Document:

Unassociated Document

 

NEITHER THE ISSUANCE AND SALE OF THE SECURITIES REPRESENTED BY THIS CERTIFICATE NOR THE SECURITIES INTO WHICH THESE SECURITIES ARE EXERCISABLE HAVE BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR APPLICABLE STATE SECURITIES LAWS.  THE SECURITIES MAY NOT BE OFFERED FOR SALE, SOLD, TRANSFERRED OR ASSIGNED (I) IN THE ABSENCE OF (A) AN EFFECTIVE REGISTRATION STATEMENT FOR THE SECURITIES UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR (B) AN OPINION OF COUNSEL (WHICH COUNSEL SHALL BE SELECTED BY THE HOLDER), IN A GENERALLY ACCEPTABLE FORM, THAT REGISTRATION IS NOT REQUIRED UNDER SAID ACT OR (II) UNLESS SOLD PURSUANT TO RULE 144 OR RULE 144A UNDER SAID ACT.  NOTWITHSTANDING THE FOREGOING, SUBJECT TO THE PROVISIONS OF THE BORROWER’S ARTICLES OF ASSOCIATION REGARDING RESTRICTIONS ON TRANSFER OF THE BORROWER'S SECURITIES, AS SHALL BE AMENDED FROM TIME TO TIME,THE SECURITIES MAY BE PLEDGED IN CONNECTION WITH A BONA FIDE MARGIN ACCOUNT OR OTHER LOAN OR FINANCING ARRANGEMENT SECURED BY THE SECURITIES.

	  	
Right to Purchase __________ Common Shares of InspireMD, Inc. (subject to adjustment as provided herein)

FORM OF COMMON SHARE PURCHASE WARRANT

 

	No. __________  	
Issue Date: March 31, 2011

 

InspireMD, Inc., a corporation organized under the laws of the State of Delaware (the “Company”), hereby certifies that, for value received, _______________________________, ____________________________________________, or its assigns (the “Holder”), is entitled, subject to the terms set forth below, to purchase from the Company at any time after the Issue Date until 5:00 p.m., Tel Aviv time, on three years after the Issue Date (the “Expiration Date”), up to ___________ fully paid and non-assessable Common Shares at a per share purchase price of One Dollar and Twenty-Three Cents (US$1.23).  The aforedescribed purchase price per share, as adjusted from time to time as herein provided, is referred to herein as the “Purchase Price.”  The number and character of such Common Shares and the Purchase Price are subject to adjustment as provided herein.  Capitalized terms used and not otherwise defined herein shall have the meanings set forth in that certain Share Exchange Agreement (the “Share Exchange Agreement”), dated as of December 29, 2010, entered into by the Company, the Holder and the other signatories thereto.

As used herein the following terms, unless the context otherwise requires, have the following respective meanings:

 

(A)           The term “Common Shares” includes (i) shares of the Company’s common stock, US$0.001 par value per share, as authorized on the issue date hereof, or (ii) any other securities into which or for which any of the securities described in (i) may be converted or exchanged pursuant to a plan of recapitalization, reorganization, merger, sale of assets or otherwise.

 

(B)           The term “Other Securities” refers to any stock (other than Common Shares) and other securities of the Company or any other person (corporate or otherwise) that the holder of the Warrant at any time shall be entitled to receive, or shall have received, on the exercise of the Warrant, in lieu of or in addition to Common Shares, or which at any time shall be issuable or shall have been issued in exchange for or in replacement of Common Shares or Other Securities pursuant to Section 4 or otherwise.

 

  

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(C)           The term “Principal Market” shall mean the NASDAQ Global Market, NASDAQ Global Select Market, the NASDAQ Capital Market, the New York Stock Exchange, the NYSE Amex Equities, the OTC Bulletin Board or in the over-the-counter market or Pink Sheets.

 

(D)           The term “Warrant Shares” shall mean the Common Shares issuable upon exercise of this Warrant.

 

1.           Exercise of Warrant.

 

1.1.           Number of Shares Issuable upon Exercise.  From and after the Issue Date through and including the Expiration Date, the Holder hereof shall be entitled to receive, upon exercise of this Warrant in whole in accordance with the terms of Section 1.2 and 1.6 or upon exercise of this Warrant in part in accordance with Section 1.3, Common Shares of the Company, subject to adjustment pursuant to Section 4 below.

 

1.2.           Full Exercise.  This Warrant may be exercised in full, subject to Section 1.6 below, by the Holder hereof by delivery to the Company of an original or facsimile copy of the form of subscription attached as Exhibit A hereto (the “Subscription Form”) duly executed by such Holder and delivery within two days thereafter of payment, in cash, wire transfer or by certified or official bank check payable to the order of the Company, in the amount obtained by multiplying the number of whole Common Shares for which this Warrant is then exercisable by the Purchase Price then in effect. The original Warrant is not required to be surrendered to the Company until it has been fully exercised.

 

1.3.           Partial Exercise.  This Warrant may be exercised in part (but not for a fractional share) by delivery of a Subscription Form in the manner and at the place provided in Section 1.2, except that the amount payable by the Holder on such partial exercise shall be the amount obtained by multiplying (a) the number of whole Common Shares designated by the Holder in the Subscription Form by (b) the Purchase Price then in effect.  On any such partial exercise, provided the Holder has surrendered the original Warrant, the Company, at its expense, will forthwith issue and deliver to or upon the order of the Holder hereof a new Warrant of like tenor, in the name of the Holder hereof, the whole number of Common Shares for which such Warrant may still be exercised.

 

1.4.           Company Acknowledgment.  The Company will, at the time of the exercise of the Warrant, upon the request of the Holder hereof, acknowledge in writing its continuing obligation to afford to such Holder any rights to which such Holder shall continue to be entitled after such exercise in accordance with the provisions of this Warrant.  If the Holder shall fail to make any such request, such failure shall not affect the continuing obligation of the Company to afford to such Holder any such rights.

 

1.5.           Delivery of Stock Certificates, etc. on Exercise.  The Company agrees that, provided the full purchase price listed in the Subscription Form is received as specified in Section 1.2, the Common Shares purchased upon exercise of this Warrant shall be deemed to be issued to the Holder hereof as the record owner of such shares as of the close of business on the date on which delivery of a Subscription Form shall have occurred and payment made for such shares as aforesaid.  As soon as practicable after the exercise of this Warrant in full or in part, and in any event within seven (7) calendar days thereafter (“Warrant Share Delivery Date”), the Company at its expense (including the payment by it of any applicable issue taxes) will cause to be issued in the name of and delivered to the Holder hereof, or as such Holder (upon payment by such Holder of any applicable transfer taxes) may direct in compliance with applicable securities laws, a certificate or certificates for the number of duly and validly issued, fully paid and non-assessable Common Shares (or Other Securities) to which such Holder shall be entitled on such exercise, together with any other stock or other securities to which such Holder is entitled upon such exercise pursuant to Section 1 or otherwise.  The Company understands that a delay in the delivery of the Warrant Shares after the Warrant Share Delivery Date could result in economic loss to the Holder.  In the event that the Company fails for any reason to effect delivery of the Warrant Shares by the Warrant Share Delivery Date, the Holder may revoke all or part of the relevant Warrant exercise by delivery of a notice to such effect to the Company, whereupon the Company and the Holder shall each be restored to their respective positions immediately prior to the exercise of the relevant portion of this Warrant.

 

  

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1.6           Non Exercise and Expiration of Warrants.  Notwithstanding anything to the contrary set forth herein, in the event that (i) the Company has not completed a PIPE Financing prior to the Original Maturity Date (as defined in the Debentures) and (ii) the Company’s failure to complete a PIPE Financing was not the result of a PIPE Default (as defined in the Debentures), 1/3 (one third) of the Warrant Shares originally issuable hereunder shall expire immediately and no longer be issuable hereunder. Moreover, in order to enforce the foregoing clause, the Holder shall not be entitled to acquire more than 2/3 (two thirds) of the Warrant Shares originally issuable hereunder until following the Original Maturity Date.

 

2.           Exercise.  Payment upon exercise must be made at the option of the Holder either in cash, by wire transfer or by certified or official bank check payable to the order of the Company equal to the applicable aggregate Purchase Price, for the number of Common Shares specified in such form (as such exercise number shall be adjusted to reflect any adjustment in the total number of shares of Common Shares issuable to the holder per the terms of this Warrant) and the holder shall thereupon be entitled to receive the number of duly authorized, validly issued, fully-paid and non-assessable shares of Common Shares (or Other Securities) determined as provided herein.

 

3.           Adjustment for Reorganization, Consolidation, Merger, etc.

 

3.1.           Fundamental Transaction.  If, at any time while this Warrant is outstanding, (A) the Company effects any merger or  consolidation  of the Company with or into another entity or (B) the Company effects any reclassification of the Common Shares or any compulsory share exchange pursuant to which the Common Shares is effectively converted into or exchanged for other securities, cash or property (in any such case, a “Fundamental  Transaction”), then the Holder shall have the right thereafter to receive, upon exercise of this Warrant, the same amount and kind of securities, cash or property as it would have been entitled to receive upon the occurrence of such Fundamental Transaction if it had been, immediately prior to such Fundamental Transaction, the holder of the number of Warrant Shares then issuable upon exercise in full of this Warrant, subject to the limitations set forth herein (the “Alternate Consideration”). The aggregate Purchaser Price for this Warrant will not be affected by any such Fundamental Transaction, but the Company shall apportion such aggregate Purchase Price among the Alternate Consideration in a reasonable manner reflecting the relative value of any different components of the Alternate Consideration.  If holders of Common Shares are given any choice as to the securities, cash or property to be received in a Fundamental Transaction, then the Holder shall be given the same choice as to the Alternate Consideration it receives upon any exercise of this Warrant following such Fundamental Transaction.  To the extent necessary to effectuate the foregoing provisions, any successor to the Company or surviving entity in such Fundamental Transaction shall issue to the Holder a new warrant consistent with the foregoing provisions and evidencing the Holder's right to exercise such warrant into Alternate Consideration.  The terms of any agreement pursuant to which a Fundamental Transaction is effected shall include terms requiring any such successor or surviving entity to comply with the provisions of this Section 3.1 and insuring that this Warrant (or any such replacement security) will be similarly adjusted upon any subsequent transaction analogous to a Fundamental Transaction.  The Merger is a Fundamental Transaction.  The Company shall give the Holder not less than fifteen (15) Business Days notice prior to any Fundamental Transaction (“Fundamental Transaction Notice”).  The failure to timely give a Fundamental Transaction Notice shall extend any rights of the Holder pursuant to this Warrant until fifteen (15) Business Days after receipt of a Fundamental Transaction Notice.

 

  

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4.           Extraordinary Events Regarding Common Shares.  In the event that the Company shall (a) issue additional Common Shares as a dividend or other distribution of its assets on outstanding Common Shares, (b) subdivide its outstanding Common Shares, or (c) combine its outstanding Common Shares into a smaller number of Common Shares, then, in each such event, the Purchase Price shall, simultaneously with the happening of such event, be adjusted by multiplying the then Purchase Price by a fraction, the numerator of which shall be the number of Common Shares outstanding immediately prior to such event and the denominator of which shall be the number of Common Shares outstanding immediately after such event, and the product so obtained shall thereafter be the Purchase Price then in effect. The Purchase Price, as so adjusted, shall be readjusted in the same manner upon the happening of any successive event or events described herein in this Section 4.  The number of Common Shares that the Holder of this Warrant shall thereafter, on the exercise hereof, be entitled to receive shall be adjusted to a number determined by multiplying the number of Common Shares that would otherwise (but for the provisions of this Section 4) be issuable on such exercise by a fraction of which (a) the numerator is the Purchase Price that would otherwise (but for the provisions of this Section 4) be in effect, and (b) the denominator is the Purchase Price in effect on the date of such exercise.

 

5.           Certificate as to Adjustments.  In each case of any adjustment or readjustment in the Common Shares (or Other Securities) issuable on the exercise of the Warrants, the Company at its expense will promptly cause its Chief Financial Officer or other appropriate designee to compute such adjustment or readjustment in accordance with the terms of the Warrant and prepare a certificate setting forth such adjustment or readjustment and showing in detail the facts upon which such adjustment or readjustment is based, including a statement of (a) the consideration received or receivable by the Company for any additional Common Shares (or Other Securities) issued or sold or deemed to have been issued or sold, (b) the number of Common Shares (or Other Securities) outstanding or deemed to be outstanding, and (c) the Purchase Price and the number of Common Shares to be received upon exercise of this Warrant, in effect immediately prior to such adjustment or readjustment and as adjusted or readjusted as provided in this Warrant..  The Company will forthwith mail a copy of each such certificate to the Holder of the Warrant and any Warrant Agent of the Company (appointed pursuant to Section 11 hereof).

 

6.           Reservation of Stock, etc. Issuable on Exercise of Warrant; Financial Statements.  The Company will at all times reserve and keep available, solely for issuance and delivery on the exercise of the Warrants, all Common Shares (or Other Securities) from time to time issuable on the exercise of the Warrant.  This Warrant entitles the Holder hereof, upon written request, to receive copies of all financial and other information distributed or required to be distributed to the holders of the Company's Common Shares.

 

7.           Assignment; Exchange of Warrant.  Subject to compliance with applicable securities laws and the Company’s Articles of Association, as may be amended from time, this Warrant, and the rights evidenced hereby, may be transferred by any registered holder hereof (a “Transferor”).  On the surrender for exchange of this Warrant, with the Transferor's endorsement in the form of Exhibit B attached hereto (the “Transferor Endorsement Form”) and together with an opinion of counsel reasonably satisfactory to the Company that the transfer of this Warrant will be in compliance with applicable securities laws and the Company's Articles of Association, as may be amended from time to time, the Company will issue and deliver to or on the order of the Transferor thereof a new Warrant or Warrants of like tenor, in the name of the Transferor and/or the transferee(s) specified in such Transferor Endorsement Form (each a “Transferee”), calling in the aggregate on the face or faces thereof for the number of Common Shares called for on the face or faces of the Warrant so surrendered by the Transferor.

 

  

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8.           Replacement of Warrant.  On receipt of evidence reasonably satisfactory to the Company of the loss, theft, destruction or mutilation of this Warrant and, in the case of any such loss, theft or destruction of this Warrant, on delivery of an indemnity agreement or security reasonably satisfactory in form and amount to the Company or, in the case of any such mutilation, on surrender and cancellation of this Warrant, the Company at its expense, twice only, will execute and deliver, in lieu thereof, a new Warrant of like tenor.

 

9.           Maximum Exercise.  The Holder shall not be entitled to exercise this Warrant on an exercise date and the Company may not call this Warrant pursuant to Section 10, in connection with that number of Common Shares which would be in excess of the sum of (i) the number of Common Shares beneficially owned by the Holder and its affiliates on an exercise or call date, and (ii) the number of Common Shares issuable upon the exercise of this Warrant with respect to which the determination of this limitation is being made on an exercise date, which would result in beneficial ownership by the Holder and its affiliates of more than 9.99% of the outstanding Common Shares on such date.  For the purposes of the immediately preceding sentence, beneficial ownership shall be determined in accordance with Section 13(d) of the Exchange Act and Rule 13d-3 thereunder.  Subject to the foregoing, the Holder shall not be limited to aggregate exercises which would result in the issuance of more than 9.99%.  The Company shall have no obligation to determine whether the Holder may exercise this Warrant with respect to the limitations set forth in this paragraph and each delivery of a Subscription Form hereunder will constitute a representation by the Holder that it has evaluated the limitation set forth in this paragraph and determined that issuance of the full number of Warrant Shares requested in such Subscription Form is permitted under this paragraph.

 

10.           Mandatory Conversion.  Notwithstanding anything to the contrary contained herein, the Company may, at any time, or from time to time, require the Holder, upon not less than fifteen (15) trading days  prior written notice, to exercise this Warrant in whole or in part in the event (i) the Company’s Common Shares shall be listed for trading on a Principal Market, (ii) the closing sales price for fifteen (15) consecutive trading days was at least 165% of the Purchase Price, (iii) the average daily trading volume of the Common Shares on the Principal Market, as reported by Bloomberg L.P., was not less than 150,000 shares for fifteen (15) consecutive trading days and (iv) there is an effective registration statement covering the resale of the Warrant Shares. In the event that the Holder does not exercise this Warrant prior to the date prescribed by the Company (the “Mandatory Exercise Date”), this Warrant shall expire immediately and the Mandatory Exercise Date shall be deemed to be the “Expiration Date” hereunder.

 

11.           Warrant Agent.  The Company may, by written notice to the Holder of the Warrant, appoint an agent (a “Warrant Agent”) for the purpose of issuing Common Shares (or Other Securities) on the exercise of this Warrant pursuant to Section 1, exchanging this Warrant pursuant to Section 7, and replacing this Warrant pursuant to Section 8, or any of the foregoing, and thereafter any such issuance, exchange or replacement, as the case may be, shall be made at such office by such Warrant Agent.

 

12.           Transfer on the Company's Books.  Until this Warrant is transferred on the books of the Company, the Company may treat the registered holder hereof as the absolute owner hereof for all purposes, notwithstanding any notice to the contrary.

 

13.           Registration Rights.  The Holder of this Warrant will be granted the same registration rights granted to investors in the Reverse Merger Financing as defined in the Share Exchange Agreement.

 

  

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14.           Notices.  All notices, demands, requests, consents, approvals, and other communications required or permitted hereunder shall be in writing and, unless otherwise specified herein, shall be (i) personally served, (ii) deposited in the mail, registered or certified, return receipt requested, postage prepaid, (iii) delivered by reputable air courier service with charges prepaid, or (iv) transmitted by hand delivery, telegram, or facsimile, addressed as set forth below or to such other address as such party shall have specified most recently by written notice.  Any notice or other communication required or permitted to be given hereunder shall be deemed effective (a) upon hand delivery or delivery by facsimile, with accurate confirmation generated by the transmitting facsimile machine, at the address or number designated below (if delivered on a business day during normal business hours where such notice is to be received), or the first business day following such delivery (if delivered other than on a business day during normal business hours where such notice is to be received) or (b) on the second business day following the date of mailing by express courier service, fully prepaid, addressed to such address, or upon actual receipt of such mailing, whichever shall first occur.  The addresses for such communications shall be:  if to the Company, to: InspireMD, Ltd., 3 Menorat Hamaor St. Tel Aviv, Israel Fax:  + 972-3-6917692, Attn: Ofir Paz, with a copy to:  Haynes and Boone, LLP, 1221 Avenue of the Americas, 26th Floor, New York, NY 10020-1007, Fax: (212) 884–8234, Attention: Rick Werner, Esq., and (ii) if to the Holder, to the address and facsimile number listed on the first paragraph of this Warrant, with a copy by fax only to: Grushko & Mittman, P.C., 515 Rockaway Avenue, Valley Stream, New York 11581, facsimile: (212) 697–3575.

 

15.           Applicable law and arbitration.  All disputes arising under this Warrant or in connection with the transactions hereunder shall be resolved only between the parties in good faith, however, if these efforts fail the dispute shall be resolved in accordance with the laws of the State of New York excluding that body of law pertaining to conflict of law.  Any action brought by either party against the other concerning the transactions contemplated by this Warrant must be brought only in the courts located in New York, New York.  Both parties and the individual signing this Agreement on behalf of the Company agree to submit to the exclusive jurisdiction of such courts and the Holder irrevocably waives any objection as to venue or “inconvenient forum.”

 

IN WITNESS WHEREOF, the Company has executed this Warrant as of the date first written above.

 

	  	
INSPIREMD, INC.

 

 

By: _______________________________

Name:

Title:

 

  

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Exhibit A

FORM OF SUBSCRIPTION

(to be signed only on exercise of Warrant)

 

TO:  INSPIREMD, INC.

 

The undersigned, pursuant to the provisions set forth in the attached Warrant (No. ___________), hereby irrevocably elects to purchase ________ Common Shares covered by such Warrant

The undersigned herewith makes payment of the full purchase price for such shares at the price per share provided for in such Warrant, which is $___________.

The undersigned requests that the certificates for such shares be issued in the name of, and delivered pursuant to the DTC instructions below or to __________________________________________________________________________ whose address is ____________________________________________________________________________

____________________________________________________________________________________.

The undersigned represents and warrants that all offers and sales by the undersigned of the securities issuable upon exercise of the within Warrant shall be made pursuant to registration of the Common Shares under the Securities Act of 1933, as amended (the “Securities Act”), or pursuant to an exemption from registration under the Securities Act.

DTC Instructions: ____________________________________________________________________

___________________________________________________________________________________

___________________________________________________________________________________

	
Dated:___________________

	
______________________________________________

(Signature must conform to name of holder as specified on the face of the Warrant)

 

 

 

(Address)

 

  

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Exhibit B

 

FORM OF TRANSFEROR ENDORSEMENT

(To be signed only on transfer of Warrant)

 

For value received, the undersigned hereby sells, assigns, and transfers unto the person(s) named below under the heading “Transferees” the right represented by the within Warrant to purchase the percentage and number of Common Shares of INSPIREMD, INC. to which the within Warrant relates specified under the headings “Percentage Transferred” and “Number Transferred,” respectively, opposite the name(s) of such person(s) and appoints each such person Attorney to transfer its respective right on the books of INSPIREMD, INC. with full power of substitution in the premises.

 

	
Transferees

	
Percentage Transferred

	
Number Transferred

	  	  	  
	  	  	  
	  	  	  

 

	
Dated:  __________________, _______

 

 

 

Signed in the presence of:

 

________________________________

(Name)

 

 

ACCEPTED AND AGREED:

[TRANSFEREE]

 

________________________________

(Name)

 

	
_______________________________________________

(Signature must conform to name of holder as specified on the face of the warrant)

 

 

 

_______________________________________________

 

_______________________________________________

(address)

 

_______________________________________________

 

_______________________________________________

(address)Unassociated Document

 

NEITHER THE ISSUANCE AND SALE OF THE SECURITIES REPRESENTED BY THIS CERTIFICATE NOR THE SECURITIES INTO WHICH THESE SECURITIES ARE CONVERTIBLE HAVE BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR APPLICABLE STATE SECURITIES LAWS.  THE SECURITIES MAY NOT BE OFFERED FOR SALE, SOLD, TRANSFERRED OR ASSIGNED (I) IN THE ABSENCE OF (A) AN EFFECTIVE REGISTRATION STATEMENT FOR THE SECURITIES UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR (B) AN OPINION OF COUNSEL (WHICH COUNSEL SHALL BE SELECTED BY THE HOLDER), IN A GENERALLY ACCEPTABLE FORM, THAT REGISTRATION IS NOT REQUIRED UNDER SAID ACT OR (II) UNLESS SOLD PURSUANT TO RULE 144 OR RULE 144A UNDER SAID ACT.  NOTWITHSTANDING THE FOREGOING, SUBJECT TO THE PROVISIONS OF THE BORROWER’S ARTICLES OF ASSOCIATION REGARDING RESTRICTIONS ON TRANSFER OF THE BORROWER'S SECURITIES, AS SHALL BE AMENDED FROM TIME TO TIME, THE SECURITIES MAY BE PLEDGED IN CONNECTION WITH A BONA FIDE MARGIN ACCOUNT OR OTHER LOAN OR FINANCING ARRANGEMENT SECURED BY THE SECURITIES.

 

	 
Principal Amount: $1,250,000.00 

	 	 	 
Issue Date: July 20, 2010

 

CONVERTIBLE DEBENTURE

FOR VALUE RECEIVED, InspireMD Ltd., a corporation continued under the laws of the State of Israel (hereinafter called “Borrower”), hereby promises to pay to the order of Genesis Asset Opportunity Fund, L.P., maintaining an address at 61 Paine Avenue, New Rochelle, NY 10084, Fax: (212) 798–1366 (“Holder”) without demand, the sum of  One Million Two Hundred Fifty Thousand Dollars ($1,250,000.00) (“Principal Amount”), with interest accruing thereon, on the Maturity Date, if not sooner paid or converted into the Borrower’s or Pubco’s securities as provided herein.

This Debenture has been entered into pursuant to the terms of a securities purchase agreement among the Borrower, the Holder and certain other holders (the “Other Holders”) of convertible debentures (the “Other Debentures”), dated of even date herewith (the “Securities Purchase Agreement”) for an aggregate Principal Amount of $1,250,000.

ARTICLE I

DEFINITIONS

1.1           Definitions.  Capitalized terms used and not otherwise defined herein that are defined in the Securities Purchase Agreement shall have the meanings given to such terms in the Securities Purchase Agreement.  Whenever used in this Agreement, the following terms shall have the following respective meanings:

 

§           “Audit Default” shall have the meaning set forth in the Securities Purchase Agreement;

 

§           “Business Day” shall have the meaning set forth in the Securities Purchase Agreement;

 

§           “Closing Date” shall have the meaning set forth in the Securities Purchase Agreement;

 

  

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§           “Company Financing” shall mean the closing of, or execution of a definitive and binding agreement (subject to customary closing conditions) with respect to, an equity or convertible debt financing, or series of related financings, that provides for the receipt by the Borrower of not less than $3,000,000 in the aggregate; which closing occurs, or definitive agreement is executed, as the case may be, between the Closing and twelve months following the Maturity Date;

 

§           “Debenture” shall mean this instrument as originally executed, or if later amended or supplemented, then as so amended or supplemented;

 

§           “Exclusivity Period” shall have the meaning set forth in the Securities Purchase Agreement;

 

§           “Material Adverse Effect” shall mean (i) any event, occurrence, fact or circumstance which has had a material adverse effect on the business, assets, condition (financial or otherwise), liabilities or results of operations of the Borrower or (ii) an Audit Default; provided, however, that the following occurrences shall not be deemed to be a Material Adverse Effect: (A) changes resulting from the announcement of the sale of the Debentures or the intention to effectuate the PIPE Financing; (B) changes resulting from the parties' compliance with the terms of the Transaction Documents; (C) the failure of the Borrower to meet its financial projections and (D) provided that the Borrower is able to continue its business in substantially the same manner as before, the occurrence of: (i) changes in general political, economic or financial market conditions; (ii) changes in industry conditions that do not disproportionately effect the Borrower or its subsidiaries; (iii) changes in GAAP; (iv) changes in law; and (v) acts of terrorism or war;

 

§           “Material Subsidiary” means a subsidiary of the Borrower whose total assets (after intercompany eliminations) exceed 30 percent of the total assets of the Borrower and all of its subsidiaries, as calculated on a consolidated basis, as of the end of the most recently completed fiscal quarter;

 

§           “Maturity Date” shall mean the date that payment or conversion, as the case may be, of this Debenture is required hereunder;

 

§           “Merger” shall have the meaning set forth in the Securities Purchase Agreement;

 

§           “Ordinary Shares” shall have the meaning set forth in the Securities Purchase Agreement;

 

§           “Original Maturity Date” shall have the meaning set forth in Section 2.1 herein;

 

§           “Other Debentures” shall have the meaning set forth in the preamble of this Debenture;

 

§           “Other Holders” shall have the meaning set forth in the preamble of this Debenture;

 

§           “Pipe Default” shall mean (i) the Borrower’s failure to act in good faith to timely effectuate the Pipe Financing or (ii) the occurrence of a Material Adverse Effect;

 

§           “Pipe Financing” shall have the meaning set forth in the Securities Purchase Agreement;

 

§           “Pubco” shall have the meaning set forth in the Securities Purchase Agreement;

 

§           “Pubco Common Stock” shall have the meaning set forth in the Securities Purchase Agreement;

 

  

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§           “Second Maturity Date” shall have the meaning set forth in Section 2.2 herein;

 

§           “Securities Purchase Agreement” shall have the meaning set forth in the preamble of this Debenture;

 

§           “Tax Ruling” shall have the meaning set forth in the Securities Purchase Agreement;

 

§           “Transaction Documents” shall have the meaning set forth in the Securities Purchase Agreement.

ARTICLE II

GENERAL PROVISIONS

2.1           Original Maturity Date.  The Borrower shall pay all sums due on the Debenture on the later of (i) two months subsequent to the Borrower’s receipt of the Tax Ruling or (ii) the six month anniversary of the Closing Date (the “Original Maturity Date”).

2.2           Second Maturity Date.  Provided neither a Pipe Default nor an Event of Default have occurred then, commencing 20 Business Days before the Original Maturity Date, the Borrower shall have the right, in its sole discretion, to extend the Maturity Date until nine months after the Original Maturity Date (such extended date being the “Second Maturity Date”) by providing written notice to the Holder not later than 10 Business Days prior to the Original Maturity Date.

2.3           Interest Rate.  Interest payable on this Debenture shall accrue at the annual rate of eight percent (8%) from the Issue Date through the date the Debenture is paid or converted as provided for herein.

2.4           Pari Passu.  All payments made on this Debenture and the Other Debentures and except as otherwise set forth herein all actions taken by the Borrower with respect to this Debenture and the Other Debentures, including but not limited to Mandatory Conversion and Optional Redemption (as set forth in Article III), shall be made and taken pari passu with respect to this Debenture and the Other Debentures.

2.5           No Insolvency Proceedings.  The Holder shall not initiate any insolvency or bankruptcy proceedings against the Borrower due to the failure of the Borrower to pay this Debenture or the interest thereon.

ARTICLE III

MANDATORY CONVERSION AND OPTIONAL REDEMPTION

3.1           Pipe Financing Conversion.  Provided the closing of the Pipe Financing occurs before the Original Maturity Date, or, in the event that the Borrower elects to extend the term of this Debenture pursuant to Section 2.2 hereof, the Second Maturity Date, then, at the option of the Holder, this Debenture shall convert (in full and not in part) into shares of Pubco Common Stock at the price of $1.50 per share at the closing of the Pipe Financing.  If this Debenture is not converted at the closing of the Pipe Financing, it will be repaid in cash at the closing of the Pipe Financing.

3.2           Company Financing Conversion.  Provided a Pipe Default, an Event of Default or a Pipe Financing have not occurred, upon a Company Financing occurring after the expiration of the Exclusivity Period but prior to the one year anniversary of the Second Maturity Date, this Debenture shall automatically convert into Ordinary Shares of the Borrower at price per share calculated at a 15% discount to the pricing of the Company Financing; provided, however, the total coupon and discount granted to the Holder under this Section 3.2 shall not exceed a 20% discount to the pricing of the Company Financing.  For the purpose of clarity commencing on the expiration of the Exclusivity Period, this Debenture shall be convertible in accordance with both Sections 3.1 or 3.2 herein, which ever occurs first.

 

  

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3.3           Second Maturity Date Conversion.  Provided neither a Pipe Default nor an Event of Default have occurred and this Debenture was not previously converted pursuant to Sections 3.1 or 3.2 herein before the Second Maturity Date then, upon the Second Maturity Date, this Debenture shall automatically convert into Ordinary Shares of the Borrower as follows:

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(a) If a Company Financing occurs within one year after the Second Maturity Date then at the closing of the Company Financing this Debenture shall automatically convert into Ordinary Shares of the Borrower at price per share calculated at a 15% discount to the pricing of the Company Financing; provided, however, the total coupon and discount granted to the Holder under this Section 3.2 shall not exceed a 20% discount to the pricing of the Company Financing.

(b) If a Company Financing does not occur within one year after the Second Maturity Date then on the First Anniversary of the Second Maturity Date this Debenture shall automatically convert into Ordinary Shares of the Borrower at a price of $10 per share.

(c) For the purpose of clarity an Event of Default first occurring after the Second Maturity Date shall not affect the conversion provisions of this Section 3.3.

3.4           Reclassification, etc.  If the Borrower at any time shall, by reclassification or otherwise, change the Ordinary Shares into the same or a different number of securities of any class or classes that may be issued or outstanding, this Debenture, as to the unpaid principal portion thereof and accrued interest thereon, shall thereafter be deemed to evidence the right to purchase an adjusted number of such securities and kind of securities as would have been issuable as the result of such change with respect to the Ordinary Shares immediately prior to such reclassification or other change.

3.5           Stock Splits, Combinations and Dividends.  If the Ordinary Shares are subdivided or combined into a greater or smaller number of Ordinary Shares, or if a dividend is paid on the Ordinary Shares in Ordinary Shares, the Conversion Price shall be proportionately reduced in case of subdivision of shares or stock dividend or proportionately increased in the case of combination of shares, in each such case by the ratio which the total number of Ordinary Shares outstanding immediately after such event bears to the total number of Ordinary Shares outstanding immediately prior to such event.

3.6           Redemption.  This Debenture may be prepaid by the Borrower at any time without the consent of the Holder.

ARTICLE IV

EVENT OF DEFAULT

The occurrence of any of the following events of default (“Event of Default”) shall, at the option of the Holder hereof, make all sums of principal and interest then remaining unpaid hereon and all other amounts payable hereunder immediately due and payable, upon demand, without presentment or grace period, all of which hereby are expressly waived, except as set forth below:

4.1           Failure to Pay Principal or Interest.  The Borrower fails to pay any installment of principal, interest or other sum due under this Debenture when due.

 

  

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4.2           Breach of Covenant.  The Borrower or any Material Subsidiary breaches any material covenant or other term or condition of the Transaction Documents in any material respect and such breach, if subject to cure, continues for a period of fifteen (15) days.

4.3           Breach of Representations and Warranties.  Any material representation or warranty of the Borrower made in the Transaction Documents, or in any agreement, statement or certificate given in writing pursuant thereto or in connection therewith shall be false or misleading in any material respect as of the date made and the Closing Date.

4.4           Liquidation.  Any dissolution, liquidation or winding up of the Borrower or a Material Subsidiary.

 

4.5           Cessation of Operations.  Any cessation of operations by the Borrower or a Material Subsidiary, for 60 consecutive days, or the Borrower is unable to pay its undisputed debt as such debts become due.

 

4.6           Financing Default.  If the Borrower enters into a reverse merger, public offering or other private placement during the Exclusivity Period.

4.7           Receiver or Trustee.  The Borrower shall make an assignment for the benefit of creditors, or apply for or consent to the appointment of a receiver, trustee or liquidator for it or for a substantial part of its property or business; or such a receiver, trustee or liquidator shall otherwise be appointed which appointment has not been terminated by a court of competent jurisdiction within ninety (90) days of such appointment.

4.8           Judgments.  Any money judgment, writ or similar final process shall be entered or made in a non-appealable adjudication against the Borrower or any Material Subsidiary or any of its property or other assets for more than $500,000, unless paid, stayed, vacated, bonded or satisfied within sixty (60) days.

4.9           Bankruptcy.  Bankruptcy, insolvency, reorganization or liquidation proceedings or other proceedings or relief under any bankruptcy law or any law for the relief of debtors shall be instituted by or against the Borrower or a Material Subsidiary and, if instituted against the Borrower or a Material Subsidiary, shall not be dismissed within ninety (90) days after such institution.

4.10           Reservation Default.  Failure by the Borrower to have reserved for issuance upon exercise of the Warrants the number of shares of Ordinary Shares required to allow exercise of all Warrants issued pursuant to the Securities Purchase Agreement in the event such failure persists for a period of more than  thirty (30) days.

4.11           Merger.  Other than as part of the Merger, the merger, consolidation or reorganization of the Borrower with or into another corporation or person or entity (other than with or into a subsidiary, at least 80% of which is owned by the Borrower), or the sale of capital stock of the Borrower by the Borrower or the holders thereof, in any case under circumstances in which the holders of a majority of the voting power of the outstanding capital stock of the Borrower immediately prior to such transaction shall own less than a majority in voting power of the outstanding capital stock of the Borrower or the surviving or resulting corporation or other entity, as the case may be, immediately following such transaction.

4.12.           Material Adverse Effect.  The occurrence of one or more events having a Material Adverse Effect.

4.13           Other Debenture Default.  The occurrence of an Event of Default under any Other Debenture.

 

  

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4.14           Adverse Tax Ruling.  A Tax Ruling from the Israeli Tax Authority that the issuance of Pubco securities in exchange for Company securities held by Company shareholders and option holders upon the closing of the Merger shall not constitute a deferred tax event for the Company and/or its shareholders and shall obligate them to pay any amounts prior to receiving actual funds resulting from sale of Pubco's securities as a result of such exchange.

4.15           Failure to Obtain Tax Ruling.  If the Borrower fails to obtain a Tax Ruling within 15 months after the Closing Date.

ARTICLE V

MISCELLANEOUS

5.1           Failure or Indulgence Not Waiver.  No failure or delay on the part of the Holder hereof in the exercise of any power, right or privilege hereunder shall operate as a waiver thereof, nor shall any single or partial exercise of any such power, right or privilege preclude other or further exercise thereof or of any other right, power or privilege.  All rights and remedies existing hereunder are cumulative to, and not exclusive of, any rights or remedies otherwise available.

 

5.2           Notices.  All notices, demands, requests, consents, approvals, and other communications required or permitted hereunder shall be in writing and, unless otherwise specified herein, shall be (i) personally served, (ii) deposited in the mail, registered or certified, return receipt requested, postage prepaid, (iii) delivered by reputable air courier service with charges prepaid, or (iv) transmitted by hand delivery, telegram, or facsimile, addressed as set forth below or to such other address as such party shall have specified most recently by written notice.  Any notice or other communication required or permitted to be given hereunder shall be deemed effective (a) upon hand delivery or delivery by facsimile, with accurate confirmation generated by the transmitting facsimile machine, at the address or number designated below (if delivered on a business day during normal business hours where such notice is to be received), or the first business day following such delivery (if delivered other than on a business day during normal business hours where such notice is to be received) or (b) on the first business day following the date of mailing by express courier service, fully prepaid, addressed to such address, or upon actual receipt of such mailing, whichever shall first occur.  The addresses for such communications shall be: (i) if to the Borrower to: InspireMD, Ltd., 3 Menorat Hamaor St. Tel Aviv, Israel Fax:  + 972-3-6917692, Attn: Dr. Asher Holzer, with a copy to:  Haynes and Boone, LLP, 1221 Avenue of the Americas, 26th Floor, New York, NY 10020-1007, Fax: (212) 884–8234, Attention: Rick Werner, Esq., and (ii) if to the Holder, to the name, address and facsimile number set forth on the front page of this Debenture, with a copy by fax only to Grushko & Mittman, P.C., 515 Rockaway Avenue, Valley Stream, New York 11581, facsimile: (212) 697–3575.

 

5.3           Assignability.  This Debenture shall be binding upon the Borrower and its successors and assigns, and shall inure to the benefit of the Holder and its successors and assigns.  The Borrower may not assign its obligations under this Debenture.

 

5.4           Cost of Collection.  If default is made in the payment of this Debenture, the Borrower shall pay the Holder hereof reasonable costs of collection, including reasonable attorneys’ fees.

 

5.5           Governing Law.  This Debenture shall be governed by and construed in accordance with the laws of the State of Israel without regard to conflicts of laws principles that would result in the application of the substantive laws of another jurisdiction.  Any action brought by either party against the other concerning the transactions contemplated by this Agreement must be brought only in the courts located in the Tel Aviv Jaffa District, the State of Israel.  Both parties and the individual signing this Agreement on behalf of the Borrower agree to submit to the exclusive jurisdiction of such courts and the Holder irrevocably waives any objection to venue as an “inconvenient forum.”  In the event that any provision of this Debenture is invalid or unenforceable under any applicable statute or rule of law, then such provision shall be deemed inoperative to the extent that it may conflict therewith and shall be deemed modified to conform with such statute or rule of law.  Any such provision which may prove invalid or unenforceable under any law shall not affect the validity or unenforceability of any other provision of this Debenture.

 

  

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5.6           Maximum Payments.  Nothing contained herein shall be deemed to establish or require the payment of a rate of interest or other charges in excess of the maximum rate permitted by applicable law.  In the event that the rate of interest required to be paid or other charges hereunder exceed the maximum rate permitted by applicable law, any payments in excess of such maximum rate shall be credited against amounts owed by the Borrower to the Holder and thus refunded to the Borrower.

 

5.7           Non-Business Days.  Whenever any payment or any action to be made shall be due on a Saturday, Sunday or a public holiday under the laws of the State of New York or the State of Israel, such payment may be due or action shall be required on the next succeeding business day and, for such payment, such next succeeding day shall be included in the calculation of the amount of accrued interest payable on such date.

 

5.8           Shareholder Status.  The Holder shall not have rights as a shareholder of the Borrower with respect to unconverted portions of this Debenture.

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IN WITNESS WHEREOF, the Borrower has caused this Debenture to be signed in its name by an authorized officer as of the 20 day of July, 2010.

	 	 
INSPIREMD LTD.

	 	 
	 	 	 	 
	
 

	
By: 

	 	 
	 	 	 
Name:

Title:

	 

 

WITNESS:

______________________________________

 

 

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