SECURITIES PURCHASE AGREEMENT
This Securities Purchase Agreement (this “Agreement”) is dated as of July 20, 2010 between InspireMD Ltd., a corporation formed under the laws of the State of Israel (the “Company”), and each of the entities and persons identified on the signature pages hereto (including their successors and assigns, each a “Purchaser” and collectively “Purchasers”).
ARTICLE I.
“Action” shall have the meaning ascribed to such term in Section 3.1(j).
“Advisor” means Harborview Advisors, LLC, a New Jersey limited liability company and exclusive consultant to the Company.
“Affiliate” means any Person that, directly or indirectly through one or more intermediaries, controls or is controlled by or is under common control with a Person, as such terms are used in and construed under Rule 405 under the Securities Act. With respect to a Purchaser, any investment fund or managed account that is managed on a discretionary basis by the same investment manager as such Purchaser will be deemed to be an Affiliate of such Purchaser.
“Audit Default” shall have the meaning set forth in Section 4.14.
“Audited Financial Statements” shall have the meaning set forth in Section 4.14.
“Board of Directors” means the board of directors of the Company.
“Business Day” means any day except any Friday, Saturday, Sunday, or any day which is a holiday in the State of Israel or sabbatical day under Israeli law, federal legal holiday in the United States or any day on which banking institutions in the State of New York or State of Israel are authorized or required by law or other governmental action to close.
1
“Closing” means the closing of the purchase and sale of the Securities pursuant to Section 2.1.
“Closing Date” means the Business Day when all of the Transaction Documents have been executed and delivered by the applicable parties thereto, and all conditions precedent to (i) the Purchasers’ obligations to pay the Purchase Price and (ii) the Company’s obligations to deliver the Securities have been satisfied or waived, including without limitation the Company’s written acceptance of the subscriptions as set forth in Section 2.1.
“Commission” means the Securities and Exchange Commission.
“Company Counsel” means Xxxxxx and Xxxxx, LLP, maintaining an address at 0000 Xxxxxx xx xxx Xxxxxxxx, 00xx Xxxxx, Xxx Xxxx, XX 00000-0000, Attention: Xxxx Xxxxxx, Esq., telephone: (000) 000-0000, facsimile: (000) 000-0000.
“Debentures” means the 8% Senior Convertible Debentures to be issued by the Company to the Purchasers hereunder, in the form of Exhibit A attached hereto.
“Disclosure Schedules” shall have the meaning ascribed to such term in Section 3.1.
“Escrow Agent” means Grushko & Xxxxxxx, P.C., maintaining an address at 000 Xxxxxxxx Xxxxxx, Xxxxxx Xxxxxx, XX 00000, Attention: Xxxxxx X. Xxxxxxx, Esq., telephone: (000) 000-0000, facsimile: (000) 000-0000.
“Escrow Agreement” entered into among the Company, Purchasers and the Escrow Agent in the form of Exhibit B attached hereto.
“Event of Default” shall have the meaning ascribed thereto in the Debenture.
“Exchange Act” means the Securities Exchange Act of 1934, as amended, and the rules and regulations promulgated thereunder.
“Exclusivity Period” shall have the meaning ascribed to such term in Section 4.2.
“GAAP” shall have the meaning ascribed to such term in Section 3.1(h).
“G&M” means Grushko & Xxxxxxx, P.C., maintaining an address at 000 Xxxxxxxx Xxxxxx, Xxxxxx Xxxxxx, XX 00000, Attention: Xxxxxx X. Xxxxxxx, Esq., telephone: (000) 000-0000, facsimile: (000) 000-0000, counsel to the Purchaser.
“Indebtedness” shall have the meaning ascribed to such term in Section 3.1(q).
“Intellectual Property Rights” shall have the meaning ascribed to such term in Section 3.1(n).
“Liens” means a lien, charge, security interest or encumbrance, right of first refusal, preemptive right or other restriction.
2
“Majority in Interest” shall have the meaning assigned to such term in Section 5.5.
“Material Adverse Effect” shall have the meaning assigned to such term in Section 3.1(b).
“Material Permits” shall have the meaning ascribed to such term in Section 3.1(m).
“Maximum Rate” shall have the meaning ascribed to such term in Section 5.17.
“Merger” means the exchange of shares and options among the Company's current shareholders and option holders and Pubco pursuant to the Merger Agreement and the timely submission of all applicable filings with state and regulatory authorities required for the closing of such transaction.
“Merger Agreement” means the Agreement among the Company's current shareholders and option holders and Pubco to effectuate the Merger. The Merger Agreement will contain customary representations and warranties for a transaction of this type in which an Israeli company is a party, including the representations warranties and covenants to be made by Pubco on the closing date of the Merger and substantially on the terms set forth in a term sheet attached hereto as Exhibit C.
“Ordinary Shares” means the ordinary shares of the Company, par value NIS 0.01 per share and any other class of securities into which such securities may hereafter be reclassified or changed into.
“Ordinary Share Equivalents” means any securities of the Company that would entitle the holder thereof to acquire at any time Ordinary Shares pursuant to their terms of issuance, including, without limitation, any debt, preferred stock, rights, options, warrants or other instrument that is convertible into or exercisable or exchangeable for, or otherwise entitles the holder thereof to receive, Ordinary Shares.
“Person” means an individual or corporation, partnership, trust, incorporated or unincorporated association, joint venture, limited liability company, joint stock company, government (or an agency or subdivision thereof) or other entity of any kind.
“PIPE Financing” means that certain private placement offering pursuant to Section 4(2) of the Securities Act, and Rule 506 promulgated thereunder, of Units of Pubco’s securities corresponding to net cash proceeds to Pubco (after repayment of any Debentures that are not converted into shares of Pubco Common Stock as part of the PIPE Financing and all deductions and commissions and payments to service providers and any party involved in the Merger, PIPE Financing and transactions contemplated under the Transaction Documents) of at least Seven Million Five Hundred Thousand Dollars ($7,500,000) and up to Ten Million Dollars ($10,000,000) to close concurrently with the Merger. Such Units shall be comprised of shares of Pubco Common Stock at a pre-money valuation of Pubco of not less than Seventy Million Dollars ($70,000,000) and warrants to purchase up to 5,000,000 shares of Pubco Common Stock as described on the Term Sheet. The PIPE Financing shall not include the Purchase Price defined below.
3
“Proceeding” means an action, claim, suit, investigation or proceeding (including, without limitation, an informal investigation or partial proceeding, such as a deposition), whether commenced or threatened.
“Purchase Price” shall mean the aggregate of One Million Five Hundred Eighty Thousand Dollars ($1,580,000) payable by the Purchasers for an aggregate of a like amount of Debenture principal and Warrants issued at the rate of one Warrant to purchase one Warrant Share for each Twelve Dollars ($12.00) of Purchase Price.
“Purchaser Party” shall have the meaning ascribed to such term in Section 4.7.
“Pubco” means to be identified publicly traded company listed on the OTC Bulletin Board and currently reporting under the Exchange Act.
“Pubco Common Stock” means the class of Common Stock of Pubco, and any other class of securities into which such securities may hereafter be reclassified or changed.
“Rule 144” means Rule 144 promulgated by the Commission pursuant to the Securities Act, as such Rule may be amended from time to time, or any similar rule or regulation hereafter adopted by the Commission having substantially the same effect as such Rule.
“Securities” means the Debentures, Warrants and Warrant Shares.
“Securities Act” means the Securities Act of 1933, as amended, and the rules and regulations promulgated thereunder.
“Subsidiary” means any subsidiary of the Company as set forth on Schedule 3.1(a) and shall, where applicable, include any direct or indirect subsidiary of the Company formed or acquired after the date hereof.
“Tax Ruling” shall have the meaning ascribed to such term in Section 4.11.
“Term Sheet” means the Term Sheet annexed hereto as Exhibit C describing the terms of the transactions with Pubco.
“Transaction Documents” means this Agreement, the Debentures, the Warrants, all exhibits and schedules thereto and hereto and any other documents or agreements executed in connection with the transactions contemplated hereunder.
“Underlying Securities” means the Ordinary Shares issued and issuable upon conversion of the Debentures and securities issuable in connection with the Merger, as the case may be.
“Units” means the Pubco Common Stock and Pubco Common Stock purchase warrants sold to investors in the PIPE Financing.
4
“Warrants” means collectively the Ordinary Share purchase warrants, in the form of Exhibit D to be delivered to the Purchasers at the Closing in accordance with Section 2.2(a) hereof in the ratio of One Warrant each to purchase one Warrant Share for each Twelve Dollars and sixty four cents ($12.64) of Purchase Price.
“Warrant Shares” means all of the Ordinary Shares issuable upon exercise of the Warrants at all times.
ARTICLE II.
(a) On the Closing Date, the Company shall deliver or cause to be delivered to each Purchaser the following:
(i) this Agreement duly executed by the Company;
(ii) an opinion of Company Counsel, and/or other counsel acceptable to the Purchaser, in substantially the form of Exhibit E;
(iii) a Debenture with a principal amount equal to such Purchaser’s Purchase Price, registered in the name of such Purchaser;
(iv) a Warrant registered in the name of such Purchaser to purchase Ordinary Shares in the amount set forth on the signature pages hereto; and
(v) the Escrow Agreement duly executed by the Company.
(vi) A certificate from an officer of the Company certifying that the approval by the Company's Board of Directors of the execution and delivery of this Agreement and any and all of the Company's obligations hereunder and the approval by the Company's Shareholders Meeting of the execution and delivery of this Agreement and any and all of the Company's obligations hereunder
5
(b) On the Closing Date, each Purchaser shall deliver or cause to be delivered to the Company the following:
(i) this Agreement duly executed by such Purchaser;
(ii) such Purchaser’s Purchase Price by wire transfer to the account as specified in the Escrow Agreement; and
(iii) the Escrow Agreement duly executed by such Purchaser.
(a) The obligations of the Company hereunder in connection with the Closing are subject to the following conditions being met:
(i) the accuracy in all material respects on the Closing Date of the representations and warranties of the Purchasers contained herein;
(ii) all obligations, covenants and agreements of the Purchasers required to be performed at or prior to the Closing Date shall have been performed;
(iii) Company’s written acceptance of subscriptions referenced in Section 2.1, which acceptance shall be at the sole discretion of the Company;
(iv) the delivery by the Purchasers of the items set forth in Section 2.2(b) of this Agreement, including the transfer to the Company of the entire Purchase Price;
(v) the approval by the Company's Board of Directors of the execution and delivery of this Agreement and any and all of the Company's obligations hereunder; and
(vi) the approval by the Company's Shareholders Meeting of the execution and delivery of this Agreement and any and all of the Company's obligations hereunder.
(b) The respective obligations of the Purchasers hereunder in connection with the Closing are subject to the following conditions being met:
(i) the accuracy in all material respects when made and on the Closing Date of the representations and warranties of the Company contained herein;
(ii) all obligations, covenants and agreements of the Company required to be performed at or prior to the Closing Date shall have been performed; and
(iii) the delivery by the Company of the items set forth in Section 2.2(a) of this Agreement.
6
ARTICLE III.
7
8
9
10
(s) Seniority. Except as set forth on Schedule 3.1(s), and subject to the Israeli laws of liquidation, insolvency, receivership and bankruptcy, as of the Closing Date, no Indebtedness or other claim against the Company is senior to, the Debentures in right of payment, whether with respect to interest, or otherwise, other than indebtedness secured by purchase money security interests (which is senior only as to underlying assets covered thereby) and capital lease obligations (which is senior only as to the property covered thereby).
11
12
ARTICLE IV.
(a) The Securities may only be disposed of in compliance with state and federal securities laws. In connection with any transfer of Securities other than pursuant to an effective registration statement or Rule 144, to the Company or to an Affiliate of the Purchaser, in connection with the Merger, or in connection with a pledge as contemplated in Section 4.1(b), the Company may require the transferor thereof to provide to the Company an opinion of counsel selected by the transferor and reasonably acceptable to the Company, the form and substance of which opinion shall be reasonably satisfactory to the Company, to the effect that such transfer does not require registration of such transferred Securities under the Securities Act. As a condition of transfer, any such transferee shall agree in writing to be bound by the terms of this Agreement and shall have the rights of a Purchaser under this Agreement.
13
(b) The Purchasers agree to the imprinting, so long as is required by this Section 4.1, of a legend on any of the Securities in the following form:
[NEITHER] THIS SECURITY [NOR THE SECURITIES INTO WHICH THIS SECURITY IS [EXERCISABLE] [CONVERTIBLE]] HAS [NOT] BEEN REGISTERED WITH THE SECURITIES AND EXCHANGE COMMISSION OR THE SECURITIES COMMISSION OF ANY STATE IN RELIANCE UPON AN EXEMPTION FROM REGISTRATION UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES ACT”), AND, ACCORDINGLY, MAY NOT BE OFFERED OR SOLD EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT OR PURSUANT TO AN AVAILABLE EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO, THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT AND IN ACCORDANCE WITH APPLICABLE STATE SECURITIES LAWS AS EVIDENCED BY A LEGAL OPINION OF COUNSEL TO THE TRANSFEROR TO SUCH EFFECT, THE SUBSTANCE OF WHICH SHALL BE REASONABLY ACCEPTABLE TO THE COMPANY. EXCEPT AS OTHERWISE PROVIDED IN THE COMPANY'S ARTICLES OF ASSOCIATION, AS SHALL BE AMENDED FROM TIME TO TIME, REGARDING RESTRICTIONS ON TRANSFERABILITY OF THE COMPANY'S SHARES AND OTHER SECURITIES THIS SECURITY [AND THE SECURITIES ISSUABLE UPON [EXERCISE] [CONVERSION] OF THIS SECURITY] MAY BE PLEDGED IN CONNECTION WITH A BONA FIDE MARGIN ACCOUNT OR OTHER LOAN SECURED BY SUCH SECURITIES.
Except as otherwise provided in the Company's articles of association, as shall be amended from time to time, regarding restrictions on transferability of the Company's shares and other securities, the Company acknowledges and agrees that a Purchaser may from time to time pledge pursuant to a bona fide margin agreement with a registered broker-dealer or grant a security interest in some or all of the Securities to a financial institution that is an “accredited investor” as defined in Rule 501(a) under the Securities Act and who agrees to be bound by the provisions of this Agreement and, if required under the terms of such arrangement, the Purchaser may transfer pledged or secured Securities to the pledgees or secured parties. Such a pledge or transfer would not be subject to approval of the Company and no legal opinion of legal counsel of the pledgee, secured party or pledgor shall be required in connection therewith. Further, subject to the aforesaid, no notice shall be required of such pledge. At the Purchaser’s expense, the Company will execute and deliver such reasonable documentation as a pledgee or secured party of Securities may reasonably request in connection with a pledge or transfer of the Securities.
14
15
16
17
ARTICLE V.
18
If to the Company, to:
InspireMD Ltd.
0 Xxxxxxx Xxxxxx Xx.
Xxx Xxxx 00000, Israel
Attention: Xxxxx Xxxxxx
Phone: x000 0 0000000
Fax: x000 0 0000000
With a copy (which shall not constitute notice) to:
Xxxxxx and Xxxxx, LLP
0000 Xxxxxx xx xxx Xxxxxxxx, 00xx Xxxxx
Xxx Xxxx, XX 00000-0000
Attention: Xxxx Xxxxxx, Esq.
Phone: (000) 000-0000
Fax: (000) 000-0000
If to the Purchasers, to:
The addresses set forth on the signature pages
With a copy (which shall not constitute notice) to:
Xxxxxx X. Xxxxxxx, Esq.
Grushko & Xxxxxxx, P.C.
000 Xxxxxxxx Xxxxxx
Xxxxxx Xxxxxx, Xxx Xxxx 00000
(000) 000-0000 - Phone
(000) 000-0000 - Fax
xxxxxxxxx@xxx.xxx
19
20
21
22
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK
SIGNATURE PAGES FOLLOWS]
SIGNATURE PAGES FOLLOWS]
23
IN WITNESS WHEREOF, the parties hereto have caused this Securities Purchase Agreement to be duly executed by their respective authorized signatories as of the date first indicated above.
INSPIREMD LTD.
|
||
By:
|
/s/ Xxxx Xxx | |
Xxxx Xxx
CEO
|
ACKNOWLEDGED BY:
HARBORVIEW ADVISORS LLC
|
||
By:
|
||
Name:
Title:
|
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK
SIGNATURE PAGE FOR PURCHASER FOLLOWS]
SIGNATURE PAGE FOR PURCHASER FOLLOWS]
24
[PURCHASER SIGNATURE PAGES TO INSPIREMD LTD. SECURITIES PURCHASE AGREEMENT]
IN WITNESS WHEREOF, the undersigned have caused this Securities Purchase Agreement to be duly executed by their respective authorized signatories as of the date first indicated above.
Name of Purchaser: ____________________________________________________________
Signature of Authorized Signatory of Purchaser: ______________________________________
Name of Authorized Signatory: ___________________________________________________
Title of Authorized Signatory: ____________________________________________________
Email Address of Purchaser: _____________________________________________________
Facsimile Number of Purchaser: __________________________________________________
Address for Notice of Purchaser: __________________________________________________
_____________________________________________________________________________
Address for Delivery of Securities for Purchaser (if not same as address for notice):
_____________________________________________________________________________
_____________________________________________________________________________
Purchase Price: US$ _______________________________
Warrants: ___________________________________
EIN Number, if applicable, will be provided under separate cover: ________________________
25
This Disclosure Schedule is provided pursuant to that certain Securities Purchase Agreement by and among InspireMD Ltd., an Israeli company (the "Company") and each of the Purchasers identified on the signature pages thereto (the “Agreement”). Any information disclosed herein under the heading of a particular section or subsection of the Agreement shall constitute an exception and/or disclosure for purposes of each other section of the Disclosure Schedule, where the disclosure and the relevance of such disclosure would be reasonably apparent from the disclosure in the first section. To the extent that any representation or warranty contained in the Agreement is limited or qualified by the materiality of the matters to which the representation or warranty is given, the inclusion of any matter in this Disclosure Schedule does not constitute a determination by the Company that such matters are material, nor in such cases where a representation or warranty is limited or qualified by the materiality of the matters to which the representation or warranty is given shall the disclosure of any matter in this Disclosure Schedule imply that any other undisclosed matter having a greater value or other significance is material. The inclusion in this Disclosure Schedule of any matter or document shall not imply any representation, warranty or undertaking not expressly given in the Agreement nor shall such disclosure be taken as extending the scope of any of the warranties or representations beyond the extension (if any) attributable to the nature of the reference to the Disclosure Schedule in the relevant section of the Agreement. Nothing in this Disclosure Schedule constitutes an admission towards third parties of liability, or an obligation of the Company to any third party, or an admission towards third parties against the Company or the interest of the Company. Terms used herein, unless otherwise defined herein, shall have the meaning ascribed to them in the Agreement.
Schedule 3.1(a)
|
·
|
InspireMD GMBH a limited liability private company formed under the laws of Germany.
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Schedule 3.1(d)
None
Schedule 3.1(g)
Capitalization Table
Shares
|
Cash $
|
Price per Share
|
||||||||||
Seed
|
3,059,940 | $ | 0 | |||||||||
Common 1st
|
770,280 | $ | 1,121,659 | $ | 1.44 | |||||||
Common 2nd
|
1,194,691 | $ | 3,505,009 | $ | 2.93 | |||||||
Common 3rd
|
252,720 | $ | 926,030 | $ | 3.67 | |||||||
Common 4th
|
720,853 | $ | 6,919,205 | $ | 10.00 | |||||||
Exercised Options
|
68,270 | $ | 146 | |||||||||
Stock Options
|
600,931 | $ | 0 | |||||||||
ESOP
|
344,500 | $ | 0 | |||||||||
Total all rounds
|
7,012,185 | $ | 12,472,049 |
Additional shares and stock options that doesn't appear in the table above:
|
1.
|
We have already received 200,000 USD investments for which 20,000 ordinary shares will be issued at the next BOD meeting.
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|
2.
|
We are about to receive 510,000 USD in the next week and therefore 51,000 ordinary shares will be issued at the next BOD meeting. $10 per share.
|
|
3.
|
The BOD and the general meeting of the company already approved the grant of 60,000 stock options to 3 directors that are not employed by the company, at an exercise price of 10 USD per share.
|
|
4.
|
The BOD is going to confirm additional stock option grants to several finders, that helped raising funds at the previous rounds, at the following conditions:
|
|
·
|
2,000 Stock options, exercise price of 0.01 USD per option.
|
|
·
|
300 Stock options, exercise price of 3.67 USD per option.
|
|
·
|
1,674 Stock options, exercise price of 10 USD per option.
|
|
5.
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The BOD is going to confirm 6,000 stock option grants, at an exercise price of 10 USD per share, subject to stock option plan according to an agreement that was signed on the 20th of June, 2010 with our Polish distributer.
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|
6.
|
A former business and legal consultant claims for 45,833 stock options due to an agreement as of 1/4/2005. Exercise price of such options is in dispute between the Company and such party.
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7.
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A former senior employee who was discharged from the Company claims, among other things, for the grant of 250,000 stock options at an exercise price of NIS0.01. The Company rejects all the employee's claims.
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Schedule 3.1(h)
Company Financial Statements
INSPIRE M.D. LTD
FINANCIAL STATEMENTS Unaudited
FOR THE YEARS ENDED DECEMBER 31, 2008 and 2009
TABLE OF CONTENTS
Page
|
|
Balance Sheets
|
|
Statements of Operations
|
-----------------------
1
Balance Sheets |
December 31
|
||||||||
2009
|
2008
|
|||||||
NIS in thousands
|
||||||||
Current assets:
|
||||||||
Cash and cash equivalents
|
1,448 | 5,919 | ||||||
Short term investments
|
150 | |||||||
Accounts receivable:
|
||||||||
Trade
|
1,262 | 773 | ||||||
Other
|
401 | 272 | ||||||
Inventory*
|
2,830 | 2,494 | ||||||
6,091 | 91458 | |||||||
Non - Current assets:
|
||||||||
Long term investments
|
944 | |||||||
Investment in Subsidiary
|
3,702 | 212 | ||||||
Fixed assets, net
|
1,191 | 1,427 | ||||||
5,837 | 1,639 | |||||||
11,928 | 11,097 |
2
Balance Sheets |
December 31
|
||||||||
2009
|
2008
|
|||||||
NIS in thousands
|
||||||||
Current Liabilities
|
||||||||
Short term credit from banks
|
1,062 | |||||||
Convertible loan
|
2,926 | |||||||
Accounts payable and accruals:
|
||||||||
Trade
|
3,295 | 1,235 | ||||||
Other
|
9,078 | 6,146 | ||||||
13,435 | 10,307 | |||||||
Non Current Liabilities
|
||||||||
Loan from bank
|
2,093 | |||||||
Liabilities for employees benefits, net
|
99 | 139 | ||||||
Loans from shareholders
|
587 | 125 | ||||||
Contingent liabilities
|
400 | |||||||
3,179 | 264 | |||||||
Shareholders’ Equity**
|
||||||||
Share Capital
|
60 | 58 | ||||||
Premium
|
55,705 | 53,030 | ||||||
Receivables in accounts of shares
|
||||||||
Accumulated deficit
|
(60,451 | ) | (52,562 | ) | ||||
(4,686 | ) | 526 | ||||||
11,928 | 11,097 |
*The company's inventory is based on un-audited numbers. The company expects the numbers to change after resolving issues regarding the inventory, revenue recognition and others.
**The company's equity is based on un-audited numbers, and does not include information regarding stock options grants to employees and consultants.
3
Statements of operations |
For the year
|
||||||||
ended December 31
|
||||||||
2009
|
2008
|
|||||||
NIS in thousands
|
||||||||
Revenue from sales***
|
14,054 | 3,758 | ||||||
Cost of revenue
|
9,969 | 6,892 | ||||||
Gross Profit (Loss)
|
4,085 | (3,134 | ) | |||||
Research and Development Expenses
|
4,171 | 5,382 | ||||||
Selling and Marketing Expenses
|
4,542 | 5,963 | ||||||
General And Administrative Expenses
|
3,752 | 3,373 | ||||||
Loss from ordinary operations****
|
8,381 | 17,852 | ||||||
Financial Expenses, net
|
452 | 740 | ||||||
Loss before Taxes
|
8,833 | 18,592 | ||||||
Taxes on Income
|
20 | 61 | ||||||
Loss after Taxes
|
8,853 | 18,653 | ||||||
Subsidiary Profit (Loss)
|
28 | (485 | ) | |||||
Loss for the year
|
8,825 | 19,138 |
***The company is still facing issues regarding revenue recognition, after resolving them the numbers for 'revenue from sales' will change.
****The company’s Loss from ordinary operations doesn’t include expenses arising from stock options grants to employees and consultants.
4
INSPIRE M.D. LTD
FINANCIAL STATEMENTS Unaudited
FOR THE YEARS ENDED DECEMBER 31, 2007 and 2008
TABLE OF CONTENTS
Page
|
|
Balance Sheets
|
|
Statements of Operations
|
-----------------------
1
Balance Sheets |
December 31
|
||||||||
2008
|
2007
|
|||||||
NIS in thousands
|
||||||||
Current assets:
|
||||||||
Cash and cash equivalents
|
5,919 | 7,138 | ||||||
Short term investments
|
3,123 | |||||||
Cash Enslaved
|
300 | |||||||
Accounts receivable:
|
||||||||
Trade
|
773 | |||||||
Other
|
272 | 352 | ||||||
Inventory*
|
2,494 | 2,450 | ||||||
9,458 | 13,363 | |||||||
Non - Current assets:
|
||||||||
Investment in Subsidiary
|
212 | 141 | ||||||
Fixed assets, net
|
1,427 | 1,547 | ||||||
1,639 | 1,688 | |||||||
11,097 | 15,051 |
2
Balance Sheets |
December 31
|
||||||||
2008
|
2007
|
|||||||
NIS in thousands
|
||||||||
Current Liabilities
|
||||||||
Convertible loan
|
2,926 | |||||||
Accounts payable and accruals:
|
||||||||
Trade
|
1,235 | 1,577 | ||||||
Other
|
6,146 | 1,381 | ||||||
Taxes payable
|
||||||||
10,307 | 2,958 | |||||||
Non Current Liabilities
|
||||||||
Liabilities for employees benefits, net
|
139 | 62 | ||||||
Loans from shareholders
|
125 | 156 | ||||||
264 | 218 | |||||||
Shareholders’ Equity**
|
||||||||
Share Capital
|
58 | 56 | ||||||
Premium
|
53,030 | 46,171 | ||||||
Receivables in accounts of shares
|
(928 | ) | ||||||
Accumulated deficit
|
(52,562 | ) | (33,424 | ) | ||||
526 | 11,875 | |||||||
11,097 | 15,051 |
\
* The company's inventory is based on un-audited numbers. The company expects the numbers to change after resolving issues regarding the inventory, revenue recognition and others.
**The company's equity is based on un-audited numbers, and does not include information regarding stock options grants to employees and consultants.
3
Statements of operations |
For the year
|
||||||||
ended December 31
|
||||||||
2008
|
2007
|
|||||||
NIS in thousands
|
||||||||
Revenue from sales***
|
3,758 | |||||||
Cost of revenue
|
6,892 | 157 | ||||||
Gross Loss
|
3,134 | 157 | ||||||
Research and Development Expenses
|
5,382 | 6,587 | ||||||
Selling and Marketing Expenses
|
5,963 | 2,939 | ||||||
General and Administrative Expenses
|
3,373 | 3,166 | ||||||
Loss from ordinary operations****
|
17,852 | 12,849 | ||||||
Financial Expenses, net
|
740 | 522 | ||||||
Loss before Taxes
|
18,592 | 13,371 | ||||||
Taxes on Income
|
61 | 112 | ||||||
Loss after Taxes
|
18,653 | 13,483 | ||||||
Subsidiary Loss
|
485 | |||||||
Loss for the year
|
19,138 | 13,483 |
***The company is still facing issues regarding revenue recognition, after resolving them the numbers for 'revenue from sales' will change.
****The company’s Loss from ordinary operations doesn’t include expenses arising from stock options grants to employees and consultants.
4
Schedule 3.1(i)
|
1.
|
Xxxx Xxx, an employee, has asserted a claim against the Company for approximately $105,000, which she claims is owed to her for services rendered over the past two years. The Company intends to propose resolving this dispute through mediation.
|
|
2.
|
Xxxxx Xxxxxx and Xxxx Xxx are owed an aggregate of $110,000 by the Company for deferred salary over the past 16 months.
|
|
3.
|
Goldfarb, Levy, Eran, Meiri, Tzafrir & Co. has sent invoices to the Company for approximately $48,000 for past work. The Company is disputing these fees.
|
|
4.
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Xxxx Xxxxxxxx brought a claim against the Company in Israel, asserting that the Company failed to pay him certain finder’s fees. This claim was recently settled, and the Company has agreed to pay Xx. Xxxxxxxx $20,000.
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Schedule 3.1(j)
Legal Proceedings:
|
1.
|
Finder fee claim at the amount of NIS 579,000 (approximately 150K USD) against the company, initiated on October 1st, 2009.
|
|
2.
|
Claim filed by a previous distributor of the Company for enforcement of a distribution agreement in Israel and temporary injunction order. The Company and the plaintiff have agreed to settle the claim through the grant of 1,000 warrants at $10 per share. Formal settlement agreement has not yet been filed to court.
|
|
1.
|
A demand letter sent to the Company by a certain individual that financed our customer at Thailand. The customer returned stents for 22,000 USD and received credit note. The party that financed the customer is asking for his money back from the Company. The Company sent his a letter rejecting all his claims since we don't have any agreement or any understanding with him.
|
|
2.
|
A Former senior employee of the Company who was discharged from the Company sent to the Company demand letters asking for payment of NIS150,000 for the year 2009, redemption of rights due to employment termination and the grant of 250,000 stock options at an exercise price of NIS 0.01 (see also Section 5 to Schedule 3.1(j)). The Company sent the former employee a letter rejecting all his claims.
|
|
3.
|
Microbank LLC – through emails communication with Palladium Capital Advisors LLC to which the Company's managers were CCed, Microbank is claiming that it is entitled to receive finder's fee in relation to the Agreement. Microbank offered to settle its claim for a cash payment of $400,000 once the Company enters into the Agreement and 268,000 cashless exercise warrants at 1.50 per share. The Company sent a letter to Microbank rejecting the claim.
|
Schedule 3.1(m)
The Company is in the process of receiving a business license from the District Pharmacist. The Company, however, does not believe that the current absence of this business license will result in a Material Adverse Effect.
Schedule 3.1(o)
|
1.
|
Payment to Palladium Capital Advisors LLC as set forth in Section 5.2 to the Agreement to which this Disclosure Schedule is attached;
|
|
2.
|
Microbank LLC – through emails communication with Palladium Capital Advisors LLC to which the Company's managers were CCed, Microbank is claiming that it is entitled to receive finder's fee in relation to the Agreement. Microbank offered to settle its claim for a cash payment of $400,000 once the Company enters into the Agreement and 268,000 cashless exercise warrants at 1.50 per share. The Company sent a letter to Microbank rejecting the claim. Due to the Company's refusal to pay commission to Microbank LLC, Microbank LLC may claim bigger commission from the Company.
|
Schedule 3.1(q)
Leasing contracts:
|
·
|
Office rental fees till February 2012 – 228,000 USD
|
Bank debt:
|
·
|
Secured Loan from Bank Mizrahi-Tefahot: principal amount of USD 656,000 (7 quarterly payments).
|
Consultants:
|
·
|
Sales & Marketing - 105,000 USD
|
|
·
|
Management – 152,000 USD
|
Schedule 3.1(s)
·
|
Secured Loan from Bank Mizrahi-Tefahot: principal amount of USD 656,000 (7 quarterly payments).
|
EXHIBIT A
NEITHER THE ISSUANCE AND SALE OF THE SECURITIES REPRESENTED BY THIS CERTIFICATE NOR THE SECURITIES INTO WHICH THESE SECURITIES ARE CONVERTIBLE HAVE BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR APPLICABLE STATE SECURITIES LAWS. THE SECURITIES MAY NOT BE OFFERED FOR SALE, SOLD, TRANSFERRED OR ASSIGNED (I) IN THE ABSENCE OF (A) AN EFFECTIVE REGISTRATION STATEMENT FOR THE SECURITIES UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR (B) AN OPINION OF COUNSEL (WHICH COUNSEL SHALL BE SELECTED BY THE HOLDER), IN A GENERALLY ACCEPTABLE FORM, THAT REGISTRATION IS NOT REQUIRED UNDER SAID ACT OR (II) UNLESS SOLD PURSUANT TO RULE 144 OR RULE 144A UNDER SAID ACT. NOTWITHSTANDING THE FOREGOING, SUBJECT TO THE PROVISIONS OF THE BORROWER’S ARTICLES OF ASSOCIATION REGARDING RESTRICTIONS ON TRANSFER OF THE BORROWER'S SECURITIES, AS SHALL BE AMENDED FROM TIME TO TIME, THE SECURITIES MAY BE PLEDGED IN CONNECTION WITH A BONA FIDE MARGIN ACCOUNT OR OTHER LOAN OR FINANCING ARRANGEMENT SECURED BY THE SECURITIES.
Principal Amount: [at least an aggregate $1,580,000] $________,000.00 | Issue Date: July ___, 2010 |
CONVERTIBLE DEBENTURE
FOR VALUE RECEIVED, InspireMD Ltd., a corporation continued under the laws of the State of Israel (hereinafter called “Borrower”), hereby promises to pay to the order of _________________________, maintaining an address at _________________________________________________, Fax: (___) ___–____ (“Holder”) without demand, the sum of _________ Dollars ($___.00) (“Principal Amount”), with interest accruing thereon, on the Maturity Date, if not sooner paid or converted into the Borrower’s or Pubco’s securities as provided herein.
This Debenture has been entered into pursuant to the terms of a securities purchase agreement among the Borrower, the Holder and certain other holders (the “Other Holders”) of convertible debentures (the “Other Debentures”), dated of even date herewith (the “Securities Purchase Agreement”) for an aggregate Principal Amount of [at least an aggregate of $1,580,000] $______,000.
ARTICLE I
DEFINITIONS
1.1 Definitions. Capitalized terms used and not otherwise defined herein that are defined in the Securities Purchase Agreement shall have the meanings given to such terms in the Securities Purchase Agreement. Whenever used in this Agreement, the following terms shall have the following respective meanings:
§ “Audit Default” shall have the meaning set forth in the Securities Purchase Agreement;
§ “Business Day” shall have the meaning set forth in the Securities Purchase Agreement;
§ “Closing Date” shall have the meaning set forth in the Securities Purchase Agreement;
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§ “Company Financing” shall mean the closing of, or execution of a definitive and binding agreement (subject to customary closing conditions) with respect to, an equity or convertible debt financing, or series of related financings, that provides for the receipt by the Borrower of not less than $3,000,000 in the aggregate; which closing occurs, or definitive agreement is executed, as the case may be, between the Closing and twelve months following the Maturity Date;
§ “Debenture” shall mean this instrument as originally executed, or if later amended or supplemented, then as so amended or supplemented;
§ “Exclusivity Period” shall have the meaning set forth in the Securities Purchase Agreement;
§ “Material Adverse Effect” shall mean (i) any event, occurrence, fact or circumstance which has had a material adverse effect on the business, assets, condition (financial or otherwise), liabilities or results of operations of the Borrower or (ii) an Audit Default; provided, however, that the following occurrences shall not be deemed to be a Material Adverse Effect: (A) changes resulting from the announcement of the sale of the Debentures or the intention to effectuate the PIPE Financing; (B) changes resulting from the parties' compliance with the terms of the Transaction Documents; (C) the failure of the Borrower to meet its financial projections and (D) provided that the Borrower is able to continue its business in substantially the same manner as before, the occurrence of: (i) changes in general political, economic or financial market conditions; (ii) changes in industry conditions that do not disproportionately effect the Borrower or its subsidiaries; (iii) changes in GAAP; (iv) changes in law; and (v) acts of terrorism or war;
§ “Material Subsidiary” means a subsidiary of the Borrower whose total assets (after intercompany eliminations) exceed 30 percent of the total assets of the Borrower and all of its subsidiaries, as calculated on a consolidated basis, as of the end of the most recently completed fiscal quarter;
§ “Maturity Date” shall mean the date that payment or conversion, as the case may be, of this Debenture is required hereunder;
§ “Merger” shall have the meaning set forth in the Securities Purchase Agreement;
§ “Ordinary Shares” shall have the meaning set forth in the Securities Purchase Agreement;
§ “Original Maturity Date” shall have the meaning set forth in Section 2.1 herein;
§ “Other Debentures” shall have the meaning set forth in the preamble of this Debenture;
§ “Other Holders” shall have the meaning set forth in the preamble of this Debenture;
§ “Pipe Default” shall mean (i) the Borrower’s failure to act in good faith to timely effectuate the Pipe Financing or (ii) the occurrence of a Material Adverse Effect;
§ “Pipe Financing” shall have the meaning set forth in the Securities Purchase Agreement;
§ “Pubco” shall have the meaning set forth in the Securities Purchase Agreement;
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§ “Pubco Common Stock” shall have the meaning set forth in the Securities Purchase Agreement;
§ “Second Maturity Date” shall have the meaning set forth in Section 2.2 herein;
§ “Securities Purchase Agreement” shall have the meaning set forth in the preamble of this Debenture;
§ “Tax Ruling” shall have the meaning set forth in the Securities Purchase Agreement;
§ “Transaction Documents” shall have the meaning set forth in the Securities Purchase Agreement.
ARTICLE II
GENERAL PROVISIONS
2.1 Original Maturity Date. The Borrower shall pay all sums due on the Debenture on the later of (i) two months subsequent to the Borrower’s receipt of the Tax Ruling or (ii) the six month anniversary of the Closing Date (the “Original Maturity Date”).
2.2 Second Maturity Date. Provided neither a Pipe Default nor an Event of Default have occurred then, commencing 20 Business Days before the Original Maturity Date, the Borrower shall have the right, in its sole discretion, to extend the Maturity Date until nine months after the Original Maturity Date (such extended date being the “Second Maturity Date”) by providing written notice to the Holder not later than 10 Business Days prior to the Original Maturity Date.
2.3 Interest Rate. Interest payable on this Debenture shall accrue at the annual rate of eight percent (8%) from the Issue Date through the date the Debenture is paid or converted as provided for herein.
2.4 Pari Passu. All payments made on this Debenture and the Other Debentures and except as otherwise set forth herein all actions taken by the Borrower with respect to this Debenture and the Other Debentures, including but not limited to Mandatory Conversion and Optional Redemption (as set forth in Article III), shall be made and taken pari passu with respect to this Debenture and the Other Debentures.
2.5 No Insolvency Proceedings. The Holder shall not initiate any insolvency or bankruptcy proceedings against the Borrower due to the failure of the Borrower to pay this Debenture or the interest thereon.
ARTICLE III
MANDATORY CONVERSION AND OPTIONAL REDEMPTION
3.1 Pipe Financing Conversion. Provided the closing of the Pipe Financing occurs before the Original Maturity Date, or, in the event that the Borrower elects to extend the term of this Debenture pursuant to Section 2.2 hereof, the Second Maturity Date, then, at the option of the Holder, this Debenture shall convert (in full and not in part) into shares of Pubco Common Stock at the price of $1.50 per share at the closing of the Pipe Financing. If this Debenture is not converted at the closing of the Pipe Financing, it will be repaid in cash at the closing of the Pipe Financing.
3.2 Company Financing Conversion. Provided a Pipe Default, an Event of Default or a Pipe Financing have not occurred, upon a Company Financing occurring after the expiration of the Exclusivity Period but prior to the one year anniversary of the Second Maturity Date, this Debenture shall automatically convert into Ordinary Shares of the Borrower at price per share calculated at a 15% discount to the pricing of the Company Financing; provided, however, the total coupon and discount granted to the Holder under this Section 3.2 shall not exceed a 20% discount to the pricing of the Company Financing. For the purpose of clarity commencing on the expiration of the Exclusivity Period, this Debenture shall be convertible in accordance with both Sections 3.1 or 3.2 herein, which ever occurs first.
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3.3 Second Maturity Date Conversion. Provided neither a Pipe Default nor an Event of Default have occurred and this Debenture was not previously converted pursuant to Sections 3.1 or 3.2 herein before the Second Maturity Date then, upon the Second Maturity Date, this Debenture shall automatically convert into Ordinary Shares of the Borrower as follows:
(a) If a Company Financing occurs within one year after the Second Maturity Date then at the closing of the Company Financing this Debenture shall automatically convert into Ordinary Shares of the Borrower at price per share calculated at a 15% discount to the pricing of the Company Financing; provided, however, the total coupon and discount granted to the Holder under this Section 3.2 shall not exceed a 20% discount to the pricing of the Company Financing.
(b) If a Company Financing does not occur within one year after the Second Maturity Date then on the First Anniversary of the Second Maturity Date this Debenture shall automatically convert into Ordinary Shares of the Borrower at a price of $10 per share.
(c) For the purpose of clarity an Event of Default first occurring after the Second Maturity Date shall not affect the conversion provisions of this Section 3.3.
3.4 Reclassification, etc. If the Borrower at any time shall, by reclassification or otherwise, change the Ordinary Shares into the same or a different number of securities of any class or classes that may be issued or outstanding, this Debenture, as to the unpaid principal portion thereof and accrued interest thereon, shall thereafter be deemed to evidence the right to purchase an adjusted number of such securities and kind of securities as would have been issuable as the result of such change with respect to the Ordinary Shares immediately prior to such reclassification or other change.
3.5 Stock Splits, Combinations and Dividends. If the Ordinary Shares are subdivided or combined into a greater or smaller number of Ordinary Shares, or if a dividend is paid on the Ordinary Shares in Ordinary Shares, the Conversion Price shall be proportionately reduced in case of subdivision of shares or stock dividend or proportionately increased in the case of combination of shares, in each such case by the ratio which the total number of Ordinary Shares outstanding immediately after such event bears to the total number of Ordinary Shares outstanding immediately prior to such event.
3.6 Redemption. This Debenture may be prepaid by the Borrower at any time without the consent of the Holder.
ARTICLE IV
EVENT OF DEFAULT
The occurrence of any of the following events of default (“Event of Default”) shall, at the option of the Holder hereof, make all sums of principal and interest then remaining unpaid hereon and all other amounts payable hereunder immediately due and payable, upon demand, without presentment or grace period, all of which hereby are expressly waived, except as set forth below:
4
4.1 Failure to Pay Principal or Interest. The Borrower fails to pay any installment of principal, interest or other sum due under this Debenture when due.
4.2 Breach of Covenant. The Borrower or any Material Subsidiary breaches any material covenant or other term or condition of the Transaction Documents in any material respect and such breach, if subject to cure, continues for a period of fifteen (15) days.
4.3 Breach of Representations and Warranties. Any material representation or warranty of the Borrower made in the Transaction Documents, or in any agreement, statement or certificate given in writing pursuant thereto or in connection therewith shall be false or misleading in any material respect as of the date made and the Closing Date.
4.4 Liquidation. Any dissolution, liquidation or winding up of the Borrower or a Material Subsidiary.
4.5 Cessation of Operations. Any cessation of operations by the Borrower or a Material Subsidiary, for 60 consecutive days, or the Borrower is unable to pay its undisputed debt as such debts become due.
4.6 Financing Default. If the Borrower enters into a reverse merger, public offering or other private placement during the Exclusivity Period.
4.7 Receiver or Trustee. The Borrower shall make an assignment for the benefit of creditors, or apply for or consent to the appointment of a receiver, trustee or liquidator for it or for a substantial part of its property or business; or such a receiver, trustee or liquidator shall otherwise be appointed which appointment has not been terminated by a court of competent jurisdiction within ninety (90) days of such appointment.
4.8 Judgments. Any money judgment, writ or similar final process shall be entered or made in a non-appealable adjudication against the Borrower or any Material Subsidiary or any of its property or other assets for more than $500,000, unless paid, stayed, vacated, bonded or satisfied within sixty (60) days.
4.9 Bankruptcy. Bankruptcy, insolvency, reorganization or liquidation proceedings or other proceedings or relief under any bankruptcy law or any law for the relief of debtors shall be instituted by or against the Borrower or a Material Subsidiary and, if instituted against the Borrower or a Material Subsidiary, shall not be dismissed within ninety (90) days after such institution.
4.10 Reservation Default. Failure by the Borrower to have reserved for issuance upon exercise of the Warrants the number of shares of Ordinary Shares required to allow exercise of all Warrants issued pursuant to the Securities Purchase Agreement in the event such failure persists for a period of more than thirty (30) days.
4.11 Merger. Other than as part of the Merger, the merger, consolidation or reorganization of the Borrower with or into another corporation or person or entity (other than with or into a subsidiary, at least 80% of which is owned by the Borrower), or the sale of capital stock of the Borrower by the Borrower or the holders thereof, in any case under circumstances in which the holders of a majority of the voting power of the outstanding capital stock of the Borrower immediately prior to such transaction shall own less than a majority in voting power of the outstanding capital stock of the Borrower or the surviving or resulting corporation or other entity, as the case may be, immediately following such transaction.
5
ARTICLE V
MISCELLANEOUS
5.1 Failure or Indulgence Not Waiver. No failure or delay on the part of the Holder hereof in the exercise of any power, right or privilege hereunder shall operate as a waiver thereof, nor shall any single or partial exercise of any such power, right or privilege preclude other or further exercise thereof or of any other right, power or privilege. All rights and remedies existing hereunder are cumulative to, and not exclusive of, any rights or remedies otherwise available.
5.2 Notices. All notices, demands, requests, consents, approvals, and other communications required or permitted hereunder shall be in writing and, unless otherwise specified herein, shall be (i) personally served, (ii) deposited in the mail, registered or certified, return receipt requested, postage prepaid, (iii) delivered by reputable air courier service with charges prepaid, or (iv) transmitted by hand delivery, telegram, or facsimile, addressed as set forth below or to such other address as such party shall have specified most recently by written notice. Any notice or other communication required or permitted to be given hereunder shall be deemed effective (a) upon hand delivery or delivery by facsimile, with accurate confirmation generated by the transmitting facsimile machine, at the address or number designated below (if delivered on a business day during normal business hours where such notice is to be received), or the first business day following such delivery (if delivered other than on a business day during normal business hours where such notice is to be received) or (b) on the first business day following the date of mailing by express courier service, fully prepaid, addressed to such address, or upon actual receipt of such mailing, whichever shall first occur. The addresses for such communications shall be: (i) if to the Borrower to: XxxxxxxXX, Xxx., 0 Xxxxxxx Xxxxxx Xx. Xxx Xxxx, Xxxxxx Fax: + 000-0-0000000, Attn: Xx. Xxxxx Xxxxxx, with a copy to: Xxxxxx and Xxxxx, LLP, 0000 Xxxxxx xx xxx Xxxxxxxx, 00xx Xxxxx, Xxx Xxxx, XX 00000-0000, Fax: (212) 884–8234, Attention: Xxxx Xxxxxx, Esq., and (ii) if to the Holder, to the name, address and facsimile number set forth on the front page of this Debenture, with a copy by fax only to Grushko & Xxxxxxx, P.C., 000 Xxxxxxxx Xxxxxx, Xxxxxx Xxxxxx, Xxx Xxxx 00000, facsimile: (212) 697–3575.
5.3 Assignability. This Debenture shall be binding upon the Borrower and its successors and assigns, and shall inure to the benefit of the Holder and its successors and assigns. The Borrower may not assign its obligations under this Debenture.
5.4 Cost of Collection. If default is made in the payment of this Debenture, the Borrower shall pay the Holder hereof reasonable costs of collection, including reasonable attorneys’ fees.
5.5 Governing Law. This Debenture shall be governed by and construed in accordance with the laws of the State of Israel without regard to conflicts of laws principles that would result in the application of the substantive laws of another jurisdiction. Any action brought by either party against the other concerning the transactions contemplated by this Agreement must be brought only in the courts located in the Tel Aviv Jaffa District, the State of Israel. Both parties and the individual signing this Agreement on behalf of the Borrower agree to submit to the exclusive jurisdiction of such courts and the Holder irrevocably waives any objection to venue as an “inconvenient forum.” In the event that any provision of this Debenture is invalid or unenforceable under any applicable statute or rule of law, then such provision shall be deemed inoperative to the extent that it may conflict therewith and shall be deemed modified to conform with such statute or rule of law. Any such provision which may prove invalid or unenforceable under any law shall not affect the validity or unenforceability of any other provision of this Debenture.
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5.6 Maximum Payments. Nothing contained herein shall be deemed to establish or require the payment of a rate of interest or other charges in excess of the maximum rate permitted by applicable law. In the event that the rate of interest required to be paid or other charges hereunder exceed the maximum rate permitted by applicable law, any payments in excess of such maximum rate shall be credited against amounts owed by the Borrower to the Holder and thus refunded to the Borrower.
5.7 Non-Business Days. Whenever any payment or any action to be made shall be due on a Saturday, Sunday or a public holiday under the laws of the State of New York or the State of Israel, such payment may be due or action shall be required on the next succeeding business day and, for such payment, such next succeeding day shall be included in the calculation of the amount of accrued interest payable on such date.
5.8 Shareholder Status. The Holder shall not have rights as a shareholder of the Borrower with respect to unconverted portions of this Debenture.
[rest of this page left intentionally blank]
7
IN WITNESS WHEREOF, the Borrower has caused this Debenture to be signed in its name by an authorized officer as of the ____ day of July, 2010.
INSPIREMD LTD.
|
||||
|
By:
|
|||
Name: | ||||
Title: | ||||
WITNESS:
|
||||
8
EXHIBIT B
ESCROW AGREEMENT
This Agreement is dated as of the __ day of July, 2010 among InspireMD Ltd., a corporation formed under the laws of the State of Israel (the “Company”), the purchasers listed on Schedule 1 hereto (“Purchasers”), and Grushko & Xxxxxxx, P.C. (the “Escrow Agent”):
W I T N E S S E T H:
ARTICLE I
INTERPRETATION
1.1. Definitions. Capitalized terms used and not otherwise defined herein that are defined in the Securities Purchase Agreement shall have the meanings given to such terms in the Securities Purchase Agreement. Whenever used in this Agreement, the following terms shall have the following respective meanings:
§ “Agreement” means this Agreement and all amendments made hereto and thereto by written agreement between the parties;
§ “Closing Date” shall have the meaning set forth in Section 1.1 of the Securities Purchase Agreement;
§ “Debenture” shall have the meaning set forth in Section 1.1 of the Securities Purchase Agreement;
§ “Escrowed Payment” means an aggregate cash payment of up to $1,580,000;
§ “Iska Contract” means that certain contract between the Company and the Investing Partner to be entered into with Harborview Master Fund, L.P. and Genesis Asset Opportunity Fund, L.P. of even date in the form annexed hereto as Exhibit A.
1
§ “Legal Opinion” means the original signed legal opinion referred to in Section 2.2 of the Securities Purchase Agreement;
§ “Palladium” shall mean Palladium Capital Advisors LLC;
§ “Palladium Fee” shall have the meaning set forth in Section 5.2 of the Securities Purchase Agreement;
§ “Principal Amount” shall mean an aggregate of up to $1,580,000;
§ “Purchaser Legal Fees” shall have the meaning set forth in Section 5.2 of the Securities Purchase Agreement;
§ “Securities Purchase Agreement” means the Securities Purchase Agreement (and the exhibits and schedules thereto) entered into or to be entered into by the Company and Purchasers in reference to the sale and purchase of the Debentures and Warrants;
§ “Warrants” shall have the meaning set forth in Section 1.1 of the Securities Purchase Agreement;
§ Collectively, the Legal Opinion, Debentures, Warrants, Iska Contract, Palladium Fee, and Securities Purchase Agreement signed and executed by all signators thereto other than the Purchasers, and Purchaser Legal Fees and are referred to as “Company Documents”; and
§ Collectively, the Escrowed Payment and the Purchasers executed Securities Purchase Agreement are referred to as “Purchaser Documents.”
1.2. Entire Agreement. This Agreement along with the Company Documents and the Purchaser Documents to which the Purchaser and the Company or Subsidiary are a party constitute the entire agreement between the parties hereto pertaining to the Company Documents and Purchaser Documents and supersedes all prior agreements, understandings, negotiations and discussions, whether oral or written, of the parties. There are no warranties, representations and other agreements made by the parties in connection with the subject matter hereof, except as specifically set forth in this Agreement, the Company Documents and the Purchaser Documents.
1.3. Extended Meanings. In this Agreement words importing the singular number include the plural and vice versa; words importing the masculine gender include the feminine and neuter genders. The word “person” includes an individual, body corporate, partnership, trustee or trust or unincorporated association, executor, administrator or legal representative.
1.4. Waivers and Amendments. This Agreement may be amended, modified, superseded, cancelled, renewed or extended, and the terms and conditions hereof may be waived, only by a written instrument signed by all parties, or, in the case of a waiver, by the party waiving compliance. Except as expressly stated herein, no delay on the part of any party in exercising any right, power or privilege hereunder shall operate as a waiver thereof, nor shall any waiver on the part of any party of any right, power or privilege hereunder preclude any other or future exercise of any other right, power or privilege hereunder.
2
1.5. Headings. The division of this Agreement into articles, sections, subsections and paragraphs and the insertion of headings are for convenience of reference only and shall not affect the construction or interpretation of this Agreement.
1.6. Law Governing this Agreement. This Agreement shall be governed by and construed in accordance with the laws of the State of New York without regard to conflicts of laws principles that would result in the application of the substantive laws of another jurisdiction. Any action brought by either party against the other concerning the transactions contemplated by this Agreement shall be brought only in the state courts of New York or in the federal courts located in the state of New York. Both parties and the individuals executing this Agreement and other agreements on behalf of the Company agree to submit to the jurisdiction of such courts and waive trial by jury. The prevailing party (which shall be the party which receives an award most closely resembling the remedy or action sought) shall be entitled to recover from the other party its reasonable attorney’s fees and costs. In the event that any provision of this Agreement or any other agreement delivered in connection herewith is invalid or unenforceable under any applicable statute or rule of law, then such provision shall be deemed inoperative to the extent that it may conflict therewith and shall be deemed modified to conform with such statute or rule of law. Any such provision which may prove invalid or unenforceable under any law shall not affect the validity or enforceability of any other provision of any agreement.
1.7. Specific Enforcement, Consent to Jurisdiction. The Company and Purchasers acknowledge and agree that irreparable damage would occur in the event that any of the provisions of this Agreement were not performed in accordance with their specific terms or were otherwise breached. It is accordingly agreed that the parties shall be entitled to an injuction or injunctions to prevent or cure breaches of the provisions of this Agreement and to enforce specifically the terms and provisions hereof or thereof, this being in addition to any other remedy to which any of them may be entitled by law or equity. Subject to Section 1.6 hereof, each of the Company and Purchasers hereby waives, and agrees not to assert in any such suit, action or proceeding, any claim that it is not personally subject to the jurisdiction of such court, that the suit, action or proceeding is brought in an inconvenient forum or that the venue of the suit, action or proceeding is improper. Nothing in this Section shall affect or limit any right to serve process in any other manner permitted by law.
ARTICLE II
DELIVERIES TO THE ESCROW AGENT
2.1. Company Deliveries. On or before the Closing Date, the Company shall execute and deliver the Company Documents to the Escrow Agent.
2.2. Purchaser Deliveries. On or before the Closing Date, Purchasers shall execute and deliver the Securities Purchase Agreements, and shall deliver the Escrowed Payment in cash, to the Escrow Agent. The Escrowed Payment will be delivered pursuant to the following wire transfer instructions:
Citibank, N.A.
0000 0xx Xxxxxx
Xxx Xxxx, XX 00000
ABA Number: 0210-00089
For Credit to: Grushko & Xxxxxxx, XXXX Trust Account
Account Number: 00000000
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2.3. Intention to Create Escrow Over Company Documents and Purchaser Documents. The Purchasers and Company intend that the Company Documents and Purchaser Documents shall be held in escrow by the Escrow Agent pursuant to this Agreement for their benefit as set forth herein.
2.4. Escrow Agent to Deliver Company Documents and Purchaser Documents. The Escrow Agent shall hold and release the Company Documents and Purchaser Documents only in accordance with the terms and conditions of this Agreement.
ARTICLE III
RELEASE OF COMPANY DOCUMENTS AND PURCHASER DOCUMENTS
3.1. Release of Escrow. Subject to the provisions of Section 4.2, the Escrow Agent shall release the Company Documents and Purchaser Documents as follows:
(a) On the Closing Date, the Escrow Agent will simultaneously release the Company Documents to the Purchasers and release the Purchaser Documents to the Company, except that:
(i) Purchaser Legal Fees will be released directly to G&M, and
(ii) the Palladium Fee will be released to Palladium.
(b) Notwithstanding the above, upon receipt by the Escrow Agent of joint written instructions (“Joint Instructions”) signed by the Company and the Purchasers, it shall deliver the Company Documents and Purchaser Documents in accordance with the terms of the Joint Instructions.
(c) Anything herein to the contrary notwithstanding, upon receipt by the Escrow Agent of a final and non-appealable judgment, order, decree or award of a court of competent jurisdiction (a “Court Order”), the Escrow Agent shall deliver the Company Documents and Purchaser Documents in accordance with the Court Order. Any Court Order shall be accompanied by an opinion of counsel for the party presenting the Court Order to the Escrow Agent (which opinion shall be satisfactory to the Escrow Agent) to the effect that the court issuing the Court Order has competent jurisdiction and that the Court Order is final and non-appealable.
3.2. If a Closing does not take place on or before July 30, 2010, the Escrow Agent will promptly return the applicable Company Documents to the Company and return the Purchaser Documents to the Purchaser.
3.3. Acknowledgement of Company and Purchaser; Disputes. The Company and the Purchasers acknowledge that the only terms and conditions upon which the Company Documents and Purchaser Documents are to be released are set forth in Sections 3 and 4 of this Agreement. The Company and the Purchasers reaffirm their agreement to abide by the terms and conditions of this Agreement with respect to the release of the Company Documents and Purchaser Documents. Any dispute with respect to the release of the Company Documents and Purchaser Documents shall be resolved pursuant to Section 4.2 or by agreement between the Company and Purchasers.
4
ARTICLE IV
CONCERNING THE ESCROW AGENT
4.1. Duties and Responsibilities of the Escrow Agent. The Escrow Agent’s duties and responsibilities shall be subject to the following terms and conditions:
(a) The Purchasers and Company acknowledge and agree that the Escrow Agent (i) shall not be responsible for or bound by, and shall not be required to inquire into whether either the Purchasers or Company is entitled to receipt of the Company Documents and Purchaser Documents pursuant to any other agreement or otherwise; (ii) shall be obligated only for the performance of such duties as are specifically assumed by the Escrow Agent pursuant to this Agreement; (iii) may rely on and shall be protected in acting or refraining from acting upon any written notice, instruction, instrument, statement, request or document furnished to it hereunder and believed by the Escrow Agent in good faith to be genuine and to have been signed or presented by the proper person or party, without being required to determine the authenticity or correctness of any fact stated therein or the propriety or validity or the service thereof; (iv) may assume that any person believed by the Escrow Agent in good faith to be authorized to give notice or make any statement or execute any document in connection with the provisions hereof is so authorized; (v) shall not be under any duty to give the property held by Escrow Agent hereunder any greater degree of care than Escrow Agent gives its own similar property; and (vi) may consult counsel satisfactory to Escrow Agent, the opinion of such counsel to be full and complete authorization and protection in respect of any action taken, suffered or omitted by Escrow Agent hereunder in good faith and in accordance with the opinion of such counsel.
(b) The Purchasers and Company acknowledge that the Escrow Agent is acting solely as a stakeholder at their request and that the Escrow Agent shall not be liable for any action taken by Escrow Agent in good faith and believed by Escrow Agent to be authorized or within the rights or powers conferred upon Escrow Agent by this Agreement. The Purchasers and Company, jointly and severally, agree to indemnify and hold harmless the Escrow Agent and any of Escrow Agent’s partners, employees, agents and representatives for any action taken or omitted to be taken by Escrow Agent or any of them hereunder, including the fees of outside counsel and other costs and expenses of defending itself against any claim or liability under this Agreement, except in the case of gross negligence or willful misconduct on Escrow Agent’s part committed in its capacity as Escrow Agent under this Agreement. The Escrow Agent shall owe a duty only to the Purchasers and Company under this Agreement and to no other person.
(c) The Purchasers and Company jointly and severally agree to reimburse the Escrow Agent for outside counsel fees, to the extent authorized hereunder and incurred in connection with the performance of its duties and responsibilities hereunder.
(d) The Escrow Agent may at any time resign as Escrow Agent hereunder by giving five (5) days prior written notice of resignation to the Purchasers and the Company. Prior to the effective date of the resignation as specified in such notice, the Purchasers and Company will issue to the Escrow Agent a Joint Instruction authorizing delivery of the Company Documents and Purchaser Documents to a substitute Escrow Agent selected by the Purchasers and Company. If no successor Escrow Agent is named by the Purchasers and Company, the Escrow Agent may apply to a court of competent jurisdiction in the State of New York for appointment of a successor Escrow Agent, and to deposit the Company Documents and Purchaser Documents with the clerk of any such court.
(e) Other than in connection with the Purchaser Legal Fees, the Escrow Agent does not have and will not have any interest in the Company Documents and Purchaser Documents, but is serving only as escrow agent, having only possession thereof. The Escrow Agent shall not be liable for any loss resulting from the making or retention of any investment in accordance with this Escrow Agreement.
5
(f) This Agreement sets forth exclusively the duties of the Escrow Agent with respect to any and all matters pertinent thereto and no implied duties or obligations shall be read into this Agreement.
(g) The Escrow Agent shall be permitted to act as counsel for the Purchasers in any dispute as to the disposition of the Company Documents and Purchaser Documents, in any other dispute between the Purchasers and Company, whether or not the Escrow Agent is then holding the Company Documents and Purchaser Documents and continues to act as the Escrow Agent hereunder.
(h) The provisions of this Section 4.1 shall survive the resignation of the Escrow Agent or the termination of this Agreement.
4.2. Dispute Resolution: Judgments. Resolution of disputes arising under this Agreement shall be subject to the following terms and conditions:
(a) If any dispute shall arise with respect to the delivery, ownership, right of possession or disposition of the Company Documents and Purchaser Documents, or if the Escrow Agent shall in good faith be uncertain as to its duties or rights hereunder, the Escrow Agent shall be authorized, without liability to anyone, to (i) refrain from taking any action other than to continue to hold the Company Documents and Purchaser Documents pending receipt of a Joint Instruction from the Purchasers and Company, or (ii) deposit the Company Documents and Purchaser Documents with any court of competent jurisdiction in the State of New York, in which event the Escrow Agent shall give written notice thereof to the Purchasers and the Company and shall thereupon be relieved and discharged from all further obligations pursuant to this Agreement. The Escrow Agent may, but shall be under no duty to, institute or defend any legal proceedings which relate to the Company Documents and Purchaser Documents. The Escrow Agent shall have the right to retain counsel if it becomes involved in any disagreement, dispute or litigation on account of this Agreement or otherwise determines that it is necessary to consult counsel.
(b) The Escrow Agent is hereby expressly authorized to comply with and obey any Court Order. In case the Escrow Agent obeys or complies with a Court Order, the Escrow Agent shall not be liable to the Purchasers and Company or to any other person, firm, corporation or entity by reason of such compliance.
ARTICLE V
GENERAL MATTERS
5.1. Termination. This escrow shall terminate upon the release of all of the Company Documents and Purchaser Documents or at any time upon the agreement in writing of the Purchasers and Company.
5.2. Notices. All notices, demands, requests, consents, approvals, and other communications required or permitted hereunder shall be in writing and, unless otherwise specified herein, shall be (i) personally served, (ii) deposited in the mail, registered or certified, return receipt requested, postage prepaid, (iii) delivered by reputable air courier service with charges prepaid, or (iv) transmitted by hand delivery, telegram, or facsimile, addressed as set forth below or to such other address as such party shall have specified most recently by written notice. Any notice or other communication required or permitted to be given hereunder shall be deemed effective (a) upon hand delivery or delivery by facsimile, with accurate confirmation generated by the transmitting facsimile machine, at the address or number designated below (if delivered on a business day during normal business hours where such notice is to be received), or the first business day following such delivery (if delivered other than on a business day during normal business hours where such notice is to be received) or (b) on the second business day following the date of mailing by express courier service, fully prepaid, addressed to such address, or upon actual receipt of such mailing, whichever shall first occur. The addresses for such communications shall be:
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(a)
|
If to the Company, to:
|
InspireMD Ltd.
InspireMD Ltd.
3 Menorat Xxxxxx Xx.
Xxx Xxxx 00000, Xxxxxx
Attention: Xxxxx Xxxxxx
Phone: x000 0 0000000
Fax: x000 0 0000000
With a copy (which shall not constitute notice) to:
Xxxxxx and Xxxxx, LLP
0000 Xxxxxx xx xxx Xxxxxxxx, 00xx Xxxxx
Xxx Xxxx, XX 00000-0000
Attention: Xxxx Xxxxxx, Esq.
Fax: (000) 000-0000
(b)
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If to the Purchasers: to the addresses set forth on Schedule 1
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With a copy by facsimile only to:
Grushko & Xxxxxxx, P.C.
000 Xxxxxxxx Xxxxxx
Xxxxxx Xxxxxx, Xxx Xxxx 00000
Fax: 000-000-0000
(c)
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If to the Escrow Agent, to:
|
Grushko & Xxxxxxx, P.C.
000 Xxxxxxxx Xxxxxx
Xxxxxx Xxxxxx, Xxx Xxxx 00000
Fax: 000-000-0000
or to such other address as any of them shall give to the others by notice made pursuant to this Section 5.2.
5.3. Interest. The Escrowed Payment shall not be held in an interest bearing account nor will interest be payable in connection therewith. In the event the Escrowed Payment is deposited in an interest bearing account, the Purchasers shall be entitled to receive any accrued interest thereon, but only if the Escrow Agent receives from the Purchaser the Purchasers’ United States taxpayer identification number and other requested information and forms.
7
5.4. Assignment; Binding Agreement. Neither this Agreement nor any right or obligation hereunder shall be assignable by any party without the prior written consent of the other parties hereto. This Agreement shall enure to the benefit of and be binding upon the parties hereto and their respective legal representatives, successors and assigns.
5.5. Invalidity. In the event that any one or more of the provisions contained herein, or the application thereof in any circumstance, is held invalid, illegal, or unenforceable in any respect for any reason, the validity, legality and enforceability of any such provision in every other respect and of the remaining provisions contained herein shall not be in any way impaired thereby, it being intended that all of the rights and privileges of the parties hereto shall be enforceable to the fullest extent permitted by law.
5.6. Counterparts/Execution. This Agreement may be executed in any number of counterparts and by different signatories hereto on separate counterparts, each of which, when so executed, shall be deemed an original, but all such counterparts shall constitute but one and the same instrument. This Agreement may be executed by facsimile transmission and delivered by facsimile transmission.
5.7. Agreement. Each of the undersigned states that he has read the foregoing Escrow Agreement and understands and agrees to it.
[rest of this page left intentionally blank]
8
IN WITNESS WHEREOF, the udersigned have executed and delivered this Escrow Agreement, as of the date first written above.
“COMPANY”
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|||
INSPIREMD LTD.
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an Israel corporation
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|||
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By:
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||
ESCROW AGENT:
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|||
GRUSHKO & XXXXXXX, P.C. | |||
By: | |||
Name: |
9
PURCHASER SIGNATURE PAGE TO
ESCROW AGREEMENT
The undersigned, in its capacity as a Purchaser, hereby executes and delivers the Escrow Agreement to which this signature page is attached and agrees to be bound by the Escrow Agreement on the date set forth on the first page of the Escrow Agreement. This counterpart signature page, together with all counterparts of the Escrow Agreement and signature pages of the other parties named therein, shall constitute one and the same instrument in accordance with the terms of the Escrow Agreement.
Debenture Principal Subscribed for:
|
||
$_______________________ | ||
[Print Name of Purchaser]
|
||
[Signature]
|
||
Telephone No.:__________________________________
|
||
Name:_________________________________________ |
Facsimile No:___________________________________
|
|
Title:__________________________________________ |
Email Address:__________________________________
|
|
Mailing Address: | Tax ID Number:__________________________________ | |
(City, State and Zip) |
10
SCHEDULE 1
(PURCHASERS)
PURCHASER AND ADDRESS
|
PRINCIPAL AMOUNT OF DEBENTURE
|
WARRANTS
|
Arvest Privatbank AG
Xxxxxx Xxxxxx, CEO
Xxxxxxxxxxxxx 00, XX Xxx 000
XX 0000, Xxxxxxxxx, Xxxxxxxxxxx
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$250,000
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19,779
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Genesis Asset Opportunity Fund LP
00 Xxxxx Xxxxxx
Xxx Xxxxxxxx, XX 00000
|
$1,250,000
|
98,892
|
Harborview Master Fund, LP
000 0xx Xxxxxx Xxxxx #0000
Xxx Xxxx, XX 00000
|
$80,000
|
6,329
|
TOTALS
|
$1,580,000
|
125,000
|
11
EXHIBIT C
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Term Sheet for InspireMD Inc.
Issuer:
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A public “shell” company listed on the OTCBB (the “Company”) with no liabilities or business activities as certified by its independent auditors that subject to the successful closing of the Offering will acquire at least 80% of InspireMD Ltd.'s share capital on a fully diluted basis (“Inspire”). In connection with the transactions described below, the Company shall change its name to InspireMD Inc. and obtain a new trading symbol consistent with such name.
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Security:
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Common Stock, par value $.001 per share (the “Common Stock”)
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Issuance Amount:
|
A minimum net cash of $7,500,000 but not exceeding $10,000,000 in the company's bank account at the Closing (defined below) after deductions of all fees and payments to Palladium and HarborviewF and any other third party, including counsel to Inspire and the Company with respect to the Offering, involved or in connection with the Reverse Merger of the Company (the “Offering”). The Issuance Amount shall not include the $1,500,000 Investment Amount to be lent to the Company under the Bridge Loan Term Sheet between the Company and Harborview of even date, which shall be converted into the Company's Common Stock at the Closing of the Offering.
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Price Per Share:
|
$1.50 per share
|
Warrants:
|
The investors shall receive 100% warrant coverage for the shares of Common Stock issued at the closing of the offering (the “Closing”), with each investor receiving (a) a four-year warrant to purchase 0.5 of one share of Common Stock at an exercise price of $2.00 per share for each share of Common Stock purchased in the Offering and (b) a two-year warrant to purchase 0.5 of one share of Common Stock at an exercise price of $2.50 per share for each share of Common Stock purchased in the Offering (each, a “Warrant”).
If at any time following the twelve (12) month anniversary of the closing date (a) the volume weighted average price of the Common Stock for fifteen (15) consecutive trading days is at least 175% of its respective exercise price; (b) the fifteen (15) day average daily trading volume of the Common Stock has been at least 150,000 shares and (c) a registration statement providing for the resale of the Common Stock issuable upon exercise of the Warrants is effective, the Company may require the investors to exercise all or a portion of their Warrants pursuant to the terms described above within 3 business days following such 15th day. Any Warrant that shall not be exercised as aforesaid shall expire automatically at the end of the said 15th day.
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Investor Protection:
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For a period of twelve (12) month period following the Closing, in the event that the Company issues or grants any shares of Common Stock or any warrants or other convertible securities pursuant to which shares of Common Stock may be acquired at a price less than $1.50 per share (other than in connection with employment arrangements or business combinations), then the price per share for Common Stocks issued to the Investors hereunder against the Investment Amount (but not the Warrants) shall be adjusted on a customary broad based "weighted average" as shall be determined in the Definitive Agreement.
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Registration Rights:
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The Company shall use reasonable commercial efforts to file a Registration Statement on Form S-1 covering the shares of Common Stock and the Common Stock underlying the Warrants as soon as practicable but no later than 180 calendar days from the Closing. The Company shall use its best efforts to cause such Registration Statement to be declared effective within 210 calendar days from the Closing. At least 1/3 (one third) of each registration statement shall be reserved for Common Stock to be held by existing Inspire's major shareholders (5% and up). Any existing major shareholder that shall not exercise his right in any share registration shall be entitled to roll over such non-exercised right to the next registration(s) at his sole discretion. If the Company fails to file the Registration Statement within the prescribed 180 day period or fails to have such Registration Statement declared effective within the prescribed 210 day period, then the Company shall pay to the investors in cash a fee equal to 1% of the dollar amount invested by each investor, for each month (i) in excess of 180 days following the Closing and (ii) in excess of 210 days following the Closing, as the case may be, with a ceiling of no more than 3% (three percent) of the dollar amount invested by each investor. Up to 30 day delay in performing one or two of the Company's obligations in this section shall not trigger the compensation to the invesors; provided that in any delay which is longer than 30 days the compensation herein shall be calculated as of the 1st day of the delay. Notwithstanding anything to the contrary contained herein, the Company shall not be obligated to pay any liquidated damages if the Company is unable to fulfill its registration obligations as a result of rules, regulations, positions or releases issued or actions taken by the SEC pursuant to its authority with respect to “Rule 415,” and the Company registers at such time the maximum number of shares of Common Stock permissible upon consultation with the staff of the SEC, in such registration statement and subsequent registration statements
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Page 2 of 8
Business
Combination:
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Immediately prior to the Closing and subject thereto especially the Offering, the Company shall acquire at least 80% of the issued and outstanding capital stock of InspireMD Ltd. (“Inspire”) on a fully diluted basis through a merger, share exchange or other business combination and shall succeed to the business of Inspire as its sole line of business (the “Business Combination”). In connection with the Business Combination, (a) the existing shareholders of Inspire on January 1st, 2010 shall receive 44 million shares of the Company in exchange for all of the outstanding capital stock of Inspire, resulting in Inspire becoming a subsidiary of the Company, (b) the existing option holders and holders of any other securities or debts exercisable or convertible into Inspire's ordinary shares, as set forth in Inspire's cap table a copy of which is attached hereto as Annex A, shall convert their securities in Inspire to the same type of securities bearing the same rights on a 1:0.81 ratio; and (c) the stockholders of the Company prior to the Business Combination shall be entitled to retain 5.5 million shares, of which 1.5 million shares shall be placed into escrow subject to the Stock Forfeiture Condition (as defined below) (the “Stockholder Escrow Shares”). Up to the 1st 500,000 ordinary share of the Company that have been issued by the Company at a PPS of at least $10 as of January 1st 2010 until the Closing against cash investment shall result in issuance of additional Common Stock on a 1 (Ordinary share):0.81 (Common Stock) ratio. In the event the Closing does not take place until the earlier between (i)180 days after the date hereof; (ii) or 2 months after the receiving of the Tax Ruling Inspire shall have the right to terminate the Business Combination. In such event the current shareholders of Inspire shall keep their current shareholding in Inspire, without any change.
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This Term Sheet as well as the definitive agreement shall not limit the Company from operating its business as it has prior to the consummation of the Business Combination, including but not limited to the granting of licenses to use the Company’s IP, selling and distributing its products and technology or entering into technological collaborations with any party.
Stock Forfeiture:
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In the event that the Company (i) records at least $10 million in revenue (on a consolidated basis), as certified by its independent auditors, during the twelve (12) month period following the Closing, and (ii) fails, after a good faith effort, to secure a listing on the Nasdaq Capital Market, Nasdaq Global Market or Nasdaq Global Select Market within twelve (12) months following the Closing, the Company shall have the right to cause the cancellation of the Stockholder Escrow Shares and consequently forfeit the Stockholder Escrow Shares.
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Placement Agent Fees:
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The Company shall pay Palladium Capital Advisors, LLC (“Palladium”) a cash fee in an amount of 8% of the actual aggregate proceeds from the sale of the Common Stock and Warrants at the Closing and shall issue Palladium a warrant to purchase that number of shares equal to 6% of the aggregate number of shares of Common Stock sold at the Closing. The warrants to be issued to Palladium shall be substantially similar in all respects to the Warrants except that the exercise price will be $1.50 per share. It is agreed upon that such 8% in cash and 6% in warrants shall be the total and final finder’s fees and Placement Agent Fees that the Company shall pay to any third party including Palladium and Harborview. In the event that a third party claims or found to be entitled to finder's fee in cash or otherwise in connection with the transactions contemplated herein and the Reverse Merger, Palladium shall pay such third the entire fees in cash, warrants or otherwise from Palladium Placement Agent Fees hereunder.
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Page 3 of 8
StockIncentive Plan:
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In connection with the Offering, the Company will adopt a stock incentive plan, pursuant to which new designated 7,476,000 shares of the Company’s Common Stock will be reserved for issuance to employees, directors, consultants, and other service providers. The Company shall not be permitted to increase the size of this plan or adopt an additional plan for twelve (12) months following the Closing. In addition, for twelve (12) months following the Closing the Company shall not issue any awards under this plan with an exercise price that is less than the lower between: (i) $1.50 per share; or (ii) average market price of the Common Stock for the 3 trading days prior to the grant of such shares.
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If the company records from January 1st, until the Offering Closing date a revenue increase of 150% from the same period in 2009 (on a proportionate basis), then Inspire's management shall be entitled to 300,000 options to purchase Inspire's Ordinary Shares. Such Options shall be fully vested and with an exercise price of NIS 0.01. Inspire's CEO and President shall allocate such Options between Inspire's management (which shall include also the CEO and President).
The Company shall use $240,000 exclusively for the payment of investor relations fees.
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In addition, following the Closing, the Company shall authorize the issuance of 500,000 shares of Common Stock be used exclusively for the payment of investor relations fees. In the event that any such shares remain unissued following the second year anniversary of the Closing, the Company shall cancel such shares.
Lock-upAgreements:
|
Subject to the Registration Rights of the Inspire's existing major shareholders as provided above, each of the directors of the Company, together with each shareholder of Inspire holding 5% or more of the issued share capital of the Company immediately prior to the Business Combination, will be required to enter lock-up agreements prior to the Closing, pursuant to which such persons may not, subject to certain exemptions, without the prior written consent of Palladium, directly or indirectly, offer, sell, offer to sell, contract to sell, hedge, pledge, sell any option or contract to purchase, purchase any option or contract to sell, grant any option, right or warrant to purchase or sell, or otherwise transfer or dispose of (or enter into any transaction or device that is designed to, or could be expected to, results in the disposition by any person at any time in the future), any securities of the Company beneficially owned or subsequently acquired until the twelve month anniversary of the Closing. The above Lock-up shall not apply to 10% of all securities held by each such major shareholder post Closing.
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Page 4 of 8
Use of Proceeds:
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Proceeds from the Offering shall be used as follows:
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• |
General Business Proceeds
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• |
$240,000 to be used for IR/PR Purposes
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Post Reverse
Merger
Capitalization:
|
• | Investors: 5,000,000 shares and Warrants to purchase 5,000,000 shares (assumes the minimum Offering) |
• |
Inspire shareholders: 44,000,000 shares
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• | Existing ESOP ~ 7,000,000 shares | |
• |
Pre-Merger Stockholders of the Company: 5,500,000 shares (1,500,000 of which shall be held in an escrow)
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|
• |
Harborview Advisors, LLC Warrants: 2,500,000 (1/3 of which shall be held in an escrow)
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|
• |
Palladium Placement Agent Warrants: 300,000 (assumes the minimum Offering)
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• |
Investor Relations: 500,000 shares
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• |
New Company Options (ESOP): 7,476,000 Shares, of which 2,100,000 (equals to 300,000 shares of Inspire) shall be reserved to the current management of Inspire as set forth in "Stock Incentive Plan" Section above
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See Exhibit A.
Other than as set forth above and in Exhibit A no other person or entity has or will have any right or option to purchase or obtain any capital stock or other securities of the public "shell" which will acquire Inspire.
Governing law:
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State of Israel
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Page 5 of 8
Closing:
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Closing will occur promptly upon negotiation of mutually acceptable definitive documentation. A Current Report on Form 8-K containing information required under Form 10 with respect to Inspire shall be filed by the Company within four business day following the Closing (the “Super 8-K”). The Closing shall take place no later than 6 months following the date hereof, provided that ALL Conditions to Closing have been met by such date. In the event not all the Conditions to Closing, other than the Tax Pre Ruling (defined below), have been met by November __, 2010 all the transactions contemplated in this Term Sheet shall terminate automatically and be with no effect without the need of any further action by either Party. In such event the current shareholders of Inspire shall keep their current shareholding in Inspire, without any change. If the Tax Pre Ruling is not received by the end of the aforesaid 6 month period Inspire shall be entitled to extend the Closing date by up to 9 additional months.
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Conditionsto Closing:
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Conditions to Closing in favor of the Company: (i) execution and delivery of the transaction documents; (ii) delivery of the purchase price; (iii) representations and warranties of the investors shall be true and correct as of the Closing; (iv) the investors shall have satisfied all covenants required to be satisfied at or prior to the Closing (v) the Company shall have received reconfirmed subscriptions for at least net cash amount of $7,500,000 as aforesaid; (vii) at least 80% of the shareholders and 80% of the option holders of the Company approved in writing the Offering and the Reverse Merger; and (vii) Current Inspire's shareholders and Inspire shall have received a favorable Israeli tax pre-ruling (the “Tax Pre Ruling”) to their full satisfaction providing that the consummation of the Business Combination shall constitute a deferred tax event for Inspire and its shareholders and shall not obligate them to pay any tax amounts prior to receiving actual funds resulting from sale of shares or assets of Inspire (the successor entity post the share exchange).
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Conditions to Closing in favor of the investors: (i) execution and delivery of the transaction documents; (ii) representations and warranties of the investors shall be true and correct as of the Closing; (iii) the Company shall have satisfied all covenants required to be satisfied at or prior to the Closing; (iv) delivery of the securities; (v) board resolutions approving the transactions; (vi) delivery of a legal opinion from the Company’s counsel and (vii) transfer agent instructions shall have been delivered to and acknowledged by the Company’s transfer agent.
Confidentiality:
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This term sheet is confidential, and none of its provisions or terms shall be disclosed to anyone who is not a prospective purchaser of the securities contemplated herein, an officer or director of the Company or their agent, adviser, or legal counsel, unless required by law.
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Non Binding Effect:
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Other than as set forth in the section entitled “Confidentiality”, which section constitutes binding obligations of the Parties, the transactions contained in this general Term Sheet does not constitute a binding obligation on the part of the Parties hereto.
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Documentation:
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The definitive documentation shall contain such additional and supplementary provisions, including, without limitation, certain representations, warranties, covenants, payments and remedies as are appropriate to preserve and protect economic benefits intended to be conveyed to the Company and the investors pursuant hereto.
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Page 6 of 8
Accepted and agreed this _____ day of May, 2010
InspireMD Ltd.
Agreed: | /s/ Xxxx Xxx | |
Xxxx Xxx | ||
CEO |
Palladium Capital Advisors, LLC:
Agreed: | ||
Xxxx Xxxxxxxx
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CEO |
The above terms constitute an indication of interest and are for discussion purposes only.
Page 7 of 8
Exhibit A
Post-Transaction Fully Diluted Capitalization Table
Common Stock
|
Percentage
|
|||||||
Former Inspire Shareholders
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44,000,000 | 81 | % | |||||
Pre-Transaction Company Shareholders
|
5,500,000 | 9 | % | |||||
Current Offering Purchases of Common Stock
|
5,000,000 | 9 | % | |||||
Investor Relations Shares
|
500,000 | (1) | 1 | % | ||||
Total (2)
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55,000,000 | (2) | 100.00 | % |
_____________
(1)
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Represents 500,000 shares of Common Stock reserved for issuance for investor relations.
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(2)
|
Excludes (i) 2,500,000 shares of Common Stock issuable upon the exercise of four year warrants, exercisable at $2.00 per share, to be issued to investors in the Offering, (ii) Represents 2,500,000 shares of Common Stock issuable upon the exercise of four year warrants, exercisable at $2.50 per share, to be issued to investors in the Offering, (iii) 2,500,000 shares of Common Stock issuable upon the exercise of three year warrants, exercisable at $1.50 per share, to be issued to Harborview Advisors, LLC and (iv) 7,476,000 new shares of Common Stock reserved for issuance under the stock incentive plan to be adopted by the Company; (v) approximately 7,000,000 shares of Common Stock reserved for issuance under Inspire's current ESOP; (vi) 300,000 shares of Common Stock upon the exercise of three year warrants, exercisable at $1.50 per share, to be issued to Palladium (if the minimum amount is raised and (vii) 916,667 shares of Common Stock issuance upon the exercise of five year warrants, exercisable at $1.36 per share, to be issued to investors in the bridge round financing.
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EXHIBIT D
NEITHER THE ISSUANCE AND SALE OF THE SECURITIES REPRESENTED BY THIS CERTIFICATE NOR THE SECURITIES INTO WHICH THESE SECURITIES ARE EXERCISABLE HAVE BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR APPLICABLE STATE SECURITIES LAWS. THE SECURITIES MAY NOT BE OFFERED FOR SALE, SOLD, TRANSFERRED OR ASSIGNED (I) IN THE ABSENCE OF (A) AN EFFECTIVE REGISTRATION STATEMENT FOR THE SECURITIES UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR (B) AN OPINION OF COUNSEL (WHICH COUNSEL SHALL BE SELECTED BY THE HOLDER), IN A GENERALLY ACCEPTABLE FORM, THAT REGISTRATION IS NOT REQUIRED UNDER SAID ACT OR (II) UNLESS SOLD PURSUANT TO RULE 144 OR RULE 144A UNDER SAID ACT. NOTWITHSTANDING THE FOREGOING, SUBJECT TO THE PROVISIONS OF THE BORROWER’S ARTICLES OF ASSOCIATION REGARDING RESTRICTIONS ON TRANSFER OF THE BORROWER'S SECURITIES, AS SHALL BE AMENDED FROM TIME TO TIME,THE SECURITIES MAY BE PLEDGED IN CONNECTION WITH A BONA FIDE MARGIN ACCOUNT OR OTHER LOAN OR FINANCING ARRANGEMENT SECURED BY THE SECURITIES.
Right to Purchase __________ Ordinary Shares of InspireMD Ltd. (subject to adjustment as provided herein)
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FORM OF ORDINARY SHARE PURCHASE WARRANT
No. 2010-001 | Issue Date: July ___, 2010 |
InspireMD Ltd., a corporation continued under the laws of the State of Israel (the “Company”), hereby certifies that, for value received, _______________________________, ____________________________________________, or its assigns (the “Holder”), is entitled, subject to the terms set forth below, to purchase from the Company at any time after the Issue Date until 5:00 p.m., Tel Aviv time, on three years after the Issue Date (the “Expiration Date”), up to ___________ fully paid and non-assessable Ordinary Shares at a per share purchase price of Ten Dollars (US$10). The aforedescribed purchase price per share, as adjusted from time to time as herein provided, is referred to herein as the “Purchase Price.” The number and character of such Ordinary Shares and the Purchase Price are subject to adjustment as provided herein. Capitalized terms used and not otherwise defined herein shall have the meanings set forth in that certain Securities Purchase Agreement (the “Securities Purchase Agreement”), dated as of July ___, 2010, entered into by the Company, the Holder and the other signatories thereto.
As used herein the following terms, unless the context otherwise requires, have the following respective meanings:
(A) The term “Ordinary Shares” includes (i) the Company’s Ordinary Shares, 0.01 New Israeli Shekel par value per share, as authorized on the date of the Securities Purchase Agreement, or (ii) any other securities into which or for which any of the securities described in (i) may be converted or exchanged pursuant to a plan of recapitalization, reorganization, merger, sale of assets or otherwise.
(B) The term “Other Securities” refers to any stock (other than Ordinary Shares) and other securities of the Company or any other person (corporate or otherwise) that the holder of the Warrant at any time shall be entitled to receive, or shall have received, on the exercise of the Warrant, in lieu of or in addition to Ordinary Shares, or which at any time shall be issuable or shall have been issued in exchange for or in replacement of Ordinary Shares or Other Securities pursuant to Section 4 or otherwise.
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(C) The term “Principal Market” shall mean the NASDAQ Global Market, NASDAQ Global Select Market, the NASDAQ Capital Market, the New York Stock Exchange, the NYSE Amex Equities, the OTC Bulletin Board or in the over-the-counter market or Pink Sheets.
(D) The term “Warrant Shares” shall mean the Ordinary Shares issuable upon exercise of this Warrant.
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3. Adjustment for Reorganization, Consolidation, Merger, etc.
3.1. Fundamental Transaction. If, at any time while this Warrant is outstanding, (A) the Company effects any merger or consolidation of the Company with or into another entity or (B) the Company effects any reclassification of the Ordinary Shares or any compulsory share exchange pursuant to which the Ordinary Shares is effectively converted into or exchanged for other securities, cash or property (in any such case, a “Fundamental Transaction”), then the Holder shall have the right thereafter to receive, upon exercise of this Warrant, the same amount and kind of securities, cash or property as it would have been entitled to receive upon the occurrence of such Fundamental Transaction if it had been, immediately prior to such Fundamental Transaction, the holder of the number of Warrant Shares then issuable upon exercise in full of this Warrant, subject to the limitations set forth herein (the “Alternate Consideration”). The aggregate Purchaser Price for this Warrant will not be affected by any such Fundamental Transaction, but the Company shall apportion such aggregate Purchase Price among the Alternate Consideration in a reasonable manner reflecting the relative value of any different components of the Alternate Consideration. If holders of Ordinary Shares are given any choice as to the securities, cash or property to be received in a Fundamental Transaction, then the Holder shall be given the same choice as to the Alternate Consideration it receives upon any exercise of this Warrant following such Fundamental Transaction. To the extent necessary to effectuate the foregoing provisions, any successor to the Company or surviving entity in such Fundamental Transaction shall issue to the Holder a new warrant consistent with the foregoing provisions and evidencing the Holder's right to exercise such warrant into Alternate Consideration. The terms of any agreement pursuant to which a Fundamental Transaction is effected shall include terms requiring any such successor or surviving entity to comply with the provisions of this Section 3.1 and insuring that this Warrant (or any such replacement security) will be similarly adjusted upon any subsequent transaction analogous to a Fundamental Transaction. The Merger is a Fundamental Transaction. The Company shall give the Holder not less than fifteen (15) Business Days notice prior to any Fundamental Transaction (“Fundamental Transaction Notice”). The failure to timely give a Fundamental Transaction Notice shall extend any rights of the Holder pursuant to this Warrant until fifteen (15) Business Days after receipt of a Fundamental Transaction Notice.
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4. Extraordinary Events Regarding Ordinary Shares. In the event that the Company shall (a) issue additional Ordinary Shares as a dividend or other distribution of its assets on outstanding Ordinary Shares, (b) subdivide its outstanding Ordinary Shares, or (c) combine its outstanding Ordinary Shares into a smaller number of Ordinary Shares, then, in each such event, the Purchase Price shall, simultaneously with the happening of such event, be adjusted by multiplying the then Purchase Price by a fraction, the numerator of which shall be the number of Ordinary Shares outstanding immediately prior to such event and the denominator of which shall be the number of Ordinary Shares outstanding immediately after such event, and the product so obtained shall thereafter be the Purchase Price then in effect. The Purchase Price, as so adjusted, shall be readjusted in the same manner upon the happening of any successive event or events described herein in this Section 4. The number of Ordinary Shares that the Holder of this Warrant shall thereafter, on the exercise hereof, be entitled to receive shall be adjusted to a number determined by multiplying the number of Ordinary Shares that would otherwise (but for the provisions of this Section 4) be issuable on such exercise by a fraction of which (a) the numerator is the Purchase Price that would otherwise (but for the provisions of this Section 4) be in effect, and (b) the denominator is the Purchase Price in effect on the date of such exercise.
5. Certificate as to Adjustments. In each case of any adjustment or readjustment in the Ordinary Shares (or Other Securities) issuable on the exercise of the Warrants, the Company at its expense will promptly cause its Chief Financial Officer or other appropriate designee to compute such adjustment or readjustment in accordance with the terms of the Warrant and prepare a certificate setting forth such adjustment or readjustment and showing in detail the facts upon which such adjustment or readjustment is based, including a statement of (a) the consideration received or receivable by the Company for any additional Ordinary Shares (or Other Securities) issued or sold or deemed to have been issued or sold, (b) the number of Ordinary Shares (or Other Securities) outstanding or deemed to be outstanding, and (c) the Purchase Price and the number of Ordinary Shares to be received upon exercise of this Warrant, in effect immediately prior to such adjustment or readjustment and as adjusted or readjusted as provided in this Warrant.. The Company will forthwith mail a copy of each such certificate to the Holder of the Warrant and any Warrant Agent of the Company (appointed pursuant to Section 11 hereof).
6. Reservation of Stock, etc. Issuable on Exercise of Warrant; Financial Statements. The Company will at all times reserve and keep available, solely for issuance and delivery on the exercise of the Warrants, all Ordinary Shares (or Other Securities) from time to time issuable on the exercise of the Warrant. This Warrant entitles the Holder hereof, upon written request, to receive copies of all financial and other information distributed or required to be distributed to the holders of the Company's Ordinary Shares.
7. Assignment; Exchange of Warrant. Subject to compliance with applicable securities laws and the Company’s Articles of Association, as may be amended from time, this Warrant, and the rights evidenced hereby, may be transferred by any registered holder hereof (a “Transferor”). On the surrender for exchange of this Warrant, with the Transferor's endorsement in the form of Exhibit B attached hereto (the “Transferor Endorsement Form”) and together with an opinion of counsel reasonably satisfactory to the Company that the transfer of this Warrant will be in compliance with applicable securities laws and the Company's Articles of Association, as may be amended from time to time, the Company will issue and deliver to or on the order of the Transferor thereof a new Warrant or Warrants of like tenor, in the name of the Transferor and/or the transferee(s) specified in such Transferor Endorsement Form (each a “Transferee”), calling in the aggregate on the face or faces thereof for the number of Ordinary Shares called for on the face or faces of the Warrant so surrendered by the Transferor.
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INSPIREMD LTD.
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By:
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Name: Xxxx Xxx | |||
Title: CEO | |||
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Exhibit A
FORM OF SUBSCRIPTION
(to be signed only on exercise of Warrant)
TO: INSPIREMD LTD.
The undersigned, pursuant to the provisions set forth in the attached Warrant (No. ___________), hereby irrevocably elects to purchase ________ Ordinary Shares covered by such Warrant
The undersigned herewith makes payment of the full purchase price for such shares at the price per share provided for in such Warrant, which is $___________.
The undersigned requests that the certificates for such shares be issued in the name of, and delivered pursuant to the DTC instructions below or to __________________________________________ whose address is ____________________________________________________________________________
____________________________________________________________________________________.
The undersigned represents and warrants that all offers and sales by the undersigned of the securities issuable upon exercise of the within Warrant shall be made pursuant to registration of the Ordinary Shares under the Securities Act of 1933, as amended (the “Securities Act”), or pursuant to an exemption from registration under the Securities Act.
DTC Instructions: ____________________________________________________________________
___________________________________________________________________________________
___________________________________________________________________________________
Dated:___________________
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_______________________________________
(Signature must conform to name of holder as specified on the face of the Warrant)
_______________________________________
_______________________________________
(Address)
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Exhibit B
FORM OF TRANSFEROR ENDORSEMENT
(To be signed only on transfer of Warrant)
For value received, the undersigned hereby sells, assigns, and transfers unto the person(s) named below under the heading “Transferees” the right represented by the within Warrant to purchase the percentage and number of Ordinary Shares of INSPIREMD LTD. to which the within Warrant relates specified under the headings “Percentage Transferred” and “Number Transferred,” respectively, opposite the name(s) of such person(s) and appoints each such person Attorney to transfer its respective right on the books of INSPIREMD LTD. with full power of substitution in the premises.
Transferees
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Percentage Transferred
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Number Transferred
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Dated: __________________, _______
Signed in the presence of:
________________________________
(Name)
ACCEPTED AND AGREED:
[TRANSFEREE]
________________________________
(Name)
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___________________________________________________
(Signature must conform to name of holder as specified on the face of the warrant)
___________________________________________________
___________________________________________________
(address)
___________________________________________________
___________________________________________________
(address)
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