Document:

exhibit_10-1.htm

Exhibit 10.1

 

CONFIDENTIAL TREATMENT REQUESTED

 

Redacted Copy

 

AMENDMENT TO FUNDING AGREEMENT

 

This Amendment is entered on this April 21, 2013 (the “Amendment”) to the Funding Agreement dated December 29, 2010, (the “2010 Agreement”),  that  was entered into between BAIZE INVESTMENTS (ISRAEL) LTD., a private company organized under the laws of Israel No. 51-430159-1, c/o – The Goldman Group, 55 St. Clair Avenue West, Suite 240, Toronto, Ontario, Canada M4V2Y  (“Investor”), and COMPUGEN, Ltd., an Israeli corporation, having a place of business at 72 Pinchas Rosen Tel Aviv, Israel (“Compugen”).

 

WHEREAS, following a total investment of $5 million by the Investor pursuant to the 2010 Agreement, and $8,000,000 pursuant to the Funding Agreement, dated December 20, 2011 (the “2011 Agreement”) entered into between the Investor and  Compugen, both Parties are interested in amending certain provisions of the 2010 Agreement, and terminating the 2011 Agreement all as set forth herein.

 

NOW, THEREFORE, in consideration of the foregoing premises and the mutual covenants set forth below, the parties hereby agree as follows:

 

	
1.

	
The Parties hereby agree to terminate in its entirety the 2011 Agreement.

 

	
2.

	
All defined terms used herein but not defined herein, shall have the respective meanings as set forth in the 2010 Agreement.

 

	
3.

	
The second WHEREAS clause in the 2010 Agreement will be replaced by the following:

 

“WHEREAS, included in the Compugen discovered molecules selected for inclusion in the Pipeline Program are the molecules set forth in Exhibit A1 hereof  (the “Designated Product Candidates”)”

 

	
4.

	
Section 1.1 of the 2010 Agreement, will be replaced by the following:

 

	 	
“1.1. 

	
“Affiliate” shall mean any company or other legal entity which, directly or indirectly, controls, or is controlled by, or is under common control with, Compugen; control means the ability to direct the operations of any company or other legal entity, including, without limitation, the holding of fifty (50%) or more of (i) the capital and/or (ii) the voting rights or general partnership interest and/or (iii) the right to elect or appoint directors, and/or (iv) the right to receive profits.”

 

	
5.

	
Section 1.1A will be added to the 2010 Agreement as follows:

 

	 	
“1.1A 

	
“Annual Report” shall mean an annual report containing a summary report for each Designated Product Candidate and Target mAb (as such term is hereinafter defined), providing general information with respect to what research was conducted by Compugen since the prior Annual Report, and what is planned to be undertaken during the remainder of the current calendar year. The Annual Report shall also contain general information as to any commercialization efforts taken (and planned to be taken) and agreements reached (and planned to be reached) in respect of the Designated Product Candidates and Target mAbs during the period covered by such report. The Annual Report shall be duly signed by either the CEO, CFO or COO of Compugen and shall be subject to the confidentiality provisions hereof.”

 

Portions of the exhibit, indicated by the mark “[***],” were omitted and have been filed separately with the Securities and Exchange Commission pursuant to the Registrant’s application requesting confidential treatment pursuant to Rule 24b-2 of the Securities Exchange Act of 1934, as amended.

  

  

CONFIDENTIAL TREATMENT REQUESTED

  

 

	
6.

	
Section 1.3 of the 2010 Agreement, will be replaced by the following:

 

	
  

	
“1.3

	
“Cash Consideration” shall mean the amounts payable by Compugen to the Investor in respect of Gross Cash, which shall equal ten percent (10%) of Net Cash.”

 

	
7.

	
Section 1.4 of the 2010 Agreement,  will be replaced by the following:

 

	
  

	
“1.4

	
“Compugen Warrant” shall mean a warrant setting forth the right of the Investor to purchase Ordinary Shares for an exercise price of seven U.S. dollars and fifty cents ($7.50) per Ordinary Share, to be exercised no later than June 30, 2015, in the form attached hereto as Exhibit B.”

 

	
8.

	
Sections 1.5 and 1.6 will be deleted from the 2010 Agreement.

 

	
9.

	
Section 1.7A will be added to the 2010 Agreement as follows:

 

	 	
“1.7A. 

	
“Gross Cash” shall mean all cash consideration received by Compugen or its Affiliates from third parties on the earlier of;

 

	
  

	
X.

	
any day (i) on or prior to June 30, 2015 with  respect to any Designated Product Candidate and/or Target mAb;  and (ii) on or after July 1, 2015 with respect to the Selected Products; or

 

	
  

	
Y.

	
if applicable, on or prior to the Exchange Notice Date (as such term is hereinafter defined).”

 

	
10.

	
Section 1.7B will be added to the 2010 Agreement as follows:

 

	 	
“1.7B.

	
“Monoclonal Antibody” or “mAb” shall mean an antibody produced by a single clone of cells or cell line.”

 

	
11.

	
Section 1.7C will be added to the 2010 Agreement as follows:

 

	 	
“1.7C   

	
“Net Cash” shall mean Gross Cash minus Pass-Through Amounts.”

 

	
12.

	
Section 1.13 will be replaced by the following:

 

	 	
“1.13

	
“Pass-Through Amounts” shall mean: (i) out-of-pocket cash payments by Compugen or its Affiliates to subcontractors directly related to a Designated Product Candidate, or Target mAb provided that such cash payments become payable by Compugen following the closing of the third party agreement giving rise to the Gross Cash received by Compugen on which the related Cash Consideration is based; (ii) Third Party Royalties paid in connection with the Gross Cash received by Compugen on which the related Cash Consideration is based; (iii) the amount of any taxes withheld at source for which Compugen cannot receive a tax credit under then prevailing laws; (iv) any payments made at fair market value for equity investments in Compugen as part of a transaction in connection with the Gross Cash received by Compugen on which the related Cash Consideration is based; (v) research funding paid to Compugen under a written agreement with a research project and a budget intended to further research and development with respect to such Designated Candidates and Target mAbs; and (vi) arm's length loans provided to Compugen under the third party agreement giving rise to the Gross Cash received by Compugen on which the related Cash Consideration is based. For the avoidance of doubt, (i) each such Pass-Through Amount shall be subject to only one recovery by Compugen and (ii) reimbursement of out-of-pocket cash payments by Compugen to subcontractors incurred by Compugen prior to the closing of the third party agreement giving rise to the Gross Cash on which the related Cash Consideration is based, shall not be considered as Pass-Through Amounts for the purposes of this Agreement.

 

Portions of the exhibit, indicated by the mark “[***],” were omitted and have been filed separately with the Securities and Exchange Commission pursuant to the Registrant’s application requesting confidential treatment pursuant to Rule 24b-2 of the Securities Exchange Act of 1934, as amended.

  

  

  

CONFIDENTIAL TREATMENT REQUESTED

 

	
13.

	
Section 1.15 will be deleted from the 2010 Agreement.

 

	
14.

	
Section 1.16 will be added to the 2010 Agreement as follows:

 

	 	
“1.16

	
“Selected Products” shall mean a total of five (5) Designated Product Candidates and Target mAbs as selected by Investor on or prior to the later of (i)  June 30, 2015, or (ii) thirty (30) days following receipt by Investor of the Annual Report for calendar year 2014,  pursuant to Section 3A hereunder.”

 

	
15.

	
Section 1.17 will be added to the 2010 Agreement as follows:

 

	
  

	
“1.17

	
“Target” shall mean each of the eight (8) drug targets identified by Compugen and listed in Appendix A2  to this Agreement.”

 

	
16.

	
Section 1.18 will be added to the 2010 Agreement as follows:

 

	
  

	
“1.18

	
“Target mAb” shall mean any mAb developed for the treatment of disease or other conditions in humans or animals by or on behalf of Compugen or any Affiliate of Compugen against a Target.”

 

	
17.

	
Section 1.19 will be added to the 2010 Agreement as follows:

 

	
  

	
“1.19

	
“Third Party Royalties” shall mean any royalties or percentage payments to be paid by Compugen or an Affiliate of Compugen to any third party in connection with, or in consideration for, a license granted by such third party to technology and/or intellectual property rights needed for the making, using, marketing or selling of a Designated Product Candidate and/or Target mAb.

 

	
18.

	
Section 3.1.2 of the 2010 Agreement will be replaced by the following:

 

	 	
“3.1.2

	
An entitlement to receive the Cash Consideration.”

 

	
19.

	
Section 3.1.3 will be deleted from the 2010 Agreement.

 

	
20.

	
Section 3.1.4 of the 2010 Agreement will be replaced by the following:

 

	 	
“3.1.4

	
An entitlement to receive the Annual Reports and the Cash Consideration Quarterly Reports mentioned in Section 3.3 below.”

 

	
21. 

	
Section 3.2 of the 2010 Agreement will be replaced by the following:

 

	
  

	
“3.2

	
Compugen shall issue to Investor the Annual Reports not later than 60 days following Company’s filing of its Form 20-F Annual Report with the SEC for calendar years 2012, 2013 and 2014.”

 

  

Portions of the exhibit, indicated by the mark “[***],” were omitted and have been filed separately with the Securities and Exchange Commission pursuant to the Registrant’s application requesting confidential treatment pursuant to Rule 24b-2 of the Securities Exchange Act of 1934, as amended.

  

  

CONFIDENTIAL TREATMENT REQUESTED

 

	
22. 

	
Section 3.3 of the 2010 Agreement will be replaced by the following:

 

	
  

	
“3.3

	
Payments of Cash Consideration pursuant to 3.1.2 above shall be made quarterly within 120 days following the end of each calendar quarter, during which any Gross Cash was received. Such payments shall be in total only and shall be paid together with a validity report signed by the CFO of the Company (the “Cash Consideration Quarterly Report”). At Investor's request no later than two years following each such payment, Investor will have an audit right at Compugen’s premises, to be performed by a recognized accounting firm (chosen by Investor) during normal business hours and subject to the signature of a customary confidentiality undertaking. The cost of such auditing shall be borne by Investor, unless a deficiency of more than 2% is found, in which event Compugen shall bear all reasonable auditing costs. Within thirty (30) days of such auditing, the Party which either received an excessive amount, or paid an amount lower than required, according to the auditing, shall pay the appropriate amount, provided that if such payment is made by Compugen it shall be paid together with interest at an annual rate of five percent (5%) from the due date and until actual payment hereunder.

 

	
23. 

	
Section 3.8 of the 2010 Agreement will be replaced by the following:

 

	
  

	
“3.8

	
Notwithstanding the above, Investor may, at any time on or prior to June 30, 2015  provide a written notice (the “Exchange Option Notice”) of its election to exchange, as of the Actual Exchange Date (as such term is hereinafter defined), all of its rights to receive the full Cash Consideration for the Exchange Shares (as such term is hereinafter defined) without any further consideration required to be paid by the Investor to Compugen in connection therewith (the right to provide the Exchange Option Notice and instead receive the Exchange Shares, the “Exchange Option”). The “Actual Exchange Date” shall be a date selected by the Investor and set forth in the Exchange Option Notice, provided that such date shall not be earlier than 61 trading days  following the date of delivery of such Exchange Option Notice to Compugen (the “Exchange Notice Date”), nor later than the 62nd trading day following June 30, 2015.

 

The “Exchange Shares” shall mean Ordinary Shares in an amount which is the quotient of (i) Thirteen Million U.S. Dollars ($13,000,000) less 50% of any Cash Consideration paid to Investor by Compugen up to the 21st trading day prior to the Actual Exchange Date divided by (ii) the average closing price of the Ordinary Shares during the twenty (20) trading days prior to the Actual Exchange Date (the “Exchange Price”); provided however that the Exchange Price shall not be lower than $3 per share, and shall not exceed $12 per share.

 

In the event that the Investor exercises the Exchange Option and provides the Exchange Option Notice, the Company shall, within ten (10) Business Days following the Actual Exchange Date, issue to the Investor the Exchange Shares.  It is the intention of the parties hereto that the issuance to the Investor of the Exchange Option pursuant to the provisions hereof shall commence the Investor’s holding period with respect to the Exchange Shares issuable upon the exercise thereof under Rule 144 (“Rule 144”), paragraph (d)(3)(ii), under the U.S. Securities Act of 1933, as amended (the “Securities Act”), and that following any Actual Exchange Date occurring after the lapse of six months following the date on which the Exchange Option is issued, the Investor shall be permitted to publicly resell Exchange Shares in accordance with Rule 144 (assuming that the Investor is not then, nor in the 3 months preceding such time, an “affiliate” of the Company (as defined in Rule 144(a)(1)) and that the Company is then current in its reports under the U.S. Securities Exchange Act of 1934, as amended (the “Exchange Act”)).  To the extent that the Investor is unable to rely upon Rule 144 for the public resale of such Exchange Shares, the Company shall exercise commercially reasonable efforts to promptly file a resale registration statement pursuant to the Securities Act within the following 90 day period to enable the public disposition by the Investor of such Exchange Shares.

 

Portions of the exhibit, indicated by the mark “[***],” were omitted and have been filed separately with the Securities and Exchange Commission pursuant to the Registrant’s application requesting confidential treatment pursuant to Rule 24b-2 of the Securities Exchange Act of 1934, as amended.

  

  

  

CONFIDENTIAL TREATMENT REQUESTED

 

	
24. 

	
Section 3.10 of the 2010 Agreement will be replaced by the following:

 

	
  

	
“3.10

	
For the avoidance of doubt, in the event  of the Investor providing Compugen with an Exchange Notice, the Investor shall not be entitled to receive any further Cash Consideration or Cash Consideration Reports with respect to Net Cash received by Compugen following the Exchange Notice Date, and

 

	
  

	
3.10.1

	
All Compugen Warrants issued to Investor shall remain outstanding in full with no change to their terms or conditions.

 

	
  

	
3.10.2

	
Other than with respect to (i) the issuance of the Exchange Shares,  (ii) the Compugen Warrants and (iii) any Compugen obligations related to the period on or prior to the Exchange Notice Date, Compugen shall have no further financial or other obligations of any kind to Investor.

 

	
25. 

	
Section 3.11 will be deleted

 

	
26.

	
Section 3A will be added to the 2010 Agreement as follows:

 

“3A. SELECTION BY INVESTOR OF SELECTED PRODUCTS

 

	
  

	
3A.1

	
At any time, or from time to time, but in any event prior to the later of (i)  June 30, 2015, or (ii) the date that is thirty (30) days following receipt by Investor of the Annual Report for calendar year 2014, (in either case, the “Final  Date”) Investor shall notify Company in writing of its selection of a total of not more than five (5) Designated Product Candidates and Target mAbs to be Selected Products under this Agreement.

 

	
  

	
3A.2

	
Once a Designated Product Candidate or Target mAb, is selected by the Investor, it shall remain a Selected Product for the entire term of the Agreement.

 

	
  

	
3A.3

	
If no Selected Product  has been selected by Investor 30 days prior to the Final Date, Compugen shall, within the following five business days, notify Investor in writing that this is the case.  If no Selected Product  has been selected by Investor 15 days prior to the Final Date, Compugen shall again, within the following five business days, notify Investor in writing that this is the case.

 

Portions of the exhibit, indicated by the mark “[***],” were omitted and have been filed separately with the Securities and Exchange Commission pursuant to the Registrant’s application requesting confidential treatment pursuant to Rule 24b-2 of the Securities Exchange Act of 1934, as amended.

  

  

  

CONFIDENTIAL TREATMENT REQUESTED

 

	
  

	
3A.4

	
For the avoidance of doubt, if no Selected Product  has been selected by Investor prior to the Final Date, it shall be deemed that as of the Final Date, Investor has elected to exercise the Exchange Option pursuant to Section 3.8 above and therefore the Exchange Notice Date shall be the Final Date.

 

	
27. 

	
Section 6 of the 2010 Agreement will be replaced by the following:

 

	
1.

	
“6.

	
INVENTIONS

 

	
  

	
Investor agrees that all information, improvements, inventions, formulae, processes, techniques, know-how and data, and all related intellectual property, whether or not patentable or registerable under copyright or any similar laws, made or conceived or reduced to practice or learned in connection with any of the Designated Product Candidates, Targets and/or Target mAbs (all such information, improvements, inventions, formulae, processes, techniques, know-how, and data, and all related intellectual property, are hereinafter referred to as the “Invention(s)”) immediately upon discovery, receipt, creation or invention as applicable, shall be considered Inventions of the Company, shall be the sole property of the Company and its assignees, and the Company and its assignees shall be the sole owner of all patents, copyrights, trade secret and all other rights of any kind or nature, including moral rights, in connection with such Inventions.” 

 

	
28. 

	
Section 7.1 of the 2010 Agreement will be replaced by the following:

 

“7.1              Term and Termination. Unless earlier terminated by the Parties, or expiration in accordance with the terms hereof, the term of this Agreement will commence on the Effective Date and continue until the first to occur of:

 

	
  

	
7.1.1

	
Receipt by Investor of the Exchange Shares pursuant to Section 3.8 above; or

 

	
  

	
7.1.2

	
December 31, 2030,

 

provided that any provision hereof that, according to the terms hereof, is to expire on an earlier date, shall expire on such earlier date and provided further that the terms of Company Warrants granted to Investor hereunder and any rights prevailing during the period until such termination shall not be affected by such termination.”

 

	
29. 

	
Section 7.2.2 of the 2010 Agreement will be replaced by the following:

 

“7.2.2                             Notwithstanding the above prohibition of assignment or transfer, (i) Compugen may assign any rights related to the Designated Product Candidates, Targets, and/or Target mAbs in connection with any participation, joint venture, partnership or any other cooperation with third parties in connection with the development, marketing, selling, commercialization or any other activity it deems necessary or advisable in connection with any of the Designated Product Candidates, Targets, and/or Target mAbs, it being clarified for avoidance of doubt that such assignment or transfer shall be subject and without impairment to the Investor's rights against Compugen hereunder, including without limitation, the right for Cash Consideration and (ii) Investor may freely transfer and assign any Company Warrants obtained by it pursuant to this Agreement, provided such transfer or assignment is in compliance with and consistent with applicable securities law. A Party shall promptly notify the other Party in writing of any assignment made hereunder.”

 

Portions of the exhibit, indicated by the mark “[***],” were omitted and have been filed separately with the Securities and Exchange Commission pursuant to the Registrant’s application requesting confidential treatment pursuant to Rule 24b-2 of the Securities Exchange Act of 1934, as amended.

  

  

  

 

CONFIDENTIAL TREATMENT REQUESTED

 

	
30. 

	
Section 7.3 of the 2010 Agreement will be replaced by the following:

 

“7.3              Confidentiality.

 

Investor and any successor or assignee thereof, who received or receives from the Company or its agents, directly or indirectly, any information concerning the Company, including, without limitation, the Designated Product Candidates, Targets, and/or Target mAbs, which the Company has not made generally available to the public, acknowledges and agrees that such information is confidential, and further agrees that, for so long as such information is not public, it will neither use such information for any purpose other than in connection with the consummation of its rights pursuant to this Agreement and the transactions contemplated hereby, nor will it disseminate such information to any person other than the representatives and advisors of Investor who have a need to know such information for purposes of effecting the transaction contemplated by this Agreement, provided that such persons to whom Investor has given access to the Company's confidential information are bound by similar confidentiality obligations to those set forth herein.  If this Agreement is terminated by any of the Parties, for any reason whatsoever, (a) at the Company’s request, Investor shall immediately return to the Company any and all non-public information received from the Company or their respective advisors in connection with the transactions contemplated hereby (but shall be entitled to retain for archival purposes and protection of his interests one copy of any report received from Compugen hereunder) and shall so confirm to the Company by a written certificate executed by Investor; and (b) the Confidentiality provisions of this Section 7.3 shall remain in full force and effect and binding on Investor.

 

Investor understands and acknowledges that it may receive material, non-public information concerning the Company under this Agreement and that applicable securities law and regulations contain prohibitions with respect to the use of such information and the disclosure of such information to others.”

 

	
31. 

	
Section 7.4 of the 2010 Agreement will be replaced by the following:

 

“7.4              Notices.

 

All notices required to be given under this Agreement shall be in writing, by mail, courier or hand delivery to the addresses which may be designated by each Party from time to time in a writing complying with this Notice provision, and shall be deemed received on the date confirmed on: (1) the return receipt for certified mail sent return receipt requested; or (2) the receipt for notices sent by Airborne, Federal Express or other reliable overnight courier; or (3) two (2) Business Days following delivery by Facsimile (with receipt of proper transmission).

 

Portions of the exhibit, indicated by the mark “[***],” were omitted and have been filed separately with the Securities and Exchange Commission pursuant to the Registrant’s application requesting confidential treatment pursuant to Rule 24b-2 of the Securities Exchange Act of 1934, as amended.

  

  

  

CONFIDENTIAL TREATMENT REQUESTED

  

If to Compugen:

 

Compugen Ltd.

 

Pinchas Rosen Street #72

 

Tel Aviv 69512, Israel

 

Fax. 03-765-8555

 

Attention: General Counsel

 

If to Investor:

 

Baize Investment (Israel) Ltd, c/o – The Goldman Group,

 

55 St. Clair Avenue West, Suite 240,

 

Toronto, Ontario, Canada M4V2Y7

 

Attention: Mr. Murray Goldman

 

With a Copy (which shall not constitute a notice) to:

 

POB 5481

 

Caesarea 30889, Israel

 

Fax: 04-9400874

 

	
32. 

	
Exhibit A of the 2010 Agreement will be replaced by Exhibits A1 and A2 attached to this Amendment.

 

	
33. 

	
Exhibit B of the 2010 Agreement will be replaced by Exhibit B1 attached to this Amendment.

 

	
34.

	
In the event of any conflict between the provisions of the 2010 Agreement as amended by this Amendment, the provisions of this Amendment shall prevail. For avoidance of doubt a copy of the 2010 Agreement as amended by this Amendment is attached.

 

	
35.

	
Except as amended herein, all other terms and conditions of the 2010 Agreement shall remain in full force and effect.

 

	
36.

	
This Amendment may be executed in counterparts, each of which shall be deemed an original and all of which together shall constitute one and the same instrument. Any signature page delivered by facsimile or electronic image transmission shall be binding to the same extent as an original signature page.

 

Portions of the exhibit, indicated by the mark “[***],” were omitted and have been filed separately with the Securities and Exchange Commission pursuant to the Registrant’s application requesting confidential treatment pursuant to Rule 24b-2 of the Securities Exchange Act of 1934, as amended.

  

  

  

 

CONFIDENTIAL TREATMENT REQUESTED

 

	
37.

	
IN WITNESS WHEREOF, the parties have executed this Amendment as of the date hereof.

 

	BAIZE INVESTMENTS (ISRAEL) LTD	 	
COMPUGEN LTD.

	 	 	 	 	 
	
By:

	/s/ Murray Goldman                      	 	
By:

	
/s/ Anat Cohen-Dayag                  

	 	 	 	 	 
	
Name:

	Murray Goldman 	
 

	
Name:

	
Anat Cohen-Dayag 

	
 

	 	 	 	 
	
Title:  

	President                                                                 	
 

	
Title:  

	
President & CEO         

	 	 	 	 	 
	
Date:

	April 19, 2013  	 	
Date:

	
April 21, 2013 

	
 

	 	 	 	 

Portions of the exhibit, indicated by the mark “[***],” were omitted and have been filed separately with the Securities and Exchange Commission pursuant to the Registrant’s application requesting confidential treatment pursuant to Rule 24b-2 of the Securities Exchange Act of 1934, as amended.

  

  

  

CONFIDENTIAL TREATMENT REQUESTED

 

Appendix A1: Designated Product Candidates

	

Designated Product Candidates

	Status
	
[***]

	
[***]

	
[***]

	
[***]

	
[***]

	
[***]

	
[***]

	
[***]

	
[***]

	
[***]

Appendix A2: Targets

	

Targets

	
Status

	
[***]

	
[***]

	
[***]

	
[***]

	
[***]

	
[***]

	
[***]

	
[***]

	
[***]

	
[***]

	
[***]

	
[***]

	
[***]

	
[***]

	
[***]

	
[***]

 

Portions of the exhibit, indicated by the mark “[***],” were omitted and have been filed separately with the Securities and Exchange Commission pursuant to the Registrant’s application requesting confidential treatment pursuant to Rule 24b-2 of the Securities Exchange Act of 1934, as amended.Exhibit 10.1 

 

A G R E E M E N T

THIS AGREEMENT dated this 19th day of June, 2013.

 

B E T W E E N:

 

2367416 ONTARIO INC.

Hereinafter referred to as “236”

 

And

 

TURBINE TRUCK ENGINES INC.,

 

Hereinafter referred to as “TTE”

WHEREAS TTE and Enzo Cirillo in trust for a company to be incorporated, entered into a Letter of Intent dated March 16th, 2013;

AND WHEREAS 236 is the corporation that will be taking over the responsibilities and obligations of Enzo Cirillo in respect of the Letter of Intent and this Definitive Agreement being entered into in furtherance of the Letter of Intent.

 

    	 

    	 

    
 

 

AND WHEREAS the parties hereto agree and acknowledge that upon the execution of this Agreement Enzo Cirillo is released from any and all liability and/or obligations that may have arisen as a result of his execution of the Letter of Intent.

AND WHEREAS in accordance with the terms and conditions contained in this Definitive Agreement, 236 will advance by way of loan to TTE an initial sum in the minimum amount of FOUR HUNDRED FIFTY THOUSAND ($450,000.00) DOLLARS, with a maximum advance of TEN MILLION ($10,000,000.00) DOLLARS.

NOW THEREFORE THIS AGREEMENT WITNESSES that in consideration of the mutual covenants and agreements contained herein and other good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged by each of the parties hereto, the parties hereto covenant and agree as follows:

ARTICLE I – INTERPRETATION:

 

	
1.1  

	
Definition

 

In this Agreement unless the context otherwise requires, the following words and phrases will have the meaning set out below, respectively:

 

(a)           “Advance”- means the advance of the loan;

 

(b)           “Business day”-  means a day other than a Saturday, Sunday or public holiday;

 

(c)           “Loan”  - has the meaning ascribed hereto in Section 2.1 below;

 

(d)           “Loan documents”   - means this loan agreement, any security agreements and/or other documents to be executed and/or delivered to 236 by TTE or its counsel;

 

    	 

    	 

    
 

 

(e)           “Security agreement” - has the meaning ascribed thereto in this Agreement.

1.2         HEADINGS:

 

The division of this loan agreement into articles and sections and the insertion of headings is for convenience and reference only, and shall not affect the construction or interpretation of this Loan Agreement.

	
1.3  

	
NUMBER AND GENDER

In this Loan Agreement words importing the single number only shall include the plural and vice versa, words importing a specific gender shall include the other gender, and references to persons shall include individuals, partnerships, trusts, associations and incorporated organizations and corporations.

	
1.4  

	
CURRENCY:

 

All dollar amounts referred to in the Loan Agreement are in Canadian Funds.

ARTICLE II – LOAN

 

2.1            236 has agreed to advance an initial minimum amount of FOUR HUNDRED FIFTY THOUSAND ($450,000.00) DOLLARS (the “Initial Loan”) with a maximum advance of TEN MILLION ($10,000,000.00) DOLLARS upon TTE satisfying the terms and conditions as set out herein.

 

    	 

    	 

    
 

 

2.2            REPAYMENT OF LOAN:

 

The Principal amount of any monies advanced forming the loan together with accrued interest shall be repayable on or before a period, to be negotiated, that is a minimum of three years from the date of advance and a maximum of five years from the date of the advance.

 

2.3            INTEREST:

 

The Initial Loan shall bear interest at the rate of 20% per annum payable monthly, commencing on the last day of the month after the date of the first advance of the loan.

2.4            SECURITY:

 

Payment of the Initial Loan will be secured by a GSA in the form of the Security Agreement, to be negotiated (the Security Agreement) and by restricted Shares, which will be subject to a Lock Up/Leak Out Agreement, to be negotiated. TTE will also get its larger shareholders to agree to a Leak Out Agreement. The Shares shall be issued at the time of closing and funding of the Initial Loan of not less than FOUR HUNDRED FIFTY THOUSAND ($450,000.00) DOLLARS, and shall be delivered to 236 upon receipt by TTE of the Lock Up/Leak Out Agreement. The Shares to be issued to 236, shall be equal to the issued and outstanding common shares of TTE at the time.   The share issuance will be in complete conformity with all corporate by-laws and resolutions of TTE, and in complete conformity with all applicable securities legislation of Canada and the U.S.A.  After the Initial Loan, the parties agree that any further advances will be secured using conventional financing, keeping the companies’ best interests in mind.

 

    	 

    	 

    
 

2.5            Upon execution of this Agreement 236 shall have appointed to the Board of Directors of TTE two nominees, one being Robert Oliva, and the other to be selected by 236.  Both of these appointments are hereby consented to by TTE, subject only to the parties being qualified to serve on the Board of a US public company.  TTE will take all corporate steps necessary to have these appointments made and confirmed.

 

2.6. In the event that the Initial Loan is not made and funded, on or before July 26, 2013, this Agreement shall be void and the Board members appointed by 236 shall resign as of that date, without further action being necessary.

ARTICLE III: ADVANCE:

 

3.1            Prior to any advance being made in accordance with the terms hereunder, 236 is to be provided with the following information so as to satisfy itself of the manner in which the funds will be utilized by TTE, that being:

 

a)            TTE will provide to 236 detailed specifications on the hydrogen generators and a copy of all associated documentation including all warranty obligations and service contracts, in relation to the purchase of the hydrogen generators from the Chinese manufacturer with whom it presently does business;

 

b)            TTE will provide documentary proof that the hydrogen generators will cost less to operate than traditional diesel generators;

 

c)            TTE will provide copies of agreements it has entered into with end users of the hydrogen generators;

 

    	 

    	 

    
 

 

d)            the parties acknowledge that a portion of the Initial Loan (with all disbursements being approved by the Board) will be used to purchase the hydrogen generators from the manufacturer and then have those provided to TTE for an annual fee;

 

e)            all monies for the purchase of the hydrogen generators will be advanced by 236 at an interest rate to be paid by TTE of 20% per annum payable on the last day of the month after the initial advance.

 

f)            236 shall sign a Non-Disclosure Agreement with TTE, and represents that any party approached for the provision of funds to TTE, will sign a NDA, prior to any information being provided to them.

ARTICLE IV – REPRESENTION AND WARRANTY:

 

TTE hereby represents and warrants to 236 as follows, and acknowledges and confirms that 236 is relying on such representations and warranties in connection with the loan.

CORPORATE STATUS:

 

4.1            TTE was incorporated under the laws of the State of Nevada and has not been dissolved.

CORPORATE POWER:

 

4.2            TTE has all requisite corporate power and capacity to loan or lease its property, to carry on its business, to enter into this Loan Agreement and to complete the transaction provided for herein.

 

    	 

    	 

    
 

CORPORATE AUTHORIZATION:

 

4.3            The execution and delivery of each of the loan documents by TTE and the completion of the transaction provided for herein have been duly authorized by all necessary corporate action and proceedings of TTE.

NO CONTRAVENTION:

 

4.4            The execution and delivery of the loan documents and the performance by TTE of its obligations thereunder will not result in the violation of any indenture or other agreement, written or oral, to which TTE is a party or by which it is bound.

ENFORCEABILITY:

 

4.5            This Loan Agreement and the other loan documents, have been duly executed and delivered by TTE and constitute legal, valid and binding obligations of TTE enforceable against TTE in accordance with their respective terms, subject only to any limitation under applicable laws relating to bankruptcy, insolvency, arrangement or creditors rights generally, and the discretion that a Court may exercise in the granting of equitable remedies.

TYPE OF ASSETS:

 

4.6            The property and assets and shares of TTE to be issued in furtherance of this Agreement are beneficially owned by it, with good marketable title thereto, free and clear of any mortgages, charges, pledges, assignments, liens, security interests or encumbrances whatsoever.

 

    	 

    	 

    
 

ARTICLE IV - COVENANTS:

 

So long as the loan or any part thereof remains outstanding, the borrower covenants and agrees with 236 as follows.

EXISTENCE:

 

5.1            TTE will preserve and maintain its existence and its power and capacity to own or lease its property and assets and carry on its business.

CONDUCT OF BUSINESS:

 

5.2            TTE shall do or cause to be done, all things necessary or desirable to maintain its existence, to maintain its power and capacity to own its properties and assets, and to carry on business in a commercially reasonable manner in accordance with normal industry standards.

PUNCTUAL PAYMENT:

 

5.3            TTE shall pay or cause to be paid, all obligations falling due hereunder on the dates and in the manner specified herein.

COMPLIANCE WITH APPLICABLE LAWS AND CONTRACTS:

 

5.4            TTE shall comply in all material respects with the requirements of all applicable law and all obligations which, if contravened, could rise to a lien or any of TTE’s assets and all contracts to which it is bound, non-compliance with which would, singly or in the aggregate, have a material adverse effect upon its business or upon the ability of TTE to perform its obligations under any loan documents to which it is a party.

 

    	 

    	 

    
 

ARTICLE VI - CONDITIONS PRECEDENT:

 

CONDITIONS OF ADVANCE:

 

6.1           The obligations of 236 to make available the advance to TTE are subject to compliance, with each of the following conditions precedent, which conditions precedent are for the sole and exclusive benefit of 236 and may be waived in writing by 236 in its sole discretion.

 

a)            The representations and warranties set out in article 4 shall be true and correct on the date of the advances made on and as such date.

 

b)            TTE shall deliver the loan documents to 236.

 

c)            236 shall have received an opinion of TTE’s counsel that the loan documents have been duly executed and delivered and are enforceable against TTE in accordance with their terms.

 

d)            TTE shall have satisfied its obligations under Article 3 hereof.

ARTICLE VII - EVENTS OF DEFAULT:

 

7.1           The occurrence of any of the following events will constitute an event of default:

 

a)            default by TTE in payment of money to 236 unless such default is remedied within five (5) business days of the receipt of notice;

 

b)            default by TTE in performance or observance of any covenant, condition or obligation contained in any loan documents to which it is a party does not require the payment of money to 236, unless such default is remedied within fifteen (15) business days after notice thereof by 236 to TTE.

 

    	 

    	 

    
 

 

c)            default by TTE in the performance or observance of any covenant, condition or obligation contained in any agreement between TTE and any person where such default gives rise to a right to enforce security against TTE, and such securities being enforced.

 

d)            TTE takes any action or commences any proceedings or any action or proceedings taken or commenced by any other person or persons against TTE in respect of the liquidation or dissolution of TTE, and same is not contested in good faith by TTE.

 

e)            TTE commits or threatens to commit any act of bankruptcy pursuant to or set out under the provisions of any bankruptcy or insolvency legislation in Canada or in the U.S.A.

 

f)            the filing of a petition for a Receiving Order against TTE pursuant to the provisions of any bankruptcy or insolvency legislation in Canada or in the U.S.A., and the same is not contested in good faith by TTE.

 

g)            any execution, sequestration or other process of any Court or other Tribunal becoming enforceable against TTE or a distress or analogous action or proceeding being taken, commenced or issued against TTE.

 

h)            a Receiver and Manager, agent, liquidator or other similar administrator being appointed in respect of the assets of TTE or any part thereof or the taking by a secured party, lien claimant, other encumbrance, judgment creditor or a person asserting similar rights of possession of the assets of TTE, or any part thereof, and the same is not contested in good faith by TTE.

 

    	 

    	 

    
 

REMEDIES UPON DEFAULT:

 

7.2           Upon the occurrence of any event of default, 236 may:

 

a)            declare the entire principal amount and interest to be immediately due and payable;

 

b)            realize upon all or part of the security;

 

c)            take such actions and commence such proceedings as may be permitted at law or in equity (whether or not provided for herein or in the Security Agreement) at such times and in such manner as 236 in its sole discretion may consider expedient.

ARTICLE VIII - GENERAL PROVISIONS:

 

RELIANCE IN NON-MERGER

 

8.1            All covenants, agreements, representations and warranties of TTE made herein or in another loan document are material, shall be deemed to have been relied upon by 236, notwithstanding any investigation hereto for or hereafter made by it, 236 or any employee or other representative of 236, and shall survive the execution and delivery of this Agreement and any other loan document, until TTE shall have satisfied and performed all of its obligations.

NOTICES:

 

8.2            Any notice or other communication to be given hereunder to any of the parties hereto shall be in writing and may be given by delivery, or sent by facsimile or other similar means of electronic communication, or if postal services and deliveries are then operating, mail by registered mail, to such party at its address as set out below, or at such other address as such party may have designated by notice so given to the other parties hereto.

 

    	 

    	 

    
 

 

TO 236 at:  Enzo Cirillo

 

                                 84 Carron Ave.

 

                                 Maple Onterio CA.  L6A1Y6

TO TTE at:            Michael Rouse

 

46660 Deep Woods Road

 

Paisley, FL 32767

8.3            ANY NOTICE or other communication shall be deemed to have been given, if delivered, on the date of delivery, or if sent by facsimile or other similar means of electronic communication, on the business day next following the date of sending, or if mailed by registered mail as aforesaid, on the third business day following the date of the mailing, if postal service and deliveries are then operating.

PROPER LAW:

 

8.4            This Loan Agreement shall be construed in accordance with and governed in all respects by the laws of the Province of Ontario.

SUCCESSORS AND ASSIGNS:

 

8.5.            This Loan Agreement shall ensure to the benefit and be binding upon the parties hereto and their respective successors and assigns.

 

    	 

    	 

    
 

FURTHER ASSURANCES:

 

8.6            Whether before or after the happening of an event of default, TTE shall, at its own expense, do, make, execute or deliver, or cause to be done, made, executed or delivered by other persons, all further acts, documents and things in connection with the loan, and the loan documents as TTE may reasonably require from time to time for the purpose of giving effect to the loan documents, including, without limitation, for the purposes of facilitating the enforcement of the security, all immediately upon the request of 236.

COUNTERPARTS:

 

8.7            This Agreement may be executed in counterparts, each of which when so executed and delivered, shall be deemed to be an original, and such counterparts together shall constitute one and the same agreement.

 

IN WITNESS WHEREOF the parties hereto have duly executed this Loan Agreement as of the first day written above.

	 	 	 
	 	
2367416 ONTARIO INC.

	 	 	 
	 	Per:  	/s/ Michael
H. Rouse
	 	 	 
	 	I have authority to bind the corporation
	 	 	 
	 	TURBINE TRUCK ENGINES INC.
	 	 	 
	 	Per:	/s/
Enzo Cirillo
	 	 	 
	 	
I have authority to bind the corporation

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