Document:

exhibit_4-35.htm

Exhibit 4.35

EXECUTION COPY

 

UNDERWRITING AGREEMENT

 

between

 

D. MEDICAL INDUSTRIES LTD.

 

and

 

RODMAN & RENSHAW, LLC

 

as Representative

  

  

  

 

D. MEDICAL INDUSTRIES LTD.

 

UNDERWRITING AGREEMENT

 

New York, New York

August 4, 2010

 

Rodman & Renshaw, LLC,

as Representative of the several Underwriters named on Schedule I attached hereto

 

	
c/o

	
Rodman & Renshaw, LLC

1251 Avenue of the Americas, 20th Floor

	
  

	
New York, New York 10020

 

Ladies and Gentlemen:

 

The undersigned, D. Medical Industries Ltd., a company formed under the laws of the State of Israel, public company number 52-0041955 (the “Company”), hereby confirms its agreement with Rodman & Renshaw, LLC (hereinafter referred to as the “Representative”) and with the other underwriters named on Schedule I attached hereto for which the Representative is acting as representative (the Representative and such other underwriters being collectively called the “Underwriters” or, individually, an “Underwriter”) as follows:

 

	
1.

	
Purchase and Sale of Securities.

 

1.1           Firm Securities.

 

1.1.1        Nature and Purchase of Firm Securities.

 

(i)           On the basis of the representations and warranties herein contained, but subject to the terms and conditions herein set forth, the Company agrees to issue and sell to the several Underwriters, an aggregate of 1,500,906 ordinary shares (the “Firm Shares”), par value NIS 0.32 per share (the “Shares”).

 

(ii)           The Underwriters, severally and not jointly, agree to purchase from the Company the number of Firm Shares set forth opposite their respective names on Schedule 1 attached hereto and made a part hereof at a purchase price (net of discounts and commissions) of $6.51 per Share.  The Company understands that the Underwriters intend to make a public offering of the Public Securities (as hereinafter defined) as soon after the effectiveness of this Agreement as in the judgment of the Representative is advisable, and initially to offer the Public Securities on the terms set forth in the Prospectus (as hereinafter defined).

 

1.1.2        Shares Payment and Delivery.

 

(i)           Delivery and payment for the Firm Shares shall be made at 10:00 a.m., New York City time, on the third Business Day (as hereinafter defined) following the effective date (the “Effective Date”) of the Registration Statement (as hereinafter defined) (or the fourth Business Day following the Effective Date if the Registration Statement is declared effective after 4:30 p.m., New York City time, on the Effective Date) or at such earlier time as shall be agreed upon by the Representative and the Company, at the offices of O’Melveny & Myers LLP, U.S. securities counsel to the Underwriters (“O’Melveny”), or at such other place (or remotely by facsimile or other electronic transmission) as shall be agreed upon by the Representative and the Company.  The hour and date of delivery and payment for the Firm Shares is called the “Closing Date.”

 

  

  

  

 

(ii)          Payment for the Firm Shares shall be made on the Closing Date by wire transfer in U.S. federal (same day) funds, payable to the order of the Company upon delivery of the certificates (in form and substance satisfactory to the Underwriters) representing the Firm Shares (or through the facilities of the Depository Trust Company (“DTC”)) for the account of the Underwriters.  The Firm Shares shall be registered in such name or names and in such authorized denominations as the Representative may request in writing at least two Business Days prior to the Closing Date.  The Company shall not be obligated to sell or deliver the Firm Shares except upon tender of payment by the Representative for all of the Firm Shares.  The term “Business Day” means any day other than a Saturday, a Sunday or a legal holiday or a day on which banking institutions are authorized or obligated by law to close in New York City.

 

1.2           Over-allotment Option.

 

1.2.1        Option Shares.  For the purposes of covering any over-allotments in connection with the distribution and sale of the Firm Shares, the Company hereby grants the Underwriters an option to purchase up to 225,136 Shares (representing 15% of the Firm Shares sold in the Offering) from the Company (the “Over-allotment Option”). Such additional 225,136 Shares are hereinafter referred to as “Option Shares.”  The purchase price to be paid for the Option Shares will be the same price per Option Share as the price per Firm Share set forth in Section 1.1.1 hereof.  The Firm Shares and the Option Shares are hereinafter referred to collectively as the “Public Securities.”

 

1.2.2        Exercise of Option.  The Over-allotment Option granted pursuant to Section 1.2.1 hereof may be exercised by the Representative as to all (at any time) or any part (from time to time) of the Option Shares within 45 days after the Effective Date.  The Underwriters will not be under any obligation to purchase any Option Shares prior to the exercise of the Over-allotment Option.  The Over-allotment Option granted hereby may be exercised by the giving of oral notice to the Company from the Representative, which must be confirmed in writing setting forth the number of Option Shares to be purchased and the date and time for delivery of and payment for the Option Shares set forth in any such notice (any such date, an “Option Closing Date”), which may be simultaneous with, but not earlier than, the Closing Date and will not be earlier than three nor later than five full Business Days after the date of any such written notice or such other time as shall be agreed upon by the Company and the Representative, at the offices of O’Melveny or at such other place (including remotely by facsimile or other electronic transmission) as shall be agreed upon by the Company and the Representative.  If such delivery and payment for the Option Shares does not occur on the Closing Date, the applicable Option Closing Date will be as set forth in any such notice. Upon exercise of the Over-allotment Option (in full or in part), the Company will become obligated to deliver to the Underwriters, and, subject to the terms and conditions set forth herein, the Underwriters, severally and not jointly, will become obligated to purchase the number of Option Shares specified in any such notice.  The issuance and sale of the Option Shares will be on the basis of the representations and warranties herein contained, but subject to the terms and conditions herein set forth.

 

1.2.3        Payment and Delivery.  Payment for the Option Shares specified in any such notice will be made on the applicable Option Closing Date by wire transfer in U.S. federal (same day) funds as follows:  $6.51 per Option Share payable to the order of the Company upon delivery of certificates (in form and substance satisfactory to the Underwriters) representing the Option Shares specified in any such notice (or through the facilities of DTC) for the account of the Underwriters.  The Option Shares shall be registered in such name or names and in such authorized denominations as the Representative may request in writing at least two Business Days prior to the applicable Option Closing Date.  The Company shall not be obligated to sell or deliver any Option Shares except upon tender of payment by the Representative for the applicable Option Shares.

 

  

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1.3           Representative’s Option.

 

1.3.1        Purchase Option.  The Company hereby agrees to issue and sell to the Representative (and/or its designees) on the Effective Date and to deliver on the Closing Date an option (the “Representative’s Option”) for the purchase of an aggregate of 75,045 Shares (representing 5% of the Firm Shares sold in the Offering) for an aggregate purchase price of $100.00 substantially in the form of Exhibit A attached hereto (the “Representative’s Option Agreement”).  The Representative’s Option shall be exercisable, in whole or in part, at any time or from time to time commencing on a date which is one year from the Effective Date and expiring on the four-year anniversary of the Effective Date at an initial exercise price per Share of $8.75, which is equal to 125% of the initial public offering price of the Firm Shares.  The Representative’s Option Agreement and the Shares issuable upon exercise thereof are sometimes hereinafter referred to collectively as the “Representative’s Securities.”  The Representative understands and agrees that there are significant restrictions pursuant to Rule 5110 of the Financial Industry Regulatory Authority, Inc. (“FINRA”) against transferring the Representative’s Securities during the first year after the Effective Date and, by its acceptance thereof, shall agree that it will not, sell, transfer, assign, pledge or hypothecate the Representative’s Securities, or any portion thereof, or allow the Representative’s Securities to be the subject of any hedging, short sale, derivative, put or call transaction that would result in the effective economic disposition of such securities for a period of one year following the Effective Date to anyone other than (i) an Underwriter or a dealer selected by the Representative that participates in the offer and sale of the Public Securities (each, a “Selected Dealer”) in connection with the Offering, or (ii) a bona fide officer or partner of the Representative or of any such Underwriter or Selected Dealer; provided that any such transferee agrees to the foregoing lock-up restrictions.

 

1.3.2        Delivery.  Delivery for the Representative’s Option Agreement shall be made on the Closing Date and shall be issued in the name or names and in such authorized denominations as the Representative may request.

 

2.            Representations and Warranties of the Company.  The Company represents and warrants to the Underwriters as of the date hereof, as of the Applicable Time (as hereinafter defined), as of the Closing Date and as of any Option Closing Date, as the case may be, as follows:

 

2.1           Filing of Registration Statements.

 

2.1.1        Pursuant to the Act.  The Company has filed with the U.S. Securities and Exchange Commission (the “Commission”) a registration statement and any pre-effective amendments thereto, on Form F-1 (File No. 333-167079) (including any related prospectus or prospectuses) for the registration of the Public Securities, the Representative’s Option Agreement and the Shares issuable upon exercise of the Representative’s Option under the U.S. Securities Act of 1933, as amended (the “Act”), which registration statement and any pre-effective amendments thereto have been prepared by the Company in conformity with the requirements of the Act and the rules and regulations of the Commission thereunder (the “Regulations”).  Except as the context may otherwise require, such registration statement,  as amended, on file with the Commission at the time the registration statement becomes effective (including any preliminary prospectus included in the registration statement or filed with the Commission pursuant to Rule 424(a) under the Act (each, a “Preliminary Prospectus”), financial statements, schedules, exhibits and all other documents filed as a part thereof or incorporated therein and all information deemed to be a part thereof as of the Effective Date pursuant to paragraph (b) of Rule 430A of the Regulations) is referred to herein as the “Registration Statement.”  If the Company has filed an abbreviated registration statement pursuant to Rule 462(b) under the Act (the “Rule 462 Registration Statement”), then any reference herein to the term “Registration Statement” shall be deemed to include such Rule 462 Registration Statement.  The Preliminary Prospectus, subject to completion, dated August 4, 2010, that was included in the Registration Statement immediately prior to the Applicable Time, as supplemented by the pricing information communicated to potential investors, is hereinafter called the “Pricing Prospectus.”  The final prospectus in the form first furnished to the Underwriters for use in the Offering, is hereinafter called the “Prospectus.”  Any “issuer free writing prospectus” as defined in Rule 433 under the Act relating to the Public Securities is hereinafter called an “Issuer Free Writing Prospectus.”  All references in this Agreement to the Registration Statement, the Rule 462 Registration Statement, any Preliminary Prospectus, the Pricing Prospectus and the Prospectus shall be deemed to refer to and include any documents incorporated by reference therein.  “Applicable Time” means 7:30 p.m., New York City time, on the Effective Date or such other time as agreed to by the Company and the Representative.

 

  

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2.1.2        Pursuant to the Exchange Act.  The Company has filed with the Commission a registration statement on Form 8-A (File Number 001-34830) (the “Form 8-A”) providing for the registration of the Shares under the U.S. Securities Exchange Act of 1934, as amended (the “Exchange Act”), which registration statement complies in all material respects with the requirements of the Exchange Act and the rules and regulations of the Commission thereunder.  The Form 8-A has been declared effective by the Commission.

 

2.1.3        Registration under the Exchange Act and Stock Exchange Listing.  The Shares are registered pursuant to Section 12(b) of the Exchange Act and have been approved for listing on The NASDAQ Capital Market (“NASDAQ”), and the Company has taken no action designed to, or likely to have the effect of, terminating the registration of the Shares under the Exchange Act or delisting the Shares from NASDAQ, nor has the Company received any notification that the Commission or NASDAQ is contemplating terminating such registration or listing except as described in the Registration Statement, the Pricing Prospectus and the Prospectus.

 

2.2           Effectiveness of Registration Statement; No Stop Orders, etc.  The Registration Statement and any post-effective amendment thereto have been declared effective by the Commission and, other than the Rule 462 Registration Statement, if any, which became effective upon filing, no other document with respect to the Registration Statement following the declaration of effectiveness has been filed under the Act with the Commission.  Neither the Commission nor any state regulatory authority has issued any order preventing or suspending the use of the Registration Statement, any post-effective amendment thereto or the Rule 462 Registration Statement, if any, or any Preliminary Prospectus or Issuer Free Writing Prospectus, or has instituted or, to the best of the Company’s knowledge, threatened to institute any proceedings with respect to such an order.

 

2.3           Disclosures in Registration Statement, Preliminary Prospectus, Pricing Prospectus and Prospectus.

 

2.3.1        10b-5 Representation.

 

(i)           Each Preliminary Prospectus at the time of filing thereof, conformed in all material respects to the requirements of the Act and the Regulations and did not contain an untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary to make the statements therein, in the light of the circumstances under which they were made, not misleading; provided, however, that this representation and warranty does not apply to statements made in reliance upon and in conformity with written information furnished to the Company with respect to the Underwriters by the Representative expressly for use in the Registration Statement, the Pricing Prospectus or the Prospectus or any amendment thereof or supplement thereto.  The parties acknowledge and agree that such information provided by the Representative on behalf of any Underwriter consists solely of the following disclosure contained in the “Underwriting” section of the Pricing Prospectus:  the name of each Underwriter; the second sentence of the first paragraph; and the first and second sentences in the first paragraph under the heading “Pricing of Ordinary Shares” (such information, the “Underwriters’ Information”).

 

  

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(ii)          The Pricing Prospectus, as supplemented by the Issuer Free Writing Prospectuses, if any, listed on Schedule II attached hereto, taken together as of the Applicable Time, did not contain an untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary in order to make the statements therein, in the light of the circumstances under which they were made, not misleading; and each Issuer Free Writing Prospectus, if any, listed on Schedule II attached hereto does not conflict with the information contained in the Registration Statement, any Preliminary Prospectus, the Pricing Prospectus or the Prospectus, and each such Issuer Free Writing Prospectus, as supplemented by and taken together with the Pricing Prospectus as of the Applicable Time, did not include an untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary in order to make the statements therein, in the light of the circumstances under which they were made, not misleading; provided, however, that this representation and warranty shall not apply to the Underwriters’ Information.

 

(iii)         The Company meets the general eligibility requirements for use of Form F-1 under the Act.  The Company is a “foreign private issuer” (as defined in Rule 405 under the Act) as of the date of the Registration Statement, any Preliminary Prospectus, the Pricing Prospectus and any Issuer Free Writing Prospectus.  At the time of filing the Registration Statement, the Company was not an “ineligible issuer” (as defined in Rule 405 under the Act).  The Registration Statement conforms, and the Prospectus and any further amendments or supplements to the Registration Statement or the Prospectus will conform, in all material respects with the requirements of the Act and the Regulations, and do not and will not, as of the Effective Date as to the Registration Statement and the applicable effective date of any amendment thereto and as of the applicable filing date as to the Prospectus and any amendment or supplement thereto, contain an untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary to make the statements therein not misleading; provided, however, that this representation and warranty shall not apply to the Underwriters’ Information.

 

2.3.2        Disclosure of Agreements.  The agreements and documents described in the Registration Statement, the Pricing Prospectus and the Prospectus conform to the descriptions thereof contained therein and there are no agreements or other documents required by the Act and the Regulations to be described in the Registration Statement, the Pricing Prospectus and the Prospectus or to be filed with the Commission as exhibits to the Registration Statement that have not been so described or filed.  Each agreement or other instrument (however characterized or described) to which the Company, its Subsidiaries (as hereinafter defined) and its or their affiliates is a party or by which it is or may be bound or affected and that is (i) referred to in the Registration Statement, the Pricing Prospectus and the Prospectus, or (ii) is material to the business of the Company or any of its direct and indirect subsidiaries, including each entity disclosed or described in the Registration Statement as being a subsidiary of the Company (each a “Subsidiary” and together the “Subsidiaries”), has been duly authorized and validly executed by the Company and each Subsidiary, as applicable, is in full force and effect (assuming due authorization and valid execution by the other party thereto) and is enforceable against the Company and its Subsidiaries, as applicable, and, to the Company’s knowledge, the other parties thereto, in accordance with its terms, except (x) as such enforceability may be limited by applicable bankruptcy, insolvency, reorganization or similar laws affecting creditors’ rights generally, (y) as enforceability of any indemnification or contribution provision may be limited under the U.S. federal and state securities laws, and (z) that the remedy of specific performance and injunctive and other forms of equitable relief may be subject to the equitable defenses and to the discretion of the court before which any proceeding therefore may be brought.  None of such agreements or instruments has been assigned by the Company or its Subsidiaries, as applicable, and neither the Company nor any Subsidiary nor, to the best of the Company’s knowledge, any other party is in default thereunder, and no event has occurred that, with the lapse of time or the giving of notice, or both, would constitute a default thereunder by the Company or any Subsidiary or, to the Company’s knowledge, by the other party thereto, except to the extent that such default would not have a Material Adverse Effect (as hereinafter defined).  To the best of the Company’s knowledge, performance by the Company or its Subsidiaries of the material provisions of such agreements or instruments, as applicable, will not result in a violation of any existing applicable law, rule, regulation, judgment, order or decree of any governmental agency or court, domestic or foreign, having jurisdiction over the Company and its Subsidiaries or any of its or their assets or businesses.

 

  

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2.3.3        Prior Securities Transactions.  Except as disclosed in the Registration Statement, the Pricing Prospectus and the Prospectus, since January 1 2007, no securities of the Company or its Subsidiaries have been sold by the Company or its Subsidiaries or by or on behalf of, or for the benefit of, any person or persons controlling, controlled by, or under common control with the Company and its Subsidiaries.

 

2.3.4        Regulations.  The disclosures in the Registration Statement, the Pricing Prospectus and the Prospectus concerning the effects of U.S. federal, state and local, Israeli and other foreign regulation (including, without limitation, foreign regulation with respect to Brazil, Russia, India, China and Mexico) on this Offering and the Company’s and its Subsidiaries’ business as currently contemplated are true, correct and complete in all material respects, and no other such regulations are required to be disclosed in the Registration Statement, the Pricing Prospectus and the Prospectus which are not so disclosed.

 

2.4           Changes After Dates in Registration Statement.

 

2.4.1        No Material Adverse Change.  Since the respective dates as of which information is given in the Registration Statement, the Pricing Prospectus and the Prospectus, except as otherwise specifically stated therein, (i) there has been no material adverse change in the condition, financial or otherwise, or prospects of the Company and its Subsidiaries, (ii) there have been no material transactions entered into by the Company and its Subsidiaries, including, without limitation, related party transactions, other than as contemplated pursuant to this Agreement, and (iii) no officer or director of the Company or any Subsidiary has resigned from any position with the Company or any Subsidiary.

 

2.4.2        Recent Securities Transactions, etc.  Subsequent to the respective dates as of which information is given in the Registration Statement, the Pricing Prospectus and the Prospectus, and except as may otherwise be indicated or contemplated herein or disclosed in the Registration Statement, the Pricing Prospectus and the Prospectus, the Company and its Subsidiaries have not (i) issued any securities or incurred any liability or obligation, direct or contingent, for borrowed money other than in the ordinary course of business, or (ii) declared or paid any dividend or made any other distribution on or in respect to its capital stock.

 

2.5           Independent Accountants.  Kesselman & Kesselman LLP (“Kesselman”), whose report is filed with the Commission as part of the Registration Statement, is an independent registered public accounting firm with respect to the Company and its Subsidiaries within the applicable rules and regulations adopted by the Commission and the Public Company Accounting Oversight Board (United States) and as required by the Act. Kesselman has not, during the periods covered by the financial statements included in the Registration Statement, the Pricing Prospectus and  the Prospectus, provided to the Company and its Subsidiaries any non-audit services, as such term is used in Section 10A(g) of the Exchange Act.

 

  

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2.6           Financial Statements, etc.  The financial statements, including the notes thereto and supporting schedules included in the Registration Statement, the Pricing Prospectus and the Prospectus comply with the applicable requirements of the Act and the Regulations and fairly present the consolidated financial position and the results of operations of the Company and its consolidated Subsidiaries at the dates and for the periods to which they apply; such financial statements have been prepared in conformity with International Financial Reporting Standards (“IFRS”), as issued by the International Accounting Standards Board (“IASB”), consistently applied throughout the periods involved; and no supporting schedules are required to be included in the Registration Statement.  The Registration Statement, the Pricing Prospectus and the Prospectus disclose all material off-balance sheet transactions, arrangements, obligations (including contingent obligations), and other relationships of the Company and its consolidated Subsidiaries with unconsolidated entities or other persons that may have a material current or future effect on the Company’s financial condition, changes in financial condition, results of operations, liquidity, capital expenditures, capital resources, or significant components of revenues or expenses.  Except as disclosed in the Registration Statement, the Pricing Prospectus and the Prospectus, (a) neither the Company nor any of its Subsidiaries has incurred any material liabilities or obligations, direct or contingent, or entered into any material transactions other than in the ordinary course of business, (b) the Company and its Subsidiaries have not declared or paid any dividends or made any distribution of any kind with respect to its or their capital stock, (c) there has not been any change in the capital stock of the Company or any Subsidiary or any grants under any stock compensation plan of the Company or any Subsidiary, and (d) there has not been any material adverse change in the long-term or short-term debt of the Company or any Subsidiary.

 

2.7           Authorized Capital; Options, etc.  The Company had, at the date or dates indicated in the Registration Statement, the Pricing Prospectus and the Prospectus, the duly authorized, issued and outstanding capitalization as set forth therein. Based on the assumptions stated in the Registration Statement, the Pricing Prospectus and the Prospectus, the Company will have on the Closing Date the adjusted stock capitalization set forth therein.  Except as set forth in, or contemplated by, the Registration Statement, the Pricing Prospectus and the Prospectus, on the Effective Date and the Closing Date, there will be no options, warrants, or other rights to purchase or otherwise acquire any authorized, but unissued Shares of the Company or securities of its Subsidiaries, or any security convertible into Shares of the Company or securities of its Subsidiaries, or any contracts or commitments to issue or sell Shares or any such options, warrants, rights, securities or convertible securities.

 

2.8           Corporate Records.  The minute books and corporate records of the Company and its Subsidiaries delivered to the Representative and its counsel are true and correct in all material respects and contain all minutes of all meetings convened and all resolutions adopted by the directors (and any committees of such directors) and shareholders of the Company and its Subsidiaries since January 1, 2007 and, as of the Closing Date, will contain all of the minutes of all meetings and all resolutions of the directors (and any committees of such directors) and shareholders of the Company and its Subsidiaries.  No resolutions have been adopted by the directors and shareholders of the Company and its Subsidiaries except as set forth in such minute books and corporate records.

 

2.9           Valid Issuance of Securities, etc.

 

2.9.1        Outstanding Securities.  All issued and outstanding shares of capital stock of the Company and its Subsidiaries issued prior to the transactions contemplated by this Agreement have been duly authorized and validly issued and are fully paid and non-assessable, the holders thereof have no rights of rescission with respect thereto, and are not subject to personal liability by reason of being such holders, and none of such shares of capital stock were issued in violation of the preemptive rights of any holders of any security of the Company or similar contractual rights granted by the Company.  All of the issued and outstanding shares of capital stock of the Company and its Subsidiaries issued prior to the transactions contemplated by this Agreement have been issued in compliance in all material respects with all applicable Israeli, U.S. federal and state and foreign securities laws, or an exemption therefrom.  The share capital of the Company conforms in all material respects to the description of the share capital as set forth in the Registration Statement, the Pricing Prospectus and the Prospectus at the date or dates indicated in the Registration Statement, the Pricing Prospectus and the Prospectus, as the case may be.

 

  

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2.9.2        Securities Sold Pursuant to this Agreement.  The Public Securities and the Representative’s Securities have been duly authorized for issuance and sale and, when issued and paid for in accordance with their respective terms, will be validly issued, fully paid and non-assessable, the holders thereof are not and will not be subject to personal liability by reason of being such holders, the Public Securities and Representative’s Securities are not and will not be subject to the preemptive rights of any holders of any security of the Company or similar contractual rights granted by the Company, and all corporate action required to be taken for the authorization, issuance and sale of the Public Securities and the Representative’s Securities has been duly and validly taken.  The Public Securities and the Representative’s Securities conform in all material respects to all statements with respect thereto contained in the Registration Statement, the Pricing Prospectus and the Prospectus.

 

2.10         Registration Rights of Third Parties.  Except as described in the Registration Statement, the Pricing Prospectus and the Prospectus, no holders of any securities of the Company or any rights exercisable for or convertible or exchangeable into securities of the Company have the right to require the Company to register any such securities of the Company under applicable Israeli securities laws or the Act or to include any such securities in a registration statement to be filed by the Company under applicable Israeli securities laws or pursuant to the Act.

 

2.11         Validity and Binding Effect of Agreements.  This Agreement and the Representative’s Option Agreement have been duly and validly authorized by the Company, and, when executed and delivered, will constitute, the valid and binding agreements of the Company, enforceable against the Company in accordance with their respective terms, except (i) as such enforceability may be limited by bankruptcy, insolvency, reorganization or similar laws affecting creditors’ rights generally, (ii) as enforceability of any indemnification or contribution provision may be limited under U.S. federal and state securities laws, and (iii) that the remedy of specific performance and injunctive and other forms of equitable relief may be subject to the equitable defenses and to the discretion of the court before which any proceeding therefore may be brought.

 

2.12         No Conflicts, etc.  The execution, delivery, and performance by the Company of this Agreement and the Representative’s Option Agreement, the consummation by the Company of the transactions herein and therein contemplated and the compliance by the Company with the terms hereof and thereof, do not and will not, with or without the giving of notice or the lapse of time, or both, (i) result in a breach of, or conflict with any of the terms and provisions of, or constitute a default under, or result in the creation, modification, termination or imposition of any lien, charge or encumbrance upon any property or assets of the Company and its Subsidiaries pursuant to the terms of any agreement or instrument to which the Company and its Subsidiaries are a party, (ii) result in any violation of the provisions of the Company’s current amended and restated articles of association (the “Articles of Association”) or the applicable organizational documents of any Subsidiary, in each case as of the date hereof and as of the applicable Closing Date, or (iii) violate any existing applicable law, rule, regulation, judgment, order or decree of any governmental agency or court, domestic or foreign, having jurisdiction over the Company and its Subsidiaries or any of its or their properties or business in effect as of the date hereof and as of the applicable Closing Date, except in the case of clauses (i) and (iii) above for such breaches or violations as would not have a material adverse effect on the business, properties, management, financial position, stockholders’ equity, results of operations or prospects of the Company and its Subsidiaries, taken as a whole, or on the performance by the Company of its obligations under this Agreement and the Representative’s Option Agreement (a “Material Adverse Effect”).

 

  

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2.13         No Defaults; Violations.  No default by the Company or its Subsidiaries exists in the due performance and observance of any term, covenant or condition of any material license, contract, indenture, mortgage, deed of trust, note, loan or credit agreement, or any other material agreement or instrument evidencing an obligation for borrowed money, or any other material agreement or instrument to which the Company or its Subsidiaries are a party or by which the Company and its Subsidiaries may be bound or to which any of the properties or assets of the Company and its Subsidiaries is subject, including, without limitation, any conditions or requirements stipulated by the instruments of approval granted to it by the Office of the Chief Scientist in the Israeli Ministry of Industry, Trade and Labor with respect to any research and development grants given to the Company, except for any such defaults as would not have a Material Adverse Effect.  Neither the Company nor any Subsidiary is in violation of (i) any term or provision of its articles of association or organizational documents, as applicable, or (ii) any franchise, license, permit, applicable law, rule, regulation, judgment or decree of any governmental agency or court, domestic or foreign, having jurisdiction over the Company or any Subsidiary or any of its or their properties or businesses, except in the case of clause (ii) above for such violations as would not have a Material Adverse Effect.

 

2.14         Corporate Power; Licenses; Consents.

 

2.14.1      Conduct of Business.  Except as described in the Registration Statement, the Pricing Prospectus and the Prospectus, the Company and its Subsidiaries have all requisite corporate power and authority, and have all necessary authorizations, approvals, orders, licenses, certificates and permits (collectively, “Governmental Licenses”) of and from all Governmental Authorities (as hereinafter defined) that they need as of the date hereof to conduct their respective business as currently conducted and as proposed to be conducted as described in the Registration Statement, the Pricing Prospectus and the Prospectus, including, without limitation, all such registrations, approvals, clearances, certificates, authorizations and permits required by the Governmental Authorities engaged in the regulation of clinical trials, medical devices or biohazardous substances or materials, except for such failures to have such authorizations, approvals, orders, licenses, certificates and permits as would not have a Material Adverse Effect; the Company is in compliance with the requirements of all such Governmental Licenses in all material respects; all such Governmental Licenses are valid and in full force and effect; the Company and its Subsidiaries have not received any notice of proceedings relating to the revocation, suspension, modification, withdrawal, or termination of any such Governmental Licenses, and there are no facts or circumstances, including, without limitation, facts or circumstances relating to the revocation, suspension, modification, withdrawal or termination of any Governmental Licenses held by others, known to the Company, that could lead to the revocation, suspension, modification, withdrawal or termination of any such Governmental Licenses; and the Company has no reason to believe that any party granting any such Governmental Licenses is considering revoking, suspending, modifying, withdrawing, or terminating the same in any material respect.

 

2.14.2      Transactions Contemplated Herein.  The Company has all corporate power and authority to enter into this Agreement and the Representative’s Option Agreement and to carry out the provisions and conditions hereof and thereof, and all consents, authorizations, approvals and orders required to be obtained by the Company or any of its Subsidiaries in connection herewith and therewith have been obtained.  No consent, authorization or order of, and no filing with, any court, government agency or other body is required for the valid issuance, sale and delivery of the Public Securities and the Representative’s Securities and the consummation of the transactions and agreements contemplated by this Agreement and the Representative’s Option Agreement and as contemplated by the Registration Statement, the Pricing Prospectus and the Prospectus, except with respect to applicable U.S. federal and state securities laws and the rules and regulations of FINRA.

 

  

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2.15         D&O Questionnaires.  To the Company’s knowledge, all information contained in the questionnaires (the “Questionnaires”) completed by each of the Company’s directors, officers and principal shareholders immediately prior to the Offering (each, an “Insider” and, collectively, the “Insiders”), as supplemented by all information concerning the Company’s directors, officers and principal shareholders as described in the Registration Statement, the Pricing Prospectus and the Prospectus, is true, correct and complete, and the Company has not become aware of any information which would cause such information to become inaccurate, incorrect or incomplete.

 

2.16         Litigation; Governmental Proceedings.  Except as disclosed in the Registration Statement, the Pricing Prospectus and the Prospectus, there is no action, suit, proceeding, arbitration, litigation or governmental proceeding pending or, to the Company’s knowledge, threatened against or involving the Company, any of its Subsidiaries or any executive officer or director of the Company and its Subsidiaries, except for any such action, suit, proceeding, inquiry, arbitration, investigation, litigation or governmental proceeding as would not have a Material Adverse Effect.

 

2.17         Good Standing.  Each of the Company and its Subsidiaries has been duly organized and is validly existing as a corporation, and is duly qualified to do business as currently conducted and as proposed to be conducted in each jurisdiction in which its ownership or lease of property or the conduct of its business currently requires such qualification, except where the failure to so qualify would not have a Material Adverse Effect.

 

2.18         Transactions Affecting Disclosure to FINRA.

 

2.18.1      Finder’s Fees.  Except as described in the Registration Statement, the Pricing Prospectus and the Prospectus, there are no claims, payments, arrangements, agreements or understandings relating to the payment of a finder’s, consulting or origination fee by the Company, its Subsidiaries or any Insider with respect to the sale of the Public Securities and the Representative’s Securities hereunder, or any other arrangements, agreements or understandings of the Company, its Subsidiaries or, to the Company’s knowledge, any of its or their shareholders that may affect the Underwriters’ compensation as determined by FINRA.

 

2.18.2      Payments within 12 Months.  Except as described in the Registration Statement, the Pricing Prospectus and the Prospectus, within the 12 months prior to the Effective Date, neither the Company nor any Subsidiary has made any direct or indirect payments (in cash, securities or otherwise) to (i) any person as a finder’s fee, consulting fee or otherwise in consideration of such person raising capital for the Company or its Subsidiaries or introducing to the Company and its Subsidiaries persons who raised or provided capital to the Company or its Subsidiaries, (ii) to any FINRA member, or (iii) to any person or entity that has any direct or indirect affiliation or association with any FINRA member, except in the case of clause (i) above as provided in Schedule 2.18.2 attached hereto and, in the case of clauses (ii) and (iii) above, the prior payment of $50,000 to the Representative as an advance against the expenses described in Section 3.8 below.

 

2.18.3      Use of Proceeds.  None of the net proceeds of the Offering will be paid by the Company to any participating FINRA member or its affiliates, except as specifically authorized herein.

 

  

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2.18.4      FINRA Affiliation.  To the Company’s knowledge, no officer, director or principal shareholder of the Company has any direct or indirect affiliation or association with any FINRA member (as determined in accordance with the rules and regulations of FINRA).

 

2.18.5      Information.  All information provided by the Company in its FINRA Questionnaire to O’Melveny specifically for use by O’Melveny in connection with its COBRADesk filings (and related disclosure) with FINRA is true, correct and complete in all material respects.

 

2.19         Foreign Corrupt Practices Act.  Neither the Company nor its Subsidiaries nor any of the directors, employees or officers of the Company and its Subsidiaries or any other person acting on behalf of the Company and its Subsidiaries has, directly or indirectly, given or agreed to give any money, gift or similar benefit (other than legal price concessions to customers in the ordinary course of business) to any customer, supplier, employee or agent of a customer or supplier, or official or employee of any governmental agency or instrumentality of any government (domestic or foreign) or any political party or candidate for office (domestic or foreign) or other person who was, is, or may be in a position to help or hinder the business of the Company and its Subsidiaries (or assist it in connection with any actual or proposed transaction) that (i) might subject the Company or any of its Subsidiaries to any damage or penalty in any civil, criminal or governmental litigation or proceeding, (ii) if not given in the past, might have had a Material Adverse Effect, or (iii) if not continued in the future, might adversely affect the assets, business, operations or prospects of the Company and its Subsidiaries.  The Company and its Subsidiaries have taken reasonable steps to ensure that its accounting controls and procedures are sufficient to cause the Company and its Subsidiaries to comply in all material respects with the Foreign Corrupt Practices Act of 1977, as amended, and Title 5 of the Israeli Penalty Law (Bribery Transactions).

 

2.20         Money Laundering Laws.  The operations of the Company and its Subsidiaries are and have been conducted at all times in compliance in all material respects with applicable financial recordkeeping and reporting requirements of the Currency and Foreign Transactions Reporting Act of 1970, as amended, if applicable, the Israeli Prohibition of Money Laundering Law, 2000, the applicable money laundering statutes of all jurisdictions, the rules and regulations thereunder and any related or similar rules, regulations or guidelines, issued, administered or enforced by any governmental agency in the jurisdictions in which the Company or any of its Subsidiaries conduct, or propose to conduct, their respective operations or activities (collectively, the “Money Laundering Laws”), and no action, suit or proceeding by or before any court or governmental agency, authority or body or any arbitrator involving the Company or its Subsidiaries with respect to the Money Laundering Laws is pending or, to the Company’s knowledge, threatened.

 

2.21         Compliance with OFAC.  None of the Company and its Subsidiaries or, to the Company’s knowledge, any director, officer, agent, employee or affiliate of the Company and its Subsidiaires or any other person acting on behalf of the Company and its Subsidiaries, is currently subject to any U.S. sanctions administered by the Office of Foreign Assets Control of the U.S. Department of the Treasury (“OFAC”), and the Company will not, directly or indirectly, use the proceeds of the offering of the Public Securities hereunder, or lend, contribute or otherwise make available such proceeds to any subsidiary, joint venture partner or other person or entity, for the purpose of financing the activities of any person currently subject to any U.S. sanctions administered by OFAC

 

2.22         Officers’ Certificate.  Any certificate signed by a duly authorized officer of the Company and delivered to the Representative or to O’Melveny shall be deemed a representation and warranty by the Company to the Underwriters as to the matters covered thereby as of the date of such certificate.

 

  

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2.23         Lock-Up Period.

 

2.23.1      Each of the Company’s officers and directors (each a “Lock-Up Party” and, collectively, the “Lock-Up Parties”) have agreed pursuant to executed lock-up agreements in the form attached hereto as Exhibit B (each, a “Lock-Up Agreement”) that, commencing on July 14, 2010 and ending 180 days after the date of the Prospectus (the “Lock-Up Period”), such persons and their affiliated parties shall not offer, pledge, sell, contract to sell, grant, lend or otherwise transfer or dispose of, directly or indirectly, any Shares, or any securities convertible into or exercisable or exchangeable for Shares, without the prior written consent of the Representative.  The Company has caused each Lock-Up Party to deliver to the Representative the agreement of each such Lock-Up Party to the foregoing effect prior to the Effective Date.

 

2.23.2      The Company, on behalf of itself and any successor entity, has agreed that, without the prior written consent of the Representative, it will not, for a period of 180 days from the date of the Prospectus, (i) offer, pledge, sell, contract to sell, sell any option or contract to purchase, purchase any option or contract to sell, grant any option, right or warrant to purchase, lend, or otherwise transfer or dispose of, directly or indirectly, any shares of capital stock of the Company or any securities convertible into or exercisable or exchangeable for shares of capital stock of the Company, (ii) file or cause to be filed any registration statement with the Commission relating to the offering of any shares of capital stock of the Company or any securities convertible into or exercisable or exchangeable for shares of capital stock of the Company, or (iii) enter into any swap or other arrangement that transfers to another, in whole or in part, any of the economic consequences of ownership of capital stock of the Company, whether any such transaction described in clauses (i), (ii) or (iii) above is to be settled by delivery of shares of capital stock of the Company or such other securities, in cash or otherwise.

 

The restrictions contained in this paragraph 2.23.2 shall not apply to (i) the Shares to be sold hereunder, (ii) the issuance by the Company of ordinary shares and other convertible securities to employees, directors or consultants or pursuant to share option plans approved by the Board of Directors of the Company prior to the date hereof, including up to 800,000 additional Shares to be issued pursuant to such plans, (iii) the issuance by the Company of ordinary shares and other convertible securities in connection with strategic partnering arrangements, or (iv) the pledge or issuance by the Company of ordinary shares to commercial lenders providing bona fide financing to the Company.

 

2.23.3      Notwithstanding the foregoing, if (i) the Company issues an earnings release or material news, or a material event relating to the Company occurs, during the last 17 days of the Lock-Up Period, or (ii) prior to the expiration of the Lock-Up Period, the Company announces that it will release earnings results during the 16-day period beginning on the last day of the Lock-Up Period, the restrictions imposed by this Section 2.23 shall continue to apply until the expiration of the 18-day period beginning on the issuance of the earnings release or the occurrence of the material news or material event, unless the Representative waives such extension.

 

2.24         Subsidiaries.  The Company’s ownership and control of each direct and indirect Subsidiary is as described in the Registration Statement, the Pricing Prospectus and the Prospectus.

 

2.25         Related Party Transactions.  Except as disclosed in the Registration Statement, the Pricing Prospectus and the Prospectus, there are no business relationships or related party transactions involving the Company, its Subsidiaries or any Insider or other person required to be described in the Prospectus, whether pursuant to the Act and the Regulations or Israeli securities laws, that have not been described as required.  The descriptions of the events and transactions set forth in the Registration Statement, the Pricing Prospectus and the Prospectus under the caption “Related Party Transactions” are true, correct and complete in all material respects.

 

  

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2.26         Corporate Governance.  The Company is, and will be on the Closing Date, in material compliance with the applicable corporate governance requirements of the Companies Law, 1999, and the regulations thereunder (the “Companies Law”), the Exchange Act and the regulations thereunder, the Israeli Securities Law, 1968 and the regulations thereunder (the “Securities Law”), The NASDAQ Stock Market LLC, and the Tel-Aviv Stock Exchange (the “TASE”).

 

2.27         Disclosure Controls.  The Company has developed and currently maintains an effective system of “disclosure controls and procedures” (as defined in Rule 13a-15(e) of the Exchange Act) that complies with the requirements of the Exchange Act applicable to it, and such controls and procedures are effective to ensure that all material information concerning the Company and its Subsidiaries will be made known on a timely basis to the individuals responsible for the preparation of the Company’s Exchange Act filings and other public disclosure documents.

 

2.28         Sarbanes-Oxley Compliance.

 

2.28.1      The Company is, and will be on the Closing Date, in material compliance with the provisions of the Companies Law and the Securities Law applicable to it as of the Effective Date, and has implemented or will implement such programs and take reasonable steps to ensure the Company’s future compliance (not later than the relevant statutory and regulatory deadlines therefore) with all material provisions thereof regarding the implementation of internal controls, including, without limitation, with respect to the appointment of an internal auditor, maintenance and functioning of a duly constituted audit committee and compliance with relevant approval procedures for corporate actions and transactions.

 

2.28.2      The Company is, and will be on the Closing Date, in compliance with the provisions of the U.S. Sarbanes-Oxley Act of 2002 (the “Sarbanes-Oxley Act”) applicable to it as of the Effective Date, and has implemented or will implement such programs and take reasonable steps to ensure the Company’s future compliance (not later than the relevant statutory and regulatory deadlines therefore) with all the material provisions of the Sarbanes-Oxley Act.

 

2.29         Critical Accounting Policies.  The section entitled “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Critical Accounting Policies” in the Registration Statement, the Pricing Prospectus and the Prospectus truly, correctly and completely describes (i) accounting policies which the Company believes are the most important in the portrayal of the Company’s financial condition and results of operations and which require management’s most difficult, subjective or complex judgments (“Critical Accounting Policies”), (ii) judgments and uncertainties affecting the application of Critical Accounting Policies, and (iii) the likelihood that materially different amounts would be reported under different conditions or using different assumptions.  The Board of Directors of the Company and management have reviewed and agreed with the selection, application and disclosure of Critical Accounting Policies and have consulted with the Kesselman regarding such disclosure.

 

2.30         No Investment Company Status.  The Company is not and, after giving effect to the Offering and sale of the Public Securities and the application of the proceeds thereof as described in the Registration Statement, the Pricing Prospectus and the Prospectus, will not be an “investment company” as defined in the Investment Company Act of 1940, as amended.

 

2.31         No Labor Disputes.  No labor dispute with the employees of the Company or its Subsidiaries, as the case may be, exists or, to the Company’s knowledge, is threatened or imminent.  The Company is not aware of any existing, threatened or imminent labor disturbance by the employees of its principal suppliers, manufacturers or contractors, as applicable.  Without limiting the generality of the foregoing, the Company and its Subsidiaries are in compliance in all material respects with the labor and employment laws and collective bargaining agreements applicable to its and their employees.

 

  

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2.32         Compliance with and Liability under Environmental Laws.  Except as described in the Registration Statement, the Pricing Prospectus and the Prospectus, (i) the Company and its Subsidiaries (a) are, and at all prior times were, in compliance with any and all applicable Israeli, U.S. federal, state and local and foreign laws, rules, regulations, requirements, decisions, judgments, decrees, orders and the common law relating to pollution or the protection of the environment, natural resources or human health or safety, including those relating to the generation, storage, treatment, use, handling, transportation, Release or threat of Release of Hazardous Materials (collectively, “Environmental Laws”), (b) have received and are in compliance with all permits, licenses, certificates or other authorizations or approvals required of them under applicable Environmental Laws to conduct their respective businesses, (c) have not received notice of any actual or potential liability under or relating to, or actual or potential violation of, any Environmental Laws, including for the investigation or remediation of any Release (as hereinafter defined) or threat of Release of Hazardous Materials, and have no knowledge of any event or condition that would reasonably be expected to result in any such notice, (d) are not conducting or paying for, in whole or in part, any investigation, remediation or other corrective action pursuant to any Environmental Law at any location, and (e) are not a party to any order, decree or agreement that imposes any obligation or liability under any Environmental Law, (ii) there are no costs or liabilities associated with Environmental Laws of or relating to the Company or its subsidiaries, except in the case of each of clauses (i) and (ii) above, for any such matter as would not have a Material Adverse Effect, and (iii) (a) there are no proceedings that are pending or, to the Company’s knowledge, threatened against the Company or any of its Subsidiaries under any Environmental Laws in which a governmental entity is also a party, (b) the Company and its Subsidiaries are not aware of any facts or issues regarding compliance with Environmental Laws, or liabilities or other obligations under Environmental Laws, including the Release or threat of Release of Hazardous Materials, that could have a Material Adverse Effect, and (c) none of the Company and its Subsidiaries anticipates material capital expenditures relating to any Environmental Laws. “Hazardous Materials” means any material, chemical, substance, waste, pollutant, contaminant, compound, mixture, or constituent thereof, in any form or amount, including petroleum (including crude oil or any fraction thereof) and petroleum products, natural gas liquids, asbestos and asbestos containing materials, naturally occurring radioactive materials, brine, and drilling mud, regulated or which can give rise to liability under any Environmental Law.  “Release” means any spilling, leaking, seepage, pumping, pouring, emitting, emptying, discharging, injecting, escaping, leaching, dumping, disposing, depositing, dispersing, or migrating in, into or through the environment, or in, into, from or through any building or structure.

 

  

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2.33         Regulatory.  Except as set forth in the Registration Statement, the Pricing Prospectus and the Prospectus, the Company and its Subsidiaries have complied in all material respects with, are not in violation of, and have not received any written notices of violation with respect to any laws, statutes, rules, regulations or orders administered, issued or enforced by the Israeli Health Ministry (the “IHM”), the U.S. Food and Drug Administration (the “FDA”), the European Medicines Agency (“EMEA”), the European Commission’s Enterprise Directorate General, the regulatory agencies within each E.U. Member State granting marketing authorization through the Mutual Recognition Procedure (“EU regulatory agencies”) or any other U.S. or foreign federal, state or local governmental or quasi-governmental authority exercising comparable authority over the Company and its Subsidiaries or any of its or their products or services (together with the IHM, the FDA, the EMEA and the EU regulatory agencies, the “Governmental Authorities”) applicable to the design, ownership, testing, development, processing, manufacture, packaging, use, distribution, marketing, labeling, promotion, sale, offer for sale, storage, import, export or disposal of any product manufactured, distributed or developed by or for the Company, including, those relating to investigational use, investigational device exemption, premarket notification, premarket approval, good clinical practices, good manufacturing practices, record keeping, filing of reports, and patient privacy and medical record security (collectively, “Applicable Laws”), or any license, certificate, approval, clearance, authorization, permit, application, supplement or amendment required by any Applicable Laws (collectively, “Authorizations”).  Except as set forth in the Registration Statement, the Pricing Prospectus and the Prospectus, the Company possesses all required Authorizations for the conduct of the business of the Company and its Subsidiaries now operated as described in the Registration Statement, the Pricing Prospectus and the Prospectus and such Authorizations are in full force and effect. Except as set forth in the Registration Statement, the Pricing Prospectus and the Prospectus, the Company and its Subsidiaries have not received from the Governmental Authorities any written notice of adverse findings, notices of violations, citations, regulatory letters, warning letters, untitled letters, criminal proceeding notices under Section 305 of the Federal Food, Drug, and Cosmetic Act or other similar communication from the Governmental Authorities alleging or asserting noncompliance with Applicable Laws or any Authorizations, and there have been no seizures or suspensions of Authorizations conducted or, to the Company’s knowledge, threatened by the Governmental Authorities, and no recalls, market withdrawals, field notifications, notifications of misbranding or adulteration, safety alerts or similar actions relating to the safety or efficacy of the Company’s and its Subsidiaries’ products, and no investigations with respect to any alleged product defect or violation have been conducted by the Company or its Subsidiaries or requested or, to the Company’s knowledge, threatened by the Governmental Authorities which remain unresolved.  The Company and its Subsidiaries have no knowledge that the Governmental Authorities have initiated, conducted or intend to initiate any such notice or action.  Except as set forth in the Registration Statement, the Pricing Prospectus and the Prospectus, the Company and its Subsidiaries have not received notice of any claim, litigation, action, suit, proceeding, hearing, investigation, or other similar action from the Governmental Authorities alleging that any Company or Subsidiary operation or activity is in violation of any Applicable Laws or Authorizations and has no knowledge that the Governmental Authorities are considering any such claim, litigation, action, suit, proceeding, hearing, or investigation.  Except as set forth in the Registration Statement, the Pricing Prospectus and the Prospectus, each regulatory submission of the Company’s and its Subsidiaries’ products has been filed and maintained in material compliance with all Applicable Laws and Authorizations, and all laboratory and clinical studies and tests currently being conducted by or on behalf of the Company and its Subsidiaries and that support clearance or approval of its products are or have been conducted in material compliance with all Applicable Laws and Authorizations.  Except as set forth in the Registration Statement, the Pricing Prospectus and the Prospectus, no filing or submission to the Governmental Authorities contains any material omission or false information, and the Company and its Subsidiaries have not received any notices or correspondence from the Governmental Authorities, Institutional Review Board or foreign comparable authority requiring termination, suspension or clinical hold of any laboratory and clinical studies and tests conducted or currently being conducted by or on behalf of the Company.  Except as set forth in the Registration Statement, the Pricing Prospectus and the Prospectus, all manufacturing operations conducted by or for the benefit of the Company and its Subsidiaries are and have been in compliance in all material respects with all applicable manufacturing practices, quality assurance standards and similar business practices mandated by Applicable Laws.  Except as set forth in the Registration Statement, the Pricing Prospectus and the Prospectus, the Company and its Subsidiaries are not aware of any material facts which are reasonably likely to cause (i) the non-approval or non-clearance of any products intended to be sold by the Company and its Subsidiaries, (ii) a change in the marketing classification or labeling of any such products, (iii) a termination or suspension of clinical trials being conducted by or on behalf of the Company and its Subsidiaries, or (iv) a suspension or revocation of any of the Company’s or its Subsidiaries’ Authorizations.  The pre-clinical tests and clinical trials conducted by or on behalf of the Company and its Subsidiaries that are described in, and the results of which are referred to in, the Registration Statement, the Pricing Prospectus and the Prospectus, if any, are the only pre-clinical tests and clinical trials currently being conducted by or on behalf of the Company and its Subsidiaries, and, to the best of the Company’s knowledge, such studies and tests were and, if still pending, are being conducted in compliance in all material respects with experimental protocols, procedures and controls pursuant to accepted professional scientific standards and in material compliance with Applicable Laws and Authorizations.

 

  

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2.34         Intellectual Property.

 

2.34.1      Except as set forth in the Registration Statement, the Pricing Prospectus and the Prospectus, (i) the Company and its Subsidiaries own or have the right to use pursuant to license, sublicense, agreement or permission, all patents, trademarks, service marks, patent applications, trade names, copyrights, trade secrets, domain names, information, proprietary rights and processes (“Intellectual Property”) that are necessary for the conduct of the business of the Company and its Subsidiaries now operated by them, or as proposed to be operated by them, as described in the Registration Statement, the Pricing Prospectus and the Prospectus, except for such failure to own or have the right to use as would not have a Material Adverse Effect, without any material conflict with or infringement of the interests of others, and the Company and its Subsidiaries have taken all reasonable steps necessary to secure or perfect their interests in such Intellectual Property and have taken all reasonable steps necessary to secure assignment of such Intellectual Property from their employees and contractors, (ii) the Company has no knowledge of any infringement by any third party of any Intellectual Property of the Company and its Subsidiaries, (iii) the Company is not a party to outstanding options, licenses or agreements of any kind relating to the Intellectual Property of the Company and its Subsidiaries except as would not have a material adverse effect on the assets, business or operations of the Company and its Subsidiaries, taken as a whole, (iv) the Company and its Subsidiaries have complied in all material respects with the terms of each agreement pursuant to which Intellectual Property has been licensed to the Company or any Subsidiary, and all such agreements are in full force and effect, (v) to the Company’s knowledge after due inquiry, none of the technology or information employed by the Company and its Subsidiaries has been obtained or is being used by the Company and its Subsidiaries in violation of any contractual or fiduciary material obligation binding on the Company and its Subsidiaries or any of its or their directors or executive officers, or any of its or their employees, or otherwise in violation of the rights of any third party, (vi) neither the Company nor any of its Subsidiaries has received any written or, to the Company’s knowledge, oral communications alleging that the Company or its Subsidiaries has violated, infringed or conflicted with, or, by conducting its business as set forth in the Registration Statement, the Pricing Prospectus and the Prospectus (including the commercialization of products or services under development), violates, infringes or conflicts with any of the Intellectual Property of any other person or entity or engages in unfair competition or trade practice, and the Company is unaware of any facts which could form a reasonable basis for such allegations, and (vii) and the Company and its Subsidiaries have taken reasonable measures to prevent the unauthorized dissemination or publication of their confidential information and, to the extent required to do so by contract or under law, the confidential information of third parties in their possession.

 

2.34.2      The Company and its Subsidiaries, where applicable, have properly filed or caused to be filed with applicable Israeli, U.S. and other foreign and international patent authorities (the “Patent Authorities”) all patent applications owned or purported to be owned by the Company and its Subsidiaries (the “Company Patent Applications”), and have not allowed any issued patent of the Company or its Subsidiaries to lapse or enter the public domain.  To the Company’s knowledge, (i) no material misrepresentation was made to, or material fact withheld from, any Patent Authorities during any prosecution of any Company Patent Applications, (ii) except as disclosed in the Registration Statement, the Pricing Prospectus and the Prospectus, neither the Company nor its Subsidiaries has knowledge of any fact which would preclude the patentability, validity or enforceability of any patents and patent applications in the Intellectual Property of the Company and its Subsidiaries, (iii) neither the Company nor its Subsidiaries has knowledge of any information which would preclude the Company, its Subsidiaries or, as applicable, its licensors from having clear title to the patents and patent applications in the Intellectual Property of the Company and its Subsidiaries, and (iv) except as disclosed in the Registration Statement, the Pricing Prospectus and the Prospectus, all assignments for all patents and/or patent applications in the Intellectual Property of the Company and its Subsidiaries have been properly executed and/or submitted for recordation for each named inventor, except in the case of each of clauses (i) through (iv) above as would not have a Material Adverse Effect.

 

  

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2.35         Taxes  Each of the Company and its Subsidiaries has filed all returns (as hereinafter defined) required to be filed with taxing authorities prior to the date hereof or has duly obtained extensions of time for the filing thereof.  Each of the Company and its Subsidiaries has paid all taxes (as hereinafter defined) shown as due on such returns that were filed and has paid all taxes imposed on or assessed against the Company or such respective Subsidiary.  The provisions for taxes payable, if any, shown on the financial statements filed with, or included as part of, the Registration Statement are sufficient for all accrued and unpaid taxes, whether or not disputed, and for all periods to and including the dates of such consolidated financial statements.  Except as disclosed in writing to the Representative, (i) no issues have been raised (and are currently pending) by any taxing authority in connection with any of the returns or taxes asserted as due from the Company or its Subsidiaries, and (ii) no waivers of statutes of limitation with respect to the returns or collection of taxes have been given by or requested from the Company or its Subsidiaries.  The term “taxes” mean all Israeli, U.S. federal, state and local and other foreign, and other net income, gross income, gross receipts, sales, use, ad valorem, transfer, franchise, profits, license, lease, service, service use, withholding, payroll, employment, excise, severance, stamp, occupation, premium, property, windfall profits, customs, duties or other taxes, fees, assessments, or charges of any kind whatsoever, together with any interest and any penalties, linkage differentials, additions to tax, or additional amounts with respect thereto.  The term “returns” means all returns, declarations, reports, statements, and other documents required to be filed in respect to taxes.

 

2.36         Insurance.  The Company and its Subsidiaries are insured by insurers of recognized financial responsibility against such losses and risks and in such amounts as are customary in the businesses in which they are engaged; and neither the Company nor any of its Subsidiaries has any reason to believe that it will not be able to renew its existing insurance coverage as and when such coverage expires or to obtain similar coverage from similar insurers as may be necessary to continue its business at a cost that would not have a material adverse effect on the assets, business or operations of the Company taken as a whole.

 

2.37         Forward-Looking Statements.  No forward-looking statement (within the meaning of Section 27A of the Act and Section 21E of the Exchange Act) contained in the Registration Statement, the Pricing Prospectus or the Prospectus has been made without a reasonable basis or has been disclosed other than in good faith.

 

2.38         Stabilization.  None of the Company and its Subsidiaries or, to the Company’s knowledge, any of its or their employees, officers or directors, have taken, directly or indirectly, any action designed to or that might reasonably be expected to cause or result in, under the Exchange Act, or otherwise, stabilization or manipulation of the price of any security of the Company to facilitate the sale or resale of the Public Securities.

 

2.39         Offering Materials.  The Company has not distributed and will not distribute prior to the completion of the distribution of the Public Securities, any offering material in connection with the Offering other than the Registration Statement, the Pricing Prospectus, the Prospectus and Issuer Free Writing Prospectus listed on Schedule II attached hereto or such other materials reviewed and approved by the Representative or otherwise required by applicable law.

 

2.40         Statistical and Market Data.  Nothing has come to the attention of the Company that has caused it to believe that the statistical and market-related data included in the Registration Statement, the Pricing Prospectus and the Prospectus is not based on or derived from sources that are reliable and accurate in all material respects.

 

  

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2.41         Transaction Documents under Israeli Law.  As of the date hereof and as of the Closing Date and any Option Closing Date, each of this Agreement and the Representative’s Option Agreement is in proper form to be enforceable against the Company in Israel in accordance with its terms; to ensure the legality, validity, enforceability or admissibility into evidence in Israel of this Agreement and the Representative’s Option Agreement, it is not necessary that the such agreements be filed or recorded with any court or other authority in the Israel (other than court filings in the normal course of proceedings) or that any stamp or similar tax (other than nominal stamp duty if the such agreements are executed in or brought into Israel) in Israel be paid on or in respect of such agreements or any other documents to be furnished hereunder, other than court costs, including filing fees and deposits to guarantee judgment required by Israeli laws and regulations.

 

2.42         Choice of Law.  The courts of the State of Israel recognize and give effect to the choice of law provisions set forth in Section 9.6.1 hereof and will enforce judgments of U.S. courts obtained against the Company in connection with this Agreement under which a sum of money is payable (other than a sum of money payable in respect of multiple damages, taxes or other charges of a like nature or in respect of a fine or other penalty) and would give a judgment based thereon, subject to the conditions and qualifications set forth in the Registration Statement, the Pricing Prospectus and the Prospectus.

 

2.43         Israeli Securities Laws; Listing on the TASE.

 

2.43.1      The Company is a reporting issuer in the State of Israel with Shares listed on the TASE, and is in compliance in all material respects with all applicable rules and regulations under the Israeli securities laws and of the TASE.  Since January 1, 2007, and except as provided in Schedule 2.43.1 attached hereto, there are no reports or information required to be disclosed pursuant to the requirements of the Israeli securities laws or the TASE that have not been made publicly available.

 

2.43.2      Except as disclosed in the Registration Statement, the Pricing Prospectus and the Prospectus, the Shares are listed on the TASE and the Company has taken no action designed to, or likely to have the effect of, delisting the Shares from the TASE, nor has the Company received any notification that the TASE contemplates terminating such listing.

 

2.43.3      Since August 4, 2010, (i) none of the Company’s filings with the TASE contained any untrue statement of a material fact or omitted to state any material fact necessary in order to make the statements, in light of the circumstances under which they were made, not misleading, and (ii) the Company has made all filings with the TASE required under the applicable Israeli securities laws.

 

	
3.

	
Covenants of the Company.  The Company covenants and agrees as follows:

 

3.1           Amendments to Registration Statement.  The Company will deliver to the Representative, prior to filing, any amendment or supplement to the Registration Statement or Prospectus proposed to be filed after the Effective Date and will not file any such amendment or supplement to which the Representative shall reasonably object.

 

3.2           Federal Securities Laws.

 

3.2.1        Compliance.  During the time when a Prospectus is required to be delivered under the Act, the Company will comply with all requirements imposed upon it by the Act, the Regulations and the Exchange Act and the regulations thereunder, as from time to time in effect, so far as necessary to permit the continuance of sales of or dealings in the Public Securities and the Representative’s Securities in accordance with the provisions hereof and the Prospectus.  If at any time when a Prospectus relating to the Public Securities and the Representative’s Securities is required to be delivered under the Act, any event shall have occurred as a result of which, in the opinion of counsel for the Company or counsel for the Underwriters, the Registration Statement, the Pricing Prospectus and the Prospectus, as then amended or supplemented, includes an untrue statement of a material fact or omits to state any material fact required to be stated therein or necessary to make the statements therein, in light of the circumstances under which they were made, not misleading, or if it is necessary at any time to amend the Prospectus to comply with the Act, the Company will notify the Representative promptly and prepare and file with the Commission, subject to Section 3.1 hereof, an appropriate amendment or supplement in accordance with Section 10 of the Act.

 

  

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3.2.2        Filing of Final Prospectus.  The Company will file the Prospectus (in form and substance satisfactory to the Representative) with the Commission pursuant to the requirements of Rule 424 of the Regulations and, in any event, not later than the Closing Date.

 

3.2.3        Exchange Act Registration.  For a period of three years from the Effective Date, the Company will use its reasonable best efforts to maintain the registration of the Shares.

 

3.2.4        Free Writing Prospectuses.  The Company represents and agrees that it has not made and will not make any offer relating to the Public Securities that would constitute an Issuer Free Writing Prospectus, other than the Issuer Free Writing Prospectuses identified on Schedule II attached hereto, without the prior consent of the Representative.  The Company represents that it will comply with the applicable requirements of Rule 433 of the Act with respect to any Issuer Free Writing Prospectus, including timely Commission filing where required, legending and record keeping.

 

3.3           Qualification.  The Company agrees to promptly take such action as the Representative may reasonably request to qualify the Public Securities and the Representative’s Securities for offering and sale under the securities laws of such jurisdictions as the Representative may request and to comply with such laws so as to permit the continuance of sales and dealings therein in such jurisdictions for as long as may be necessary to complete the distribution of the Public Securities and Representative’s Securities; provided that in connection therewith the Company shall not be required to qualify as a foreign corporation or to file a general consent to service of process in any jurisdiction.

 

3.4           Delivery to the Underwriters of Prospectuses.  The Company will deliver to each of the Underwriters, without charge, from time to time during the period when a Prospectus is required to be delivered under the Act or the Exchange Act, such number of copies of each Prospectus as such Underwriters may reasonably request and, as soon as the Registration Statement or any amendment or supplement thereto becomes effective, deliver to the Representative two original executed Registration Statements, including exhibits, and all post-effective amendments thereto, and copies of all exhibits filed therewith or incorporated therein by reference and all original executed consents of certified experts.

 

3.5           Effectiveness and Events Requiring Notice to the Representative.  The Company will notify the Representative immediately and confirm the notice in writing of (i) the effectiveness of the Registration Statement and any amendment thereto, (ii) the issuance by the Commission of any stop order or of the initiation, or the threatening, of any proceeding for that purpose, (iii)  the issuance by any securities commission or regulatory authority of any proceedings for the suspension of the qualification of the Public Securities or the Representative’s Securities for offering or sale in any jurisdiction or of the initiation, of any proceeding for that purpose, (iv) the mailing and delivery to the Commission for filing of any amendment or supplement to the Registration Statement, Pricing Prospectus or the Prospectus, (v) the receipt of any comments or request for any additional information from the Commission, and (vi) the happening of any event during the period described in this Section 3.4 that, in the judgment of the Representative or the Company, makes any statement of a material fact made in the Registration Statement, the Pricing Prospectus or the Prospectus untrue or that requires the making of any changes (a) in the Registration Statement in order to make the statements therein not misleading, or (b) in the Pricing Prospectus or the Prospectus in order to make the statements therein, in light of the circumstances under which they were made, not misleading.  If the Commission or any U.S. state securities commission shall enter a stop order or suspend such qualification at any time, the Company will use its best efforts to obtain promptly the lifting of such order.

 

  

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3.6           Financial Public Relations Firm.  As of the Effective Date, the Company shall have retained a financial public relations firm reasonably acceptable to the Representative and the Company, which firm will be experienced in assisting issuers in public offerings of securities and in their relations with their security holders, and shall retain such firm or another firm reasonably acceptable to the Representative for a period of not less than two years after the Effective Date.  Kilmer Lucas Inc. & Bio Tuesday Publishing Corporation is acceptable to the Representative to act as the Company’s public relations firm.

 

3.7           Reports to the Representative.  For a period of three years from the Effective Date, the Company will furnish to the Representative copies of such financial statements and other periodic and special reports as the Company from time to time furnishes generally to holders of any class of its securities and also promptly furnish to the Representative (i) a copy of each periodic report the Company shall be required to file with the Commission, (ii) a copy of every press release which was released by the Company, (iii) a copy of each Form 6-K prepared and filed by the Company, (iv) two copies of each registration statement filed by the Company under the Act, and (v) such additional documents and information with respect to the Company and its subsidiaries as the Representative may from time to time reasonably request, other than non-public information in the Company’s possession which may be provided by the Company to the Representative at its discretion in light of attorney-client privilege and subject to execution of a non-disclosure agreement in a form reasonably satisfactory to the Company and the Representative.  Documents filed with the Commission pursuant to its EDGAR system shall be deemed to have been delivered to the Representative pursuant to this Section.

 

3.8           Payment of Expenses.

 

3.8.1        General Expenses Related to the Offering.  The Company hereby agrees to pay on each of the Closing Date and any Option Closing Date, as the case may be, to the extent not paid at the Closing Date, all expenses incident to the performance of the obligations of the Company under this Agreement, as follows:  (a) all filing fees and communication expenses relating to the registration of the Public Securities and the Representative’s Securities with the Commission, (b) all COBRADesk filing fees associated with the review of the Offering by FINRA and all fees and expenses relating to the listing of the Shares on NASDAQ and such other stock exchanges as the Company and the Representative together determine, (c) all fees, expenses and disbursements relating  to background checks of the Company’s officers and directors in an amount not to exceed $5,000 per individual and $30,000 in the aggregate, (d) all fees, expenses and disbursements relating to the registration or qualification of the Shares under the “blue sky” securities laws of such states and other jurisdictions as the Company and the Representative may reasonably designate (including, without limitation, all filing and registration fees, and the reasonable fees and disbursements of “blue sky” counsel up to $5,000), (e) all fees, expenses and disbursements relating to the registration, qualification or exemption of the Shares under the securities laws of such foreign jurisdictions as the Company and the Representative may reasonably designate, (f) the costs of all mailing and printing of the underwriting documents (including, without limitation, this Agreement, any “Blue Sky Surveys” and, if appropriate, any Agreement Among Underwriters, Selected Dealers’ Agreement, Underwriters’ Questionnaire and related Powers of Attorney), registration statements, prospectuses and all amendments, supplements and exhibits thereto, and as many preliminary and final prospectuses as the Representative may reasonably deem necessary, (g) the costs and expenses of the public relations firm referred to in Section 3.6 hereof, (h) the costs of preparing, printing and delivering certificates representing the Shares, (i) the fees and expenses of the Transfer Agent referred to in Section 3.15 hereof, (j) stock transfer and/or stamp taxes, if any, payable upon the transfer of securities from the Company to the Underwriters, (k) the costs associated with bound volumes of the public offering materials, as well as commemorative mementos and Lucite tombstones, each of which the Company or its designee will provide within a reasonable time after the Closing in such quantities as the Representative may reasonably request, (l) the fees and expenses of the Company’s accountants, (m) the fees and expenses of the Company’s legal counsel and other agents and representatives, (n) the $16,000 cost associated with the use of i-Deal’s book-building, prospectus tracking and compliance software for the Offering, and (o) up to $10,000 of the Representative’s actual accountable “road show” expenses for the Offering. Any expenses, other than the payment to be made pursuant to clause (d) above, shall be subject to prior approval of the Company, which approval shall not be unreasonably withheld, conditioned or delayed.

 

  

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3.8.2        Non-accountable Expenses.  The Company further agrees that, in addition to the expenses payable pursuant to Section 3.8.1, on the Closing Date it will pay to the Representative an amount equal to the documented fees and expenses actually incurred by counsel to the Representative by deduction from the proceeds of the Offering contemplated herein.

 

3.9           Application of Net Proceeds.  The Company will apply the net proceeds from the Offering received by it in a manner consistent with the application described under the caption “Use Of Proceeds” in the Pricing Prospectus.

 

3.10         Delivery of Earnings Statements to Security Holders.  The Company will make generally available to its security holders as soon as practicable, but not later than the first day of the fifteenth full calendar month following the Effective Date, an earnings statement (which need not be certified by independent public or independent certified public accountants unless required by the Act or the Regulations, but which shall satisfy the provisions of Rule 158(a) under Section 11(a) of the Act) covering a period of at least 12 consecutive months beginning after the Effective Date.

 

3.11         Stabilization.  None of the Company and its Subsidiaries will take, directly or indirectly, any action designed to or that might reasonably be expected to cause or result in, under the Exchange Act, or otherwise, stabilization or manipulation of the price of any security of the Company to facilitate the sale or resale of the Public Securities, and the Company and its Subsidiaries shall take reasonable steps designed to prevent its or their employees, officer or directors from taking, directly or indirectly, any such action.

 

3.12         Internal Controls.  The Company will maintain a system of internal accounting controls sufficient to provide reasonable assurances that (i) transactions are executed in accordance with management’s general or specific authorization, (ii) transactions are recorded as necessary in order to permit preparation of financial statements in accordance with IFRS and to maintain accountability for assets, (iii) access to assets is permitted only in accordance with management’s general or specific authorization, and (iv) the recorded accountability for assets is compared with existing assets at reasonable intervals and appropriate action is taken with respect to any differences.

 

3.13         FINRA.  The Company shall advise the Representative (who shall make an appropriate filing with FINRA) if it becomes aware that any director, officer or 5% or greater shareholder of the Company becomes an affiliate or associated person of a FINRA member participating in the distribution of the Public Securities.

 

  

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3.14         No Fiduciary Duties.  The Company acknowledges and agrees that the Underwriters’ responsibility to the Company is solely contractual in nature and that none of the Underwriters or their affiliates shall be deemed to be acting in a fiduciary capacity, or otherwise owes any fiduciary duty to the Company or any of its affiliates in connection with the Offering and the other transactions contemplated by this Agreement.

 

3.15         Transfer Agent and Registrar.  The Company shall retain, at its expense, a transfer agent and registrar for the Shares acceptable to the Representative (the “Transfer Agent”).  American Stock Transfer & Trust Company, LLC is acceptable to the Representative to act as Transfer Agent for the Shares.

 

3.16         Rule 462(b) Registration Statement.  If the Company elects to rely upon Rule 462(b) of the Act, the Company shall file the Rule 462(b) Registration Statement with the Commission by 5:30 p.m., Washington, D.C. time, on the date of this Agreement, and the Company shall at the time of filing pay to the Commission the filing fee for the Rule 462(b) Registration Statement.

 

3.17         Passive Foreign Investment Company.  The Company agrees (i) to make a determination on an annual basis as to whether it was a “passive foreign investment company” within the meaning of Section 1297(a) of the Internal Revenue Code of 1986, as amended (the “Code”) for the preceding fiscal year, including any qualifications, and (ii) to promptly report such determination in the next filing of an annual report with the Commission and to provide shareholders with the necessary information to make a “qualified electing fund” election as defined under the Code; provided, however, that nothing in this Section 3.17 shall be interpreted as an undertaking to qualify as a “passive foreign investment company.”

 

3.18         License.  Upon request of the Representative, the Company will furnish, or cause to be furnished, to the Underwriters an electronic version of the Company’s trademarks, service marks and corporate logo for use on the websites, if any, operated by the Underwriters for the purpose of facilitating the Offering (the “License”); provided, however, that the License shall be used solely for the purpose described above, is granted without any fee and may not be assigned or transferred.

 

3.19         Listing.  The Company shall use its reasonable best efforts to maintain the listing of the Shares on NASDAQ for a period of at least three years.

 

4.           Conditions of Underwriters’ Obligations.  The obligations of the several Underwriters to purchase and pay for the Shares, as provided herein, shall be subject to (i) the continuing accuracy of the representations and warranties of the Company as of the date hereof and as of each of the Closing Date and, with respect to any Option Shares, any Option Closing Date, (ii) the accuracy of the statements of officers of the Company made pursuant to the provisions hereof, (iii) the performance by the Company of its obligations hereunder, and (iv) the following conditions:

 

4.1           Regulatory Matters.

 

4.1.1        Effectiveness of Registration Statement.  The Registration Statement shall have become effective not later than 5:00 p.m., New York City time, on the date of this Agreement, or such later date and time as shall be consented to in writing by the Representative and, at each of the Closing Date and any Option Closing Date, as the case may be, no stop order suspending the effectiveness of the Registration Statement shall have been issued or be in effect and no proceedings for that purpose shall have been instituted or shall be pending or, to the Company’s knowledge, contemplated by the Commission and any request on the part of the Commission for additional information shall have been complied with to the reasonable satisfaction of the Representative.

 

  

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4.1.2        FINRA Clearance.  By the Effective Date, the Representative shall have received clearance from FINRA as to the amount of compensation allowable or payable to the Underwriters as described in the Registration Statement.

 

4.1.3        NASDAQ Stock Market Clearance.  On the Closing Date, the Company’s Shares, including the Firm Shares and any Option Shares, shall have been approved for listing on the NASDAQ, and the Company shall have complied with all obligations of NASDAQ.

 

4.2           Company Counsel Matters.

 

4.2.1        Opinions of Company’s U.S. Counsel.  Torys LLP, U.S. counsel to the Company, shall have furnished to the Representative, at the request of the Company, its written opinion and 10b-5 statement, dated the Closing Date and any Option Closing Date, as the case may be, and addressed to the Underwriters, in form and substance reasonably satisfactory to the Representative.

 

4.2.2        Opinions of Company’s Israeli Counsel.  Yoram L. Cohen, Ashlagi, Eshel Law Firm, Israeli counsel to the Company, shall have furnished to the Representative, at the request of the Company, its written opinion with respect to such Israeli legal matters as the Representative may reasonably request, including a 10b-5 statement, dated the Closing Date and any Option Closing Date, as the case may be, and addressed to the Underwriters, in form and substance reasonably satisfactory to the Representative.

 

4.2.3        Opinion of Company’s Intellectual Property Counsel.  Dr. Mark Friedman Ltd., intellectual property counsel to the Company, shall have furnished to the Representative, at the request of the Company, its written opinion with respect to such intellectual property matters as the Representative may reasonably request, dated the Closing Date and any Option Closing Date, as the case may be, and addressed to the Underwriters, in form and substance reasonably satisfactory to the Representative.

 

4.2.4        Opinion of Company’s U.S. Regulatory Counsel.  Latham & Watkins LLP, U.S. regulatory counsel to the Company, shall have furnished to the Representative, at the request of the Company, its written opinion with respect to such U.S. regulatory matters as the Representative may reasonably request, dated the Closing Date and any Option Closing Date, as the case may be, and addressed to the Underwriters, in form and substance reasonably satisfactory to the Representative.

 

4.2.5        Opinion of Company’s European Union Regulatory Counsel.  Latham & Watkins LLP, European Union regulatory counsel to the Company, shall have furnished to the Representative, at the request of the Company, its written opinion with respect to such European Union regulatory matters as the Representative may reasonably request, dated the Closing Date and any Option Closing Date, as the case may be, and addressed to the Underwriters, in form and substance reasonably satisfactory to the Representative.

 

4.2.6        Opinion of Company’s Brazil Regulatory Counsel.  Derraik Advogados, Brazil regulatory counsel to the Company, shall have furnished to the Representative, at the request of the Company, its written opinion with respect to such Brazilian regulatory matters as the Representative may reasonably request, dated the Closing Date and any Option Closing Date, as the case may be, and addressed to the Underwriters, in form and substance reasonably satisfactory to the Representative.

 

4.2.7        Opinion of Company’s Republic of India Regulatory Counsel.  Desai & Diwanji, Mumbai, Republic of India regulatory counsel to the Company, shall have furnished to the Representative, at the request of the Company, its written opinion with respect to such Indian regulatory matters as the Representative may reasonably request, dated the Closing Date and any Option Closing Date, as the case may be, and addressed to the Underwriters, in form and substance reasonably satisfactory to the Representative.

 

  

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4.2.8        Opinion of Company’s China Regulatory Counsel. Guo & Partners Attorneys at Law, China regulatory counsel to the Company, shall have furnished to the Representative, at the request of the Company, its written opinion with respect to such Chinese regulatory matters as the Representative may reasonably request, dated the Closing Date and any Option Closing Date, as the case may be, and addressed to the Underwriters, in form and substance reasonably satisfactory to the Representative.

 

4.2.9        Opinion of Company’s Mexico Regulatory Counsel.  Galicia Abogados, S.C., Mexico regulatory counsel to the Company, shall have furnished to the Representative, at the request of the Company, its written opinion with respect to such Mexican regulatory matters as the Representative may reasonably request, dated the Closing Date and any Option Closing Date, as the case may be, and addressed to the Underwriters, in form and substance reasonably satisfactory to the Representative.

 

4.3           Cold Comfort Letter.  At the time this Agreement is executed, and at each of the Closing Date and any Option Closing Date, the Representative shall have received from Kesselman a cold comfort letter with respect to the financial statements and certain financial information contained in the Registration Statement, the Pricing Prospectus and the Prospectus, addressed to the Underwriters and in form and substance satisfactory to the Representative and to O’Melveny, dated as of the date of this Agreement and as of the Closing Date and any Option Closing Date, as the case may be; provided that the cold comfort letter delivered on the Closing Date or any Option Closing Date, as the case may be, shall use a “cut-off” date no more than three Business Days prior to such Closing Date or any such Option Closing Date, as the case may be.

 

4.4           Officers’ Certificates.

 

4.4.1        Officers’ Certificate.  At each of the Closing Date and any Option Closing Date, as the case may be, the Representative shall have received a certificate of the Company signed by the Chairman of the Board of Directors and the Chief Executive Officer of the Company, dated the Closing Date and any Option Closing Date, as the case may be, to the effect that the Company has performed all covenants and complied with all conditions required by this Agreement to be performed or complied with by the Company prior to and as of the Closing Date or the Option Closing Date, as the case may be, and that the conditions set forth in Section 4.5 hereof have been satisfied as of such date and that, as of the Closing Date and the Option Closing Date, as the case may be, the representations and warranties of the Company set forth in Section 2 hereof are true, correct and complete.

 

4.4.2        Secretary’s Certificate.  At each of the Closing Date and the Option Closing Date, if any, the Representative shall have received a certificate of the Company signed by the Secretary or Assistant Secretary of the Company, dated the Closing Date and any Option Closing Date, as the case may be, certifying (i) that the Company’s and its Subsidiaries’ articles of association and organizational documents, as the case may be, are true and complete, have not been modified and are in full force and effect, (ii) that the resolutions of the Board of Directors of the Company relating to the public offering contemplated by this Agreement are in full force and effect and have not been modified, (iii) as to the accuracy and completeness of all correspondence between the Company or its counsel and the Commission, and (iv) as to the incumbency of the officers of the Company.  The documents referred to in such certificate shall be attached to such certificate.

 

  

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4.5           No Material Changes.  Prior to and on each of the Closing Date and any Option Closing Date, as the case may be, (i) there shall have been no material adverse change or development involving a prospective material adverse change in the condition or prospects or the business activities, financial or otherwise, of the Company from the latest dates as of which such condition is set forth in the Registration Statement, the Pricing Prospectus and the Prospectus, (ii) no action suit or proceeding, at law or in equity, shall have been pending or threatened against the Company or any Insider before or by any court or federal or state commission, board or other administrative agency wherein an unfavorable decision, ruling or finding may materially adversely affect the business, operations, prospects or financial condition or income of the Company, except as set forth in the Registration Statement, the Pricing Prospectus or the Prospectus, (iii) no stop order shall have been issued under the Act and no proceedings therefore shall have been initiated or threatened by the Commission, and (iv) the Registration Statement, the Pricing Prospectus and the Prospectus and any amendments or supplements thereto shall contain all material statements which are required to be stated therein in accordance with the Act and the Regulations and shall conform in all material respects to the requirements of the Act and the Regulations, and neither (a) the Registration Statement, or any amendment or supplement thereto, shall contain any untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary to make the statements therein not misleading, nor (b) any Preliminary Prospectus, the Pricing Prospectus or the Prospectus, or any amendment or supplement thereto, shall contain any untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary to make the statements therein, in light of the circumstances under which they were made, not misleading, and (v) no event or condition or a type described in Section 8.2 hereof shall have occurred or shall exist which would, in the Representative’s judgment, make it impracticable to proceed with the offering, sale and/or delivery of the Firm Shares or any Option Shares, as the case may be, or to enforce contracts made by the Underwriters for the sale of any such securities.

 

4.6           Delivery of Agreements.

 

4.6.1        Effective Date Deliveries.  On the Effective Date, the Company shall have delivered to the Representative executed copies of this Agreement and the Lock-Up Agreements.

 

4.6.2        Closing Date Deliveries.  On the Closing Date, the Company shall have delivered to the Representative executed copies of the Representative’s Option Agreement.

 

4.7           Additional Documents.  On or prior to the Closing Date or any Option Closing Date, as the case may be, the Company shall have furnished to the Representative such further certificates, including certificates of officers of the Company, and documents as the Representative may reasonably require for the purpose of enabling them to pass upon the issuance and sale of the Public Securities as contemplated herein or in order to evidence the accuracy of any of the representations and warranties, or the satisfaction of any of the conditions or agreements, herein contained.

 

  

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5.

	
Indemnification.

 

5.1           Indemnification of the Underwriters.

 

5.1.1        General.  Subject to the conditions set forth below, the Company agrees to indemnify and hold harmless each of the Underwriters and each Selected Dealer, and each of their respective directors, officers and employees and each person, if any, who controls any such Underwriter (“Controlling Person”) within the meaning of Section 15 of the Act or Section 20 of the Exchange Act, from and against any and all loss, liability, claim, damage and expense whatsoever (including, without limitation, any and all legal or other expenses reasonably incurred in investigating, preparing or defending against any litigation, commenced or threatened, or any claim whatsoever, whether arising out of any action between any of the Underwriters and the Company or between any of the Underwriters and any third party or otherwise) to which they or any of them may become subject under the Act, the Exchange Act or any other statute or at common law or otherwise or under the laws of foreign countries, arising out of or based upon any untrue statement or alleged untrue statement of a material fact contained (i) in the Registration Statement, the Pricing Prospectus, the Prospectus or in any Issuer Free Writing Prospectus (in each case as may be amended and supplemented from time to time), (ii) any materials or information provided to investors by, or with the approval of, the Company in connection with the marketing of the offering of the Public Securities, including, without limitation, any “road show” or investor presentations made to investors by the Company (whether in person or electronically), or (iii) any application or other document or written communication executed by the Company or based upon written information furnished by the Company to be used or provided in any jurisdiction in order to qualify the Public Securities and the Representative’s Securities under the securities laws thereof or filed with the Commission, or the omission or alleged omission therefrom of a material fact required to be stated therein or necessary to make the statements therein, in the light of the circumstances under which they were made, not misleading, unless such statement or omission was made in reliance upon and in conformity with the Underwriters’ Information.  With respect to any untrue statement or omission or alleged untrue statement or omission made in the Pricing Prospectus, the indemnity agreement contained in this Section 5.1.1 shall not inure to the benefit of any Underwriter to the extent that any loss, liability, claim, damage or expense of such Underwriter results from the fact that a copy of the Prospectus was not given or sent by such Underwriter to the person asserting any such loss, liability, claim or damage at or prior to the written confirmation of sale of the Securities to such person as required by the Act and the Regulations and the untrue statement or omission has been corrected in the Prospectus, unless such failure to deliver the Prospectus was a result of non-compliance by the Company with its obligations under Section 3.2 hereof.  The Company agrees promptly to notify the Representative of the commencement of any litigation or proceedings against the Company or any of its officers, directors or Controlling Persons in connection with the issue and sale of the Public Securities or in connection with the Registration Statement, the Pricing Prospectus, the Prospectus or any Issuer Free Writing Prospectus.

 

5.1.2        Procedure.  If any action is brought against an Underwriter, a Selected Dealer or a Controlling Person in respect of which indemnity may be sought against the Company pursuant to Section 5.1.1 hereof, such Underwriter, Selected Dealer or Controlling Person, as the case may be, shall promptly notify the Company in writing of the institution of such action and the Company shall assume the defense of such action, including the employment and fees of counsel (subject to the reasonable approval of such Underwriter, Selected Dealer or Controlling Person, as the case may be) and payment of actual expenses.  Such Underwriter, Selected Dealer or Controlling Person shall have the right to employ its or their own counsel in any such case, but the fees and expenses of such counsel shall be at the expense of such Underwriter, Selected Dealer or Controlling Person unless (i) the employment of such counsel at the expense of the Company shall have been authorized in writing by the Company in connection with the defense of such action, (ii) the Company shall not have employed counsel to have charge of the defense of such action, or (iii) such indemnified party or parties shall have reasonably concluded that there may be defenses available to it or them which are different from or additional to those available to the Company (in which case the Company shall not have the right to direct the defense of such action on behalf of the indemnified party or parties), in any of which events the reasonable fees and expenses of not more than one additional firm of attorneys selected by such Underwriter (in addition to local counsel), Selected Dealer and/or Controlling Person and identified to the Company in writing shall be borne by the Company. Notwithstanding anything to the contrary contained herein, if any Underwriter, Selected Dealer or Controlling Person shall assume the defense of any such action as provided above, the Company shall have the right to approve the terms of any settlement of such action, which approval shall not be unreasonably withheld; provided, however, that the Company shall not be liable to indemnify any person for the settlement of any action effected without the Company’s prior written consent, which consent shall not be unreasonably withheld, unless such settlement (a) includes an unconditional release from all liability on any claims that are the subject matter of such action and (b) does not include a statement as to, or an admission of, fault, culpability or a failure to act by or on behalf of the Company.

 

  

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5.2           Indemnification of the Company.  Each Underwriter, severally and not jointly, agrees to indemnify and hold harmless the Company, each of its directors, officers, employees and agents and each person who controls the Company within the meaning of Section 15 of the Act or Section 20 of the Exchange Act against any and all loss, liability, claim, damage and expense described in the foregoing indemnity from the Company to the several Underwriters, as incurred, but only with respect to any untrue statement or alleged untrue statement of a material fact contained in the Registration Statement, the Pricing Prospectus, the Prospectus or any Issuer Free Writing Prospectus (in each case as may be amended and supplemented from time to time), or the omission or alleged omission therefrom of a material fact required to be stated therein or necessary to make the statements therein, in the light of the circumstances under which they were made, not misleading, in each case to the extent, but only to the extent, that such untrue statement or alleged untrue statement or omission or alleged omission was made in the Registration Statement, the Pricing Prospectus, the Prospectus or any Issuer Free Writing Prospectus (in each case as may be amended and supplemented from time to time) in reliance upon and in conformity with the Underwriters’ Information.  In case any action shall be brought against the Company or any other person so indemnified based on the Registration Statement, the Pricing Prospectus or the Prospectus (in each case as may be amended and supplemented from time to time), and in respect of which indemnity may be sought against any Underwriter, such Underwriter shall have the rights and duties given to the Company, and the Company and each other person so indemnified shall have the rights and duties given to the several Underwriters by the provisions of Section 5.1.2 hereof.

 

5.3           Contribution.

 

5.3.1        Contribution Rights.  If the indemnification provided for in this Section 5 is unavailable to or insufficient to hold harmless an indemnified party under Sections 5.1 or 5.2 hereof in respect of any losses, claims, damages or liabilities (or actions in respect thereof) referred to therein, then each indemnifying party shall contribute to the amount paid or payable by such indemnified party as a result of such losses, claims, damages or liabilities (or actions in respect thereof) in such proportion as is appropriate to reflect the relative benefits received by the Company, on the one hand, and the Underwriters, on the other hand, from the offering of the Public Securities.  If, however, the allocation provided by the immediately preceding sentence is not permitted by applicable law, then each indemnifying party shall contribute to such amount paid or payable by such indemnified party in such proportion as is appropriate to reflect not only such relative benefits but also the relative fault of the Company, on the one hand, and the Underwriters, on the other hand, in connection with the statements or omissions which resulted in such losses, claims, damages or liabilities (or actions in respect thereof), as well as any other relevant equitable considerations.  The relative benefits received by the Company, on the one hand, and the Underwriters, on the other hand, shall be deemed to be in the same proportion as the total net proceeds from the Offering (before deducting expenses) received by the Company bear to the total underwriting discounts and commissions received by the Underwriters, in each case as set forth in the table on the cover page of the Prospectus.  The relative fault shall be determined by reference to, among other things, whether the untrue or alleged untrue statement of a material fact or the omission or alleged omission to state a material fact relates to information supplied by the Company, on the one hand, or the Underwriters, on the other hand, and the parties’ relative intent, knowledge, access to information and opportunity to correct or prevent such statement or omission.  The Company and the Underwriters agree that it would not be just and equitable if contributions pursuant to this Section 5.3 were determined by pro rata allocation or by any other method of allocation which does not take account of the equitable considerations referred to above in this Section 5.3.  The amount paid or payable by an indemnified party as a result of the losses, claims, damages or liabilities (or actions in respect thereof) referred to above in this Section 5.3 shall be deemed to include any legal or other expenses reasonably incurred by such indemnified party in connection with investigating or defending any such action or claim.  Notwithstanding the provisions of this Section 5.3, no Underwriter shall be required to contribute any amount, when taken together with the amount of any damages which such Underwriter has otherwise been required to pay by reason of such untrue or alleged untrue statement or omission or alleged omission, in excess of the amount actually received by such Underwriter with respect to the Public Securities underwritten by it and distributed to the public. No person guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of the Act) shall be entitled to contribution from any person who was not guilty of such fraudulent misrepresentation.

 

  

27

  

 

5.3.2        Contribution Procedure.  Within 15 days after receipt by any party to this Agreement (or its representative) of notice of the commencement of any action, suit or proceeding, such party will, if a claim for contribution in respect thereof is to be made against another party (“contributing party”), notify the contributing party of the commencement thereof, but the failure to so notify the contributing party will not relieve it from any liability which it may have to any other party other than for contribution hereunder. In case any such action, suit or proceeding is brought against any party, and such party notifies a contributing party or its representative of the commencement thereof within the aforesaid 15 days, the contributing party will be entitled to participate therein with the notifying party and any other contributing party similarly notified.  Any such contributing party shall not be liable to any party seeking contribution on account of any settlement of any claim, action or proceeding affected by such party seeking contribution on account of any settlement of any claim, action or proceeding affected by such party seeking contribution without the written consent of such contributing party.  The contribution provisions contained in this Section 5.3.2 are intended to supersede, to the extent permitted by applicable law, any right to contribution under the Act, the Exchange Act or otherwise available.  Each Underwriter’s obligations to contribute pursuant to this Section 5.3 are several and not joint.

 

5.4           The remedies provided for in this Section 5 are not exclusive and shall not limit any rights or remedies which may otherwise be available to any indemnified party at law or in equity

 

	
6.

	
Default by an Underwriter.

 

6.1           Default Not Exceeding 10% of Firm Shares or Option Shares.  If any Underwriter or Underwriters shall default in its or their obligation to purchase the Public Securities hereunder on the Closing Date or any Option Closing Date, as the case may be, and the aggregate number of Public Securities with respect to which such default relates does not exceed, in the aggregate, 10% of the number of Public Securities that all Underwriters have agreed to purchase hereunder on the Closing Date or any Option Closing Date, as the case may be, then the non-defaulting Underwriters shall be obligated severally, in proportion to their respective commitments to purchase Firm Shares or in such other proportions as may be specified by the Representative with the consent of the non-defaulting Underwriters hereunder, to purchase the Public Securities that such defaulting Underwriter agreed but failed to purchase on the Closing Date or any Option Closing Date, as the case may be.

 

6.2           Default Exceeding 10% of Firm Shares or Option Shares.  In the event that the default addressed in Section 6.1 hereof relates to more than 10% of the Public Securities that all Underwriters have agreed to purchase hereunder on the Closing Date or any Option Closing Date, as the case may be, the Representative may, in its discretion, arrange for itself or any other party or parties to purchase the Public Securities to which such default relates on the terms contained herein.  If, within one Business Day after such default, the Representative does not arrange for the purchase of the Public Securities to which such default relates on the terms contained herein, then the Company shall be entitled to a further period of one Business Day within which to procure another party or parties satisfactory to the Representative to purchase the Public Securities to which such default relates on the terms contained herein. In the event that neither the Representative nor the Company arrange for the purchase of the Public Securities to which such default relates on the terms contained herein pursuant to this Section 6.2, this Agreement will automatically be terminated by the Representative or the Company without liability on the part of the Company (except as provided in Section 3.8 and Section 5 hereof) or the several Underwriters (except as provided in Section 5 hereof); provided, however, that if such default occurs with respect to any Option Shares, this Agreement will not terminate as to the Firm Shares; provided, further, however, that nothing herein shall relieve a defaulting Underwriter of its liability, if any, to the other Underwriters and to the Company for damages occasioned by its default hereunder.

 

  

28

  

 

6.3           Postponement of Closing Date.  In the event that the Public Securities to which the default relates are to be purchased by the non-defaulting Underwriters, or are to be purchased by another party or parties as described in this Section 6, the Representative or the Company shall have the right to postpone the Closing Date and any Option Closing Date, as the case may be, for a reasonable period, but not in any event exceeding five Business Days, in order to effect whatever changes may thereby be made necessary in the Registration Statement or the Prospectus or in any other documents and arrangements, and the Company agrees to file promptly any amendment to the Registration Statement or the Prospectus that in the opinion of counsel for the Company and the Representative deem necessary.  The term “Underwriter” as used in this Agreement shall include any party substituted under this Section 6 with like effect as if it had originally been a party to this Agreement with respect to such Public Securities.

 

	
7.

	
Additional Covenants.

 

7.1           Favorable Consideration.  For a period of 12 months following the Closing Date, the Company agrees that it will favorably consider designating, in its sole discretion, the Representative to act as lead underwriter or co-manager of any underwriting group or placement agent or co-placement agent for any proposed public offering of the Company’s equity securities in the United States during the 12 month period following the Closing Date.  If the Company elects to so designate the Representative, the Representative shall be entitled to receive as its compensation 50% of the compensation payable to the underwriting or placement agent group when serving as co-manager or co-placement agent and 33% of the compensation payable to the underwriting or placement agent group when serving as co-manager or co-placement agent with respect to a proposed financing in which there are three co-managing or lead underwriters or co-placement agents.

 

	
8.

	
Effective Date of this Agreement and Termination Thereof.

 

8.1           Effective Date.  This Agreement shall become effective when both the Company and the Representative have executed the same and delivered counterparts of such signatures to the other party.

 

8.2           Termination.  The Representative shall have the right to terminate this Agreement at any time prior to the Closing Date and any Option Closing Date, as the case may be, by notice given to the Company if (i)  any domestic or international event or act or occurrence has materially disrupted, or in your opinion will in the immediate future materially disrupt, general securities markets in the United States or Israel, (ii) trading on the TASE, the New York Stock Exchange, NASDAQ or The NASDAQ Global Market shall have been suspended or materially limited, or minimum or maximum prices for trading shall have been fixed, or maximum ranges for prices for securities shall have been required by FINRA or by order of the Commission or any other government authority having jurisdiction, (iii) if the State of Israel or the United States shall have become involved in a new war or the United States shall have become involved in an increase in major hostilities, (iv) a banking moratorium has been declared by the State of Israel or a New York State or U.S. federal authority, (v) a moratorium on foreign exchange trading has been declared which materially adversely impacts the United States or Israeli securities markets, (vi) the Company shall have sustained a material loss by fire, flood, accident, hurricane, earthquake, theft, sabotage or other calamity or malicious act which, whether or not such loss shall have been insured, will, in your opinion, make it inadvisable to proceed with the delivery of the Firm Shares or any Option Shares, as the case may be, (vii) the Company is in material breach of any of its representations, warranties or covenants hereunder, or (viii) the Representative shall have become aware after the date hereof of a substantial change in general market conditions which would, in the Representative’s judgment, make it impracticable to proceed with the offering, sale and/or delivery of the Firm Shares or any Option Shares, as the case may be, or to enforce contracts made by the Underwriters for the sale of any such securities.

 

  

29

  

 

8.3           Expenses.  Except in the case of a default by the Underwriters pursuant to Section 6.2 hereof, in the event that this Agreement shall not be carried out for any reason whatsoever, within the time specified herein or any extensions thereof pursuant to the terms herein, the Company shall be obligated to pay to the Underwriters their actual and accountable out of pocket expenses related to the transactions contemplated herein then due and payable (including the fees and disbursements of counsel to the Representative).

 

8.4           Indemnification.  Notwithstanding any provision contained in this Agreement to the contrary, any election hereunder or any termination of this Agreement, and whether or not this Agreement is otherwise carried out, the provisions of Section 5 hereof shall not be in any way effected by such election or termination or failure to carry out the terms of this Agreement or any part hereof.

 

	
9.

	
Miscellaneous.

 

9.1           Notices.  All communications hereunder, except as herein otherwise specifically provided, shall be in writing and shall be mailed (registered or certified mail, return receipt requested), personally delivered or sent by facsimile transmission and confirmed, and shall be deemed given when so delivered or faxed and confirmed or if mailed, two Business Days after such mailing.

 

If to the Representative:

 

Rodman & Renshaw, LLC

1251 Avenue of Americas, 20th Floor

New York, NY 10020

Attn:  General Counsel

Fax No.:  646-841-1640

 

Copy to:

 

O’Melveny & Myers LLP

Two Embarcadero Center, 28th Floor

San Francisco, CA 94111

Attn:  C. Brophy Christensen, Jr., Esq.

Fax No.:  415-984-8701

 

If to the Company:

 

D. Medical Industries Ltd.

7 Zabotinsky Street

Moshe Aviv Tower

Ramat Gan 52520

Israel

Attn:  Efraim Argaman, Chief Executive Officer

Fax No.:  +972-3-611-4514

 

Copy to:

 

Torys LLP

237 Park Avenue

New York, NY 10017

Attn:  Cheryl Reicin, Esq.

Fax No.:  212-682-0200

 

  

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9.2           Headings.  The headings contained herein are for the sole purpose of convenience of reference, and shall not in any way limit or affect the meaning or interpretation of any of the terms or provisions of this Agreement.

 

9.3           Amendment.  This Agreement may only be amended by a written instrument executed by each of the parties hereto.

 

9.4           Entire Agreement.  This Agreement (together with the other agreements and documents being delivered pursuant to or in connection with this Agreement) constitutes the entire agreement of the parties hereto with respect to the subject matter hereof and thereof, and supersedes all prior agreements and understandings of the parties, oral and written, with respect to the subject matter hereof, including, without limitation, that certain Engagement Letter dated as of February 3, 2010, between the Company and the Representative (the “Engagement Letter”); provided, however, that Section 19 of the Engagement Letter shall survive the execution of this Agreement and shall continue in full force and effect.

 

9.5           Binding Effect.  This Agreement shall inure solely to the benefit of and shall be binding upon the Representative, the Underwriters, the Company and each Controlling Person, director, officer and person referred to in Section 5 hereof, and their respective successors, legal representatives and assigns, and no other person shall have or be construed to have any legal or equitable right, remedy or claim under or in respect of or by virtue of this Agreement or any provisions herein contained.  The term “successors and assigns” shall not include a purchaser, in its capacity as such, of securities from any of the Underwriters.

 

9.6           Governing Law; Consent to Service of Process.

 

9.6.1        Governing Law.  This Agreement shall be governed by and construed and enforced in accordance with the laws of the State of New York, without giving effect to conflict of laws principles thereof.  The Company hereby agrees that any action, proceeding or claim against it arising out of, or relating in any way to, this Agreement shall be brought and enforced in the New York Supreme Court, County of New York, or in the United States District Court for the Southern District of New York, and irrevocably submits to such jurisdiction, which jurisdiction shall be exclusive.  The Company hereby waives any objection to such exclusive jurisdiction and that such courts represent an inconvenient forum.  Any such process or summons to be served upon the Company may be served by transmitting a copy thereof by registered or certified mail, return receipt requested, postage prepaid, addressed to it at the address set forth in Section 9.1 hereof.  Such mailing shall be deemed personal service and shall be legal and binding upon the Company in any action, proceeding or claim.  The Company agrees that the prevailing party(ies) in any such action shall be entitled to recover from the other party(ies) all of its reasonable attorneys’ fees and expenses relating to such action or proceeding and/or incurred in connection with the preparation therefore.

 

9.6.2        Consent to Service of Process.  The Company irrevocably appoints Corporation Service Company, 1180 Avenue of the Americas, Suite 210, New York, New York 10036, as its agent for service of process in any suit, action or proceeding described in Section 9.6.1 hereof and agrees that service of process in any such suit, action or proceeding may be made upon it at the office of such agent.  The Company waives, to the fullest extent permitted by law, any other requirements of or objections to personal jurisdiction with respect thereto.  The Company represents and warrants that such agent has agreed to act as its agent for service of process, and the Company agrees to take any and all action, including the filing of any and all documents and instruments, that may be necessary to continue such appointment in full force and effect.

 

  

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9.7           Execution in Counterparts.  This Agreement may be executed in one or more counterparts, and by the different parties hereto in separate counterparts, each of which shall be deemed to be an original, but all of which taken together shall constitute one and the same agreement, and shall become effective when one or more counterparts has been signed by each of the parties hereto and delivered to each of the other parties hereto.  Delivery of a signed counterpart of this Agreement by facsimile or email/pdf transmission shall constitute valid and sufficient delivery thereof.

 

9.8           Waiver, etc.  The failure of any of the parties hereto to at any time enforce any of the provisions of this Agreement shall not be deemed or construed to be a waiver of any such provision, nor to in any way effect the validity of this Agreement or any provision hereof or the right of any of the parties hereto to thereafter enforce each and every provision of this Agreement.  No waiver of any breach, non-compliance or non-fulfillment of any of the provisions of this Agreement shall be effective unless set forth in a written instrument executed by the party or parties against whom or which enforcement of such waiver is sought; and no waiver of any such breach, non-compliance or non-fulfillment shall be construed or deemed to be a waiver of any other or subsequent breach, non-compliance or non-fulfillment.

 

[SIGNATURE PAGE FOLLOWS]

 

  

32

  

If the foregoing correctly sets forth the understanding between the Underwriters and the Company, please so indicate in the space provided below for that purpose, whereupon this letter shall constitute a binding agreement between us.

 

	 	Very truly yours,	 
	 	 	 	 
	 	D. MEDICAL INDUSTRIES LTD.	 
	 	 	 	 
	 	By:	
/s/ Efraim Argaman

	 
	 	Name: 	Efraim Argaman	 
	 	Title:	Chief Executive Officer	 
	 	 	 	 
	 	By:	/s/ Amir Loberman	 
	 	Name:	Amir Loberman	 
	 	Title:  	Chief Financial Officer	 

 

Accepted on the date first above written.

 

RODMAN & RENSHAW, LLC

 

By:/s/ John Borer                                                            

Name: John Borer

Title: Senior Managing Director

33exhibit_4-36.htm

Exhibit 4.36

 

STANDBY EQUITY PURCHASE AGREEMENT

 

THIS STANDBY EQUITY PURCHASE AGREEMENT (“Agreement”) dated as of April 16, 2011 between YA Global Investments, L.P., a limited partnership organized and existing under the laws of the Cayman Islands (the “Investor”), and D. Medical Industries Ltd., a public company organized and existing under the laws of Israel (the “Company”).

 

Each of the above mentioned parties to this Agreement shall be referred to as a “Party” and all of such Parties as the “Parties.”

 

WHEREAS, the shares of the Company are listed for trade on the Tel Aviv Stock Exchange Ltd. ("TASE") under the symbol “DMDC" and on the NASDAQ CM under the symbol “DMED"; and

 

WHEREAS, the Parties desire that, upon the terms and subject to the conditions contained herein, the Company shall issue and sell to the Investor, and the Investor shall purchase from the Company from time to time, Company’s Ordinary Shares of par value of NIS 0.32 each, subject to the terms and conditions set forth herein; and

 

WHEREAS, each of the issuances of Ordinary Shares to the Investor shall be made solely at the election of the Company; and

 

WHEREAS, the Ordinary Shares shall be issued to the Investor under Shelf Offering Documents pursuant to a Shelf Prospectus to be published and maintained in full force and effect throughout the Commitment Period, free of any lock-up or selling restrictions as more fully detailed herein.

 

NOW, THEREFORE, the Parties represent and agree as follows:

 

Article I. Certain Definitions

 

Section 1.01                      “Advance” shall mean the Company’s right to sell Ordinary Shares to the Purchaser, pursuant to the terms and conditions hereof.

 

Section 1.02                      "Advance Amount" shall mean the amount specified by the Company in the relevant Advance Notice as the total amount of Advance for which the Company wishes to sell to the Investor its Ordinary Shares pursuant to such Advance Notice provided such Advance Amount is not higher than the Maximum Advance Amount.

 

Section 1.03                      “Advance Closing Date” shall mean, in respect of each Advance, on or before the third (3rd) Trading Day after the expiry of each Pricing Period.

 

Section 1.04                       “Advance Notice” shall mean a written notice to the Investor in the form of Annex A attached hereto, executed by an officer of the Company, delivered to the Investor and setting forth the Advance Amount.

 

Section 1.05                      “Advance Notice Date” shall mean, each date that the Company delivers an Advance Notice to the Investor in compliance with Section 2.01(b) of this Agreement.

 

  

  

  

 

Section 1.06                      “Affiliate” shall have the meaning ascribed to the term under the Securities Regulations.

 

Section 1.07                      “Applicable Securities Laws” shall mean Securities Regulations and rules, regulations and formal requirements of the ISA and any of the Principal Markets, the Securities Act, any other applicable foreign, federal, state and local securities laws and regulations.

 

Section 1.08                       “Closing” shall mean one of the closings of a purchase and sale of Shares pursuant to Section 2.02.

 

Section 1.09                      “Companies Law” shall mean the Israeli Companies Law, 1999.

 

Section 1.10                      ”Condition Precedent" shall mean each of the Conditions Precedent specified in Article VII.

 

Section 1.11                      “Control” shall have the meaning ascribed to the term under the Companies Law.

 

Section 1.12                      “Commitment Amount” shall mean an amount of Ten Million United States Dollars (US$ 10,000,000) as may be increased pursuant to Section 2.04.

 

Section 1.13                      "Commitment Fee" shall have the meaning set forth in Section 12.06 below.

 

Section 1.14                      “Commitment Period” shall mean the period commencing on the Effective Date, and expiring upon the termination of this Agreement in accordance with Article X hereof.

 

Section 1.15                       “Condition Satisfaction Date” shall have the meaning set forth in Section 7.03.

 

Section 1.16                      “Disclosure Schedule” shall mean Schedule 1 attached hereto, provided by the Company to the Investor, which contains certain disclosures constituting qualifications and exceptions to the Company's representations to the Investor under Article IV below.

 

Section 1.17                      “Effective Date” shall mean the date on which the Shelf Prospectus under which the Shares may be issued to the Investor in accordance with the provision of this Agreement shall be first duly published.

 

Section 1.18                      “Environmental Laws” shall have the meaning set forth in Section 4.10.

 

Section 1.19                      “Exchange Act” shall mean the Securities Exchange Act of 1934, as amended, and the rules and regulations promulgated thereunder.

 

Section 1.20                      “Excluded Day” shall have the meaning set forth in Section 2.01(c).

 

Section 1.21                      “Free” with respect to the Shares shall mean that immediately subsequent to their issuance to the Investor, the Shares shall be freely tradable on the TASE, may be freely sold by the Investor without any lock-up or selling restrictions imposed pursuant to the Securities Regulations (including any ruling or release of the ISA published prior to the date hereof) or pursuant to the TASE rules and regulation, and the Investor shall not be subject to any legal restrictions whatsoever with respect to the selling of the Shares to any party and on any terms, other than any reporting requirements applicable to the Investor.

 

Section 1.22                      “General TASE Approval” shall have the meaning set forth in Section 6.05 below.

 

Section 1.23                      “NIS” means New Israeli Shekel.

 

  

  

  

 

Section 1.24                       “ISA” means the Israeli Securities Authority.

 

Section 1.25                      “Material Adverse Effect” shall mean any condition, circumstance, or situation that may result in, or reasonably be expected to result in (i) a material adverse effect on the legality, validity or enforceability of this Agreement, including on the Shares' legal status as Free, (ii) a material adverse effect on the results of operations, assets, business or conditions (financial or otherwise) of the Company, taken as a whole, or (iii) a material adverse effect on the Company’s ability to perform its obligations hereunder in any material respect on a timely basis provided, however, that, in no event shall any of the following, alone or in combination with one another, be deemed to constitute, nor shall any of the following be taken into account in determining whether there has been or would reasonably expected to be, a Material Adverse Effect: (i) any change in local, national or world economic or political conditions or the financial, credit or securities markets, (ii) any change in the Company’s share price or trading volume or suspension of trading in securities on NASDAQ or TASE (unless such change or suspension is due to a circumstances that would separately constitute a Material Adverse Effect), (iii) any failure by the Company to meet any internal or external projections, forecasts or revenue or earnings predictions for any period (unless such failure is due to a circumstances that would separately constitute a Company Material Adverse Effect), (iv) any change that affects generally the industry in which any of the Company or its Subsidiary operates, (v) any effect resulting from an act of war, terrorism or from any earthquakes, hurricanes, tornadoes, floods or other natural disasters, or (vi) changes in IFRS or any law or interpretation or application of the foregoing.

 

Section 1.26                      “Market Price” shall mean the VWAP of the Ordinary Shares on one of the Trading Days during the applicable Pricing Period which is the lowest VWAP compared to all other days during such applicable Pricing Period.

 

Section 1.27                      “Maximum Advance Amount” with respect to each Advance, shall be up to Five Hundred Thousand Dollars (US$500,000), and with respect to the first Advance made by the Company immediately prior to the due date of payment of each of the Commitment Fee and the Additional Commitment Fee, as applicable (up to a total of two (2) Advances), shall be up to Seven Hundred Thousand United States Dollars (US$700,000), provided that such additional sum above Five Hundred Thousand United States Dollars (US$500,000) shall be used to pay the Commitment Fee and Additional Commitment Fee, as applicable. The Parties shall be entitled, by mutual consent in writing and in advance, to increase the Maximum Advance Amount beyond five hundred thousand US Dollars (US$500,000) up to an amount of  Nine Hundred Thousand United States Dollars (US$ 900,000). Such mutual written consent to increase the Maximum Advance Amount shall not bind the Investor in regards to any additional and/or other Advance Notices, and the Investor shall be entitled, at its sole discretion and without providing explanation, to deny any Company’s request for such increase.

 

Section 1.28                      “Minimum Acceptable Price” shall mean, in respect of each Advance Notice delivered by the Company, the greater of (a) the TASE Minimal Acceptable Price, or (b) such other price that the Company in its discretion may state in an Advance Notice (which shall be greater than the TASE Minimal Acceptable Price).

 

Section 1.29                      “Misleading Item” shall have the meaning ascribed to the term under the Securities Law and Regulations.

 

Section 1.30                      “NASDAQ” shall mean the Nasdaq Global Select Market, the Nasdaq Global Market or the Nasdaq Capital Market, whichever is at the time the principal United States trading market for the Ordinary Shares.

 

Section 1.31                      "Offering Document" shall mean a Shelf Prospectus and/or a Shelf Offering Document.

 

  

  

  

 

Section 1.32                      “Ordinary Shares” shall mean the Company’s ordinary shares, par value NIS 0.32 per share.

 

Section 1.33                      “Person” means any natural person (including personal representatives, executors and heirs of a deceased individual) or any entity which is given, or is recognized as having, legal personality by the law of any jurisdiction, any corporation, company, unincorporated association, limited liability entity, joint venture, joint stock company, partnership, general partnership, limited partnership, proprietorship, trust, union, association, organization, nation, state, government (including agencies, departments, bureaus, boards, divisions and instrumentalities thereof), Authority, trustee, receiver or liquidator;

 

Section 1.34                       “Pricing Period” shall mean the ten (10) consecutive Trading Days commencing on the Trading Day immediately following the Advance Notice Date.

 

Section 1.35                      “Pricing Underwriter” shall mean Analyst Underwriting and Issuing Ltd. which represented to the Parties that it is qualified to act as an underwriter under the Securities Regulations and was approved in writing by the Investor. The Parties acknowledge that the Pricing Underwriter has been involved in the negotiations for the business terms of the transactions hereunder, including the formulation of the Purchase Price of the Shares hereunder, and has agreed that said formula shall determine the Purchase Price hereunder.

 

Section 1.36                      “Principal Market” shall mean each of NASDAQ and TASE .

 

Section 1.37                      “Prospectus” shall have the meaning ascribed to the term under the Securities Law and Regulations. Any provision herein that applies to the Company's Prospectus, shall apply to any amendment thereto, and any provision herein that applies to a proposed Company's Prospectus shall apply to any proposed amendment to a Company's Prospectus.

 

Section 1.38                      “Purchase Price” shall mean the price per Share equal to (i) the higher of (a) the Market Price, or (b) the Minimum Acceptable Price (measured with respect to the applicable Pricing Period), (ii) multiplied by the Relevant Percentage, and the result converted into US$ by dividing such price by the US$-NIS representative exchange rate last published by the Bank of Israel at the end of last Trading Day of the applicable Pricing Period. The calculation of the Purchase Price with respect to each Advance shall be made by the Pricing Underwriter.

 

Section 1.39                      “Public Fillings” shall have the meaning set forth in Section 4.06 below.

 

Section 1.40                      “Regulation S" shall mean the "Rules Governing Offers and Sales Made Outside the United States without Registration under the Securities Act".

 

Section 1.41                      “Relevant Percentage” shall mean ninety seven percent (97%).

 

Section 1.42                      “SEC Documents” shall have the meaning set forth in Section 4.05 below.

 

Section 1.43                      “Securities Act” shall mean the Securities Act of 1933, as amended, and the rules and regulations promulgated thereunder.

 

Section 1.44                      “Securities Regulations” shall mean the Securities Law, 1968, as amended, and all regulations promulgated thereunder.

 

Section 1.45                      “Shares” shall mean the Ordinary Shares to be issued to the Investor or to any other Person designated by the Investor from time to time hereunder pursuant to the Advances, the Commitment Shares and the Additional Commitment Shares.

 

  

  

  

 

Section 1.46                      “Shelf Prospectus” (in Hebrew: "תשקיף מדף") shall have the meaning ascribed to the term under the Securities Regulations.

 

Section 1.47                      “Shelf Offering Document” (in Hebrew: "דו"ח הצעת מדף") shall have the meaning ascribed to the term under the Securities Regulations. The Shares shall be issued to the Investor under Shelf Offering Documents subsequent to each Advance Notice.

 

Section 1.48                      “Specific TASE Approval” shall have the meaning set forth in Section 6.05 below.

 

Section 1.49                      "Subsidiary" shall have the meaning ascribed to the term under the Companies Law.

 

Section 1.50                      “TASE” means the Tel Aviv Stock Exchange Ltd.

 

Section 1.51                      “TASE Approval” shall mean each of the approvals required from the TASE under TASE rules and regulations for the listing of the Shares on the TASE, including the General TASE Approval and the Specific TASE Approvals as set forth in Section 6.05 below.

 

Section 1.52                      “TASE Minimum Acceptable Price” with respect to each Advance, shall mean ninety five percent (95%) of the average of the closing prices of the Ordinary Shares during the ten (10) consecutive Trading Days immediately preceding the date of delivery of the applicable Advance Notice.

 

Section 1.53                      “Trading Day” shall mean any day during which the TASE is open for business.

 

Section 1.54                      “US$” means United States Dollar.

 

Section 1.55                      “VWAP” shall mean, in respect of any relevant Trading Day, the daily volume-weighted average price published by Bloomberg L.P. (in NIS) for the Ordinary Shares on the TASE during regular trading hours, provided that any trades in the Ordinary Shares and any derivatives thereof by or on behalf of the Investor and any parties managed by Yorkville Advisors LLC and their Affiliates shall be excluded from such calculation in compliance with the requirement of the ISA.

 

Article II. Advances

 

Section 2.01                      Advances; Mechanism. Based on the representations, warranties and agreements herein contained, subject to the terms and conditions of this Agreement, the Company, at its sole and exclusive election, may, from time to time during the Commitment Period, issue and sell Shares to the Investor, against payment by the Investor to the Company of the Purchase Price per Share, on the following terms:

 

	
  

	
(a)

	
Advance Notice. At any time and from time to time during the Commitment Period, the Company may require the Investor to purchase Ordinary Shares by delivering an Advance Notice to the Investor, that shall specify the amount of the Advance, subject to the conditions set forth in Section 7.03 provided, however, that (i) the amount for each Advance as set forth by the Company in the applicable Advance Notice shall not exceed the Maximum Advance Amount, (ii) the aggregate amount of the Advances pursuant to this Agreement shall not exceed the Commitment Amount, (iii) in no event shall the number of Ordinary Shares issuable per each Advance Notice to  the Investor and its Affiliates (that may be considered under the Securities Regulations as holders of Ordinary Shares jointly with the Investor) cause the beneficial ownership of the Investor and its Affiliates to exceed 4.99% of the then outstanding Ordinary Shares of the Company (hereinafter the “Ownership Limitation”) and in such event the provisions of subsection 2.01(e) below shall apply; and (iv) if the provisions of Section 270(5) of the Companies Law shall apply to the issuance of Ordinary Shares to the Investor pursuant to an Advance, then the Company shall not issue Ordinary shares to the Investor pursuant to such Advance unless the Company shall have obtained the requisite corporate approvals for such issuance as required pursuant to the fifth chapter of the sixth part of the Companies Law ( the “Section 270(5) Limitation”). There shall be no mandatory minimum advances and no non-usages fee for not utilizing the Commitment Amount or any part thereof.

 

  

  

  

 

The Investor shall be irrevocably bound to purchase Shares from the Company and the Company shall be irrevocably bound to issue and sell the Shares to the Investor, subject to each valid Advance Notice. An Advance Notice shall be deemed valid if it has been issued by the Company in the form attached as Annex A hereof, was executed by an officer of the Company in accordance with the terms of this Agreement and all Conditions in Section 7.03 have been satisfied.

 

	
  

	
(b)

	
Date of Delivery of Advance Notice. Advance Notices shall be delivered in accordance with the instructions set forth in Annex A. An Advance Notice shall be deemed delivered (i) on the Trading Day it was received provided that the Advance Notice had been sent via mail, e-mail or facsimile (in the latter case, a fax confirmation printout shall serve as proof of a successful delivery and the time of receipt) and received by Investor prior to 5:00 pm Eastern Time of the same Trading Day or (ii) on the following Trading Day in the event that the Advance Notice was not received via facsimile, e-mail or mail prior to 5:00 pm Eastern Time on a Trading Day, or at any time on a day which is not a Trading Day. Advance Notices may only be deemed delivered on a day that is a Trading Day.

 

	 	
(c)

	
MinimumAcceptable Price.The Advance Amount set forth in such Advance Notice shall automatically be reduced by ten percent (10%) for each Trading Day (each, an "Excluded Day") during the Pricing Period in which the VWAP was below the Minimum Acceptable Price and such day will be omitted from the calculation of the Purchase Price.

 

Notwithstanding the foregoing, the Investor shall have the option by giving the Company a written notice to this effect, to purchase, and the Company shall sell to the Investor, at the applicable Closing, up to such amount of additional Shares as shall be obtained by multiplying an amount equal to ten percent (10%) of the Advance Amount specified in the Advance Notice by the number of Excluded Days. Notwithstanding any provision herein to the contrary, in the event the Investor exercises the said option, then the purchase price of such additional Shares shall be equal to the Minimum Acceptable Price. In no event shall the Company be obligated to issue such additional Shares if such issuance may result in the non-compliance with the TASE rules and/or with the provisions of the General TASE approval.

 

	
  

	
(d)

	
Company Election. The Company may elect to stop a Pricing Period at the end of any Trading Day during the applicable Pricing Period by providing a written notice with a follow up phone call for confirmation. In such event: (i) the remaining Trading Days in the applicable Pricing Period shall be excluded from the Pricing Period for purposes of determining the Market Price, and (ii) the amount set forth in the corresponding Advance Notice shall automatically be reduced by ten percent (10%) for each such Excluded Day.  In the event that the Company elects to stop a Pricing Period, it shall not be able to give a subsequent Advance Notice for a period of at least five (5) Trading Days from the last day of the Pricing Period that was stopped, unless otherwise agreed to by the Investor.

 

  

  

  

 

Notwithstanding the foregoing, in the event that a Pricing Period has been stopped by the Company, if the Investor had sold during the Pricing Period more shares than will be purchased pursuant to previous paragraph of Section 2.01(d), then the Investor shall have the option to purchase, and the Company shall have the obligation to sell to the Investor, at the applicable Closing, up to such amount of additional Shares as shall be equal to the difference between the number of shares sold by the Investor during the Pricing Period before it was stopped and the number of Shares purchased by the Investor pursuant to this Section 2.01(d) . Notwithstanding any provision herein to the contrary, the purchase price of such Shares shall be equal to the Purchase Price determined in accordance with this Section 2.01(d). In no event shall the Company be obligated to issue such additional Shares if such issuance may result in the non-compliance with the TASE rules and/or with the provisions of the General TASE approval.

 

	
  

	
(e)

	
Ownership Limitation. In respect of each Advance Notice delivered by the Company, any portion of an Advance Amount that would cause the Investor to exceed the Ownership Limitation shall automatically be withdrawn by the Company with no further action required on its behalf and the Advance Notice will remain in full force and effect with respect to the remaining portion of the Advance amount.

 

As of the date hereof, the Investor does not hold any Ordinary Shares or the right to purchase any Ordinary Shares, and during the Commitment Period the Investor shall not hold, at any time, Ordinary Shares that exceed in the aggregate 4.99% of the then outstanding Ordinary Shares, as calculated in accordance with Section 270(5) of the Companies Law, unless the Company notifies the Investor that the Section 270(5) Limitation does not apply under applicable law.

 

In order to decrease the chances that the Ownership Limitation will limit the size of an Advance under this Section 2.01(e), the Investor will use commercially reasonable efforts to reduce its holdings in Ordinary Shares as quickly as practicable after each Advance, subject to the maintenance of orderly markets, adequate trading volume, and sufficient value of the Ordinary Shares, all as determined by the Investor in its sole discretion, and not to acquire Ordinary Shares other than pursuant to this Agreement, so as to limit the number of Shares held by the Investor and increase the likelihood that the Shares issuable to the Investor under the Advance Notice, together with any remainder of Shared held by it at such Advance Notice’s date, shall not exceed the Ownership Limitation threshold.  Notwithstanding the forgoing, the Company acknowledges and agrees that the Investors ability to reduce its holdings in accordance with this paragraph may be limited by the application of the limitation set forth in Section 2.03 below.

 

	
  

	
(f)

	
Offering Limitation. In respect of each Advance Notice, any portion of an Advance Amount that would cause the aggregate number of Shares to exceed the aggregate number of Ordinary Shares available for offering under the Shelf Prospectus shall automatically be deemed to be withdrawn by the Company with no further action required on its behalf and the Advance Notice will remain in full force and effect with respect to the remaining portion of the Advance amount.

 

	
  

	
(g)

	
Purchased Shares. The number of Shares purchased by Investor pursuant to each Advance Notice shall be determined by dividing the Advance Amount specified in the Advance Notice by the Purchase Price, subject to the limitations set forth herein, and any adjustments or additions as set forth in this Section 2.01. No fractional shares shall be issued. Fractional shares shall be rounded up in the event the fraction is one half or more, or rounded down in any other event, to the nearest whole number.

 

	
  

	
(h)

	
Section 270(5) Limitation. In respect of each Advance Notice delivered by the Company, any portion of an Advance Amount that, when taken together with the other terms of issuance, would cause the non compliance with the Section 270(5) Limitation shall automatically be withdrawn by the Company with no further action required on its behalf, unless the Company shall have obtained the requisite corporate approvals for such issuance as required pursuant to the fifth chapter of the sixth part of the Companies Law prior to the Advance Notice Date.

 

  

  

  

 

Section 2.02                      Closings. Each Closing shall take place on the applicable Advance Closing Date. In connection with each Closing, provided that all Conditions Precedent have been satisfied or waived in accordance with the provisions hereof, the Parties shall fulfill their obligations as set forth below:

 

	
  

	
(a)

	
Prior to the issuance of the Shares to the Investor, subject to the provisions of Sections 6.02 and 6.03, the Company shall duly file an effective Shelf Offering Document with respect to the issuance of the Shares applicable to the relevant Advance Notice. The Company shall issue the Shares to the Investor under the Shelf Prospectus as set forth in this Section.

 

	
  

	
(b)

	
The Company shall obtain all permits and approvals required for the issuance of the Shares to be issued in connection with the Advance Notice. Without derogating from the generality of the aforementioned, the Specific TASE Approval covering such Shares issuable under the Advance Notice shall be effective and in force.

 

	
  

	
(c)

	
The Company shall issue and deliver to the Investor such number of Shares determined in accordance with the provisions of Section 2.01, as applicable. The Shares shall be registered in the name of a Registration Company (in Hebrew: "חברה לרישומים") and shall be Free. On the Advance Closing Date the Company shall deliver to the Registration Company, a share certificate covering the Shares, as well as instruct the Registration Company to deposit the Shares in a specific securities account (with a TASE member) (the "Investor's Account"), the details of which are set forth in Annex B1 hereto and shall provide to the TASE and/or the Registration Company all the necessary forms and documents so as to facilitate the immediate deposit of the Shares in the Investor’s Account. The Investor may change the details of such securities account, by giving a written notice to the Company, no later than the 2nd Trading Day of the applicable Pricing Period.  Each Closing and the purchase of the Shares shall be conditioned upon the Company promptly fulfilling the foregoing in full.

 

	
  

	
(d)

	
Immediately prior to each Advance Closing Date, the Investor shall deposit with the Pricing Underwriter the amount of the Advance (as may be reduced in accordance with Section 2.01 above and subject to any deductions and set-off in accordance with Section 2.02 (e) herein) by wire transfer of immediately available funds to the Pricing Underwriter's Designated Bank Account, the details of which are set forth in Annex B2 hereto (the Pricing Underwriter may change the details of such bank account by giving a written notice to the Investor, at any time prior to the Advance Closing Date). The Pricing Underwriter shall act with any Advance Amount in accordance with the Irrevocable Instructions set forth in Annex B3 hereto and shall remit the Advance Amount to the Company's bank account the details of which are set forth in Annex B3 hereto promptly upon receiving from the Company a document evidencing the deposit of the Shares in the Investor's Account and delivery by the Pricing Underwriter of a copy of such document to the Investor. The Company may change the details of such bank account by giving a written notice to the Investor, at any time prior to the Advance Closing Date. Prior to the transfer of funds to the Company in accordance with the provisions of this Section 2.02(d), all funds in the Pricing Underwriter's Designated Bank Account together with any amount accrued thereon, shall belong to the Investor and Pricing Underwriter shall act with respect to same in accordance with instructions delivered from time to time by the Investor to the Pricing Underwriter. Provided however, that commencing upon the issuance of the Shares to the Investor the Pricing Underwriter shall hold the amount of the Advance (as may be reduced in accordance with Section 2.01 above and subject to any deductions and set-off in accordance with Section 2.02 (e) herein) in trust to the benefit of the Company. For the sake of clarity, (i) any funds left in the Pricing Underwriter's Designated Bank Account shall belong to the Investor; and (ii) any and all costs and expenses associated with the Pricing Underwriter's tasks hereunder shall be borne by the Company. Immediately following the Effective Date the Parties and the Pricing Underwriter shall execute an escrow agreement in the form of Annex B5 hereto.

 

  

  

  

 

	
  

	
(e)

	
The Investor may set off from any such Advance Amount any amount due to the Investor pursuant to Section 12.06 hereunder. Such deduction shall be the sole deduction made by the Investor. The Advance Amount shall be paid in US$.

 

	
  

	
(f)

	
In addition, on or prior to the Advance Closing Date, the Company and the Investor shall deliver to each other all documents, instruments and writings required to be delivered by either of them pursuant to this Agreement in order to implement and effect the transactions contemplated herein.

 

Section 2.03                      No Short Selling. The Investor and any parties managed by Yorkville Advisors LLC and their Affiliates (collectively referred to as the “Funds”) shall not directly or indirectly engage in any form of short selling of any of the Company's securities other than during the Pricing Period. The Investor shall make available to the Company, upon the Company's request, details of all trading activity by the Funds in the Ordinary Shares and derivatives thereof in a timely and transparent fashion, provided that the Company shall not publicly disclose such information unless required by law. The volume of sales of the Ordinary Shares made by the Funds during each Pricing Period shall not exceed twenty percent (20%) of the total volume of sales of the Ordinary Shares during such Pricing Period (the “Volume Restriction”).  The Funds will not make any sales of the Ordinary Shares during the applicable Pricing Period at a price that is less than the applicable Minimum Acceptable Price for such Pricing Period multiplied by the Relevant Percentage (the “MAP Limit”). The Company acknowledges that in the event of a change regarding the ISA requirements regarding the Volume Restriction or the MAP Limit in favor of the Investor, same will be changed accordingly.

 

Section 2.04                      Increase of Commitment Amount. At any time prior to the twenty four (24) month anniversary of the Effective Date, the Company may notify the Investor in writing, by delivering to it a Commitment Increase Notice in substantially the form attached hereto as Exhibit C, that it wishes to increase the total Commitment Amount up to Twenty Million United States Dollars (US$20,000,000) effective upon the date of such notice (the “Commitment Increase Date”) and the Commitment Amount shall automatically be deemed increased provided that the following conditions (the “Increase Conditions”) have been met:

 

	
  

	
(a)

	
On the Commitment Increase Date the Company has an effective Shelf Prospectus.

 

	
  

	
(b)

	
The Investor has received the Additional Commitment Fee (as defined in Section 12.06(c)).

 

Article III. Representations and Warranties of the Investor

 

The Investor hereby represents and warrants to the Company that the following are true and correct as of the date hereof and as of each Condition Satisfaction Date:

 

Section 3.01                      Organization and Authorization. The Investor is duly incorporated or organized, validly existing and in good standing in the jurisdiction of its incorporation or organization and has all requisite corporate power and authority to enter into and perform this Agreement and any related agreements, in accordance with the terms hereof and thereof, and to purchase and hold the Shares issuable hereunder. The decision to invest and the execution and delivery of this Agreement and any related agreements by the Investor, the performance by the Investor of its obligations hereunder and the consummation by the Investor of the transactions contemplated hereby and thereby have been duly authorized and requires no other proceedings on the part of the Investor. The Investor has the right, power and authority to execute and deliver this Agreement and all other instruments, on behalf of the Investor, and to perform all of its obligations hereunder and thereunder. This Agreement and any related agreements have been duly executed and delivered by the Investor and constitute the legal, valid and binding obligations of the Investor, enforceable against the Investor in accordance with their terms, subject to (i) applicable bankruptcy, insolvency, reorganization, fraudulent transfer, composition, reorganization, moratorium or similar laws from time to time in effect affecting creditors' rights generally, and (ii) general principles of equity (including, without limitation, standards of materiality, good faith, fair dealing, minority oppression and reasonableness), whether such principles are considered in a proceeding at law or in equity or any limitations imposed by general principles of equity upon the availability of equitable remedies or the enforcement of provisions of any documents referred to herein.

 

  

  

  

 

Section 3.02                      No Conflict. The execution, delivery and performance of this Agreement by the Investor and the consummation by the Investor of the transactions contemplated hereby will not: (i) result in a violation of its incorporation documents or partnership agreement or (ii) conflict with or constitute a default under, or give to others any rights of termination, amendment, acceleration or cancellation of, any agreement or instrument to which the Investor is a party, or result in a violation of any law, rule, regulation, order, judgment or decree (including the Securities Regulations and the rules of the TASE) applicable to the Investor or by which any material property or asset of the Company or any of its Subsidiaries is bound or affected. Except as specifically contemplated by this Agreement, the Investor is not required to obtain any consent, authorization or order of, any court or governmental authority in order for it to execute, deliver or perform any of its obligations under or contemplated by this Agreement in accordance with the terms hereof or thereof. Except as specifically contemplated by this Agreement, all consents, authorizations, orders, filings and registrations which the Investor is required to obtain pursuant to the preceding sentence have been obtained or effected on or prior to the date hereof. The Investor is unaware of any fact or circumstance which might give rise to any of the foregoing.

 

Section 3.03                      Evaluation of Risks. The Investor has such knowledge and experience in financial, tax and business matters as to be capable of evaluating the merits and risks of, and bearing the economic risks entailed by, an investment in the Company and of protecting its interests in connection with the transactions contemplated hereby. It recognizes that its investment in the Company involves a high degree of risk.

 

Section 3.04                      No Legal Advice from the Company. The Investor acknowledges that it had the opportunity to review this Agreement and the transactions contemplated by this Agreement with its own legal counsel and investment and tax advisors.

 

Section 3.05                      Information. The Investor, its advisors and its counsel, have been furnished with all materials relating to the business, finances and operations of the Company and information it deemed material to making an informed investment decision. The Investor and its advisors have been afforded the opportunity to ask questions of the Company and its management. The Investor understands that its investment involves a high degree of risk. The Investor has sought such accounting, legal and tax advice, as it has considered necessary to make an informed investment decision with respect to this transaction.

 

Section 3.06                      Financial Capabilities. The Investor has, and will maintain throughout the Commitment Period, sufficient financial resources and liquid funds to perform all of its obligations under this Agreement in accordance with the terms and conditions hereof and in a timely manner.

 

  

  

  

 

Section 3.07                      The Securities Law Investors' Categories. The Investor represents that it falls within category 11 of the list of investors categories set forth in Annex I to the Israeli Securities Law. For avoidance of doubt, the Investor undertakes to maintain such status throughout the Commitment Period and to immediately notify the Company if it loses such status

 

Section 3.08                      Not an Affiliate. The Investor is not an officer, director or a person that directly or indirectly through one or more intermediaries, controls or is controlled by, or is under common control with the Company or any affiliate of any of these persons and entities.

 

Section 3.09                      Regulation S.  The Investor represents that it is not a "U.S. person" (as defined in Rule 902 of Regulation S) among others pursuant to paragraph (k)(2)(i) of Rule 902 of Regulation S). For avoidance of doubt, the Investor undertakes to maintain such status throughout the Commitment Period and to immediately notify the Company if it loses such status or if it becomes aware of any circumstances that may reasonably be expected to result in it losing such status. The Investor represents that no "directed selling efforts" (as defined in Rule 902 of Regulation S) were made, and no "directed selling efforts" will be made in the United States by the Investor or any of its Affiliates throughout the Commitment Period.

 

Section 3.10                      No Securities Act Registration.  The Investor understands that the Shares are being offered in a transaction not involving any public offering in the United States within the meaning of the Securities Act, that the Shares will not be registered under the Securities Act, and that the Shares may only be offered or sold pursuant to an effective registration statement under the Securities Act, or pursuant to an available exemption from, or in a transaction not subject to, the registration requirements of the Securities Act and applicable state securities laws.

 

Section 3.11                      Trading Activities. The Investor’s trading activities with respect to the Company’s Shares shall be in compliance with all applicable Securities Regulations and the rules of the TASE.

 

Section 3.12                      Non-exclusivity. The Investor confirms and acknowledges that this Agreement and the rights awarded to the Investor thereunder are non-exclusive, and the Company may, at any time throughout the term of this Agreement and thereafter, issue and allot, or undertake to issue and allot, any shares and/or securities and/or convertible notes, bonds, debentures, options to acquire shares or other securities and/or other facilities which may be converted into or replaced by the Company’s shares or other securities of the Company and/or grant any rights with respect to its existing and/or future share capital.

 

Article IV. Representations and Warranties of the Company

 

Except as stated below, in the Disclosure Schedule, the SEC Documents or in the Public Fillings, the Company hereby represents and warrants to, the Investor that the following as of the date hereof and as of each Condition Satisfaction Date (unless otherwise contemplated hereunder):

 

Section 4.01                      Organization and Qualification.  The Company is duly incorporated and validly existing under the laws of the State of Israel and has all requisite corporate power to own its properties and to carry on its business as now being conducted.  Each of the Company and its Subsidiaries is duly qualified to do business and is in good standing (to the extent applicable) in every jurisdiction in which the nature of the business conducted by it makes such qualification necessary, except to the extent that the failure to be so qualified or be in good standing would not have a Material Adverse Effect on the Company and its Subsidiaries taken as a whole.

 

Section 4.02                      Authorization, Enforcement, Compliance with Other Instruments.  (i) The Company has the requisite corporate power and authority to enter into and perform this Agreement and any related agreements, in accordance with the terms hereof and thereof, (ii) the execution and delivery of this Agreement and any related agreements by the Company and the consummation by it of the transactions contemplated hereby and thereby, have been duly authorized by the Company’s Board of Directors and no further consent or authorization is required by the Company, its corporate organs, Board of Directors or its shareholders (provided the Section 270(5) Limitation is maintained), (iii) this Agreement and any related agreements have been duly executed and delivered by the Company, (iv) this Agreement and any related agreements, constitute the valid and binding obligations of the Company enforceable against the Company in accordance with their terms, subject to (i) applicable bankruptcy, insolvency, reorganization, fraudulent transfer, composition, reorganization, moratorium or similar laws from time to time in effect affecting creditors' rights generally, and (ii) general principles of equity (including, without limitation, standards of materiality, good faith, fair dealing, minority oppression and reasonableness), whether such principles are considered in a proceeding at law or in equity or any limitations imposed by general principles of equity upon the availability of equitable remedies or the enforcement of provisions of any documents referred to herein.

 

  

  

  

 

Section 4.03                      Capitalization.  As of the date of this Agreement, the registered share capital of the Company consists of 312,500,000 Ordinary Shares of which 7,784,006 Ordinary Shares are issued and outstanding.  All of such outstanding shares have been validly issued and are fully paid and nonassessable.  No Ordinary Shares are subject to preemptive rights or right of first refusal or any other similar rights or any liens or encumbrances suffered or permitted by the Company, and (i) there are no outstanding options, warrants, rights to subscribe to, calls or commitments of any character whatsoever issued or undertaken by the Company relating to, or securities or rights convertible into or right to purchase or receive, any shares of the Company issued by the Company, as applicable, or contracts, commitments, understandings or arrangements by which the Company is or may become bound to issue or register pursuant to the Securities Act, the Securities Regulations or otherwise any shares or other securities of the Company upon issuance or sale of the Shares, as applicable, (ii) there are no outstanding debt securities, (iii) there are no outstanding registration statements and (iv) there are no agreements or arrangements under which the Company is obligated to register the sale of any of their securities under the Securities Act, the Securities Regulations or otherwise (except pursuant to this Agreement).  There are no securities or instruments containing anti-dilution or similar provisions that will be triggered by this Agreement or any related agreement or the consummation of the transactions described herein or therein.  The Company has furnished or made available to the Investor true and correct copies of the Company’s Certificate of Incorporation and Articles of Association, and as in effect on the date hereof (the “Incorporation Documents”), and the terms of all securities convertible into or exercisable for Ordinary Shares and the material rights of the holders thereof in respect thereto.

 

Section 4.04                      No Conflict.  The execution, delivery and performance of this Agreement and any document contemplated hereunder by the Company and the consummation by the Company of the transactions contemplated hereby will not (i) conflict with or result in the breach or violation of any of the terms or provisions of, or constitute a default or result in the creation or imposition of any lien or charge on any assets or properties of the Company, under the Incorporation Documents, (ii) conflict with or constitute a default (or an event which with notice or lapse of time or both would become a default) under, or give to others any rights of termination, amendment, acceleration or cancellation of, any agreement, indenture, mortgage, deed of trust or instrument to which the Company or any of its Subsidiaries is a party or by which it is bound, or result in a violation of any law, rule, regulation, statue, order, judgment or decree of any court or governmental agency or body having jurisdiction over the Company or its properties, (including Applicable Securities Laws) applicable to the Company or any of its Subsidiaries or by which any material property or asset of the Company or any of its Subsidiaries is bound or affected in each case which conflict or default, would likely cause a Material Adverse Effect.  Neither the Company nor its Subsidiaries is in violation of any term of or in default under the Company’s Incorporation Documents or the Subsidiaries’ Certificates of Incorporation and Articles of Association, as applicable.  Neither the Company nor its Subsidiaries is in violation of any term of or in default under any material contract, agreement, mortgage, indebtedness, indenture, instrument, judgment, decree or order or any statute, rule or regulation applicable to the Company or its Subsidiaries and which would cause a Material Adverse Effect.  The business of the Company and its Subsidiaries is not being conducted in violation of any law, ordinance, and regulation of any governmental entity and which would cause a Material Adverse Effect.  Except as specifically contemplated by this Agreement and as required under any Applicable Securities Laws, the Company is not required to obtain any consent, authorization or order of, or make any filing or registration with, any court or governmental agency in order for it to execute, deliver or perform any of its obligations under or contemplated by this Agreement in accordance with the terms hereof or thereof except as specifically contemplated by this Agreement, and all consents, authorizations, orders, filings and registrations which the Company is required to obtain pursuant to the preceding sentence have been obtained or effected on or prior to the date hereof.  The Company is unaware of any fact or circumstance which, in their reasonable judgment, might give rise to any of the foregoing.

 

  

  

  

 

Section 4.05                      SEC Documents; Financial Statements.  The Ordinary Shares are registered pursuant to Section 12(b) of the Exchange Act and the Company has filed all reports, schedules, forms, statements and other documents required to be filed by it with the SEC under the Exchange Act for the two years preceding the date hereof (or such shorter period as the Company was required by law or regulation to file such material) (all of the foregoing filed within the two years preceding the date hereof or amended after the date hereof and all exhibits included therein and financial statements and schedules thereto and documents incorporated by reference therein, being hereinafter referred to as the “SEC Documents”) on timely basis or has received a valid extension of such time of filing and has filed any such SEC Document prior to the expiration of any such extension.  The Company has delivered to the Investors or their representatives, or made available through the SEC’s website at http://www.sec.gov, true and complete copies of the SEC Documents.  As of their respective dates, the SEC Documents complied in all material respects with the requirements of the Exchange Act and the rules and regulations of the SEC promulgated thereunder applicable to the SEC Documents, and none of the SEC Documents, at the time they were filed with the SEC, contained any untrue statement of a material fact or omitted to state a material fact required to be stated therein or necessary in order to make the statements therein, in light of the circumstances under which they were made, not misleading.  As of their respective dates, the financial statements of the Company included in the SEC Documents complied as to form in all material respects with applicable accounting requirements and the published rules and regulations of the SEC with respect thereto.  Such financial statements have been prepared in accordance with international financial reporting standards, consistently applied, during the periods involved (except (i) as may be otherwise indicated in such financial statements or the notes thereto, or (ii) in the case of unaudited interim statements, to the extent they may exclude footnotes, may be condensed or summary statements or may be presented differently) and fairly present in all material respects the financial position of the Company as of the dates thereof and the results of its operations for the periods then ended (subject, in the case of unaudited statements, to normal year-end audit adjustments).  No other information provided by or on behalf of the Company to the Investor which is not included in the SEC Documents (including, without limitation, information provided by the Company to the Investor in response to the due diligence questionnaire) contains any untrue statement of a material fact or omits to state any material fact necessary in order to make the statements therein, in the light of the circumstance under which they are or were made and not misleading.

 

Section 4.06                      The Company's Israeli Public Filings. The Company has filed all reports, forms, statements and other documents that it is required to file under the Securities Regulations for the three (3) years preceding the date hereof (all of the foregoing including documents incorporated by reference therein, being hereinafter referred to as the “Public Filings”). As of their respective dates, the Public Filings complied in all material respects with the requirements of the applicable Securities Regulations, and none of the Public Documents contained any Misleading Item. As of their respective dates, the financial statements of the Company included in the Public Filings complied in all material respects with applicable accounting requirements and the rules and regulations of the ISA with respect thereto. No other information provided by or on behalf of the Company to the Investor or to the Pricing Underwriter or any other "Underwriter" (as such term is defined under the Securities Law), when authorized by the Investor in accordance with the provisions of Section 6.02 or 6.04, contains any untrue statement of a material fact or omits to state any material fact necessary in order to make the statements therein, in the light of the circumstance under which they are or were made, not misleading.

 

  

  

  

 

Section 4.07                       No Default. Neither the Company nor any of its Subsidiaries is in default in the performance or observance of any material obligation, agreement, covenant or condition contained in any indenture, mortgage, deed of trust or other material instrument or agreement to which it is a party or by which it is or its property is bound and would have a Material Adverse Effect.

 

Section 4.08                      Intellectual Property Rights. The Company and its Subsidiaries own or possess adequate rights or licenses to use all material trademarks, trade names, service marks, service mark registrations, service names, patents, patent rights, copyrights, inventions, licenses, approvals, governmental authorizations, trade secrets and rights necessary to conduct their respective businesses as now conducted, except where lack of such ownership or possession could not have a Material Adverse Effect. The Company and its Subsidiaries do not have any knowledge of any infringement by the Company or its Subsidiaries of trademark, trade name rights, patents, patent rights, copyrights, inventions, licenses, service names, service marks, service mark registrations, trade secret or other similar rights of others, and, to the knowledge of the Company, there is no claim, action or proceeding being made or brought against, or to the Company’s knowledge, being threatened against, the Company or its Subsidiaries regarding trademark, trade name, patents, patent rights, invention, copyright, license, service names, service marks, service mark registrations, trade secret or other infringement that is reasonably likely to result in a Material Adverse Effect; and the Company and its Subsidiaries are unaware of any facts or circumstances which, in their judgment, are likely to give rise to any of the foregoing.

 

Section 4.09                      Employee Relations.  Neither the Company nor any of its Subsidiaries is involved in any labor dispute nor to the knowledge of the Company or any of its Subsidiaries, is any such dispute threatened that is reasonably likely to result in a Material Adverse Effect.  None of the Company’s or its Subsidiaries’ employees is a member of a union and the Company and its Subsidiaries believe that their relations with their employees are good.

 

Section 4.10                      Environmental Laws.  Except as would not have a Material Adverse Effect, the Company and its Subsidiaries are (i) in compliance with any and all applicable material foreign, federal, state and local laws and regulations relating to the protection of human health and safety, the environment or hazardous or toxic substances or wastes, pollutants or contaminants (“Environmental Laws”), (ii) have received all permits, licenses or other approvals required of them under applicable Environmental Laws to conduct their respective businesses and (iii) are in compliance with all terms and conditions of any such permit, license or approval.

 

Section 4.11                      Title.  The Company and its Subsidiaries has good and marketable title to its properties and material assets owned by it, free and clear of any pledge, lien, security interest, encumbrance, claim or equitable interest other than such as are not material to the business of the Company.  Any real property and facilities held under lease by the Company and its Subsidiaries are held by them under valid, subsisting and enforceable leases with such exceptions as are not material and do not interfere with the use made and proposed to be made of such property and buildings by the Company and its Subsidiaries.

 

  

  

  

 

Section 4.12                      Insurance.  The Company and each of its Subsidiaries are insured against such losses and risks and in such amounts as management of the Company believes to be prudent and customary for similarly situated companies in the businesses in which the Company and its Subsidiaries are engaged except when the failure to have such insurance would not have a Material Adverse Effect.  Neither the Company nor any such Subsidiary has been refused any insurance coverage sought or applied for and neither the Company nor any such Subsidiary has any reason to believe that it will not be able to renew its existing insurance coverage as and when such coverage expires or to obtain similar coverage from similar insurers as may be necessary to continue its business at a cost that would not have a Material Adverse Effect.

 

Section 4.13                      Regulatory Permits.  The Company and its Subsidiaries possess all material certificates, authorizations and permits issued by the appropriate federal, state or foreign regulatory authorities necessary to conduct their respective businesses (except when the failure to have such certificates, authorizations and permits would not have a Material Adverse Effect), and neither the Company nor any such Subsidiary has received any notice of proceedings relating to the revocation or modification of any such certificate, authorization or permit, except in each instance which would not have a Material Adverse Effect.

 

Section 4.14                      Absence of Litigation.  There is no action, suit, proceeding, inquiry or investigation before or by any court, public board, government agency, self-regulatory organization or body pending against or affecting the Company, the Ordinary Shares or any of the Company’s Subsidiaries, wherein an unfavorable decision, ruling or finding would have a Material Adverse Effect.

 

Section 4.15                      Subsidiaries.  The Company does not presently own or control, directly or indirectly, any interest in any other corporation, partnership, association or other business entity that is considered a "significant subsidiary" under SEC Regulation S-X.

 

Section 4.16                      Tax Status. The Company and each of its Subsidiaries has made or filed all Israeli income and all other tax returns, reports and declarations required of them and (unless and only to the extent that the Company and each of its Subsidiaries has set aside on its books provisions reasonably adequate for the payment of all unpaid and unreported taxes) has paid all taxes and other governmental assessments and charges that are material in amount, shown or determined to be due on such returns, reports and declarations, except those being contested in good faith and has set aside on its books provision reasonably adequate for the payment of all taxes for periods subsequent to the periods to which such returns, reports or declarations apply. There are no unpaid taxes in any material amount claimed to be due by the any taxing authority of any jurisdiction, and the officers of the Company know of no basis for any such claim.

 

Section 4.17                      The Shares.  The Shares have been duly authorized and, when issued, delivered and paid for pursuant to this Agreement, will be validly issued and fully paid and non-assessable, Free, free and clear of all encumbrances and will be issued in compliance with all applicable United States federal and state securities laws, Securities Regulations and TASE rules; the share capital of the Company, including the Ordinary Shares, conforms in all material respects to the description thereof contained in the Public Filings and SEC Documents  The Company is not obligated to offer the Shares on a right of first refusal basis or otherwise to any third parties including, but not limited to, current or former shareholders of the Company, underwriters, brokers or agents.

 

Section 4.18                      Use of Proceeds.  The Company shall use the net proceeds from the issuance of the Shares for working capital and other general corporate purposes.

 

  

  

  

 

Section 4.19                      Acknowledgment Regarding Investor’s Purchase of Shares. The Company acknowledges and agrees that the Investor is not acting as a financial advisor or fiduciary of the Company (or in any similar capacity) with respect to this Agreement and the transactions contemplated hereunder and to the extent that any advice is given by the Investor or any of its representatives or agents in connection with this Agreement and the transactions contemplated hereunder, such advice is merely incidental to the Investor’s purchase of the Shares hereunder.  The Company is aware and acknowledges that it may not be able to request Advances under this Agreement if it does not receive the ISA’s permit to publish a Shelf Prospectus covering the issuance of the Shares, or it cannot maintain such effective Shelf Prospectus or  if it cannot publish an effective Shelf Offering Document covering the issuances of Shares pursuant to the Advance, or if it does not hold an effective TASE Approval or if any Advances would violate any Applicable Securities Law, or if any of the conditions set forth in Article VI is not fulfilled or fully complied with.  The Company further is aware and acknowledges that any fees paid or Shares issued pursuant to Section 12.06 hereunder shall be earned on the due date of such payment or issuance, as applicable, and shall not be refundable or returnable under any circumstances.

 

Section 4.20                      Eligibility for Chapter E3 of the Securities Law. The Company has duly elected to file or publish the reports required under the Securities Law pursuant to Chapter E3 of the Securities Law and all corporate actions required for such election were duly completed.

 

Section 4.21              No Substantial US Market Interest. As of the date of this Agreement, there is no substantial U.S. market interest (as such term is defined in Regulation S) with respect to the Ordinary Shares.

 

Section 4.22                      Full Disclosure. The Company has provided the Investor all the information requested by the Investor in order to conduct its due diligence.

 

Article V. Indemnification

 

Section 5.01

 

	
  

	
(a)

	
Subject to the provisions of Section 5.01(c)  and (f)  and Section 5.03 herein, the Company hereby undertakes to defend, protect, indemnify and hold harmless the Investor, and all of its officers, directors, partners, employees and agents (collectively, the “Investor Indemnitees”) from and against any and all actions, cause of action suits, claims, losses, costs, penalties, fees, liabilities and damages, and expenses in connection therewith (irrespective of whether any such Investor Indemnitee is a party to the action for which indemnification hereunder is sought), and including reasonable attorneys’ fees and disbursements (the “Indemnified Liabilities”), incurred by the Investor Indemnitees or any of them under a final and non-appealable judgment or other decision of a competent court or government authority, as applicable, or any settlement to which the Company has consented, as a result of, or arising out of, or relating to (a) any misrepresentation (including failure to state a material fact required to be stated, or necessary to make the statement, in light of the circumstances under which it was made, not misleading) or breach of any representation or material warranty made by the Company in this Agreement or or the Shelf Prospectus or the Shelf Offering Documents or any other certificate, instrument or document contemplated hereby or thereby, except insofar as such Indemnified Liabilities arise out of or are based upon (x) any untrue statement which has been made therein or upon any omission omitted therefrom in reliance upon and in conformity with the information relating to the Investor Indemnitees furnished in writing to the Company by or on behalf of the Investor Indemnitees or (y) willful, reckless, or negligent misconduct of the Investor, or (b) any breach by the Company of any covenant, agreement or obligation of the Company contained in this Agreement or any other certificate, instrument or document contemplated hereby or thereby.

 

  

  

  

 

	
  

	
(b)

	
If any action, suit or proceeding shall be brought against any Investor Indemnitee, in respect of which indemnity may be sought by the Investor Indemnitee against the Company in accordance with Section 5.01(a) above, such Investor Indemnitee shall promptly notify the Company, and the Company shall have the right to assume the defense of any such action, suit or proceedings, including the employment of counsel reasonably acceptable to the Investor Indemnitee and payment of all fees and expenses of such counsel. Such Investor Indemnitee shall have the right to employ separate counsel in any such action, suit or proceeding and to participate in the defense thereof, but the fees and expenses of such counsel shall be at the expense of such Investor Indemnitee, unless (i) the Company has agreed in writing to pay such fees and expenses, (ii) the Company has failed to assume the defense or employ counsel reasonably acceptable to the Investor Indemnitee, or (iii) the named parties to any such action, suit or proceeding (including any impleaded parties) include both Investor Indemnitee and the Company, and the representation of such indemnified party and the Company by the same counsel would be inappropriate due to conflict of interests between them (in which case the Company shall not have the right to assume the defense of such action, suit or proceeding on behalf of such Investor Indemnitee). It is understood, that without prejudice to the foregoing, the Company shall, in connection with any such one action, suit or proceeding or separate or substantially similar or related actions, suits or proceedings in the same jurisdiction arising out of the same general allegations or circumstances, be liable for the reasonable fees and expenses of only one separate firm of attorneys at any time for all such Investor Indemnitees not having actual or potential differing interests with the Company or among themselves, which firm shall be designated in writing by the Investor, and that all such fees and expenses shall be reimbursed as they are actually incurred and paid for, unless they are paid by the Company directly. If the Company assumes the defense of an action, suit or proceeding, then the Investor Indemnitees shall cooperate with and assist the Company in such defense as requested by the Company and shall make available to the Company any documents and materials in its possession or control that may reasonably be necessary to such defense. The Company shall not be liable for any settlement of any such action, suit or proceeding effected without its written consent (which shall not be unreasonably withheld), but if settled with such written consent, the Company agrees to indemnify and hold harmless any Investor Indemnitee, to the extent provided in the preceding paragraph from and against any Indemnified Liability by reason of such settlement, subject to Section 5.02 below.

 

	
  

	
(c)

	
Notwithstanding any provision herein to the contrary, the provisions of Sections 5.01(a) and 5.01(b) shall not apply in the event of any liability or expense which the Company undertakes to indemnify under Section 5.01(d) herein.

 

	
  

	
(d)

	
Notwithstanding any provision herein to the contrary, subject to the provisions of Section 5.01(e) and (f) and Section 5.03, the Company hereby undertakes to indemnify and hold harmless any Investor Indemnitee from and against any and all liabilities, and expenses (as specified in sub Sections (i), (ii), and (iii) herein) incurred by any Investor Indemnitee, by virtue of, as a result of, or arising out of, or relating to any Misleading Item in a Company's Offering Document (the "Indemnified Securities Liabilities"), to the maximum extent permitted by Law:

 

	 	
i)

	
any financial liability imposed for the benefit of another person pursuant to a judgment, including a judgment given in the matter of a settlement or an arbitral award approved by the court;

 

	 	
ii)

	
any reasonable litigation expenses, including attorney’s fees, incurred by any Investor Indemnitee, as a result of any investigation, or proceeding held by any government authority or agency so authorized to conduct any investigation or proceeding, and such proceeding or investigation against the Investor Indemnitee ended without the filing of a criminal charge (as defined in Section 260(1A) of the Companies Law), the imposition of financial penalties instead of a criminal proceeding (as defined in Section 260(1A) of the Companies Law), or ended without the filing of a criminal charge but a financial penalty was imposed on such Investor Indemnitee instead of a criminal proceeding that does not require the proof of criminal intent; and

 

  

  

  

 

	 	
iii)

	
any reasonable litigation expenses including attorney's fees, incurred by any Investor Indemnitee or charged to him/her/it, in any proceeding filed against him/her/it by or on behalf of the Company or by any other person, or for a criminal charge from which he/she/it was acquitted, or for a criminal charge in which he/she/it was found guilty of an offense not requiring proof of criminal intent.

 

	
  

	
(e)

	
Notwithstanding any provision herein to the contrary, the entire maximum indemnification amount available to the Investors Indemnitees under Section 5.01 shall not exceed in any case the aggregate total of the purchase price of the securities offered to the Investor in the Shelf Prospectus and subsequently listed for trade on the TASE (the "Cap"). Such purchase price shall be indexed to rise in consumer prices from the date of listing. Without derogating from the maximum indemnification amount stated above, no indemnification shall be paid for any sum that is greater than the value of twenty five percent (25%) of the Company’s equity, as reported in the last consolidated, audited or reviewed financial reports published immediately prior to the Investor’s request of such indemnification pursuant to this Agreement (the “Interim Amount”),  if there is a reasonable doubt that such payment of the indemnification amount shall cause the Company to fail to repay its existing and foreseeable liabilities (except for the Company’s liabilities to its Controlling parties) (the “Condition”). For the sake of clarity, (i) payment of the Interim Amount to the Investor Indemnitees is not subject to: (i) the Condition ; (ii) such Condition does not derogate from any rights of the Investor Indemnitee vis-à-vis the Company, in accordance with any applicable law; and (iii) the Condition shall not apply if the Company receives a liquidation order, or if a temporary receiver is appointed to the Company in a proceeding not initiated by the Investor Indemnitee. The Company represents and warrants to the Investor that the Cap is reasonable in the circumstances of the case. Investor Indemnitee shall not be entitled to indemnification (i) for a Misleading Item unless such Investor Indemnitee proves that the Investor believed in good faith that there is no Misleading Item in the applicable Shelf Prospectus and in the applicable Shelf Offering Document; (ii) for any willful, reckless, or negligent misconduct of the Investor; or (iii) insofar as the Misleading Item was based upon any untrue statement which has been made in reliance upon and in conformity with the information relating to the Investor Indemnitees furnished in writing to the Company by or on behalf of the Investor Indemnitees.

 

	
  

	
(f)

	
Notwithstanding any provision herein to the contrary, and without derogating from the limitations on indemnity set forth above, the indemnity obligations pursuant to this Agreement shall be further limited in the following manner:

 

	 	
i)

	
Threshold Amount. No liability of the Company under Section 5.01 shall arise, and no Investor Indemnitee will be entitled to indemnification from the Company, unless and until the cumulative amount of such Indemnified Liabilities or Indemnified Securities Liabilities allegedly due to it under Section 5.01 exceeds $250,000 (the “Threshold”).

 

  

  

  

 

	 	
ii)

	
No Punitive and Indirect Damages. In no event shall a Party be liable for any indirect, incidental, consequential or punitive damages.

 

	
  

	
(g)

	
The Company’s indemnification for the benefit of the Investor Indemnitees for Indemnified Securities Liabilities shall be: (i) specifically stated the Company's Shelf Prospectus; and (ii) approved by the Company’s Board of Directors specifically stating that the amount of indemnification for Indemnified Securities Liabilities is reasonable in the circumstances.

 

	
  

	
(h)

	
The Company shall not be liable for indemnity unless pursuant to the provisions of Section 5.01 hereof.

 

Section 5.02                      Subject to the provisions of Section 5.03, the Investor shall defend, protect, indemnify and hold harmless the Company and all of its officers, directors, shareholders, employees, consultants and agents (including, without limitation, those retained in connection with the transactions contemplated by this Agreement) (collectively, the “Company Indemnitees”) from and against any and all Indemnified Liabilities incurred by the Company Indemnitees or any of them as a result of, or arising out of or relating to (a) any misrepresentation or breach of any representation or warranty made by the Investor in this Agreement or any instrument or document contemplated hereby or thereby executed by the Investor except insofar as such Company Liabilities arise out of or are based upon (x) any untrue statement which has been made therein or upon any omission omitted therefrom in reliance upon and in conformity with the information relating to the Company Indemnitees furnished in writing to the Investor by or on behalf of the Company Indemnitees or (y) willful, reckless, or negligent misconduct of the Company Indemnitees, (b) any breach of any covenant, agreement or obligation of the Investor contained in this Agreement, or any other certificate, instrument or document contemplated hereby or thereby executed by the Investor; or (c) information relating to the Investor furnished in writing by or on behalf of the Investor for use in the applicable Offering Document or any other certificate, instrument or document contemplated hereby or thereby. If any action, suit or proceeding shall be brought against any Company Indemnitee in respect of which indemnity may be sought against the Investor, sub-Section 5.01(b) above shall apply, mutatis mutandis. Notwithstanding any provision herein to the contrary, and without derogating from the limitations on indemnity set forth above, the Investor’s indemnity obligations pursuant to this Agreement shall be further limited in the following manner:

 

	 	
i)

	
Threshold Amount. No liability of the Investor under Section 5.02 shall arise, and no Company Indemnitee will be entitled to indemnification from the Investor, unless and until the cumulative amount of such Company Liabilities allegedly due to it under Section 5.02 exceeds $250,000 (the “Threshold”).

 

	 	
ii)

	
No Punitive and Indirect Damages. In no event shall a Party be liable for any indirect, incidental, consequential or punitive damages.

 

	 	
iii)

	
The Investor shall not be liable for indemnity unless pursuant to the provisions of Section 5.02 hereof.

 

Section 5.03                      The obligations of the Company and of the Investor to indemnify under Sections 5.01(a) and 5.02, as applicable, shall survive termination for two years and the obligations of the Company to indemnify the Investor under Section 5.01(d) shall survive for two years following the periods specified in Section 6.04(b) herein.

 

  

  

  

 

Article VI. Covenants of the Company and Investor

 

Section 6.01                      Shelf Prospectus. Prior to delivering any Advance Notice hereunder, and subject to the provisions of Sections 6.02 and 6.03, the Company shall publish a Shelf Prospectus, and shall use it best efforts to cause the Shelf Prospectus or any subsequent Shelf Prospectus to be effective as of each Advance Closing Date. The Investor shall cooperate with the Company in the preparation of the Shelf Prospectus and any subsequent Shelf Prospectus, including the furnishing of certified information, as reasonably requested by the Company and/or its counsel. Prior to the publication of any Offering Document, the Company shall take all reasonable measures to verify the information and the disclosure contained in the Offering Document and the full compliance of same with the Securities Regulations.

 

Section 6.02                      Review of Shelf Prospectus and Shelf Offering Documents. The Investor shall have the discretion to take, or authorize the Pricing Underwriter (or any other "Underwriter" as such term is defined under the Securities Law) (in these Sections 6.02 and 6.03 each, an "Underwriter") to take, any measures it shall deem appropriate to ensure that there are no Misleading Items in each proposed Shelf Prospectus and Shelf Offering Document (each, an "Offering Document", and collectively, the "Offering Documents"). For the sake of clarity, the Investor, and the Pricing Underwriter or the Underwriter authorized by the Investor may notify the ISA should the Investor, the Pricing Underwriter or such authorized Underwriter, as applicable, become aware of any occurrence that would cause the ISA to prohibit the publication of any Offering Document, or would permit such publication only after corrections are made to such document.

 

Section 6.03                      Company’s Cooperation with Investor and Investor’s Cooperation With Company. At the Company's expense, and subject to an execution of a confidentiality undertaking, the Company undertakes to cooperate with the Investor, or with any Underwriter appointed by the Investor in accordance with the provisions of Section 6.02, as shall be required in order to enable the Investor or such Underwriter to take the appropriate measures to ensure that each Offering Document does not contain any Misleading Item and that is believed in good faith that it does not contain any such items, including without limitation: (i) to promptly provide all materials and information regarding the Company and its Subsidiaries that the Investor or the Underwriter and their advisors shall reasonably request from time to time and any additional material and information regarding the Company and its Subsidiaries that the Company deems helpful for taking the appropriate measures to ensure that each Offering Document does not contain any Misleading Item; (ii) to incorporate in the Offering Documents revisions and amendments reasonably requested by the Investor or the Underwriter and their advisors; and (iii) to furnish to the Investor, in connection with each Shelf Offering Report to be executed by the Investor, comfort letters signed by the Company, office holders in the Company and counsel to the Company in the form in Annex E or any other form as shall be reasonably requested by the Investor.  The Investor shall furnish to the Company for inclusion in the Offering Documents, in a certified document, all information regarding the Investor and its purchase of the Shares including the percentage holdings of the Company’s shares held by or on behalf of the Investor and any parties managed by Yorkville Advisors LLC and their Affiliates, that the Company and/or its counsel reasonably determine is necessary or advisable to include in the Offering Documents. The Investor shall furnish to the Company no later than two Trading Days following receipt of the Advance Notice, an officer certificate in the form of Annex A1.

 

Section 6.04                      Investor’s Liability for a Misleading Item in a Shelf Offering Document. Investor hereby agrees to state, in each Shelf Offering Document published by the Company hereunder, as follows:

 

	
  

	
(a)

	
Subject to the terms and conditions set forth in Section 6.02 and to the provisions of this Section 6.04, only if and to the extent required by the ISA for the purpose of permitting the publishing of the Shelf Offering Documents contemplated hereunder, Investor shall be responsible to anyone who purchased the Shares from the Investor and to anyone who sold or acquired the Shares in the course of trading on the TASE or over the counter, for damage caused to them by the inclusion of a Misleading Item in the Shelf Offering Documents published by the Company hereunder and to sign each such Shelf Offering Document to evidence the assumption of such responsibility by the Investor, subject to the terms and conditions set forth herein. Subject to the Investor's satisfaction of the contents of the applicable Offering Documents, the Investor shall sign the Shelf Offering Documents contemplated hereunder to evidence the assumption of liability for any Misleading Item in such Shelf Offering Documents.

 

  

  

  

 

	
  

	
(b)

	
The limitation period for bringing claims against the Investor in connection with the responsibilities for a Misleading Item assumed pursuant to Section 6.04 shall be equal to the limitation period pursuant to Section 31(b) of the Securities Law.

 

	
  

	
(c)

	
Investor shall not be liable in the event Investor can prove that it has taken all the appropriate measures to ensure that the applicable Offering Documents did not contain any Misleading Item, that it believed in good faith that it did not contain any such items and that it notified the ISA once it became aware of any occurrence that would cause the ISA to prohibit the publication of said Offering Documents, or would permit such publication only after corrections are made to such document.

 

	
  

	
(d)

	
Investor shall not be liable in the event Investor authorized an “Underwriter” (as such term is defined under the Securities Regulations) to take all the appropriate measures, on behalf of the Investor as well, in order to ensure that there shall not be any Misleading Item in the applicable Offering Documents, subject to fulfillment of the following two conditions:

 

	
  

	
(i)

	
Investor believed in good faith that there was no Misleading Item in the applicable Offering Documents; and

 

	
  

	
(ii)

	
The Underwriter who was given the authority does not bear any liability for the Misleading Item.

 

	
  

	
(e)

	
Investor shall not be liable vis-à-vis a party regarding which it established that the Shares were purchased when the party knew or should have known that the applicable Offering Documents contained a Misleading Item.

 

	
  

	
(f)

	
Investor shall not be liable when the Company has filed an immediate report as stated in Section 36(c) of the Securities Law, in which the Misleading Item was amended and the Company has published the fact of the amendment in a manner in which it published the notice concerning the applicable Offering Documents pursuant to Section 23(c)(2) of the Securities Law; such negation of liability shall apply with respect to anyone who is proved to have acquired the Shares following the aforesaid publication.

 

	
  

	
(g)

	
Investor shall not be liable in the event Investor delivered to the Company a written notice with regard to a correction of a Misleading Item; such negation of liability applies vis-à-vis anyone who is proved to have acquired the Shares after twenty four (24) hours had passed from the delivery of the notice.

 

	
  

	
(h)

	
In the event the Investor is liable for a Misleading Item and one or more Parties are liable under Sections 31 and 33 of the Securities Law, their liability shall be joint and several towards the injured party; their liability to each other shall be governed by the rules applicable to liability in tort.

 

  

  

  

 

	
  

	
(i)

	
The Company shall reimburse the Investor for any expenses incurred in the course of taking the measures pursuant to Section 6.04.

 

Section 6.05                      Listing of Shares, TASE Approvals. During the Commitment Period and for so long as any Shares issuable hereunder are held by the Investor, but in any event no longer than six (6) months after the Commitment Period, the Company shall maintain the Ordinary Shares' listing on the TASE, except in the event the de-listing is made pursuant to any merger or acquisition event. Prior to the publication of any Shelf Prospectus, as applicable, the Company shall obtain from the TASE a General TASE Approval evidencing the consent of the TASE, in principle, to the listing of at least such number of shares calculated by dividing the Commitment Amount by the market price of the Shares as of the date hereof (the “General TASE Approval”). The Company shall use its best efforts to cause such General TASE Approval to remain in full force and effect during the Commitment Period and upon delivery of any Advance Notice shall ensure that the number of shares remaining under the General TASE Approval is greater than or equal to the maximum number of shares issuable pursuant to such Advance. Immediately prior to the publication of each Shelf Offering Document with respect to a specific Advance, the Company shall obtain a Specific TASE Approval to the listing of such number of Shares covered under the Advance (the “Specific TASE Approval”).

 

Section 6.06                      On-going Public Filings. The Company shall file on a timely basis all reports, forms, statements and other documents required to be filed by it under any Applicable Securities Law, and none of such filings shall contain any Misleading Item. It is hereby clarified that the Company is required to file special immediate reports with respect to each Advance Notice.

 

Section 6.07                      Corporate Existence. The Company will take all steps necessary to preserve and continue the corporate existence of the Company and its Subsidiaries.

 

Section 6.08                      Cooperation with the Pricing Underwriter. The Company acknowledges that under the Securities Regulations and the ISA’s requirements, each Offering Document under which the Shares will be issued to the Investor might be required to be signed by the Pricing Underwriter, in order for the Shares to be Free. The Company therefore undertakes to cooperate with the Pricing Underwriter as shall be required in order to enable the Pricing Underwriter to so sign each Offering Document, including, without limitation: (i) to promptly provide to the Pricing Underwriter, and to its legal and accounting advisors all materials and information regarding the Company and its Subsidiaries that the Pricing Underwriter and its advisors shall reasonably request from time to time; (ii) to incorporate in the Offering Documents revisions and amendments reasonably requested by the Pricing Underwriters and its advisors; (iii) to execute an Underwriting Agreement for the duration of the Commitment Period, in a form to be reasonably acceptable by the Pricing Underwriter and the Investor and to provide a copy of such agreement to the Investor prior to the publishing of the Shelf Prospectus; and (iv) to pay the Pricing Underwriter the fees as shall be agreed between the Company and the Pricing Underwriter.

 

Section 6.09                      Notice of Certain Events Affecting the Shelf Prospectus; Suspension of Right to Make an Advance. The Company will immediately notify the Investor and the Pricing Underwriter upon its becoming aware of the occurrence of any of the following events (each, a “Suspension Event”): (i) receipt of any written request for additional information by the ISA or the TASE or a request to amend or supplement the Shelf Prospectus;  (ii) the issuance by the ISA of any notice or order suspending, or deemed by the ISA as suspending the effectiveness of the Shelf Prospectus; (ii) the issuance by the TASE of any notice suspending or deemed by the TASE as suspending the effectiveness of the General TASE Approval or a Specific TASE Approval; and (iii) the occurrence of any event that makes any statement made in the Shelf Prospectus (including any document incorporated or deemed to be incorporated therein by reference) untrue in any material respect, including the omission of a material fact, or that requires the making of any changes in the Shelf Prospectus or any of such documents incorporated by reference. The Company shall not deliver to the Investor any Advance Notice during the continuation of any Suspension Event or threatened Suspension Event.

 

  

  

  

 

Section 6.10                      Review of Public Filings. During the Commitment Period, all Public Filings filed by the Company, and also all press releases and investor relations materials (collectively “Released Material”) shall be reviewed and approved for release by the Company’s attorneys and, if containing financial information, the Company’s independent certified public accountants; provided however, that Company's attorneys and/or accountants shall have no responsibility whatsoever towards the Investor, in connection with such Released Material.

 

Section 6.11                      Review of Other Documents. The Company shall extend to the Investor the right to review any additional documents which the Pricing Underwriter shall be entitled to review, subject to the provisions of Article VIII below.

 

Section 6.12                      Opinion of Counsel. Company shall provide the Investor with an opinion letter from the Israeli counsel to the Company prior to the Effective Date as of the Effective Date in the form of Annex D. In connection with each Advance Notice the Company shall cause its US counsel to furnish a Regulation S opinion to the TASE and allow the Investor to rely on each such opinion.

 

Section 6.13                      Compliance with Applicable Securities Laws. The Parties have agreed upon the provisions of this Agreement in light of (a) the Companies Law, and the Applicable Securities Laws and with the intention that the provisions of this Article VI shall reflect the requirements, procedures, terms and conditions of the Applicable Securities Laws. In the event of any amendment to the Applicable Securities Laws during the terms of this Agreement as a result of which the requirements (formal and informal), procedures, terms or conditions of the Applicable Securities Laws would diverge from the requirements, procedures, terms or conditions of this Agreement, then the Parties shall negotiate in good faith to amend the provisions of this Agreement so that the intention of the Parties in this Agreement as expressed in this Section 6.13 shall, to the extent reasonably practicable, be realized with respect to such amendment to the Applicable Securities Laws. In any event, notwithstanding any provision in this Agreement to the contrary, neither Party hereto shall be entitled to indemnification or reimbursement of expenses to the extent prohibited by Applicable Securities Laws nor shall the liability of either Party hereto be limited to the extent prohibited by Applicable Securities Laws.

 

Section 6.14                      Certain Additional Covenants of the Investor. Without derogating from the provisions of Section 6.03 above, the Investor undertakes, to notify the Company immediately following the end of each Pricing Period regarding the transactions it and its Affiliates made on the TASE in the Ordinary Shares during the Pricing Period (with respect to each transaction – the number of Ordinary Shares transacted and the price per share) and the number of Ordinary Shares held by the Investor and its Affiliates on the date of the Shelf Offering Document. The Investor undertakes to comply with all Securities Laws applicable to it.

 

Section 6.15                      Additional Covenant of the Company. Based on the information provided to the Company by the Investor pursuant to Section 6.14 above, if and to the extent such information is provided to it by the Investor, the Company will make in the applicable Shelf Offering Document such disclosure as shall be required under any applicable law and/or by the ISA.

 

  

  

  

 

Article VII. Conditions Precedent

 

Section 7.01                      Conditions Precedent to Effectiveness of the Agreement. Notwithstanding any provision herein to the contrary, except for Company's obligation to pay Structuring and Due Diligence fees in accordance with the provisions of Section 12.06(a) herein, which is and shall be in full force and effect as from the date hereof, the provisions of this Agreement shall come into effect only upon the cumulative fulfillment of all conditions precedent hereto, as follows:

 

	
  

	
(a)

	
Obtaining the General TASE Approval and the ISApermit for publishing the effective Shelf Prospectus

 

	
  

	
(b)

	
Execution of an Underwriting Agreement as more fully detailed in Section 6.08 herein.

 

	
  

	
(c)

	
The Company shall have obtained all corporate approvals required for the offer and sale of the Shares to the Investor  (assuming the limitations set forth in Section 270(5)(a) of the Companies Law are not exceeded) and the Company’s Board of Directors shall have specifically approved the indemnification for Misleading Items in the Offering Documents pursuant to Article V of this Agreement, in accordance with Section 260(b) of the Companies Law, and Section 34A of the Securities Law.

 

The Parties hereby agree that in the event that any of the Conditions Precedent is not fulfilled before  October 31, 2011, unless extended by mutual consent of the Parties, this Agreement shall be null and void, except for Article VIII that shall survive this Agreement, and neither party shall have any claim and/or demand against the other Party.

 

Section 7.02                      Conditions Precedent to the Obligations of the Company. The obligation hereunder of the Company to issue and sell the Shares to the Investor under each Advance is subject to the satisfaction, or waiver by the Company, at or before each such Closing, of each of the conditions set forth below.

 

	
  

	
(a)

	
The representations and warranties of the Investor shall be true and correct in all material respects.

 

	
  

	
(b)

	
The Investor shall have performed, satisfied and complied in all respects with all covenants, agreements and conditions required by this Agreement to be performed, satisfied or complied with by the Investor at or prior to such Closing.

 

Section 7.03                      Conditions Precedent to the Right of the Company to Deliver an Advance Notice. The right of the Company to deliver an Advance Notice is subject to the fulfillment by the Company, on such Advance Notice Date as well as on the applicable Advance Closing Date (each a “Condition Satisfaction Date”), of each of the following conditions.

 

	
  

	
(a)

	
Neither the Company nor the Investor shall have received notice that the ISA has issued or intends to issue a stop order with respect to any applicable Offering Document or that the ISA otherwise has suspended or withdrawn the effectiveness of any applicable Offering Document, either temporarily or permanently, or intends or has threatened to do so (unless the ISA’s concerns have been addressed and the Investor is reasonably satisfied that the ISA no longer is considering or intends to take such action).

 

	
  

	
(b)

	
No event has occurred that makes any statement made in the Shelf Prospectus (including any document incorporated or deemed to be incorporated therein by reference) untrue in any material respect, including omission of a material fact, or that requires the making of any changes in the Shelf Prospectus or any of such documents incorporated by reference, unless proper amendments or updates to the Shelf Prospectus fully remedying the above can be made, and are in fact made, through disclosures included in the Shelf Offering Document.

 

	
  

	
(c)

	
Neither the Company nor the Investor shall have received notice that the TASE has issued or intends to issue a stop order with respect to the General TASE Approval or the Specific TASE Approval or that the TASE otherwise has suspended or withdrawn the effectiveness of the General TASE Approval or the Specific TASE Approval, either temporarily or permanently, or intends or has threatened to do so (unless the TASE’s concerns have been addressed and the Investor is reasonably satisfied that the TASE no longer is considering or intends to take such action).

 

  

  

  

 

	
  

	
(d)

	
The Company and the Investor have no knowledge of any event that is likely to have the effect of (i) causing the Shelf Prospectus or the Shelf Offering Document or the TASE Approvals to be suspended or otherwise ineffective; or (ii) prevent the Company from obtaining any approval that may be requested for the issuance and delivery (including the deposit in the Investors Account) the Shares hereunder, including the Specific TASE Approval.

 

	
  

	
(e)

	
The representations and warranties of the Company shall be true and correct in all material respects.

 

	
  

	
(f)

	
The Company shall have performed, satisfied and complied in all material respects with all representations, covenants, agreements and conditions required by this Agreement to be performed, satisfied or complied with by the Company at or prior to each Condition Satisfaction Date.

 

	
  

	
(g)

	
No statute, rule, regulation, executive order, decree, ruling or injunction shall have been enacted, entered, promulgated or endorsed by any court or governmental authority of competent jurisdiction that prohibits or directly and adversely affects any of the transactions contemplated by this Agreement (including adversely affect the status of the Shares as Free), and no proceeding shall have been commenced that may have the effect of prohibiting or so adversely affecting any of the transactions contemplated by this Agreement.

 

	
  

	
(h)

	
The trading of the Shares on the TASE is not suspended or discontinued and the Company shall not have received any notice threatening the continued listing of the Shares on the TASE. The Shares have not been transferred for trading on the “Shimur list” of the TASE, the Company shall not have received any notice regarding the TASE's intention to transfer the shares to the “Shimur list,” and no circumstances shall exist that may trigger the transfer of the Shares for trading on the “Shimur list.”

 

	
  

	
(i)

	
The amount of an Advance requested by the Company shall not exceed the Maximum Advance Amount.

 

	
  

	
(j)

	
The Investor shall have received the Advance Notice executed by an officer of the Company and the representations contained in such Advance Notice and in this Agreement shall be true and correct as of each Condition Satisfaction Date.

 

	
  

	
(k)

	
Except with respect to the first Advance Notice, the Company shall have delivered all Shares relating to all prior Advances.

 

	
  

	
(l)

	
As of each Condition Satisfaction Date there is no substantial US market interest (as such term is defined in Regulation S) with respect to the Ordinary Shares, the Shares to be issued pursuant to such Advance Notice are eligible to be issued under Regulation S without any offering restrictions (as such term is defined in Regulation S), and the Shares will be Free on the TASE. 

 

Section 7.04                      Dividend or Rights Offerings. In the event that the Company distributes dividends (including non-cash dividends and payments to its shareholders under a reduction of capital) or if the Company effects a rights offering, no Advance shall be made by the Company if the "record date" for such distribution or rights offering and/or the "ex-date" in connection therewith would fall within the Pricing Period.

 

  

  

  

 

Section 7.05                      Consolidation; Merger Change of Control. In the event that during the Commitment Period: (i) the Company effects any merger or consolidation with or into, or a transfer of all or substantially all the assets of the Company to another entity in which the existing shareholders of the Company hold less than fifty one percent (51%); or (ii) any event occurs which results effectively in a change of Control in the Company, (each a “Consolidation Event”), the Company's right to make any additional Advance shall expire upon the entering by the Company or by its shareholders (as the case may be) into any agreement to effect such Consolidation Event.

 

Section 7.06                      Conditions Precedent to each Closing. The obligations of each of the Parties to consummate each Closing are subject to the fulfillment by the applicable Advance Closing Date, of each of the following conditions.

 

	
  

	
(a)

	
The Company shall have published, with respect to the Shares issuable under the applicable Advance Notice, an effective Shelf Offering Document, signed by the Pricing Underwriter and the Investor, if applicable, under the Shelf Prospectus.

 

	
  

	
(b)

	
Prior to the publication of the applicable Shelf Offering Document, the Company shall have obtained an effective Specific TASE Approval covering the Shares issuable under such Advance Notice.

 

Article VIII. Non-Public Information

 

Section 8.01                      The Company covenants and agrees that it shall refrain from disclosing, and shall cause its officers, directors, employees, advisors and agents to refrain from disclosing, any material non-public information to the Investor and to its advisors (except for the advisors acting under Section 6.03) without also disclosing such information in the Public Filings, unless prior to disclosure of such information to the Investor or to its advisors the Company identifies such information as being material non-public information and provides the Investor with the opportunity, prior to providing the information, to accept or refuse to accept such material non-public information for review. Notwithstanding anything to the contrary herein or in any other agreement between the Company and Investor, neither the Company nor anyone on its behalf shall be required to disclose to the Investor any information that is deemed by the Company to constitute “Inside Information (מידע פנים)” as defined in Section 52A of the Securities Law, or, as a condition to disclosing any such information to the Investor, the Company may require the Investor to sign an undertaking that it will not trade in the Company’s Shares as long as it possesses any such information. The Company undertakes that any material non-public information included in the Disclosure Schedules shall be filed with or furnished to the SEC within 30 days of the date hereof.

 

Article IX. Choice of Law/Jurisdiction

 

Section 9.01                      This Agreement shall be governed by and interpreted in accordance with the laws of Israel without regard to the principles of conflict of laws thereof. The competent courts located in the City of Tel Aviv, Israel, shall have exclusive jurisdiction over any dispute in connection with this letter agreement, and each of the Parties hereby irrevocably submits to the exclusive jurisdiction of such courts.

 

  

  

  

 

Article X. Termination

 

Section 10.01                    Unless earlier terminated as provided hereunder, this Agreement shall terminate automatically on the earliest of (i) the date twenty four (24) (and in the event of the increase of the Commitment Amount in accordance with Section 2.04 – forty eight (48)) months from the Effective Date, or (ii) the date on which the Investor shall have made payment of Advances pursuant to this Agreement in the aggregate amount of the Commitment Amount.

 

Section 10.02                    The Company may terminate this Agreement effective upon fifteen (15) Trading Days’ prior written notice to the Investor; provided that (i) there are no Advances or Advance Notices outstanding, and (ii) the Company has paid all amounts owed to the Investor as of the date of termination pursuant to this Agreement.

 

Section 10.03                    This Agreement may be terminated at any time by the mutual written consent of the Parties, effective as of the date of such mutual written consent unless otherwise provided in such written consent.

 

Section 10.04           The Investor shall have the right to terminate this Agreement in the event that (i) there shall occur any stop order or suspension of the effectiveness of the Shelf Prospectus for an aggregate of ninety (90) days, other than due to the acts of the Investor, during the Commitment Period, or (ii) the Company shall at any time fail materially to comply with the its obligations and covenants under this Agreement and such failure is not cured within thirty (30) days after receipt of a written notice of such breach from the Investor, provided that, in the event there is no stop order or suspension of the effectiveness of the Shelf Prospectus at the time of notice of termination, there are no Advance or Advance Notice outstanding.

 

Section 10.05                    Nothing provided in this Agreement shall be deemed to release the Company or the Investor from any liability for any breach under this Agreement (provided that the amount of such liability may be limited as stipulated in Article V), or to impair the rights of the Company and the Investor to compel specific performance by the other party of its obligations under this Agreement.

 

Article XI. Notices

 

Section 11.01                    All notices or other communications hereunder (except for Advance Notices which shall be delivered in accordance with Annex A) shall be in writing and shall be given: (i) in person, by an overnight courier service which obtains a receipt to evidence delivery, or alternatively (ii) by facsimile transmission accompanied by an email transmission, addressed as set forth below, or such other address or details as any party may designate to the other in accordance with the aforesaid procedure. Notices will be deemed to have been delivered (i) upon receipt, when delivered personally or by an overnight courier service; (ii) upon receipt when sent by facsimile and email. The addresses, email addresses and facsimile numbers for such communications shall be:

 

	
If to the Company, to:

	  
	  	
D. Medical Industries Ltd.

	  	
Attention: Amir Loberman

	  	
Telephone: + 972 (73) 250-7135

	  	
Facsimile: : + 972 (0) 850-0297

	  	
Email: amir@dmedicalindustries.com

 

  

  

  

 

	
With a copy to:

	
Gross, Kleinhendler, Hodak, Halevy, Greenberg & Co.

	  	
Attention: Dr. Shachar Hadar, Adv.

	  	
Email: shacharh@gkh-law.com

	  	
Telephone: + 972 (3) 607-4479

	  	
Facsimile: : + 972 (3) 607-4566

	  	  
	
If to the Investor(s):

	
YA Global Investments, L.P.

	  	
101 Hudson Street – Suite 3700

	  	
Jersey City, NJ 07302

	  	
Attention:            Mark Angelo - Portfolio Manager

	  	
Telephone:          (201) 985-8300

	  	
Facsimile:             (201) 985-8266

	  	
Email: mangelo@yorkvilleadvisors.com

	  	  
	
With a Copy to:

	
David Gonzalez, Esq.

	  	
101 Hudson Street – Suite 3700

	  	
Jersey City, NJ 07302

	  	
Telephone:         (201) 985-8300

	  	
Facsimile:            (201) 369-7779

	  	
Email: dgonzalez@yorkvilleadvisors.com

	  	  
	
With Copy to:

	
Dr. Hilla Peer, Attorneys at Law

	  	
Gibor Sport Tower, 7 Menachem Begin St.,

	  	
Ramat Gan, Israel 52681

	  	
Attention: Dr. Hilla Peer

	  	
Telephone: + 972 (3) 575-1818

	  	
Fax: + 972 (3) 575-0608

	  	
Email: h.peer@drhp-law.com

 

Each party shall provide five (5) days’ prior written notice to the other party of any change in address or facsimile number.

 

Article XII. Miscellaneous

 

Section 12.01                    Counterparts. This Agreement may be executed in two or more identical counterparts, all of which shall be considered one and the same agreement and shall become effective when counterparts have been signed by each party and delivered to the other party. In the event any signature page is delivered by facsimile transmission or by emailing a scanned coy of the signature page, the party using such means of delivery shall cause four (4) additional original executed signature pages to be physically delivered to the other party within five (5) days of the execution and delivery hereof, though failure to deliver such copies shall not affect the validity of this Agreement.

 

Section 12.02                    Entire Agreement; Amendments. This Agreement supersedes all other prior oral or written agreements between the Investor, the Company, their affiliates and persons acting on their behalf with respect to the matters discussed herein, and this Agreement and the instruments referenced herein contain the entire understanding of the Parties with respect to the matters covered herein and therein and, except as specifically set forth herein or therein, neither the Company nor the Investor makes any representation, warranty, covenant or undertaking with respect to such matters. No provision of this Agreement may be waived or amended other than by an instrument in writing signed by the party to be charged with enforcement.

 

  

  

  

 

Section 12.03                    No Assignment. Neither this Agreement nor any rights of the Company or Investor hereunder may be assigned to any other Person.

 

Section 12.04                    Delays or Omissions. No delay or omission to exercise any right, power, or remedy accruing to any party upon any breach or default under this Agreement, shall be deemed a waiver of any other breach or default theretofore or thereafter occurring. Any waiver, permit, consent, or approval of any kind or character on the part of any party of any breach or default under this Agreement, or any waiver on the part of any party of any provisions or conditions of this Agreement, must be in writing and shall be effective only to the extent specifically set forth in such writing. All remedies, either under this Agreement or by law or otherwise afforded to any of the Parties, shall be cumulative and not alternative.

 

Section 12.05                    Severability. If any provision of this Agreement is held by a court of competent jurisdiction to be unenforceable under applicable law, then such provision shall be excluded from this Agreement and the remainder of this Agreement shall be interpreted as if such provision were so excluded and shall be enforceable in accordance with its terms; provided, however, that in such event this Agreement shall be interpreted so as to give effect, to the greatest extent consistent with and permitted by applicable law, to the meaning and intention of the excluded provision as determined by such court of competent jurisdiction. Neither party shall contest the validity of any provision of this Agreement.

 

Section 12.06                    Fees and Expenses.

 

	
  

	
(a)

	
Structuring and Due Diligence Fees. Each of the Parties shall pay its own fees and expenses (including the fees of any attorneys, accountants, appraisers or others engaged by such party) in connection with this Agreement and the transactions contemplated hereby, except that the Company shall pay a structuring and due diligence fee of Twenty Thousand United States Dollars (US$ 20,000) to Yorkville Advisors, LLC (“Yorkville”) of which Ten Thousand United States Dollars (US$ 10,000) was paid prior to the date hereof and the remaining Ten Thousand United States Dollars (US$ 10,000) shall be paid on the date hereof.

 

	
  

	
(b)

	
"Commitment Fee". The Company shall pay the Investor a Commitment Fee in the amount of Two Hundred Thousand United States Dollars (US$ 200,000), which shall due on the tenth (10th) Trading Day following the Effective Date, provided however, that if the Company delivers an Advance Notice to the Investor requesting an Advance of at least Two Hundred Thousand United States Dollars (US$200,000) prior to the due date of the Commitment Fee, then the Commitment Fee shall be due on the same day as the Closing of such Advance.  The Commitment Fee shall be paid in cash either directly by the Company or out of the net proceeds of an Advance made in accordance with the preceding sentence.

 

	
  

	
(c)

	
Additional Commitment Fee.  The Company shall pay to the Investor an additional commitment fee (the “Additional Commitment Fee”) of Two Hundred Thousand United States Dollar (US$200,000) (assuming the Commitment Amount is increased by US$10,000,000 and proportionally if the Commitment Amount is increased by less than US$10,000,000)  on the tenth (10th) Trading Day following the Commitment Increase Date, if any, provided, however, that if the Company delivers an Advance Notice to the Investor requesting an Advance of at least Two Hundred Thousand United States Dollars (US$200,000) prior to the due date of the Additional Commitment Fee, then the Additional Commitment Fee shall be due on the same day as the Closing of such Advance.  The Additional Commitment Fee shall be paid in cash either directly by the Company or out of the net proceeds of an Advance made in accordance with the preceding sentence.

 

  

  

  

 

	
  

	
(d)

	
The Commitment Fee shall be deemed fully earned as of the date the Commitment Fee is due regardless of the amount of Advances, if any, that the Company is able to, or chooses to, request hereunder. The Additional Commitment Fees shall be deemed fully earned by the Investor as of the Commitment Amount Increase Date regardless of the amount of Advances, if any, that the Company is able to, or chooses to, request hereunder.

 

Section 12.07                    Brokerage. Each of the Parties hereto represents that it has had no dealings in connection with this transaction with any finder or broker who will demand payment of any fee or commission from the other party.

 

[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]

  

  

  

IN WITNESS WHEREOF, the Parties hereto have caused this Standby Equity Purchase Agreement to be executed by the undersigned, thereunto duly authorized, as of the date first set forth above.

 

	 	

COMPANY:

	 
	 	D. Medical Industries Ltd.	 
	 	 	 	 
	
 

	
By: 

	/s/  Efraim Argaman	 
	 	Name:	

Efraim Argaman

	 
	 	Title:	

Chief Executive Officer

	 
	 	 	 	 
	 	By: 	/s/ Amir Loberman	 
	 	Name:	Amir Loberman	 
	 	Title: 	Chief Financial Officer	 
	 	 	 	 
	 	YA Global Investments, L.P.	 
	 	 	 	 
	 	By:	Yorkville Advisors, LLC	 
	 	Its:  	Investment Manager	 
	 	 	 	 
	 	By: 	/s/ Matt Beckman	 
	 	Name:	Matt Beckman	 
	 	Title:	Partner

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