construed against a Party or Parties on the ground that such Party
or Parties drafted or was more responsible for the drafting of any such
provision(s). The Parties further agree that they have each carefully read the
terms and conditions of this Agreement, that they know and understand the
contents and effect of this Agreement and that the legal effect of this
Agreement has been fully explained to their satisfaction by counsel of their own
choosing. The various paragraph and/or section headings in this
Agreement are for reference and convenience only and shall not be considered in
the interpretation hereof for any purpose and in no way alter, modify, amend,
limit, or restrict any contractual obligations of the Parties.
(b) The
use herein of the masculine pronouns "him" or "his" or similar terms shall be
deemed to include the feminine and neuter genders as well and the use herein of
the singular pronoun shall be deemed to include the plural as well and vice
versa.
(c) The
phrase "the transaction contemplated by this Agreement" and “documents ancillary
hereto” or similar terms shall be deemed to refer only to the transactions to be
consummated at the First Closing.
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.
IN
WITNESS WHEREOF, the Parties have duly executed this Investment Agreement as of
the date first above written.
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PCMT
CORPORATION
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SUSPECT
DETECTION SYSTEMS LTD.
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By:
/s/ Xxxxx
Xxxxxxx
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By:
/s/ Xxxxxxx
Xxxxxx
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Name:
Xxxxx Xxxxxxx
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Name:
Xxxxxxx Xxxxxx
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Title:
CFO and Interim CEO
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Title:
CEO
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