SECURITIES PURCHASE AGREEMENT
This Securities Purchase Agreement (this “Agreement”) is dated as of April 5, 2012, between InspireMD, Inc., a Delaware corporation (the “Company”), and each purchaser identified on the signature pages hereto (each, including its successors and assigns, a “Purchaser” and collectively, the “Purchasers”).
ARTICLE I.
“Action” shall have the meaning ascribed to such term in Section 3.1(j).
“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.
“Business Day” means any day except any Saturday, any Sunday, any day which is a federal legal holiday in the United States or any day on which banking institutions in the State of New York are authorized or required by law or other governmental action to close.
“Closing” means the closing of the purchase and sale of the Securities pursuant to Section 2.1.
“Common Stock Equivalents” means any securities of the Company or the Subsidiaries which would entitle the holder thereof to acquire at any time Common Stock, including, without limitation, any debt, preferred stock, right, option, warrant or other instrument that is at any time convertible into or exercisable or exchangeable for, or otherwise entitles the holder thereof to receive, Common Stock.
“Contingent Obligation” shall have the meaning ascribed to such term in Section 3.1(aa).
“Debentures” means the 8% Original Issue Discount Senior Secured Convertible Debentures due, subject to the terms therein, two years from their date of issuance, issued by the Company to the Purchasers hereunder, in the form of Exhibit A attached hereto.
“Deposit Account Control Agreement” means the deposit account control agreement, dated the date hereof, among the Company, HUG Funding LLC, as Agent, and Bank Leumi USA.
“Escrow Agent” means Law Debenture Trust Company of New York, with offices at 000 Xxxxxxx Xxxxxx, Xxxxx 0X, Xxx Xxxx, Xxx Xxxx 00000.
“Exchange Act” means the Securities Exchange Act of 1934, as amended, and the rules and regulations promulgated thereunder.
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“GAAP” shall have the meaning ascribed to such term in Section 3.1(h).
“Israeli Subsidiary” means InspireMD Ltd., an Israeli company and wholly owned subsidiary of the Company.
“Israeli Security Agreement” means the Israeli Security Agreement, dated the date hereof, among the Company, the Israeli Subsidiary and the Purchasers, in the form of Exhibit E attached hereto.
“Legend Removal Date” shall have the meaning ascribed to such term in Section 4.1(c).
“Legend Removal Qualification Event” shall have the meaning ascribed to such term in Section 4.1(c).
“Lien” means a lien, charge, pledge (fixed or floating), security interest, encumbrance, right of first refusal, preemptive right or other restriction.
“Material Adverse Effect” shall have the meaning assigned to such term in Section 3.1(b).
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“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.
“Medical Device” shall mean any instrument, apparatus, implement, machine, contrivance, implant, in vitro reagent, or other similar or related article, including a component part, or accessory which is: recognized in the official National Formulary, or the United States Pharmacopoeia, or any supplement to them, intended for use in the diagnosis of disease or other conditions, or in the cure, mitigation, treatment, or prevention of disease, in man or other animals, or intended to affect the structure or any function of the body of man or other animals, and which does not achieve any of its primary intended purposes through chemical action within or on the body of man or other animals and which is not dependent upon being metabolized for the achievement of any of its primary intended purposes or other non-drug based medical related technology or product developed, manufactured, marketed or distributed by the Company as of the date hereof.
“Meitar” means the law firm of Meitar Liquornik Geva & Leshem Xxxxxxxxx, with offices at 00 Xxxx Xxxxxx Xxxx, Xxxxx Xxx, 00000, Israel.
“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.
“Placement Agents” shall mean Xxxxxxxxxxx & Co. Inc., JMP Securities Inc. and Palladium Capital Advisors, LLC, in each case in their capacities as placement agents for the offering of the Securities on a best efforts basis.
“Principal Amount” means, as to each Purchaser, the amounts set forth below such Purchaser’s signature block on the signature pages hereto next to the heading “Principal Amount,” in United States Dollars, which shall equal such Purchaser’s Subscription Amount divided by 0.94.
“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.
“Public Information Failure” shall have the meaning ascribed to such term in Section 4.3(b).
“Public Information Failure Payments” shall have the meaning ascribed to such term in Section 4.3(b).
“Purchaser Party” shall have the meaning ascribed to such term in Section 4.10.
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“Registration Rights Agreement” means the Registration Rights Agreement, dated the date hereof, among the Company and the Purchasers, in the form of Exhibit G attached hereto.
“Registration Statement” means a registration statement meeting the requirements set forth in the Registration Rights Agreement and covering the resale of the Underlying Shares by each Purchaser as provided for in the Registration Rights Agreement.
“Required Approvals” shall have the meaning ascribed to such term in Section 3.1(e).
“Required Minimum” means, as of any date, the maximum aggregate number of shares of Common Stock then issued or potentially issuable in the future pursuant to the Transaction Documents, including any Underlying Shares issuable upon exercise in full of all Warrants or conversion in full of all Debentures, ignoring any conversion or exercise limits set forth therein, and assuming that the Conversion Price is at all times on and after the date of determination 75% of the then Conversion Price on the Trading Day immediately prior to the date of determination.
“Rule 144” means Rule 144 promulgated by the Commission pursuant to the Securities Act, as such Rule may be amended or interpreted from time to time, or any similar rule or regulation hereafter adopted by the Commission having substantially the same purpose and effect as such Rule.
“Rule 424” means Rule 424 promulgated by the Commission pursuant to the Securities Act, as such Rule may be amended or interpreted from time to time, or any similar rule or regulation hereafter adopted by the Commission having substantially the same purpose and effect as such Rule.
“SEC Reports” shall have the meaning ascribed to such term in Section 3.1(h).
“Securities” means the Debentures, the Warrants, the Warrant Shares and the Underlying Shares.
“Securities Act” means the Securities Act of 1933, as amended, and the rules and regulations promulgated thereunder.
“Security Agreement” means the Security Agreement, dated the date hereof, among the Company and the Purchasers, in the form of Exhibit D attached hereto.
“Security Documents” shall mean the Security Agreement, the Subsidiary Guarantees, the Israeli Security Agreement, the Deposit Account Control Agreement and any other documents and filing required thereunder in order to grant the Purchasers a first priority security interest in the assets of the Company and the Subsidiaries as provided in the Security Agreement, including all UCC-1 filing receipts and evidence of all mortgage or other required filings necessary to perfect the first priority security interest in the Company’s and its Subsidiaries’ Intellectual Property Rights (such filings, the “US IP Filings”) and fixed and floating pledges in the assets of the Israeli Subsidiary as provided in the Israeli Security Agreement, including all filing receipts and evidence of all required filings necessary to perfect the fixed pledge over the Israeli Subsidiary’s Intellectual Property Rights (such filings, the “Israeli IP Filings” and, together with the US IP Filings, the “IP Filings”).
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“Short Sales” means all “short sales” as defined in Rule 200 of Regulation SHO under the Exchange Act (but shall not be deemed to include the location and/or reservation of borrowable shares of Common Stock).
“Subscription Amount” means, as to each Purchaser, the aggregate amount to be paid for Debentures and Warrants purchased at the Closing and as specified below such Purchaser’s name on the signature page of this Agreement and next to the heading “Subscription Amount,” in United States dollars and in immediately available funds.
“Subsidiary” means any subsidiary of the Company as set forth on Schedule 3.1(a) (including the Israeli Subsidiary) and shall, where applicable, also include any direct or indirect subsidiary of the Company formed or acquired after the date hereof.
“Subsidiary Guarantees” means the Subsidiary Guarantees, dated the date hereof, by each Subsidiary in favor of the Purchasers, in the form of Exhibit F attached hereto.
“Trading Day” means a day on which the principal Trading Market is open for trading.
“Trading Market” means any of the following markets or exchanges on which the Common Stock is listed or quoted for trading on the date in question: the NYSE AMEX, the Nasdaq Capital Market, the Nasdaq Global Market, the Nasdaq Global Select Market, the New York Stock Exchange, the OTC Bulletin Board or the OTCQB over-the-counter bulletin board service maintained by OTC Markets Group Inc. (or any successors to any of the foregoing).
“Transaction Documents” means this Agreement, the Debentures, the Warrants, the Registration Rights Agreement, the Security Agreement, the Israeli Security Agreement, the Subsidiary Guarantee, all exhibits and schedules thereto and hereto and any other documents or agreements executed in connection with the transactions contemplated hereunder.
“Transfer Agent” means Action Stock Transfer Corp., the current transfer agent of the Company, with a mailing address of 0000 X. Xxxx Xxxxx Xxxx, Xxx 000, Xxxx Xxxx Xxxx, XX 00000 and a facsimile number of (000) 000-0000, and any successor transfer agent of the Company.
“Underlying Shares” means the shares of Common Stock issued and issuable upon conversion or redemption of the Debentures and upon exercise of the Warrants and issued and issuable in lieu of the cash payment of interest and other amounts on the Debentures in accordance with the terms of the Debentures.
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“Variable Rate Transaction” shall have the meaning ascribed to such term in Section 4.13.
“VWAP” means, for any date, when the price determined by the first of the following clauses that applies: (a) if the Common Stock is listed or quoted on a Trading Market, the daily volume weighted average price of the Common Stock for such date (or the nearest preceding date) on the Trading Market on which the Common Stock is then listed or quoted as reported by Bloomberg L.P. (based on a Trading Day from 9:30 a.m. (New York City time) to 4:02 p.m. (New York City time)) or (b) in all other cases, the fair market value of a share of Common Stock as determined by an independent appraiser selected in good faith by the Purchasers of a majority in interest of the Securities then outstanding and reasonably acceptable to the Company, the fees and expenses of which shall be paid by the Company.
“Warrants” means, collectively, the Common Stock purchase warrants delivered to the Purchasers at the Closing in accordance with Section 2.2(a) hereof, which Warrants shall be exercisable immediately and have a term of exercise equal to five years from the Closing Date, in the form of Exhibit B attached hereto. The Placement Agents and/or their designees are also receiving placement agent warrants as compensation for services rendered in connection with the transactions set forth herein, which warrants shall also constitute “Warrants” for all purposes hereunder.
“Warrant Shares” means the shares of Common Stock issuable upon exercise of the Warrants.
ARTICLE II.
(a) On or prior to 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;
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(ii) a legal opinion of Company Counsel, substantially in the form of Exhibit C-1 attached hereto and a legal opinion of Kafri Leibovich, Law Office, Israeli counsel to the Company, substantially in the form of Exhibit C-2 attached hereto, in each case addressed to the Purchasers and the Placement Agents;
(iii) a Debenture with a principal amount equal to such Purchaser’s Principal Amount, registered in the name of such Purchaser;
(iv) a Warrant registered in the name of such Purchaser to purchase up to a number of shares of Common Stock equal to 50% of the number of shares of Common Stock into which the Debenture issued to such Purchaser would be convertible at the Closing, with an exercise price equal to $1.80 per share of Common Stock, subject to adjustment as set forth therein;
(v) the Registration Rights Agreement duly executed by the Company;
(vi) the Security Agreement and the Israeli Security Agreement, each duly executed by the Company and each Subsidiary party thereto, along with all of the Security Documents, including the Subsidiary Guarantee, duly executed by the parties thereto; and
(vii) evidence of the IP Filings, including true and complete copies of the documents evidencing the IP Filings.
(b) On or prior to the Closing Date, each Purchaser shall deliver or cause to be delivered the following:
(i) to the Company, this Agreement duly executed by such Purchaser;
(ii) to the Escrow Agent, such Purchaser’s Subscription Amount by wire transfer or certified check to the account specified in the Escrow Agreement;
(iii) to the Company, the Registration Rights Agreement, duly executed by such Purchaser; and
(iv) to the Company, the Security Agreement and Israeli Security Agreement, each duly executed by such Purchaser.
(a) The obligations of the Company hereunder in connection with each Purchaser in respect of the Closing are subject to the following conditions being met:
(i) the accuracy in all respects at the time of the Closing of the representations and warranties of such Purchaser contained herein (unless as of a specific date therein in which case they shall be accurate as of such date);
(ii) all obligations, covenants and agreements of such Purchaser required to be performed at or prior to the Closing shall have been performed; and
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(iii) the delivery by such Purchaser of the items set forth in Section 2.2(b) of this Agreement.
(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 respects when made at the time of the Closing of the representations and warranties of the Company contained herein (unless as of a specific date therein);
(ii) all obligations, covenants and agreements of the Company required to be performed at or prior to the Closing shall have been performed;
(iii) the delivery by the Company of the items set forth in Section 2.2(a) of this Agreement;
(iv) from the date hereof to the Closing Date, trading in the Common Stock shall not have been suspended by the Commission or the Company’s principal Trading Market and, at any time prior to the Closing Date, trading in securities generally as reported by Bloomberg L.P. shall not have been suspended or limited, or minimum prices shall not have been established on securities whose trades are reported by such service, or on any Trading Market, nor shall a banking moratorium have been declared either by the United States or New York State authorities nor shall there have occurred any material outbreak or escalation of hostilities or other national or international calamity of such magnitude in its effect on, or any material adverse change in, any financial market which, in each case, in the reasonable judgment of such Purchaser, makes it impracticable or inadvisable to purchase the Securities at the Closing; and
(v) the Purchasers shall have completed to their satisfaction their due diligence investigation of the Company.
ARTICLE III.
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(ff) Seniority. As of the Closing, no Indebtedness or other claim (other than trade payables entered into in the ordinary course of business) against the Company is senior to the Debentures in right of payment, whether with respect to interest or upon liquidation or dissolution, 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).
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The Company acknowledges and agrees that the representations contained in Section 3.2 shall not modify, amend or affect such Purchaser’s right to rely on the Company’s representations and warranties contained in this Agreement or any representations and warranties contained in any other Transaction Document or any other document or instrument executed and/or delivered in connection with this Agreement or the consummation of the transaction contemplated hereby.
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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 a Purchaser 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 the Registration Rights Agreement and shall have the rights and obligations of a Purchaser under this Agreement and the Registration Rights Agreement.
(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. THIS SECURITY [AND THE SECURITIES ISSUABLE UPON [EXERCISE] [CONVERSION] OF THIS SECURITY] MAY BE PLEDGED IN CONNECTION WITH A BONA FIDE MARGIN ACCOUNT WITH A REGISTERED BROKER-DEALER OR OTHER LOAN WITH A FINANCIAL INSTITUTION THAT IS AN “ACCREDITED INVESTOR” AS DEFINED IN RULE 501(a) UNDER THE SECURITIES ACT OR OTHER LOAN SECURED BY SUCH 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 the Registration Rights Agreement and, if required under the terms of such arrangement, such 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, no notice shall be required of such pledge. At the appropriate 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, including, if the Securities are subject to registration pursuant to the Registration Rights Agreement, the preparation and filing of any required prospectus supplement under Rule 424(b)(3) under the Securities Act or other applicable provision of the Securities Act to appropriately amend the list of Selling Stockholders (as defined in the Registration Rights Agreement) thereunder.
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(c) Certificates evidencing the Underlying Shares shall not contain any legend (including the legend set forth in Section 4.1(b) hereof): (i) while a registration statement (including the Registration Statement) covering the resale of such security is effective under the Securities Act, (ii) following any sale of such Underlying Shares pursuant to Rule 144, (iii) following the six-month anniversary of the Closing Date if such Underlying Shares are eligible for sale under Rule 144 without volume or manner-of-sale restrictions and as of such date the Company is in compliance with the current public information required under Rule 144 as to such Underlying Shares, or (iv) if such legend is not required under applicable requirements of the Securities Act (including judicial interpretations and pronouncements issued by the staff of the Commission) (each such event being a “Legend Removal Qualification Event”). Upon request, the Company shall cause its counsel to issue a legal opinion to the Transfer Agent, if required by the Transfer Agent, promptly after a Legend Removal Qualification Event and the delivery to the Company or the Company’s counsel of any reasonable certifications requested by the Company or the Company’s counsel in connection with the issuance of such opinion to effect the removal of the legend hereunder with respect to any qualifying Underlying Shares. Following an applicable Legend Removal Qualification Event, the Company will no later than three (3) Trading Days following the delivery by a Purchaser to the Company or the Transfer Agent (with notice to the Company) of (i) a legended certificate representing Underlying Shares (endorsed or with stock powers attached, signatures guaranteed, and otherwise in form necessary to affect the reissuance and/or transfer) or (ii) a Notice of Exercise or Notice of Conversion in the manner stated in the Warrants or Debentures to effect the exercise of a Warrant or conversion of a Debenture in accordance with its terms, and, in each case, any reasonable certifications from the Purchaser requested by the Company or the Company’s counsel in order to effectuate a legend removal (such third Trading Day, the “Legend Removal Date”), deliver or cause to be delivered to such Purchaser a certificate representing such Underlying Shares that is free from all restrictive and other legends. In addition, promptly upon request of a Purchaser, the Company shall cause its counsel to promptly, but in no event later than two (2) Trading Days after such request and the delivery to the Company or the Company’s counsel of any reasonable certifications requested by the Company or the Company’s counsel, issue a legal opinion to the Transfer Agent at any time after the six month anniversary of the Closing Date if required by the Transfer Agent to transfer any of the Underlying Shares, which legal opinion shall provide that a Purchaser may transfer any of the Underlying Shares free of restriction during the 10 Trading Days following the date of such legal opinion and that the transferee thereof shall receive the Underlying Shares free from all restrictive and other legends. The Company may not make any notation on its records or give instructions to the Transfer Agent that enlarge the restrictions on transfer set forth in this Section 4. Certificates for Underlying Shares subject to legend removal hereunder shall be transmitted by the Transfer Agent to the Purchaser by crediting the account of the Purchaser’s prime broker with the Depository Trust Company System as directed by such Purchaser if the Company is then a participant in such system. In the event that, as of the Closing, the Company's Common Stock does not participate in The Depository Trust Company’s Deposit or Withdrawal at Custodian (“DWAC”) system program, the Company shall use commercially reasonable efforts to ensure that the Company becomes a participant in the DWAC system as soon as practicable following the Closing.
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(d) In addition to such Purchaser’s other available remedies, the Company shall pay to a Purchaser, in cash, as partial liquidated damages and not as a penalty, for each $1,000 of Underlying Shares (based on the VWAP of the Common Stock on the date such Securities are submitted to the Transfer Agent) delivered for removal of the restrictive legend and subject to Section 4.1(c), $5 per Trading Day (increasing to $10 per Trading Day five (5) Trading Days after such damages have begun to accrue) for each Trading Day commencing on the third Trading Day following the Legend Removal Date, until such certificate is delivered without a legend. Nothing herein shall limit such Purchaser’s right to pursue actual damages for the Company’s failure to deliver certificates representing any Securities as required by the Transaction Documents, and such Purchaser shall have the right to pursue all remedies available to it at law or in equity including, without limitation, a decree of specific performance and/or injunctive relief.
(e) Each Purchaser, severally and not jointly with the other Purchasers, agrees with the Company that such Purchaser will sell any Securities pursuant to either the registration requirements of the Securities Act, including any applicable prospectus delivery requirements, or an exemption therefrom, and that if Securities are sold pursuant to the Registration Statement, they will be sold in compliance with the plan of distribution set forth therein, and acknowledges that the removal of the restrictive legend from certificates representing Securities as set forth in this Section 4.1 is predicated upon the Company’s reliance upon this understanding.
4.2 Acknowledgment of Dilution. The Company acknowledges that the issuance of the Securities may result in dilution of the outstanding shares of Common Stock, which dilution may be substantial under certain market conditions. The Company further acknowledges that its obligations under the Transaction Documents, including, without limitation, its obligation to issue the Underlying Shares pursuant to the Transaction Documents, are unconditional and absolute and not subject to any right of set off, counterclaim, delay or reduction, regardless of the effect of any such dilution or any claim the Company may have against any Purchaser and regardless of the dilutive effect that such issuance may have on the ownership of the other stockholders of the Company.
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(a) Until the earliest of (i) 5 years following the Closing Date or (ii) the time that no Purchaser holds or has the right to acquire at least $375,000 of Underlying Shares (based on the VWAP of the Common Stock on the date of determination) (such earlier date, the “End Date”), the Company covenants to maintain the registration of the Common Stock under Section 12(b) or 12(g) of the Exchange Act and to timely file (or obtain extensions in respect thereof and file within the applicable grace period) all reports required to be filed by the Company after the date hereof pursuant to the Exchange Act even if the Company is not then subject to the reporting requirements of the Exchange Act.
(b) At any time during the period commencing from the six (6) month anniversary of the date hereof and ending on the End Date, if the Company shall fail for any reason to satisfy the current public information requirement under Rule 144(c) (a “Public Information Failure”) then, in addition to such Purchaser’s other available remedies, the Company shall pay to a Purchaser, in cash, as partial liquidated damages and not as a penalty, by reason of any such delay in or reduction of its ability to sell the Securities, an amount in cash equal to one percent (1.0%) of the aggregate Subscription Amount of such Purchaser’s Securities on the day of a Public Information Failure and on every thirtieth (30th) day (pro rated for periods totaling less than 30 days) thereafter until the earlier of (a) the date such Public Information Failure is cured and (b) such time that such public information is no longer required for the Purchasers to transfer the Underlying Shares pursuant to Rule 144. The payments to which a Purchaser shall be entitled pursuant to this Section 4.3(b) are referred to herein as “Public Information Failure Payments.” Public Information Failure Payments shall be paid on the earlier of (i) the last day of the calendar month during which such Public Information Failure Payments are incurred and (ii) the fifth (5th) Business Day after the event or failure giving rise to the Public Information Failure Payments is cured. In the event the Company fails to make Public Information Failure Payments in a timely manner, such Public Information Failure Payments shall bear interest at the rate of 1.5% per month (prorated for partial months) until paid in full. Nothing herein shall limit such Purchaser’s right to pursue actual damages for the Public Information Failure, and such Purchaser shall have the right to pursue all remedies available to it at law or in equity including, without limitation, a decree of specific performance and/or injunctive relief.
4.4 Integration. The Company shall not sell, offer for sale or solicit offers to buy or otherwise negotiate in respect of any security (as defined in Section 2 of the Securities Act) that would be integrated with the offer or sale of the Securities in a manner that would require the registration under the Securities Act of the sale of the Securities or that would be integrated with the offer or sale of the Securities for purposes of the rules and regulations of any Trading Market such that it would require shareholder approval prior to the closing of such other transaction unless shareholder approval is obtained before the closing of such subsequent transaction.
4.5 Conversion and Exercise Procedures. Each of the form of Notice of Exercise included in the Warrants and the form of Notice of Conversion included in the Debentures set forth the totality of the procedures required of the Purchasers in order to exercise the Warrants or convert the Debentures. No additional legal opinion, other information or instructions shall be required of the Purchasers to exercise their Warrants or convert their Debentures. The Company shall honor exercises of the Warrants and conversions of the Debentures and shall deliver Underlying Shares in accordance with the terms, conditions and time periods set forth in the Transaction Documents.
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4.6 Securities Laws Disclosure; Publicity. The Company shall, by 8:30 a.m. (New York City time) on the Trading Day immediately following the date hereof, file a Current Report on Form 8-K and press release, in a form reasonably acceptable to Xxxxxxxxxxx & Co. Inc. on behalf of the Placement Agents, disclosing the material terms of the transactions contemplated hereby, including the Transaction Documents as exhibits thereto. From and after the issuance of such press release, the Company represents to the Purchasers that it shall have publicly disclosed all material, non-public information delivered to any of the Purchasers by the Company or any of its Subsidiaries, or any of their respective officers, directors, employees or agents in connection with the transactions contemplated by the Transaction Documents. The Company and each Purchaser shall consult with each other in issuing any other press releases with respect to the transactions contemplated hereby, and neither the Company nor any Purchaser shall issue any such press release nor otherwise make any such public statement without the prior consent of the Company, with respect to any press release of any Purchaser, or without the prior consent of each Purchaser, with respect to any press release of the Company, which consent shall not unreasonably be withheld or delayed, except if such disclosure is required by law, in which case the disclosing party shall promptly provide the other party with prior notice of such public statement or communication. Notwithstanding the foregoing, the Company shall not publicly disclose the name of any Purchaser, or include the name of any Purchaser in any filing with the Commission or any regulatory agency or Trading Market, without the prior written consent of such Purchaser, except: (a) as required by federal securities law in connection with (i) any registration statement contemplated by the Registration Rights Agreement and (ii) the filing of final Transaction Documents (including conformed signature pages thereto) with the Commission and (b) to the extent such disclosure is required by law or Trading Market regulations, in which case the Company shall provide the Purchasers with prior notice of such disclosure permitted under this clause (b).
4.8 Non-Public Information. Except with respect to the material terms and conditions of the transactions contemplated by the Transaction Documents, the Company covenants and agrees that neither it, nor any other Person acting on its behalf, will provide any Purchaser or its agents or counsel with any information that the Company believes constitutes material non-public information, unless prior thereto such Purchaser shall have entered into a written agreement with the Company regarding the confidentiality and use of such information. The Company understands and confirms that each Purchaser shall be relying on the foregoing covenant in effecting transactions in securities of the Company.
4.9 Use of Proceeds. The Company shall use the net proceeds from the sale of the Securities hereunder for (i) conducting clinical trials, (ii) expanding its sales and marketing division and (ii) its general working capital purposes and shall not use such proceeds: (a) for the satisfaction of any portion of the Company’s debt (other than as set out herein and for the payment of trade payables in the ordinary course of the Company’s business and prior practices), (b) for the redemption of any Common Stock or Common Stock Equivalents, (c) for the settlement of any outstanding litigation or (d) in violation of FCPA or OFAC regulations.
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4.10 Indemnification of Purchasers. Subject to the provisions of this Section 4.10, the Company will indemnify and hold each Purchaser and its directors, officers, shareholders, members, partners, employees and agents (and any other Persons with a functionally equivalent role of a Person holding such titles notwithstanding a lack of such title or any other title), each Person who controls such Purchaser (within the meaning of Section 15 of the Securities Act and Section 20 of the Exchange Act), and the directors, officers, shareholders, agents, members, partners or employees (and any other Persons with a functionally equivalent role of a Person holding such titles notwithstanding a lack of such title or any other title) of such controlling persons (each, a “Purchaser Party”) harmless from any and all losses, liabilities, obligations, claims, contingencies, damages, costs and expenses, including all judgments, amounts paid in settlements, court costs and reasonable attorneys’ fees and costs of investigation that any such Purchaser Party may suffer or incur as a result of or relating to (a) any breach of any of the representations, warranties, covenants or agreements made by the Company in this Agreement or in the other Transaction Documents or (b) any action instituted against the Purchaser Parties in any capacity, or any of them or their respective Affiliates, by any stockholder of the Company who is not an Affiliate of such Purchaser Party, with respect to any of the transactions contemplated by the Transaction Documents (unless such action is based upon a breach of such Purchaser Party’s representations, warranties or covenants under the Transaction Documents or any agreements or understandings such Purchaser Party may have with any such stockholder or any violations by such Purchaser Party of state or federal securities laws or any conduct by such Purchaser Party which constitutes fraud, gross negligence, willful misconduct or malfeasance). If any action shall be brought against any Purchaser Party in respect of which indemnity may be sought pursuant to this Agreement, such Purchaser Party shall promptly notify the Company in writing, and the Company shall have the right to assume the defense thereof with counsel of its own choosing reasonably acceptable to the Purchaser Party. Any Purchaser Party shall have the right to employ separate counsel in any such action and participate in the defense thereof, but the fees and expenses of such counsel shall be at the expense of such Purchaser Party except to the extent that (i) the employment thereof has been specifically authorized by the Company in writing, (ii) the Company has failed after a reasonable period of time to assume such defense and to employ counsel or (iii) in such action there is, in the reasonable opinion of counsel to the Purchaser Party, a material conflict on any material issue between the position of the Company and the position of such Purchaser Party, in which case the Company shall be responsible for the reasonable fees and expenses of no more than one such separate counsel. The Company will not be liable to any Purchaser Party under this Agreement (y) for any settlement by a Purchaser Party effected without the Company’s prior written consent, which shall not be unreasonably withheld or delayed; or (z) to the extent, but only to the extent that a loss, claim, damage or liability is attributable to any Purchaser Party’s breach of any representations, warranties or covenants under the Transaction Documents or any violations by such Purchaser Party of state or federal securities laws. The indemnification required by this Section 4.10 shall be made by periodic payments of the amount thereof during the course of the investigation or defense, as and when bills are received or are incurred. The indemnity agreements contained herein shall be in addition to any cause of action or similar right of any Purchaser Party against the Company or others and any liabilities the Company may be subject to pursuant to law.
32
(a) The Company shall maintain a reserve from its duly authorized shares of Common Stock for issuance pursuant to the Transaction Documents in such amount as may then be required to fulfill its obligations in full under the Transaction Documents.
(b) If, on any date, the number of authorized but unissued (and otherwise unreserved) shares of Common Stock is less than the Required Minimum on such date, then the Board of Directors shall use commercially reasonable efforts to amend the Company’s certificate of incorporation to increase the number of authorized but unissued shares of Common Stock to at least the Required Minimum at such time, as soon as possible and in any event not later than the 75th day after such date.
(c) The Company shall, if applicable: (i) in the time and manner required by the principal Trading Market, prepare and file with such Trading Market an additional shares listing application covering a number of shares of Common Stock at least equal to the Required Minimum on the date of such application, (ii) take all steps necessary to cause such shares of Common Stock to be approved for listing or quotation on such Trading Market as soon as possible thereafter, (iii) provide to the Purchasers evidence of such listing or quotation and (iv) maintain the listing or quotation of such Common Stock on any date at least equal to the Required Minimum on such date on such Trading Market or another Trading Market.
4.12 Reserved
4.13 Subsequent Equity Sales. From the date hereof until the End Date, the Company shall be prohibited from effecting or entering into an agreement to effect any issuance by the Company or any of its Subsidiaries of Common Stock or Common Stock Equivalents for cash consideration (or a combination of units thereof) involving a Variable Rate Transaction. “Variable Rate Transaction” means a transaction in which the Company (i) issues or sells any debt or equity securities that are convertible into, exchangeable or exercisable for, or include the right to receive, additional shares of Common Stock either (A) at a conversion price, exercise price or exchange rate or other price that is based upon, and/or varies with, the trading prices of or quotations for the shares of Common Stock at any time after the initial issuance of such debt or equity securities or (B) with a conversion, exercise or exchange price that is subject to being reset at some future date after the initial issuance of such debt or equity security or upon the occurrence of specified or contingent events directly or indirectly related to the business of the Company or the market for the Common Stock or (ii) enters into any agreement, including, but not limited to, an equity line of credit, whereby the Company may sell securities at a future determined price. Any Purchaser shall be entitled to obtain injunctive relief against the Company to preclude any such issuance, which remedy shall be in addition to any right to collect damages.
33
4.15 Certain Transactions and Confidentiality. Each Purchaser, severally and not jointly with the other Purchasers, covenants that neither it, nor any Affiliate acting on its behalf or pursuant to any understanding with it will execute any purchases or sales, including Short Sales, of any of the Company’s securities during the period commencing with the execution of this Agreement and ending at such time that the transactions contemplated by this Agreement are first publicly announced pursuant to the initial press release as described in Section 4.6. Each Purchaser, severally and not jointly with the other Purchasers, covenants that until such time as the transactions contemplated by this Agreement are publicly disclosed by the Company pursuant to the initial press release as described in Section 4.6, such Purchaser will maintain the confidentiality of the existence and terms of this transaction and the information included in the Transaction Documents and the Disclosure Schedules. Notwithstanding the foregoing, and notwithstanding anything contained in this Agreement to the contrary, the Company expressly acknowledges and agrees that (i) no Purchaser makes any representation, warranty or covenant hereby that it will not engage in effecting transactions in any securities of the Company after the time that the transactions contemplated by this Agreement are first publicly announced pursuant to the initial press release as described in Section 4.6, (ii) no Purchaser shall be restricted or prohibited from effecting any transactions in any securities of the Company in accordance with applicable securities laws from and after the time that the transactions contemplated by this Agreement are first publicly announced pursuant to the initial press release as described in Section 4.6 and (iii) no Purchaser shall have any duty of confidentiality to the Company or its Subsidiaries after the issuance of the initial press release as described in Section 4.6. Notwithstanding the foregoing, in the case of a Purchaser that is a multi-managed investment vehicle whereby separate portfolio managers manage separate portions of such Purchaser’s assets and the portfolio managers have no direct knowledge of the investment decisions made by the portfolio managers managing other portions of such Purchaser’s assets, the covenant set forth above shall only apply with respect to the portion of assets managed by the portfolio manager that made the investment decision to purchase the Securities covered by this Agreement.
4.16 Form D; Blue Sky Filings. The Company agrees to timely file a Form D with respect to the Securities as required under Regulation D as promulgated by the Commission under the Securities Act. The Company shall take such action as the Company shall reasonably determine is necessary in order to obtain an exemption for, or to qualify the Securities for, sale to the Purchasers at the Closing under applicable securities or “Blue Sky” laws of the states of the United States, and shall provide evidence of such actions promptly upon request of any Purchaser.
34
4.17 Capital Changes. Until the one year anniversary of the Closing Date, other than for purposes of qualifying for initial listing on a national securities exchange or meeting the continued listing requirements of such exchange, the Company shall not undertake a reverse or forward stock split or reclassification of the Common Stock without the prior written consent of the Purchasers holding 60% in principal amount outstanding of the Debentures.
4.18 Corporate Existence. So long as any Purchaser owns any Debentures or Warrants, the Company shall not be party to any Fundamental Transaction (as defined in the Debentures) unless the Company is in compliance with the applicable provisions governing Fundamental Transactions set forth in the Debentures and the Warrants.
4.19 Board Representation. If Xxx X. Xxxxx, Ph.D. ceases to serve as Chairman of the Board of Directors due to (a) Xx. Xxxxx’x resignation as a director due to a material adverse change to the condition of Xx. Xxxxx or any member of Xx. Xxxxx’x immediate family or (b) a vote or written consent of stockholders of the Company, in which the requisite majority for approval of such removal by the stockholders of the Company does not include any stockholders who serve on the Board of Directors or who are Affiliates of any individuals who serve on the Board of Directors, the Company shall promptly take any and all actions (including by increasing the size of the Board of Directors) as may be required under the laws of its state of incorporation, its certificate of incorporation and bylaws and any all other applicable laws set forth by any governmental authority in order to (i) cause, within five (5) Trading Days following Xx. Xxxxx’x departure, (x) the election of two directors designated by Genesis, which designees shall be (A) independent under Section 5605(a)(2) of the rules of the Nasdaq Stock Market (the “Independence Rules”), (B) not existing stockholders of the Company on the date hereof and (C) persons with relevant experience in either the biotechnology, pharmaceutical or healthcare industries, to serve as members of the Board of Directors from the date hereof until such director designees’ resignation, death, removal or disqualification (the “Genesis Designees”) and (y) the election of a chairman of the Board of Directors of the Company who qualifies as an independent director under the Independence Rules and (ii) until the Debentures are either repaid or converted in full, include the Genesis Designees as nominees for election or re-election as members of the Board of Directors, as the case may be, in the proxy statement to be sent to any holders of the Company’s capital stock in connection with any annual or special meeting of such holders entitled to vote on such matters if the re-election of the members of the Board of Directors shall be proposed by the Board of Directors in such proxy statement and, in such instance, the Board of Directors shall recommend to any such holders of its capital stock entitled to vote at such meeting in such proxy statement the election or re-election, as applicable, of the Genesis Designees.
ARTICLE V.
35
5.4 Notices. Any and all notices or other communications or deliveries required or permitted to be provided hereunder shall be in writing and shall be deemed given and effective on the earliest of: (a) the date of transmission, if such notice or communication is delivered via facsimile at the facsimile number set forth on the signature pages attached hereto at or prior to 5:30 p.m. (New York City time) on a Trading Day, (b) the next Trading Day after the date of transmission, if such notice or communication is delivered via facsimile at the facsimile number set forth on the signature pages attached hereto on a day that is not a Trading Day or later than 5:30 p.m. (New York City time) on any Trading Day, (c) the second (2nd) Trading Day following the date of mailing, if sent by U.S. nationally recognized overnight courier service or (d) upon actual receipt by the party to whom such notice is required to be given. The address for such notices and communications shall be as set forth on the signature pages attached hereto.
36
5.9 Governing Law. All questions concerning the construction, validity, enforcement and interpretation of the Transaction Documents shall be governed by and construed and enforced in accordance with the internal laws of the State of New York, without regard to the principles of conflicts of law thereof. Each party agrees that all legal proceedings concerning the interpretations, enforcement and defense of the transactions contemplated by this Agreement and any other Transaction Documents (whether brought against a party hereto or its respective affiliates, directors, officers, shareholders, partners, members, employees or agents) shall be commenced exclusively in the state and federal courts sitting in the City of New York. Each party hereby irrevocably submits to the exclusive jurisdiction of the state and federal courts sitting in the City of New York, Borough of Manhattan for the adjudication of any dispute hereunder or in connection herewith or with any transaction contemplated hereby or discussed herein (including with respect to the enforcement of any of the Transaction Documents), and hereby irrevocably waives, and agrees not to assert in any suit, action or proceeding, any claim that it is not personally subject to the jurisdiction of any such court, that such suit, action or proceeding is improper or is an inconvenient venue for such proceeding. Each party hereby irrevocably waives personal service of process and consents to process being served in any such suit, action or proceeding by mailing a copy thereof via registered or certified mail or overnight delivery (with evidence of delivery) to such party at the address in effect for notices to it under this Agreement and agrees that such service shall constitute good and sufficient service of process and notice thereof. Nothing contained herein shall be deemed to limit in any way any right to serve process in any other manner permitted by law. If either party shall commence an action, suit or proceeding to enforce any provisions of the Transaction Documents, then, in addition to the obligations of the Company under Section 4.10, the prevailing party in such action, suit or proceeding shall be reimbursed by the other party for its reasonable attorneys’ fees and other costs and expenses incurred with the investigation, preparation and prosecution of such action or proceeding.
37
38
39
(Signature Pages Follow)
40
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.
|
Address for Notice:
0 Xxxxxxx Xxxxxx
Xxx Xxxx, Xxxxxx 00000
|
By: /s/ Xxxx Xxx
Name: Xxxx Xxx
Title: Chief Executive Officer
With a copy to (which shall not constitute notice):
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Fax: 000-0-000-0000
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Xxxxxx and Xxxxx, LLP
00 Xxxxxxxxxxx Xxxxx, 00xx Xxxxx
Xxx Xxxx, XX 00000
Attention: Xxxx X. Xxxxxx, Esq.
Fax: 212-884- 8234
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[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK
SIGNATURE PAGE FOR PURCHASER FOLLOWS]
[Securities Purchase Agreement – Company Signature Page]
[PURCHASER SIGNATURE PAGES TO INSPIREMD 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: HUG Funding LLC
Signature of Authorized Signatory of Purchaser: /s/ Xxxxxx Xxxx
Name of Authorized Signatory: Xxxxxx Xxxx
Title of Authorized Signatory: Managing Member
Address for Delivery of Securities to Purchaser (if not same as address for notice):
Subscription Amount: $1,300,000
Principal Amount : $1,382,978
[SIGNATURE PAGES CONTINUE]
[Securities Purchase Agreement – Investor Signature Page]
[PURCHASER SIGNATURE PAGES TO INSPIREMD 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: Genesis Opportunity Fund LP
Signature of Authorized Signatory of Purchaser: /s/ Xxxxxx Xxxx
Name of Authorized Signatory: Xxxxxx Xxxx
Title of Authorized Signatory: Managing Member
Address for Delivery of Securities to Purchaser (if not same as address for notice):
Subscription Amount: $4,200,000
Principal Amount : $4,468,085
[SIGNATURE PAGES CONTINUE]
[Securities Purchase Agreement – Investor Signature Page]
[PURCHASER SIGNATURE PAGES TO INSPIREMD 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: Genesis Asset Opportunity Fund LP
Signature of Authorized Signatory of Purchaser: /s/ Xxxxxx Xxxx
Name of Authorized Signatory: Xxxxxx Xxxx
Title of Authorized Signatory: Managing Member
Address for Delivery of Securities to Purchaser (if not same as address for notice):
Subscription Amount: $2,000,000
Principal Amount : $2,127,659
[SIGNATURE PAGES CONTINUE]
[Securities Purchase Agreement – Investor Signature Page]
[PURCHASER SIGNATURE PAGES TO INSPIREMD 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: Ayer Capital Partners Master Fund, L.P.
Signature of Authorized Signatory of Purchaser: /s/ Xxx Xxxxxxxxxx
Name of Authorized Signatory: Xxx Xxxxxxxxxx
Title of Authorized Signatory: Managing Member
Address for Delivery of Securities to Purchaser (if not same as address for notice):
Subscription Amount: $3,256,500
Principal Amount : $3,464,362
[SIGNATURE PAGES CONTINUE]
[Securities Purchase Agreement – Investor Signature Page]
[PURCHASER SIGNATURE PAGES TO INSPIREMD 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: Ayer Capital Partners Kestrel Fund, L.P.
Signature of Authorized Signatory of Purchaser: /s/ Xxx Xxxxxxxxxx
Name of Authorized Signatory: Xxx Xxxxxxxxxx
Title of Authorized Signatory: Managing Member
Address for Delivery of Securities to Purchaser (if not same as address for notice):
Subscription Amount: $64,500
Principal Amount : $68,617
[SIGNATURE PAGES CONTINUE]
[Securities Purchase Agreement – Investor Signature Page]
[PURCHASER SIGNATURE PAGES TO INSPIREMD 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: Epworth-Ayer Capital
Signature of Authorized Signatory of Purchaser: /s/ Xxx Xxxxxxxxxx
Name of Authorized Signatory: Xxx Xxxxxxxxxx
Title of Authorized Signatory: Managing Member
Address for Delivery of Securities to Purchaser (if not same as address for notice):
Subscription Amount: $179,000
Principal Amount : $190,426
[Securities Purchase Agreement – Investor Signature Page]
COMPANY DISCLOSURE SCHEDULE
in connection with the
SECURITIES PURCHASE AGREEMENT
dated as of
April 5, 2012
by and among
and
THE PURCHASERS LISTED ON THE SIGNATURE PAGES ATTACHED THERETO
No disclosure of any item in these Schedules shall be construed as an admission that such item is material. These Schedules are intended to limit and not expand the scope of the representations, warranties and covenants contained in the Agreement. Information contained in these Schedules is not necessarily limited to the information required to be reflected in this Schedule and such additional information is included for informational purposes only. Disclosure of any item in any section of these Schedules shall be deemed disclosure with respect to all applicable sections to the extent such disclosure is reasonably apparent on its face, without any independent knowledge on the part of the reader regarding the matter disclosed, that such disclosure is responsive to such other representations.
SCHEDULE 3.1(a)
SUBSIDIARIES
InspireMD Ltd.
InspireMD GmbH
SCHEDULE 3.1(g)
CAPITALIZATION
The authorized capital stock of the Company consists of (i) 5,000,000 shares of preferred stock, of which no shares are issued and outstanding; (ii) 125,000,000 shares of Common Stock, of which (A) 68,178,954 shares are issued and outstanding; (B) 8,564,756 shares issuable pursuant to outstanding awards under the InspireMD, Inc. 0000 XXXXXXXX Option Plan; (C) 3,858,583 shares reserved for issuance pursuant to stock options issued outside of the InspireMD, Inc. 0000 XXXXXXXX Option Plan; and (D) 7,723,583 shares reserved for issuance pursuant to outstanding warrants.
In addition, the Company has agreed to make the following option grants in the future:
Name and Description
|
No. of Options
|
Exercise Price
|
Vesting Schedule
|
|||
As part of the compensation package for a candidate for the Vice-President of Sales and Marketing position
|
200,000
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FMV
|
Over Three Years
|
|||
Kafri Leibovich, Law Office
|
141,220 (1)
|
0.003
|
Fully vested
|
|||
Kafri Leibovich, Law Office
|
9,674 (2)
|
0.003
|
Fully vested on grant
|
|||
Total
|
350,894
|
______________
(1) Options have not yet received board approval but are covered by written agreement.
(2) Options have received board approval, but have not yet been earned.
None.
The InspireMD, Inc. 0000 XXXXXXXX Option Plan currently consists of three components, the primary plan document that governs all awards granted under the InspireMD, Inc. 0000 XXXXXXXX Option Plan, and two appendices: (i) Appendix A, designated for the purpose of grants of stock options and restricted stock to Israeli employees, consultants, officers and other service providers and other non-U.S. employees, consultants, and service providers, and (ii) Appendix B, which is the 2011 U.S. Equity Incentive Plan, designated for the purpose of grants of stock options and restricted stock awards to U.S. employees, consultants, and service providers who are subject to the U.S. income tax.
The purpose of the InspireMD, Inc. 0000 XXXXXXXX Option Plan is to provide an incentive to attract and retain employees, officers, consultants, directors, and service providers whose services are considered valuable, to encourage a sense of proprietorship and to stimulate an active interest of such persons in the Company’s development and financial success. Unless terminated earlier by the board of directors, the InspireMD, Inc. 0000 XXXXXXXX Option Plan will expire on March 27, 2021.
2.
|
Options
|
Options granted under the InspireMD, Inc. 0000 XXXXXXXX Option Plan
Number of Shares
|
Exercise Price
|
|
3,558,412
|
Par Value
|
|
205,012
|
0.183
|
|
149,869
|
0.655
|
|
584,357
|
0.986
|
|
2,063,943
|
1.232
|
|
670,394
|
1.500
|
|
14,608
|
1.725
|
|
81,161
|
1.750
|
|
215,000
|
1.930
|
|
467,000
|
1.950
|
|
40,000
|
2.000
|
|
10,000
|
2.100
|
|
500,000
|
2.500
|
|
5,000
|
2.600
|
|
Total:
|
8,564,756
|
Options granted outside under the InspireMD, Inc. 0000 XXXXXXXX Option Plan
Number of Shares
|
Exercise Price
|
|
287,666
|
Par Value
|
|
334,545
|
0.188
|
|
336,372
|
1.232
|
|
2,900,000
|
1.950
|
|
Total:
|
3,858,583
|
3.
|
Warrants
|
On March 31, 2011 and on April 18, 2011, the Company issued certain investors five-year warrants to purchase up to an aggregate of 3,560,332 shares of Common Stock at an exercise price of $1.80 per share. The Company is prohibited from effecting the exercise of any such warrant to the extent that as a result of such exercise the holder of the exercised warrant beneficially owns more than 4.99% in the aggregate of the issued and outstanding shares of Common Stock calculated immediately after giving effect to the issuance of shares of Common Stock upon the exercise of the warrant. The warrants contain provisions that protect their holders against dilution by adjustment of the purchase price in certain events such as stock dividends, stock splits and other similar events. If at any time after the one year anniversary of the original issuance date of such warrants there is no effective registration statement registering, or no current prospectus available for, the resale of the shares of Common Stock underlying the warrant, then the holders of such warrants have the right to exercise the warrants by means of a cashless exercise. In addition, if (i) the volume-weighted average price of the Common Stock for 20 consecutive trading days is at least 250% of the exercise price of the warrants; (ii) the 20-day average daily trading volume of the Common Stock has been at least 175,000 shares; (iii) a registration statement providing for the resale of the Common Stock issuable upon exercise of the warrants is effective and (iv) the Common Stock is listed for trading on a national securities exchange, then the Company may require each holder to exercise all or a portion of its warrant pursuant to the terms described above within seven business days following the delivery of a notice of acceleration. Any warrant that is not exercised as aforesaid shall expire automatically at the end of such seven-day period.
On April 18 and April 21, 2011, the Company issued certain investors five-year warrants to purchase up to an aggregate of 158,334 shares of Common Stock at an exercise price of $1.80 per share. The Company is prohibited from effecting the exercise of any such warrant to the extent that as a result of such exercise the holder of the exercised warrant beneficially owns more than 4.99% in the aggregate of the issued and outstanding shares of Common Stock calculated immediately after giving effect to the issuance of shares of Common Stock upon the exercise of the warrant. The warrants contain provisions that protect their holders against dilution by adjustment of the purchase price in certain events such as stock dividends, stock splits and other similar events. In addition, if (i) the volume-weighted average price of the Common Stock for 20 consecutive trading days is at least 250% of the exercise price of the warrants; (ii) the 20-day average daily trading volume of the Common Stock has been at least 175,000 shares; and (iii) a registration statement providing for the resale of the Common Stock issuable upon exercise of the warrants is effective, then the Company may require each holder to exercise all or a portion of its warrant pursuant to the terms described above within three business days following the delivery of a notice of acceleration. Any warrant that is not exercised as aforesaid shall expire automatically at the end of such three-day period.
As consideration for serving as placement agent in connection with certain private placements, the Company issued Palladium Capital Advisors, LLC a five-year warrant to purchase up to 430,740 shares of Common Stock at an exercise price of $1.80 per share. The terms of this warrant are identical to the March $1.80 Warrants described above.
On March 31, 2011, for work performed in connection with the share exchange transactions and as bonus compensation, the Company issued Xxxxx Xxxxx, the Company’s chief financial officer, secretary and treasurer, a five-year warrant to purchase up to 3,000 shares of Common Stock at an exercise price of $1.80 per share. The terms of this warrant are identical to the April $1.80 Warrants described above.
In connection with the March 31, 2011 private placement, the Company issued to Hermitage Capital Management, a consultant, a five-year warrant to purchase up to 6,667 shares of Common Stock at an exercise price of $1.80 per share, in consideration for consulting services. The terms of this warrant are identical to the April $1.80 Warrants described above.
In consideration for financial consulting services, the Company issued to The Benchmark Company, LLC, a consultant, a five-year warrant to purchase up to 50,000 shares of Common Stock at an exercise price of $1.50 per share. The terms of this warrant are identical to the April $1.80 Warrants described above, except that the exercise price for this warrant is $1.50 per share.
On March 31, 2011, the Company issued certain consultants five-year warrants to purchase up to an aggregate of 2,500,000 shares of Common Stock at an exercise price of $1.50 per share. The terms of these warrants are identical to the March $1.80 Warrants described above, except that the exercise price for these $1.50 warrants is $1.50 per share.
In connection with the Company’s share exchange transactions on March 31, 2011, the Company issued certain investors warrants to purchase up to an aggregate of 1,014,500 shares of Common Stock at an exercise price of $1.23 per share. These warrants may be exercised any time on or before July 20, 2013 and were issued in exchange for warrants to purchase up to 125,000 ordinary shares of InspireMD Ltd. at an exercise price of $10 per share. The Company is prohibited from effecting the exercise of any such warrant to the extent that as a result of such exercise the holder of the exercised warrant beneficially owns more than 9.99% in the aggregate of the issued and outstanding shares of Common Stock calculated immediately after giving effect to the issuance of shares of Common Stock upon the exercise of the warrant. The warrants contain provisions that protect their holders against dilution by adjustment of the purchase price in certain events such as stock dividends, stock splits and other similar events. In addition, if at any time following the one year anniversary of the original issuance date of the warrants, (i) the Common Stock is listed for trading on a national securities exchange, (ii) the closing sales price of the Common Stock for 15 consecutive trading days is at least 165% of the exercise price of the warrants; (iii) the 15 day average daily trading volume of the Common Stock has been at least 150,000 shares and (iv) a registration statement providing for the resale of the Common Stock issuable upon exercise of the warrants is effective, then the Company may require each investor to exercise all or a portion of its warrant pursuant to the terms described above at any time upon at least 15 trading days prior written notice. Any warrant that is not exercised as aforesaid shall expire automatically at the end of the 15-day notice period.
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1.
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Pursuant to Section 4.9 of the Securities Purchase Agreement, dated March 31, 2011, by and between the Company and the purchasers identified on the signature pages thereto, as amended (the “2011 SPA”), in the event the Company fails to obtain a listing of Common Stock on the NYSE Amex Equities, the Nasdaq Capital Market, the Nasdaq Global Market, the Nasdaq Global Select Market or the New York Stock Exchange on or before December 31, 2012, the Company will issue and deliver to each purchaser additional shares of Common Stock in an amount equal to ten percent (10%) of the number of shares of Common Stock acquired by each such purchaser on the closing date of the transaction contemplated by the 2011 SPA (the “2011 SPA Closing Date”).
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2.
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Pursuant to Section 4.14 of the 2011 SPA, until March 31, 2014, in the event that the Company issues or sells any shares of Common Stock or any Common Stock Equivalent pursuant to which shares of Common Stock may be acquired at a price less than the Per Share Purchase Price (as defined below), then the Company shall promptly issue additional shares of Common Stock to each purchaser thereunder, for no additional consideration, in an amount sufficient that the purchase price paid pursuant to the 2011 SPA, when divided by the total number of shares of Common Stock issued to each such purchaser will result in an effective per share purchase price paid by each such purchaser pursuant to the 2011 SPA equal to the original per share purchase price multiplied by a fraction, (A) the numerator of which shall be (1) the number of shares of Common Stock outstanding immediately prior to such issue plus (2) the number of shares of Common Stock which the aggregate consideration received or to be received by the Company for the total number of additional shares of Common Stock so issued would purchase at the original per share purchase price; and (B) the denominator of which shall be (x) the number of shares of Common Stock outstanding immediately prior to such issue plus (y) the number of such additional shares of Common Stock so issued (such adjustment, a “Dilution Adjustment”). This weighted average anti-dilution protection shall not apply in respect of an Exempt Issuance (as defined below).
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In the event that the Company consummates a financing at any point until March 31, 2014, pursuant to which the Company sells shares of Common Stock in one transaction or series of related transactions, other than in a transaction with an Affiliate of the Company or any Subsidiary, at a price per share greater than the Per Share Purchase Price (as defined below) that results in aggregate gross proceeds to the Company of at least $5,000,000 and does not provide the investors in such financing with any price protection similar to the weighted average anti-dilution protection described in this Section 2, this weighted average anti-dilution protection shall become void and of no further effect and the purchasers shall not be entitled to any future Dilution Adjustments.
“Per Share Purchase Price” equals $1.50, subject to appropriate adjustment for reverse and forward stock splits, stock dividends, stock combinations and other similar transactions of the Common Stock that occur after the date of the 2011 SPA.
“Exempt Issuance” means the issuance of (a) shares of Common Stock or options to employees, officers, consultants or directors of the Company pursuant to the Company’s stock option plan in an amount not to exceed 15,000,000 shares of Common Stock in the aggregate (subject to appropriate adjustments for any stock dividend, stock split, stock combination, reclassification or similar transaction after the closing date of the 2011 SPA), (b) securities upon the exercise or exchange of or conversion of any of the shares of Common Stock, the warrants to purchase Common Stock or the shares of Common Stock issuable upon exercise of such warrants issued pursuant to the 2011 SPA, (c) securities exercisable or exchangeable for or convertible into shares of Common Stock issued and outstanding on the date of the 2011 SPA and listed on Schedule 3.1(g) to the 2011 SPA (available as Exhibit 10.5 to the Company’s Amendment No. 1 to Form S-1, as filed with the Commission on August 26, 2011), provided that such securities have not been amended since the date of the 2011 SPA to increase the number of such securities or to decrease the exercise price, exchange price or conversion price of such securities, (d) securities issued (other than for cash) in connection with a synergistic merger, acquisition, or consolidation of all or substantially all of the assets, securities or business division of another entity, (e) options to purchase up to an aggregate of 486,966 shares of Common Stock at an exercise price of $1.23 (subject to appropriate adjustments for any stock dividend, stock split, stock combination, reclassification or similar transaction after the Closing Date) to Xxxxx Xxxx, Xxxxxx Xxxxxxxx and Xxxxxxx Xxxxxx (and the shares of Common Stock issuable upon exercise), which options shall be fully vested and shall expire on December 31, 2014, and (f) up to 5,800,000 shares of Common Stock or options to purchase up to 5,800,000 shares of Common Stock, or a combination thereof, for issuance as compensation to current and future members of the Company’s board of directors.
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3.
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Pursuant to Section 4.15 of the 2011 SPA, in the event the Company issues any shares of Common Stock with respect to a settlement or award related to any litigation set forth on Schedule 3.1(j) to the 2011 SPA (each, a “Contingency Issuance”), the Company shall immediately thereafter issue to each such purchaser such number of new shares of Common Stock (the “Contingency Shares”), for no additional consideration, as would cause the sum of (a) shares of Common Stock acquired pursuant to the 2011 SPA by such purchaser (the “Acquired Shares”) and (b) the Contingency Shares to represent the same percentage of the Company’s outstanding Common Stock as the Acquired Shares represented immediately prior to such Contingency Issuance (assuming such purchaser has not disposed of any Acquired Shares since the closing of the transaction contemplated by the 2011 SPA).
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InspireMD Ltd. may have violated section 15 of the Israeli Security Law of 1968. Section 15 to the Israeli Security Law of 1968 requires the filing of a prospectus with the Israel Security Authority and the delivery thereof to purchasers in connection with an offer or sale of securities to more than 35 parties during any 12 month period. InspireMD Ltd. allegedly issued securities to more than 35 investors during certain 12-month periods, ending in October 2008. However, InspireMD Ltd. has applied for a no-action determination from the Israel Security Authority and is awaiting a response.
SCHEDULE 3.1(h)
SEC REPORTS
1.
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Current Report on Form 8-K, filed with the Commission on March 13, 2012, was filed one day late.
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SCHEDULE 3.1(j)
LITIGATION
1.
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Xxxx Ben Mayor
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Court of Agency: Regional Labor Court in Tel Aviv
Date Instituted: November 2, 2010
Principal Parties: Xxxx Xxx Mayor vs. InspireMD Ltd., InspireMD GmbH, Xxxx Xxx and Xx. Xxxxx Xxxxxx
Description: A former senior employee of InspireMD Ltd. has claimed that he was improperly terminated and that InspireMD Ltd. owes him money for due salary and pension fund payments, vacation pay, sick days, severance pay, additional prior notice payment, commission for revenues and other types of funds received by InspireMD Ltd.
Relief Sought: 1,476,027 NIS plus compensation for holding back wages and options to purchase 2,029,000 shares of Common Stock at an exercise price of $0.001.
2.
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Xxxxx & Tarsis
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Court of Agency: Magistrate Court in Tel Aviv
Date Instituted: February 10, 2011
Principal Parties: Xxxxx & Tarsis Sociedade De Advogados vs. InspireMD Ltd.
Description: Xxxxx & Tarsis has claimed that InspireMD Ltd. breached a Finder’s Fee Agreement between the parties through improper termination and failing to pay a finder’s fee allegedly owed to Xxxxx & Tarsis. InspireMD Ltd. has claimed that it properly terminated the agreement on account of a breach by Xxxxx & Tarsis and that Xxxxx & Tarsis is not entitled to any payments because Xxxxx & Tarsis never provided the services that were contracted for in the Finder’s Fee Agreement. In addition, InspireMD Ltd. has counterclaimed, seeking the return of a 108,000 NIS payment to Xxxxx & Tarsis by InspireMD Ltd. for the first shipment of InspireMD Ltd.'s stents to the distributor that Xxxxx & Tarsis allegedly introduced to InspireMD Ltd.
Relief Sought: 1,200,000 NIS
3.
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Court of Agency: Regional Labor Court in Tel Aviv
Date Instituted: August 8, 2011
Principal Parties: Xxxx Xxxx v. InspireMD Ltd.
Description: A former senior employee of InspireMD Ltd. has claimed that he was improperly terminated and that InspireMD Ltd. owes him 403,200 NIS in compensation and options to purchase 486,966 shares of Common Stock.
Relief Sought: 403,200 NIS in compensation and options to purchase 486,966 shares of Common Stock.
4.
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M.A. Bromfeld – Business Promotion Ltd.
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Court of Agency: Magistrate Court in Tel Aviv
Date Instituted: November 13, 2011
Principal Parties: M.A. Bromfeld – Business Promotion Ltd. vs. InspireMD Ltd., InspireMD GmbH, Xxxx Xxx and Xx. Xxxxx Xxxxxx
Description: A former finder of InspireMD Ltd. has claimed that it is entitled to convert certain of its options to purchase shares of InspireMD Ltd. into options to purchase 110,785 shares of Common Stock at an exercise price of $0.45 per share and 39,087 shares of Common Stock at an exercise price of $1.23.
Relief Sought: Options to purchase 110,785 shares of Common Stock at an exercise price of $0.45 per share and 39,087 shares of Common Stock at an exercise price of $1.23.
Court of Agency: Economic Department of the Tel Aviv District Court
Date Instituted : December 27, 2011
Principal Parties: Xxxxxxxxx Xxxxx and Xxxx Xxxxx vs. InspireMD Ltd.
Description: Xx. Xxxxx has claimed that she is owed options to purchase 584,357 shares of Common Stock due to her under an employment agreement she entered into with InspireMD Ltd. InspireMD Ltd. has claimed that Xx. Xxxxx is not owed an options because she never performed any of her obligations under the employment agreement and did not earn her options.
Relief Sought: Options to purchase 584,357 shares of Common Stock.
6.
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Court of Agency: None.
Date Instituted: Litigation threatened.
Description: Xx. Xxxxx has claimed that she was entitled to options to purchase shares of InspireMD Ltd. in connection with InspireMD Ltd.’s loan Agreement with Mizrachi Tefachot Bank Ltd. InspireMD Ltd. has responded that she is not entitled to any options and, even if she were, such options would have expired. The Company has not received any communication about this threatened litigation since August 8, 2011.
7.
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Court of Agency: None.
Date Instituted: Litigation threatened.
Description: Xx. Xxxxxxx has claimed that he is entitled to shares of Common Stock upon the exercise of an option that was assigned to him by Xxxx Xxxx. InspireMD Ltd. has responded that such option has expired and that Xx. Xxxxxxx is not entitled to any additional shares of Common Stock. The Company has not received any further communications about this matter since October 3, 2011.
Court of Agency: None.
Date Instituted: Litigation threatened.
Description: The parties listed above are the landlords for the offices and laboratory in Rechovot that InspireMD Ltd. leased beginning on January 1, 2012. The lease was terminated by InspireMD Ltd. on February 26, 2012. The parties are disputing whether the termination was permitted under the lease agreement. The Company last received communication about this matter on March 14, 2012.
9.
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MicroBank LLC & Xxxxx X. Xxxxxxxxx
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Court of Agency: None.
Date Instituted : Litigation threatened.
Description: MicroBank LLC and Xxxxx X. Xxxxxxxxx claim that InspireMD Ltd. owes them a finder’s fee in connection with the March 2011 private placement to having introduced InspireMD Ltd. to Palladium Capital Advisors.
Relief Sought: $1,000,000 and equity interests worth 9% of the Company’s March 2011 private placement.
SCHEDULE 3.1(k)
LABOR RELATIONS
See Schedule 3.1(j).
SCHEDULE 3.1(p)
INSURANCE
The Company has directors and officers insurance coverage in the amount equal to $20,000,000.
SCHEDULE 3.1(s)
CERTAIN FEES
1.
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As consideration for serving as the Company’s “lead left” placement agent, the Company has agreed to (i) pay Xxxxxxxxxxx & Co. (“Opco”) 70% of the 7% of the gross proceeds from the sale of the Debentures and the Warrants pursuant to this Agreement (other than those proceeds from the sale of the Debentures and the Warrants to HUG Funding LLC (“HUG”)), and (ii) issue Opco warrants to purchase 70% of the 3% of the number of shares of Common Stock underlying the Debentures purchased by the Purchasers pursuant to this Agreement (other than those Debentures purchased by HUG). In addition, the Company has agreed to (a) pay Opco a cash fee equal to 3.5% of the aggregate amount of Debentures purchased by HUG pursuant to this Agreement, and (b) issue Opco warrants to purchase 1.5% of the number of shares of Common Stock underlying the Debentures purchased by HUG pursuant to this Agreement.
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2.
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As consideration for serving as the Company’s “lead right” placement agent, the Company has agreed to (i) pay JMP Securities LLC (“JMP”) 30% of the 7% of the gross proceeds from the sale of the Debentures and the Warrants pursuant to this Agreement (other than those proceeds from the sale of the Debentures and the Warrants to HUG) , and (ii) issue JMP warrants to purchase 30% of the 3% of the number of shares of Common Stock underlying the Debentures purchased by the Purchasers pursuant to this Agreement (other than those Debentures purchased by HUG). In addition, the Company has agreed to (a) pay JMP a cash fee equal to 1.05% of the aggregate amount of Debentures purchased by HUG pursuant to this Agreement, and (b) issue JMP warrants to purchase 0.45% of the number of shares of Common Stock underlying the Debentures purchased by HUG pursuant to this Agreement.
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3.
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As consideration for serving as the Company’s financial advisor, the Company has agreed to (i) pay Palladium Capital Advisors, LLC (“Palladium”) a cash fee equal to 3.5% of the aggregate amount of Debentures purchased by HUG pursuant to this Agreement, payable in cash by wire transfer at the Closing, and (ii) issue Palladium warrants to purchase 3.5% of the number of shares of Common Stock underlying the Debentures purchased by HUG pursuant to this Agreement, which warrants shall be identical to the Warrants issued to Purchasers.
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SCHEDULE 3.1(w)
TRADING MARKET NOTICE
On March 31, 2011, the Company (then known as Saguaro Resources, Inc.) received an OTCBB Delinquency Notification due to the Company’s failure to be current in its reporting obligations. As such, an “E” was appended to the Company’s stock symbol on April 1, 2011. The Company was deemed to be in compliance with its reporting obligations on April 8, 2011 and the “E” was removed from the Company’s stock symbol on April 11, 2011.
SCHEDULE 3.1(aa)
SOLVENCY
The Company and its Subsidiaries have incurred the following Indebtedness:
1.
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An obligation to pay $1.7 million for the completion of the MGuard for Acute ST Elevation Reperfusion Trial (MASTER Trial).
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2.
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An obligation to pay between $10 million and $12 million for the U.S. Food and Drug Administration trial, assuming the current protocol. In the event that the protocol for the trial is changed and the trial will compare MGuard against both non-drug-eluting stents and drug-eluting stents, the sample size for the trial would be required to be increased, which could result in an increase in cost of the trial of up to $5 million. This increase is based upon the Company’s best estimates and not based upon information from the U.S. Food and Drug Administration.
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SCHEDULE 3.1(ee)
The Company’s accounting firm is Xxxxxxxxx & Xxxxxxxxx, Certified Public Accountants, a member of PricewaterhouseCoopers International Limited.
SCHEDULE 3.1(gg)
NO DISAGREEMENTS WITH ACCOUNTANTS AND LAWYERS
InspireMD Ltd. is currently disputing 188,000 NIS, including VAT, in legal fees to Goldfarb, Levy, Eran, Meiri, Tzafrir & Co., previous legal advisors of InspireMD Ltd. The dispute regarding such fees has been pending since June 2010. The Company has not received any communications with respect to such dispute in the past twelve months.
SCHEDULE 3.1(kk)
STOCK OPTION PLANS
See Schedule 3.1(g).