EXHIBIT 10.1
INVESTMENT AGREEMENT
THIS INVESTMENT AGREEMENT (this “Agreement”) is made as of February 2, 2009 by
and between TopSpin Medical, Inc. (the “Company”) a corporation incorporated
under the laws of the State of Delaware with its address at                     
and Asher Shmulewitz (the “Investor”) with its address at                     .
WHEREAS, the Company’s securities are publicly traded on the Tel Aviv Stock
Exchange Ltd. (the “TASE”); and
WHEREAS, the Investor is interested to purchase from the Company, an aggregate
of 120,000,000 shares of Common Stock, par value $0.001 each (the “Common
Stock”) at a price of NIS 0.0075 per share at an aggregate purchase price of
900,000 NIS (the “Investment Amount”) and in addition, to receive from the
Company an option, for no additional consideration, to purchase additional
Common Stock and the Company is interested in receiving the Investment Amount,
all on the terms and conditions as set forth herein.
NOW, THEREFORE, the parties hereby agree as follows:
1. Investment. The Investor hereby irrevocably undertakes to pay the Investment
Amount to the Company in consideration for the issuance to it of 120,000,000
shares of Common Stock (the “Purchased Shares”), all subject to the fulfillment
of the conditions set forth in Section 5 below.
2. Representations of the Investor. The Investor hereby represents and warrants
to the Company and acknowledges that the Company is entering into this Agreement
in reliance thereon, as follows:
2.1. This Agreement has been duly executed and delivered by the Investor and
constitutes its valid and legally binding obligation, enforceable in accordance
with its terms.
2.2. The execution and delivery of this Agreement by the Investor and the
fulfillment of the terms hereof will not constitute a default under or conflict
with any law or agreement or other instrument to which it is a party or by which
it is bound.
2.3. The Investor does not hold any securities of the Company.
2.4. The Investor acknowledges and is aware that in accordance with the
provisions of the Israeli Securities Law — 1968 (the “Securities Law”) and the
Securities Law Regulations (Details with regard to Sections 15A to 15C of the
Law), 2000 (the “Regulations”), certain limitations apply with respect to the
resale of the Purchased Shares and the Option Shares (as defined below).
2.5. The Investor is not an “Interested Party” (as defined in Section 270(5) of
the Israeli Companies Law-1999). In addition, there are no agreements, whether
in writing or oral, concerning the purchase or sale of the Company’s securities
or concerning the voting of the Company’s securities, between the Investor and
any shareholder of the Company or between the Investor or any third party
2.6. The Investor is an investor in securities of companies in similar stage as
the Company and acknowledges that it is able to fend for itself, can bear the
economic risk of its investment (including the total loss of such investment),
and has such knowledge and experience in financial or business matters that it
is capable of evaluating the merits and risks of the investment in the Purchased
Shares.
2.7. The Investor has received all the information it considers necessary or
appropriate for deciding whether to purchase the Purchased Shares, and hereby
acknowledges its agreement to invest in the Company based on such information.
The Investor further represents that it has had an opportunity to ask questions
and receive answers from the Company regarding the information delivered to it,
the terms and conditions of the offering of the Purchased Shares and the
business, properties, prospects and financial condition of the Company.

 

 

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2.8. The Investor understands that although the Purchased Shares and Option
Shares (the “Shares”) will be approved by the TASE for registration pursuant to
Section 5.1 below, it will not be permitted, except as specifically permitted
herein upon any such sale or transfer being permitted under the applicable laws
of the United States, including under the applicable provisions of the 33 Act
(as defined below) listed below that limit the transfer of securities, to
transfer the Purchased Shares or the Option Shares to The Nominee Company of
Bank Hapoalim Ltd. (the “Registration Company”). Therefore the Investor hereby
declares and confirms its agreement that it shall not be able to sell or
otherwise transfer any of the Purchased Shares or the Option Shares on the TASE
following their issuance and shall only be able to do so upon fulfillment of the
conditions set forth herein. The Investor hereby agrees that he shall have no
claim against the Company, the TASE or anyone acting on their behalf, in
connection with the Investor’s inability to sell or otherwise transfer the
Shares through the TASE. In the event the sale or transfer of the Purchased
Shares or the Option Shares through the TASE is permitted under the applicable
laws of the United States, then the Investor shall execute any and all
documentation and any and all information that the Company may request
evidencing that such sale or transfer is permissible, including without
limitation, providing opinions of counsel (qualified either in Israeli and/or
United States) and written representations as may be required by the Company,
the TASE or any other governmental authority. Following receipt of all
documentation and information the Company requires in connection therewith, the
Company shall take action in order to remove the legend from the stock
certificates of the shares for which it is permissible under all applicable laws
of the United States in a manner that will permit the transfer and registration
of the shares in the name of the Registration Company and the sale of such
shares through the TASE and Investor shall bear and all costs that the Company
may incur in connection with such transfer.
2.9. This Agreement is made with the Investor in reliance upon the Investor’s
representation to the Company, which by the Investor’s execution of this
Agreement, the Investor hereby confirms, that the securities being acquired
under this Agreement (the “Securities”) to be acquired by the Investor will be
acquired for investment for the Investor’s own account, not as a nominee or
agent, and not with a view to the resale or distribution of any part thereof,
and that the Investor has no present intention of selling, granting any
participation in, or otherwise distributing the same. By executing this
Agreement, the Investor further represents that the Investor does not presently
have any contract, undertaking, agreement or arrangement with any person or
entity to sell or transfer to such person or entity or to any third person, with
respect to any of the Securities. The Investor has not been formed for the
specific purpose of acquiring the Securities.
2.10. The Investor understands that the Securities have not been, and will not
be, registered under the Securities Act of 1933, as amended, and the rules and
regulations promulgated thereunder (the “33 Act”), by reason of a specific
exemption from the registration provisions of the 33 Act which depends upon,
among other things, the bona fide nature of the investment intent and the
accuracy of the Investor’s representations as expressed herein. The Investor
understands that the Securities are “restricted securities” under applicable
U.S. federal and state securities laws and that, pursuant to these laws, the
Investor must hold the Securities indefinitely unless they are registered with
the U.S. Securities and Exchange Commission and qualified by state authorities,
or an exemption from such registration and qualification requirements is
available and such Securities are permitted to be transferred under this
Agreement. The Investor acknowledges that the Company has no obligation to
register or qualify the Securities. The Investor further acknowledges that if an
exemption from registration or qualification is available, it may be conditioned
on various requirements including, but not limited to, the time and manner of
sale, the holding period for the Securities, and on requirements relating to the
Company which are outside of the Investor’s control, and which the Company is
under no obligation and may not be able to satisfy.
2.11. The Investor understands that the Securities and any securities issued in
respect of or exchange for the Shares, may bear one or all of the following
legends:

  2.11.1.  
“THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AND HAVE BEEN ACQUIRED FOR INVESTMENT AND NOT WITH A
VIEW TO, OR IN CONNECTION WITH, THE SALE OR DISTRIBUTION THEREOF. NO SUCH
TRANSFER MAY BE EFFECTED WITHOUT AN EFFECTIVE REGISTRATION STATEMENT RELATED
THERETO OR AN OPINION OF COUNSEL IN A FORM SATISFACTORY TO THE COMPANY THAT SUCH
REGISTRATION IS NOT REQUIRED UNDER THE SECURITIES ACT OF 1933.”
    2.11.2.  
Any legend required by the securities laws of any state to the extent such laws
are applicable to the Securities represented by the certificate so legended.

 

 

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2.12. The Investor is an “accredited investor” within the meaning of Rule 501 of
Regulation D promulgated under the 33 Act.
2.13. The Investor hereby acknowledges and agrees that other than with respect
to the representations provided to it by the Company in Section 3, the purchase
of the Purchased Shares and the execution of all other transactions contemplated
hereunder are made on an “as-is” basis, and any other representations of any
kind whatsoever, including any and all information and documentation the
Investor received from the Company, are expressly excluded by the Company,
including with respect to the Company’s financial, business or legal condition
and with respect to any liabilities of the Company and the Investor understands
that it shall have no claim against the Company, its directors, officers or
anyone on its behalf in connection with the status of the Company or any
information provided to it concerning the Company not specifically set forth in
Section 3.
3. Company Representations. The Company hereby represents and warrant to the
Investor and acknowledges that the Investor is entering into this Agreement in
reliance thereon, as follows:
3.1. This Agreement has been duly executed and delivered by the Company and
constitutes its valid and legally binding obligation, enforceable in accordance
with its terms.
3.2. The execution and delivery of this Agreement by the Company and the
fulfillment of the terms hereof will not constitute a default under or conflict
with any law or agreement or other instrument to which it is a party or by which
it is bound.
3.3. The Purchased Shares and the shares of Common Stock issuable upon the
exercise of the Option (as defined below), if exercised, shall, as of their
issuance, be equal in rights to the shares of Common Stock that exist as of the
date hereof, subject to the limitations set forth, among others, in Section 2.4,
2.9 and 2.11 above.
4. Option. In addition to the Purchased Shares, and subject to the receipt of
the approvals set forth in Section 5, the Company hereby grants the Investor,
for no additional consideration, an unregistered option (the “Option”) to
purchase up to 58,064,516 shares of Common Stock (the “Option Shares”) as
follows:
4.1. The Option shall be exercisable, in whole or in part, by providing written
notice to the Company, during the period starting from the date of issuance of
the Purchased Shares until the fourth anniversary thereof (the “Option Period”),
stating the amount of Option Shares being exercised (the “Exercise Notice”).
Upon conclusion of the Option Period, the Option shall terminate and be of no
further force or effect.
4.2. Once an Exercise Notice has been sent, it shall be irrevocable and not
subject to change. The Investor hereby agrees to sign any and all documents
required under any applicable law in order for the Company to issue the Option
Shares upon the exercise of any of the Option.
4.3. The exercise price per Option Share shall be NIS 0.01 (one AGORA) (the
“Exercise Price”), which shall be paid in full to the Company together with the
delivery of the Exercise Notice for the exercise of such Option Shares.
4.4. The Option will not be registered for trade on the TASE and is
non-transferable. The Option Shares shall be subject to all the limitations
applicable to the Purchased Shares, including without limitation, those set
forth in Section 2.4, 2.8 and 2.10, mutatis mutandis.
4.5. The Company represents and covenants that at all times during the Option
Period there shall be reserved for issuance and delivery upon exercise of the
Option such number of Option Shares as is necessary for exercise in full of the
Option.
4.6. In the event the Company dissolves prior to the full exercise of the
Option, then the Investor shall be entitled to receive payment from any amounts
distributed to the Company’s stockholders, in an amount equal to the amount it
would have received upon dissolution of the Company if the Investor was holding,
immediately prior to the dissolution, all the unexercised Option Shares, if any,
minus the aggregate Exercise Price for all such shares
4.7. The Option Shares and Exercise Price are subject to the following
adjustment provisions:
4.7.1. Subject to the following, if the Company distributes bonus shares where
the record date is prior to the conclusion of the Option Term, then in addition
to the Option Shares that the Investor is entitled to receive upon exercise of
the Option in full and payment of the aggregate Exercise Price therefor, shares
in such number and class that the Investor would have been entitled to receive
as bonus shares if it had exercised the Option immediately prior to the record
date for such distribution.

 

 

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The Exercise Price shall not change as a result of the addition of shares
described above, provided that the Exercise Price shall not be lower than the
par value of the Option Shares and the shares that were added as aforesaid. The
provisions concerning Option Shares shall apply to the shares that were added as
aforesaid, mutatis mutandis. In the event of any adjustment made pursuant to
this Section, the Investor shall not be entitled to receive fractional shares.
4.7.2. If the Company’s stockholders are offered to purchase, by way of a rights
offering, any securities, then the number of Option Shares shall be adjusted to
take into account the component of the benefit in the rights offering as is
expressed in the ratio of the price of the Company’s share on the TASE on the
record date for such rights to the basis rate “ex-rights”. In the event of any
adjustment made pursuant to this Section, the Investor shall not be entitled to
receive fractional shares.
The number of Option Shares shall only be adjusted in the event of a bonus share
distribution and rights offering as set forth above, but not in the event of any
other offering (including offerings made to interested parties).
4.7.3. If the Company distributes a dividend to its stockholders, then
immediately following the record date for the receipt of such cash dividend, the
Exercise Price shall be adjusted by multiplying it by the fraction of the basis
rate “ex-dividend” divided by the closing price of the Company’s share on the
TASE on the record date for the receipt of the dividend.
4.7.4. If the Company shall combine or subdivide its shares, the number of
Options Shares shall be increased or decreased, as applicable, following such
combination or subdivision. In such event, the aggregate Exercise Price shall
remain unchanged.
5. Conditions for the Investment. The issuance of the Purchased Shares and the
payment of the Investment Amount by the Investor to the Company shall occur
immediately following the fulfillment of all of the following conditions
(provided the Investor is entitled at any time after the date hereof and before
all of the following conditions are met, to provide the Company all or part of
the Investment Amount as advance on the account of its investment hereunder):
5.1. Approval of the TASE for the registration of the Purchased Shares and
Option Shares.
5.2. Receipt of all additional approvals that may be required from the
securities authorities in the United States and Israel, the TASE, any other
authority in Israel or the United States or under any applicable law in order to
fulfill the terms hereof and register the Purchased Shares and Option Shares for
trade on the TASE.
6. Miscellaneous.
6.1. The preamble and exhibits to this Agreement are an integral part hereof.
The titles and subtitles used in this Agreement are used for convenience only
and are not to be considered in construing or interpreting this Agreement.
6.2. This Agreement constitutes the full and entire understanding and agreement
between the parties with respect to the subject matter hereof, and any other
written or oral agreement relating to the subject matter hereof existing between
the parties are expressly canceled.
6.3. Each party shall take any and all action that may be required, including
signing on additional documentation, providing information, voting shares, in
order to fulfill the terms and intentions set forth herein.
6.4. No delay or omission to exercise any right, power, or remedy accruing to
any party upon any breach or default under this Agreement, shall be deemed a
waiver of any other breach or default theretofore or thereafter occurring. Any
waiver, permit, consent, or approval of any kind or character on the part of any
party of any breach or default under this Agreement, or any waiver on the part
of any party of any provisions or conditions of this Agreement, must be in
writing and shall be effective only to the extent specifically set forth in such
writing. All remedies, either under this Agreement or by law or otherwise
afforded to any of the parties, shall be cumulative and not alternative.

 

 

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6.5. This Agreement shall be governed by and construed according to the laws of
the State of Delaware without regard to the conflict of laws provisions thereof
any matter governed by provided, however, that any and all issues relating to
TASE rules or the Israeli Securities Laws, would be governed by such rules and
laws. If one or more provisions of this Agreement are held to be unenforceable
under applicable law, such provision shall be excluded from this Agreement and
the balance of the Agreement shall be interpreted as if such provision were so
excluded and shall be enforceable in accordance with its terms.
6.6. All notices and other communications required or permitted hereunder to be
given to a party to this Agreement shall be in writing and shall be deemed to
have arrived at its destination: (i) upon delivery or within 7 days of sending
via registered mail; (ii) upon transmission if sent via fax; upon delivery, if
hand delivered, to the addresses or fax numbers listed in the preamble to this
Agreement.
6.7. The rights and obligations of the Investor under this Agreement may not be
assigned.
IN WITNESS WHEREOF, the parties have executed this Investment Agreement as of
the date first above written.

          /s/ Ehud-Moshe Gilboa
 
TopSpin Medical, Inc.   /s/ Asher Shmulewitz
 
Asher Shmulewitz