EXHIBIT 10.5 FIRST MICRODEL
AGREEMENT OF APRIL 2009
CONTRACT
Made and executed in Tel Aviv on
the 1st day of April 2007
Between :
Microdel Co. Ltd.
Private Co.
51-357787
Of 1 Bezalel
Street, Ramat Gan
(Hereinafter:
“ the Investor ”)
The first
party
And :
Baby’s
Breath Ltd.
Private Co.
51-307694-3
Of Hahadass
Street, Building 5
North
Industrial Park Or Akiva
POB 42, Or
Akiva 30600
(Hereinafter:
“ the Company ”)
The
second party
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The Company is
a limited company duly registered in Israel, which is developing an
inhalation product for infants;
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The Company has
developed a product of inhalation for infants called “Baby
Air” (hereinafter: “ the Product
”);
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The Company
declares that the initial stage of the product’s development
has been concluded and steps may be taken forthwith to market the
product;
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The Company has
contacted the Investor so that the Investor shall invest in the
Company the amount of the investment in cash, as defined herein
below. The Investor shall take steps to market the product for the
Company or to conclude a single sale to a third party of all rights
in the product, inclusive of intellectual property rights in the
product and the rights to manufacture and market the product. And
so that the Investor may grant a variety of services thereto, as
specified herein below in this contract;
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The Investor is
well-suited to invest in the Company the sum of the investment in
cash as well as to take measures to market the product on behalf of
the Company or to make a single sale to a third-party of all rights
in the product as aforesaid as well as to provide the Company with
a variety of services on the conditions and for the proceeds as
specified herein in this Memorandum of Principles below;
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The parties
have formulated principles for the execution of the transaction
between them and would like to put these in writing as part of this
contract, while agreeing that these shall serve as the basis for
the connection thereof in a detailed contract;
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Accordingly, the parties have
agreed, stipulated and declared as follows:
1.
Preamble and Appendices
1.1 The
preamble to this contract constitutes an integral part
thereof.
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The section
titles of this contract are solely for convenience and are not to
be utilized for the interpretation thereof.
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The following
appendices are to be attached hereto to this contract and
constitute an integral part thereof:
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Appendix
2.4 – Printout
of the Registrar of Companies pertaining to the Company
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Appendix
2.11 – A list
of undertakings of the Company
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Appendix
2.21 – A table
of share allocations for the exercise of options
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Appendix
2.14 – Summary
of activities of the Investor and the share allocation made in
accordance thereto
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Appendix
3.2 – Articles
of Association of the Company
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Appendix
3.2.1 – Correct
state of holdings in the Company (which has not yet appeared at the
Registrar of Companies)
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Appendix
4.4 –
Undertaking to maintain confidentiality
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Appendix
D6 – Budgetary
Plan (The budgetary plan shall be attached to this contract within
60 days of the date of signature thereof or up to the date of
payment of half the sum of the investment in cash, as defined
herein below in section 2.15 - $250,000, according to whichever
date is the earlier of the two.)
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Appendices 1.8 and 1.8A
– The proceeds in respect of
the services of the business leader, as defined in section 2.17
herein below, including conditions of the “Bonus for
Success.”
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Appendix
8.5 – A
marketing and sales target plan for the determining
period
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Appendix
10.1 – A
service agreement specifying, inter alia , the nature and
extent of services to be provided by the Investor, as stated in
Section 10.1 herein below.
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Appendix
11.1 – The
engineering specification of the blower/inflator
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2.
Definitions and Interpretation
The following
terms shall have the meaning specified alongside thereof herein in
this contract:
2.1 “
The Company ” – Baby’s Breath Co.
Ltd.
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“ The
Determining Price ” – For the purposes of this
contract the amount of U.S. $4,000,000.00 (USD four
million)
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“
Price Per Percent ” – The amount of $40,000 U.S.
(USD forty thousand)
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“
Company Shareholders ” – As specified in the
printout of the Registrar of Companies, attached hereto to this
contract as Appendix 2.4 and constituting an
inseparable part thereof.
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“
Company Activities ” – Product development
and/or marketing of the product and/or manufacturing the
product
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Final Marketing Target ” – The sum of orders
and/or sales (hereinafter: “ Sales ”) of 170,000
(one hundred and seventy thousand) units of the product to be sold
by the Company within the determining period, whether as a result
of activities performed by the Investor and/or anyone on behalf
thereof or in any other manner. For the purposes of the aforesaid,
product units that are sold and/or transferred at the cost price or
prices lower than the price it costs the Company shall not be taken
into account.
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“
Final Profit Target ” – Pretax profits in a
cumulative amount of U.S. $1,500,000 (USD one million five hundred
thousand), which accrue to the Company in the course of thirty (30)
months, commencing on the date of signature of this contract,
whether as a result of activities performed by the Investor and/or
anyone on behalf thereof or in any other manner.
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“
Blower ” – Electric blower (compressor)
connected to the product.
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“
Determining Period ” – A period of thirty (30)
months commencing on the date of signature of this
contract.
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“
Inspection Period ” – A period commencing on the
date of signature of this contract and terminating on the
conclusion of six (6) months from the date of signature of this
contract or on the date of provision of the Notice of Existence, as
this term is defined in section 5.4 herein below, whichever is the
earlier of the two.
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“
Company Undertakings ” – As specified in
Appendix 2.11 attached hereto to this contract and constituting an
inseparable part thereof.
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“
Current Product Units ” – Thirty product units
to be produced by the Company prior to the signature of this
contract.
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“ Set
of Molds ” – The number of molds required to
constitute the platform for manufacture of an entire product
(including the blower) in accordance with the specification to be
determined and authorized in advance and in writing by the
Company.
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“
System for Investor Activities and Allocation of Allocated
Shares ” – The system used for Investor activities
and share allocations in accordance thereto, attached hereto to
this contract as Appendix 2.14 and constituting an
inseparable part thereof.
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“
Amount of Cash Investment ” – The sum of U.S.
$500,000 (USD five hundred thousand), which the Investor undertakes
to invest in the Company in the event that it decides up to
termination of the Inspection Period that it would like to invest
in the Company and provide services thereto, as stated herein below
in this contract.
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“ The
Allocated Shares ” – The shares designated for
allocation to the Investor (including those as a result of the
exercise of the call options) if the full sum of the inclusive
investment is invested in the Company, as defined herein below,
which shall purchase 50% of the entire ordinary A and B share
capital of the Company, if allocated in full at the time of
signature of this contract.
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“ Call
Options ” – As defined herein below in section
7.1.
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“
Security ” – Shares and/or any options to be
given pursuant to this contract.
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“
Business Leader ” – A business leader to be made
available to the Company by the Investor, the selection whereof
requires the agreement of the Company, all as subject to the
provisions of this contract.
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“ Date
of Signature of This Contract ” – The date whereon
all the following conditions have been fulfilled
cumulatively:
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Actual
signature of this contract, inclusive of the appendices
thereto.
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Authorization
of the Company Board of Directors for the signature of this
contract (hereinafter: “ Authorization of the
Connection ”). The Company undertakes that the Board
of Directors of the Company shall convene to discuss the
authorization of the connection within thirty (30) days of the date
of signature of this contract (hereinafter: “ the
Authorization Period ”). The parties may extend the
authorization period from time to time by way of written contract
to be signed by both parties. The parties hereby agree that in the
event that authorization of the connection fails to be obtained
within the authorization period, this contract shall be deemed as
revoked and the parties shall have no contention and/or demand each
vis-à-vis the other.
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“
Share Allocation Table for Exercise of Options ”
– A table attached hereto to this contract as Appendix
2.21 and constituting an inseparable part thereof with
details of the numbers of shares allocated in all possible
alternatives of the full exercise of the call options, pursuant to
this contract, in accordance with the chronological order of the
exercise.
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3.
Shareholders and Company Declarations
The Company
declares and undertakes the following:
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The Company is
a private company duly registered in Israel and under the ownership
and full control of the shareholders. Further, there is no decision
or order for liquidation or receivership against the Company or
shareholders thereof and no caution has been received of any intent
to request such an order.
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The
Company’s registered share capital is in the amount of NIS
1,000,000 (one million New Israeli shekels) nominal value divided
into 450,000 (four hundred and fifty thousand) ordinary A shares of
NIS 1.00 nominal value, 450,000 (four hundred and fifty thousand)
ordinary B shares of NIS 1.00 nominal value and 100,000 (one
hundred thousand) ordinary C shares of NIS 1.00 nominal value. Of
the Company’s registered capital, 11,765 (eleven thousand
seven hundred and sixty-five) ordinary A shares and 11,765 (eleven
thousand seven hundred and sixty-five) ordinary B shares have been
issued. A printout of the Registrar of Companies is attached hereto
to this contract as Appendix 2.4 (the Company
Articles of Association and all updates that applied thereto are
attached to the agreement as Appendix 3.2 . In
accordance with the understandings between the Company and the
shareholders of Life Sport Ltd., it has been agreed that part of
the allocated shares to Y.S.R. Trust Properties Ltd. and held in
trust for Life Sport (1,547 ordinary B shares) shall become
deferred shares with no rights, save for the right to receive the
nominal value thereof at liquidation. Following the application of
the aforesaid agreement, the state of shareholder holdings in the
Company shall be as specified in Appendix 3.2.1 while
the allocated and paid capital of the Company shall include 11,765
ordinary A shares and 10,218 ordinary B shares (and an undertaking
to allocate 500 ordinary C shares to Amado, as stated in section
3.3 herein below).
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As of the date
of signature of this contract, there is no other undertaking and/or
understanding, whether written or verbal, to allocate Company
shares and no option and/or options and/or any other securities
convertible to Company shares have been granted, which are valid at
the time of this contract, save for an undertaking vis-à-vis
A.T. Maagal Shivuk U’Pituach Iski Ltd. (hereinafter: “
Amado ”) to allocate to him 2.5% of Company shares at
the time that Life Sport Ltd. enters (500 shares), while these
shares shall be solely property shares, that is Type C shares, as
defined in the Company’s Articles of Association, which fail
to grant any right to vote whatsoever and/or right to appoint a
director and the sole right they do grant the holder thereof is the
right to receive a share in Company profits, all as specified in
the Company’s Articles of Association.
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The directors
of the Company are Avraham Afori, Adi Fleschkat, Tzvika Sharf,
Golan Gilad and Assaf Halamish.
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The Company is
the sole proprietor of the Company’s activities.
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Apart from the
Company’s undertakings, the Company has no additional
undertakings and has not given any valid undertaking to conclude
any transaction with any third party whatsoever in connection with
Company activities.
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Subject to the
contents stated herein below concerning the right of Company
shareholders to join in any share allocation in the Company as
aforesaid in Regulation 10 of the Company Articles of Association,
the Company for its part has no preclusion to enter into this
contract subject to the contents of section 18.1 herein
below.
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The Company is
not a party to any pending legal claim of action, civil or
criminal, and is not a party to any other legal proceeding
conducted in a court and/or tribunal and/or before an arbitrator
and it has no knowledge of any intent of any third party whatsoever
to initiate proceedings against it.
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Subject to the
provisions of this contract herein below, there is no preclusion on
the part of the Company to enter into this contract.
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Commencing on
the date of signature of this contract and as long as this contract
remains in force, the Company shall notify the Investor of any
unusual activity not in the ordinary course of business of the
Company.
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4.
Declarations of the Investor
The Investor
declares and undertakes the following:
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That it has the
knowledge and experience required to market the product and/or to
acquire a final marketing target and/or a final profit target
and/or to find a purchaser to purchase all rights in the product
and it has the financial capacity to fulfill the undertakings
thereof subject of this contract.
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That it has the
knowledge and experience necessary to set up a manufacturing system
for the product (both for molds and the blower) whether of its own
accord or by means of anyone on behalf thereof.
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That it shall
duly make all decisions and/or acquire all authorizations necessary
thereto, pursuant to any law and pursuant to the documents of
incorporation thereof, to enter into this contract and perform all
undertakings thereof pursuant thereto. And that it does not require
the consent and/or authorization of any other third party to enter
into this contract and perform all undertakings thereof specified
herein, save for the authorizations required pursuant to this
contract.
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That it shall
sign at the same time as the signature of this contract an
undertaking to maintain confidentiality with the text of
Appendix 4.4 to this contract. And it shall have
anyone on behalf thereof who shall engage on behalf thereof in
Company affairs sign a letter of undertaking with a similar text
and shall deliver a copy of the aforesaid to the Company forthwith,
proximate to the signature thereof.
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Forthwith upon
signature of this contract and throughout the inspection period,
the Investor undertakes to perform the following
actions:
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To strictly
examine the presentations of the Company and the advisability of
its investment in the Company. Subject to this, the Company shall
enable the Investor to perform all inspections it requests in
connection with the state of the Company, and the assets and
business thereof to the satisfaction of the Investor. In the event
the Investor arrives at a decision to invest in the Company the sum
of the cash investment, the matter shall be carried out according
to the As-Is state of the Company. And the Investor shall have no
contentions or claims whatsoever vis-à-vis the Company
and/or directors thereof and/or shareholders thereof in connection
with the state of the Company, save for inaccurate declarations
and/or presentations made with malicious intent and with respect
thereto the Investor may sue the Company solely for direct
damage.
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To act and
perform all that is required in coordination with the Company and
the agreement thereof in advance to further sales of the product
and the marketing thereof abroad. Without derogating from the
aforesaid, the Investor undertakes to make available to the Company
the business leader who shall act in coordination with the Company
to plan setting up a marketing system for the product abroad during
the inspection period. To the activities of the business leader the
following provisions shall apply:
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The Investor
and business leader may not undertake in the name of the Company
and/or sign in the name thereof any agreements and/or introduce
themselves as authorized therefore, both during the course of the
inspection period and during the course of the determining period,
if there is such.
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Upon conclusion
of the inspection period and during the course of the determining
period, the business leader shall be an employee of the Investor or
a provider of services to the Investor. And any monetary
undertakings in the employment thereof and/or in the provision of
services thereof shall apply to the Investor and it shall pay them,
unless one of the events specified herein in Appendix
8.1 occurs, entitling the Investor to receive proceeds in
respect of the business leader’s services in addition prior
to the conclusion of the inspection period, all as specified in
Appendix 8.1 herein below. There shall be no
employer-employee relations between the Company and the business
leader and no relations of a provider of services to client
either.
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Any expenses of
marketing and sales promotion during the inspection period shall
apply to the Investor and it shall pay them, without the Investor
being permitted to charge the Company in respect thereof, unless
one of the events listed in Appendix 8.1 occurs
during the inspection period, entitling the Investor to receive
proceeds in respect of the business leader’s services also
prior to the conclusion of the inspection period, all as specified
in Appendix 8.1 herein below.
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Any marketing
and sales promotion activity of the Investor during the inspection
period (as well as during the determining period) shall require the
Company’s agreement in advance. The Investor and business
leader shall deliver to the Company in advance a list of companies
and/or bodies they intend to contact with the aim to market the
product to them and/or by means thereof and the Investor and
business leader shall deliver to the Company copies of all
correspondence with third parties concerning the product. Nothing
in the aforesaid may derogate from the provisions of section 8.4
herein below.
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The Investor is
liable so that the business leader shall convey to the Company
every month a report on the monthly activities thereof wherein it
shall specify all marketing and sales activities conducted during
the past month as well as a plan of its activities for the next
month. Nothing in the aforesaid may derogate from the aforesaid
with respect to the business leader’s duty to act, at all
times, in coordination with the Company and the agreement thereof.
The aforesaid in this section shall apply also during the
determining period, if there is such.
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The Company may
refuse, solely on reasonable grounds, any order for products and/or
any other transaction the business leader initiates.
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The Company
shall do everything necessary to enable the complete fulfillment of
every transaction it has authorized in writing (hereinafter:
“ An Authorized Transaction ”). The Company
shall indemnify the party with which it entered into an authorized
transaction in the event that it breaches the transaction
therewith, inclusive of the Investor, if with respect to the same
transaction the Investor was a party to the authorized
transaction.
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To undertake
planning the full set of molds (inclusive of with respect to the
blower) in accordance with the engineering specification whereto
the parties agree and to take all necessary steps, in coordination
with the Company in advance, inclusive of assisting the Company in
the process of acquiring authorization (regulation) for a blower
from the American Food and Drug Administration (FDA) and other
relevant authorities, insofar as there are such, so that, at the
earliest possible date following signature of this contract, the
manufacture of an entire set of molds enabling serial production of
the product by means of the set of molds shall be fulfilled as
follows:
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Within thirty
(30) days of the date of signature of this contract, the parties
shall complete a technical specification for plans, excluding the
blower. Forthwith following the completion of the technical
specification, the Investor, by way of an external contractor,
shall make a model and persist consistently in order to have the
model authorized as soon as possible.
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Within 75 days
of authorization of the model, the molds shall be produced and
transferred to the ownership of the Company. With respect to the
molds for the production of the blower, the provisions of section 0
herein below shall apply as well.
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For the
avoidance of doubt, it is hereby clarified that the Company shall
bear all payments required for procedures of authorization as
aforesaid, inclusive of fees for the external contractor required
to obtain FDA authorization and any payment the Company is required
to pay directly to FDA authorities to have the full set of molds
authorized. It is further clarified that the Investor shall bear
any expenses of planning and production of the full set of molds,
as aforesaid.
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During the
inspection period, the Company may conduct its business without any
restrictions as it deems fit, provided that if it finds an
alternate investor to the Investor (hereinafter: “ the
Alternate Investor ”) prior to the conclusion of the
inspection period, the Company shall grant the Investor the right
of first refusal to connect with the Company on the conditions
offered by the Alternate Investor. If the Company finds an
Alternate Investor, as aforesaid, the Investor shall be given the
right of first refusal to make available to the Company the sum of
the investment subject of the Alternate Investor’s investment
in place of the Alternate Investor. The Investor shall utilize the
right of first refusal within fifteen (15) days of the day the
Company gave notice with respect to finding an alternate investor.
If the Investor chooses to place at the Company’s disposal
the sum of the investment subject of the Alternate Investor’s
offer, as aforesaid, the sum of the aforesaid investment shall be
credited on account of the sum of the additional investment, as
defined in section 6.1 herein below.
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Upon
termination of the inspection period and/or the expiration thereof
and/or the revocation of this contract, the right of first refusal
granted to the Investor pursuant to the provisions of this section
shall also expire.
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If, during the
course of the inspection period and until the conclusion of the
inspection period, the Investor decides that it no longer wishes to
invest in the Company the sum of the cash investment and provide it
with the services subject of this contract, whatever the reasons
for its decision (hereinafter: “ Cancellation at the
Investor’s Initiative ”), it shall give notice
thereof in writing to the Company up to and no later than the
termination of the inspection period and the following provisions
shall apply thereto:
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The Investor
shall deliver to the Company all information, correspondence,
survey results, potential customers’ responses as well as any
other documents relating to the product and the efforts to market
the product abroad.
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The Investor
shall deliver to the Company all products of its activities in
connection with the planning, design and production of the full set
of molds (inclusive of that of the compressor) until the date of
giving notice of cancellation at the Investor’s initiative
(hereinafter: “ the Products of Activities to Prepare a
Full Set of Molds ”).
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The Investor
shall be entitled to receive from the Company sums of money
reflecting the direct costs to the Investor of the preparation of a
full set of molds, which it actually expended up to the date of
cancellation at the Investor’s initiative and as authorized
by the Company prior to the disbursement thereof (hereinafter:
“ the Cost of the Products ”). The cost of the
products shall be determined based on the invoices the Investor
presents to the Company indicating payments of funds to third
parties. Nonetheless, in any event, the cost of planning, design
and production of a full set of molds for the product (without the
blower) up to the stage wherein it is possible to produce therewith
a serialized product shall not exceed U.S. $100,000 (USD one
hundred thousand). With respect to the blower, the upper limit of
the amount until after production of a full set of molds for the
production thereof shall not exceed U.S. $80,000 (USD eighty
thousand).
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In the event of
a dispute with respect to the cost of the products, as aforesaid in
sub-section 5.3.3, an arbitrator, as defined in section 0 herein
below, shall decide the dispute.
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The cost of the
products, as aforesaid in section 5.3.3, shall be paid to the
Investor from future Company profits and/or from the funds of the
Alternate Investor.
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Notwithstanding
the aforesaid in section 5.3.3 above, in return for payment of the
cost of the products, the Company may allocate to the Investor
shares in the Company, which following the allocation shall be part
of the allocated A and B share capital in the proportion of the
cost of the products to the determining price.
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This contract
shall be brought to an end with the performance of the contents of
this section 5.3 and the parties shall have no contentions and/or
claims each toward the other.
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If, during the
course of the inspection period, the Company decides that it does
not want the Investor to invest in the Company the sum of the cash
investment and it is not interested in the performance of this
contract, not as a result of any breach of this contract by the
Investor, the Company shall notify the Investor thereof in writing
(hereinafter: “ Notice of Intent to Revoke ”).
If a notice of intent to revoke is given, notwithstanding the
notice of intent to revoke, the Investor may inform the Company
within no more than fifteen (15) days of receiving the notice of
intent to revoke that it is interested in the fulfillment of this
contract (hereinafter: “ Notice of Fulfillment
”) and attach to the notice of fulfillment a bank check in
favor of the Company in an amount equivalent in shekels to U.S.
$250,000 (USD two hundred and fifty thousand). Provision of such
notice, as aforesaid, to which a bank check has not been attached
shall not be deemed as giving notice of fulfillment.
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In the event of
the provision of a notice of fulfillment together with a bank
check, as aforesaid, the Inspection Period shall be deemed to
conclude at that same time and the Investor shall be deemed as
having invested half the sum of the Cash Investment.
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If the Company
gives notice of intent to revoke and the Investor failed to deliver
within fifteen (15) days notice of fulfillment with a bank check
attached thereto, as aforesaid, this contract shall be deemed as
having been terminated at the Company’s initiative
(hereinafter: “ Revocation at the Company’s
Initiative ”), and in such event the following provisions
shall apply:
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The provisions
of sections 5.3.1 to 5.3.4 above shall apply as well as the
provisions of sections 5.3.6 to 5.3.7 above, mutatis mutandi
. However, the cost of the products shall be paid to the Investor
within a period that fails to exceed one hundred and twenty (120)
days.
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The Investor
shall be entitled to compensation in respect of its activities on
behalf of the Company during the period from the date of signature
of this contract until the date of revocation at the
Company’s initiative (hereinafter: “ The Halted
Period of Activity ”), in accordance with one of the
following alternatives as the Company shall choose:
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The Company
shall pay the Investor the sum of
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NIS 30,000 a
month in respect of the period of activity that was halted. Payment
shall be made within no more than one hundred and twenty (120) days
of the date of provision of the notice of revocation at the
Company’s initiative.
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The Company
shall allocate to the Investor shares in the Company granting it
holdings in the Company, as of the date of the allocation at a rate
of half a percent (0.5%) a month throughout the halted period of
activity. The aforesaid comes in addition to payment of the cost of
the products by the Company.
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The parties
hereby agree that the compensation aforesaid in sub-section 5.5.2
above shall be paid solely if the Investor transmits to the Company
a detailed report with respect to activities it undertook during
the halted period of activity and subject to the fact that during
the halted period of activity, the Investor fulfilled its
undertakings, pursuant to this contract in a reasonable manner. In
the event that the Investor failed to fulfill its undertakings in a
reasonable manner during the halted period of activity or the
revocation at the Company’s initiative is the result of an
act and/or omission on the part of the Investor or if an essential
detail is disclosed, which the Investor failed to disclose to the
Company prior to its entering into this contract and/or in a
detailed agreement, then the Investor shall not be entitled to
compensation, as aforesaid in section 5.5.2 above.
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It is hereby
clarified that the Investor may curtail the period of inspection by
the payment of the sum of U.S. $250,000 (USD two hundred and fifty
thousand) to the Company. In the event of payment, as aforesaid,
the inspection period shall be terminated on the date of actual
payment of the aforesaid amount.
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In the event
this contract is not terminated early up to the conclusion of the
inspection period by any one of the parties, as aforesaid in
section 0 above, the Investor undertakes to invest in the Company
the sum of the investment in cash in accordance with the contents
of section 6.3 herein below. The Investor may also invest in the
Company an additional sum apart from the sum of the cash investment
that is not to exceed U.S. $1.5 million dollars (USD one million
five hundred thousand) (hereinafter: “ the Sum of the
Additional Investment ”) and, in total, an amount not to
exceed U.S. $2,000,000 (USD two million dollars) (hereinafter:
“ the Comprehensive Sum of the Investment
”), in accordance with the provisions of this contract
following herein below.
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In return for
an investment equivalent to the price of a percent, the Company
shall allocate to the Investor shares in the Company reflecting a
rate of holdings of one percent of the issued shares of the
Company, in full dilution, accurate to the date of signature of
this contract. For the avoidance of doubt, the provisions of this
section shall apply relatively also to investments that are less
than the price per percent.
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The parties
hereby agree that the investment of the sum of the cash investment
and the investment of the sum of the additional investment, as
aforesaid in sub-section 6.1 above, shall constitute, in any event,
share capital, which the Company shall not be obligated to refund
to the Investor.
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The Investor
undertakes that the sum of the cash investment ($500,00) shall be
invested in the Company by way of an investment in the
Company’s capital, according to the following
dates:
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At the
conclusion of the inspection period – U.S. $250,000 (USD two
hundred and fifty thousand). The parties hereby agree that if the
Investor refrains from investing this sum by the conclusion of the
inspection period, this shall signify, for the purposes of this
contract, a notice of revocation at the Investor’s
initiative, whereto the provisions of sub-section 5.3 above shall
apply.
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Within twelve
(12) months of the date of payment aforesaid in sub-section 6.3.1
above – an additional U.S. $250,000 (USD two hundred and
fifty thousand).
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In addition to
the sum of the cash investment, which the Investor undertakes to
invest in the Company on the dates as specified above (and provided
that this contract is not brought to early termination prior to the
conclusion of the inspection period, as aforesaid in section 0
above), the Investor may (but is not obligated to) invest in the
Company in the course of a period of twenty-four (24) months from
the conclusion of the inspection period, an additional sum not to
exceed the sum of the additional investment (i.e., up to an
additional U.S. $1.5 million, apart from the sum of the cash
investment). In such event, a share allocation to the Investor
shall be performed in accordance with the sum of the actual
investment as opposed to the price of one percent.
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If the Investor
fails to fulfill its undertaking to invest the full balance of the
sum of the cash investment on time, as aforesaid in sub-section
6.3.2 above (for the avoidance of doubt, with respect to the
failure to pay the first sum of $250,000, the contents of
sub-section 6.3.1 above shall apply) and provided that the Investor
notifies the Company in writing up to no later than the conclusion
of nine (9) months following the date of the first payment on
account of the sum of the cash investment, that it has no intention
of investing the balance of the sum of the cash investment, the
Company may (but is not obligated to) take the following
measures:
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To revoke this
contract; as well as or solely in accordance with Company
discretion.
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To inform the
Investor that in place of receiving up to the same date shares in
the Company and/or options for the purchase of shares in the
Company, which reflect the actual comprehensive investment in the
Company up to the same date, in accordance with the price for a
percent and the principles specified herein in this contract
(hereinafter: “ the Securities Owing to the
Investor Had It Fulfilled Its Undertakings Up To the Date of
Calculation ”), the Investor shall be entitled to
receive in respect of its investment in the Company up to the same
date solely 78% (seventy-eight percent) of the extent of securities
owing to the Investor had it fulfilled its undertakings prior to
the date of calculation.
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In the event
that the Investor fails to fulfill its undertakings to invest the
full balance of the sum of the cash investment and fails to give
notice of such intent by the conclusion of the 9-month period, as
aforesaid, the matter shall be deemed a fundamental breach of the
provisions of this contract, granting the Company the right both to
rescind this contract and to forfeit all shares allocated and/or to
turn them into deferred shares absent of rights. And the Investor
shall not be entitled to any shares whatsoever in the Company
and/or to a refund of any monies whatsoever in respect of its
investments and activities on behalf of the Company.
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The sum of the
cash investment shall serve the Company for the ongoing
requirements thereof in accordance with the work plan attached
hereto to this contract within sixty (60) days of the date of
signature thereof or up to the date of performance of the first
payment on account of the cash investment ($250,000), whichever
date is the earlier (hereinafter: “ the Budgetary Plan
”). The Company shall utilize the sum of the cash investment
in accordance with the budgetary plan, while a divergence of up to
15% may be permitted among the elements thereof. Any substantial
divergence from the budgetary plan apart from the aforesaid
departure shall require a decision of the Company Board of
Directors.
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In any event
where this contract fails to be brought to early termination up to
the conclusion of the inspection period by either of the parties,
as aforesaid in section 0 above, and subject to the actual
investment of the first payment on account of the cash investment
according to the provisions of section 6.3.1 above, and in
accordance with the remaining provisions of this contract, rights
to purchase additional shares in the Company are hereby given to
the Investor as follows:
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The right to
purchase shares in the Company constituting twenty-seven (27)
percent of the issued and paid share capital of the Company, fully
diluted, accurate to the date of signature of this contract (i.e.,
if the option had been exercised in full on the date of signature
of this contract), while of each type of A and B shares shall be
allocated twenty-seven (27) percent of the number of the aforesaid
shares, allocated at the time of signature of this contract, as
aforesaid (hereinafter “ the First Option ”),
that is, in accordance with the number of shares stated in the
share allocation option exercise table and subject to the
provisions of section 7.1.5 herein below.
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The right to
purchase shares in the Company constituting two and a half (2.5)
percent of the issued and paid capital of the Company, fully
diluted, accurate to the date of signature of this contract (i.e.,
if the option had been exercised in full on the date of signature
of this contract), while of each type of A and B shares two and a
half (2.5) percent shall be allocated of the number of the
aforesaid shares allocated to shareholders in the Company at the
time of signature of this contract, as aforesaid (hereinafter:
“ the Second Option ”), that is in accordance
with the number of shares stated in the share allocation option
exercise table and subject to the provisions of section 7.1.5
herein below.
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The right to
purchase shares in the Company constituting six (6) percent of the
issued and paid capital of the Company, fully diluted, accurate to
the date of signature of this contract (i.e., if the option had
been exercised in full on the date of signature of this contract),
while of each type of A and B shares six (6) percen
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