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Wilbur H. Gantz

 

 

October 16, 2013

 

RE:Medgenics, Inc. (the “Company”)

 

Dear Bill,

 

I am writing to you on behalf of the board of directors of the Company to
confirm arrangements with regard to the terms of appointment to office as a
director of the Company from the date of this letter.

 

1Definitions

 

For the purposes of this Letter, the following words or expressions shall have
the following meanings respectively:

 

“AIM”means the AIM Market of London Stock Exchange plc;

 

“Biopump”means a micro organ which has undergone ex-vivo transduction with a
vector such that it produces and secretes a desired therapeutic protein;

 

“Board”means the board of directors of the Company, including any committee of
the Board duly constituted by it;

 

“Businesses”means:

 

(a)the business of the research, development, design, production, manufacturing,
marketing, sale, distribution and other commercial activities of any Group
Company in relation to the Group’s proprietary and/or licensed technology
concerning a platform technology for the treatment of various diseases and/or
chronic disorders and conditions whereby a sliver of human dermal tissue is
converted into an internal protein production plant, through ex vivo
transduction with a viral or non-viral vector, and the processed tissue is
re-implanted under the human donor’s skin to provide therapeutic levels of
protein delivery; and

 

(b)any other business that any Group Company shall at the relevant date;

 

(i)be engaged in and with which you shall have been concerned or involved to any
material extent at any time during Your Appointment; or

 

(ii)have determined to carry on with a view to developing any other biotechnical
technology for commercial exploitation in the future and in relation to which
determination you shall at the Termination Date possess any material
Confidential Business Information;

 

“Confidential Business
Information”means all and any Corporate Information, Marketing Information,
Technical Information and other information (whether or not recorded in
documentary form or on computer disk or tape) which the Company or any Group
Company treats as confidential or in respect of which it owes an obligation of
confidentiality to any third party, which is not in the public domain:

 

 

 

 

(a)which you shall have acquired or shall hereafter acquire at any time during
Your Appointment but which does not form part of your own stock in trade; and

 

(b)which is not readily ascertainable to persons not connected with the Company
or any Group Company;

 

“Corporate Information”means all and any information (whether or not recorded in
documentary form or on computer disk or tape) relating to the business methods,
corporate plans, management systems, finances, maturing new business
opportunities or research and development projects of the Company or any Group
Company;

 

“DGCL” means Delaware General Corporation Law;

 

“Group”means the Company and its affiliates, including any company that
controls, is controlled by, or is under common control with the Company, as
defined in Rule 3b-18 of the Securities Exchange Act of 1934, as amended from
time to time, including, without limitation to the generality of the foregoing,
Medgenics Medical (Israel) Limited;

 

“Group Company”means a member of the Group and “Group Companies” shall be
interpreted accordingly;

 

“Marketing Information”means all and any information (whether or not recorded in
documentary form or on computer disk or tape) relating to the marketing or sales
of any past present or future product or service of the Company or any Group
Company including, without limitation, sales targets and statistics, market
share and pricing statistics, marketing surveys and plans, market research
reports, sales techniques, price lists, discount structures, advertising and
promotional material, the names, addresses, telephone numbers, contact names and
identities of customers and potential customers of and suppliers and potential
suppliers to the Company or any Group Company, the nature of their business
operations, their requirements for any product or service sold to or purchased
by the Company or any Group Company and all confidential aspects of their
business relationship with the Company or any Group Company;

 

“Material Interest” means:

 

(a)the holding of any position as director, officer, employee, consultant,
partner, principal or agent;

 

(b)the direct or indirect control or ownership (whether jointly or alone) of any
shares (or any voting rights attached to them) or debentures save for the
ownership for investment purposes only of not more than five percent (5%) of the
issued shares of any company whose shares are listed on any national securities
exchange (as defined in Section 3(a)(1) of the Securities Exchange Act of 1934,
as amended from time to time), or any similar exchange in jurisdictions outside
the United States, including AIM; or

 

(c)the direct or indirect provision of any finance;

 

other than on behalf of any Group Company for the legitimate purposes of that
Group Company;

 

“Technical Information” means all and any trade secrets, secret formulae,
processes, inventions, designs, know-how discoveries, technical specifications
and other technical information (whether or not recorded in documentary form or
on computer disk or tape) relating to the creation, production or supply of any
past, present or future product or service of the Company or any Group Company;

 

 

 

 

“Termination Date” means the date of the termination of Your Appointment; and

 

“Your Appointment” means your appointment to and holding of office as a director
of the Company as confirmed by this letter.

 

2Duties

 

2.1As a director of the Company you will be expected to exercise the general
fiduciary duties and duties of care and loyalty as provided under the DGCL and
provide such advice and services as the Board may reasonably require.

 

2.2The Board as a whole is collectively responsible for the success of the
Company. The Board’s role is to:

 

2.2.1provide entrepreneurial leadership of the Company within a framework of
prudent and effective controls, which enable risk to be assessed and managed;

 

2.2.2set the Group’s strategic aims, ensure that the necessary financial and
human resources are in place for the Company to meet its objectives and review
management performance; and

 

2.2.3set the Company’s values and standards and ensure that its obligations to
its shareholders and others are understood and met.

 

2.3In your role as a non-executive director, you shall be required to:

 

2.3.1constructively challenge and contribute to the development of the Group’s
strategy;

 

2.3.2scrutinize the performance of management in meeting agreed goals and
objectives and monitor the reporting of performance;

 

2.3.3satisfy yourself that financial information is accurate and that financial
controls and systems of risk management are appropriate, robust and defensible;

 

2.3.4endeavor to attend all meetings of the Board and the annual and all other
meetings of the shareholders of the Company;

 

2.3.5at all times comply with the certificate of incorporation and bylaws of the
Company, each as the same may be amended or restated from time to time;

 

2.3.6abide by your fiduciary duties as a director of the Company;

 

2.3.7diligently perform your duties;

 

2.3.8immediately report your own wrongdoing or the wrongdoing or proposed
wrongdoing of any other employee or director of the Company of which you become
aware to the Chairman of the Company; and

 

2.3.9comply with the terms of the Code of Business Conduct and Ethics adopted by
the Board (a copy of which is annexed hereto) and any other code of practice
issued by the Company from time to time relating to dealing in the Company’s
securities.

 

2.4In addition, your duties shall require that you shall:

 

2.4.1promote the highest standards of integrity, probity and corporate
governance throughout the Company, particularly at Board level;

 

2.4.2use your best endeavors to ensure that the Board receives accurate, timely
and clear information;

 

2.4.3use your best endeavors to ensure effective communication with
shareholders;

 

2.4.4use your best endeavors to facilitate the effective contribution of
non-executive directors and to ensure constructive relations are maintained
between the executive and non-executive directors;

 

2.4.5ensure that the performance of the Chief Executive Officer (and of any
other executive director(s) from time to time) is evaluated at least once a
year; and

 

 

 

 

2.4.6at the request of the Company, serve on committees of the Board as shall be
agreed between you and the Chairman of the Company.

 

3Time Commitment

 

You shall work such hours per week over the term Your Appointment as are
necessary for the proper performance of your duties as a non-executive director
of the Company.

 

4FEES

 

You will be entitled to certain cash fees in connection with your services as
set forth below:

 

i. Annual retainer fee $ 15,000 ii. Per Board or Committee Meeting fee
(including telephonic) (varies depending on location and type) $  1,000 – $2,500
iii. Annual retainer fee for director acting as Chairman of committee (per
committee) $  5,000

 

The annual retainer fees are paid on a fiscal year basis and shall be prorated
for any partial year of Board service. The fees and the terms prescribing the
frequency of payment are subject to change upon the determined of the
Compensation Committee of the Board. On termination of your Appointment you will
(if applicable) be paid your director’s fee on a pro-rata basis, to the extent
unpaid up to the Termination Date.

 

You will receive stock options to acquire 300,000 shares of common stock upon
Your Appointment. Such options will be issued under the Company’s Stock
Incentive Plan, as amended (the “Stock Plan”), and will vest in three equal
installments, with the first 100,000 options vesting upon the date of issuance,
the second 100,000 options vesting on first anniversary of the effective date of
Your Appointment and the remaining options vesting on the second anniversary of
the effective date of Your Appointment, subject in each case to your continued
service as a director of the Company. You will be entitled to participate in any
equity compensation program established for non-executive directors beginning in
2014. Currently, the Company has established a plan to make annual restricted
share and option grants under the Stock Plan to be made on January 2nd of each
year (or on the first business day thereafter or (as applicable) as soon as
practical thereafter when the Company is not in a close period) as follows (i)
7,000 shares of restricted stock with 50% vesting one day after grant and the
remaining 50% vesting on the first anniversary of grant; and (ii) options to
purchase 15,000 shares, having a 10 year term and vesting in equal installments
over 3 years. You acknowledge that the Company may determine to change this
equity compensation program and this Letter shall in no way be deemed to be a
guarantee of future option grants.

 

5Term of office

 

Your Appointment commenced on the date of this Letter and shall continue
following the date of this Letter unless or until your successor is elected and
qualified or until your earlier resignation or removal. You agree that you will
give not less than sixty (60) days’ (or such lesser period if agreed by the
Board) prior notice in writing to the Company in the event you wish to resign
prior to the expiration of your term or in the event you do not wish to stand
for re-election at the Company’s annual meeting of stockholders.

 

For the avoidance of doubt, by your counter-signature hereto, you acknowledge
that your continuation in office is subject to the DGCL and the certificate of
incorporation and bylaws of the Company, each as the same may be amended or
restated from time to time.

 

On termination of Your Appointment for whatever reason you will promptly return
to the Company all documents, records, keys, correspondence or other items in
your possession or under your control which relate in any way to the business or
affairs of, or are the property of, the Company or any Group Company and all
copies thereof, regardless of the medium upon or in which such copies are stored
or held. In addition, you will cease to use the Company’s facilities and cease
to hold yourself out as being a director of the Company.

 

 

 

 

6Expenses

 

The Company shall reimburse you in respect of all reasonable travelling, hotel,
entertainment and other out of pocket expenses properly and necessarily incurred
by you in or about the performance of your duties under this Agreement, subject
to the production (if requested) of any receipts, vouchers and other supporting
documentation that the Company shall reasonably require.

 

7Confidentiality

 

7.1Both during the currency and after the Termination Date, you will treat all
Confidential Business Information as confidential and not use or disclose the
same to any other party except:

 

7.1.1insofar as may be necessary for the proper and effective performance of
your duties as a director of the Company and then only to a person who shall be
subject to equivalent, express, written confidentiality obligations to the
Company or a Group Company;

 

7.1.2to the extent that such information is or (without default of your part)
becomes generally available to the public; or

 

7.1.3to the extent that you shall be required to disclose the same by any
applicable law or legally binding order of any court, government,
semi-governmental authority, administrative or judicial body, or a legally
binding requirement of a stock exchange or regulator.

 

7.2If you are required to make a disclosure as contemplated in clause 7.1.3:

 

7.2.1you must disclose only the minimum Confidential Business Information
required to comply with the applicable law, order or requirement; and

 

7.2.2before making such disclosure, you must:

 

(a)give the Company reasonable written notice of:

 

(i)the full circumstances of the requirement for disclosure arising; and

 

(ii)the Confidential Business Information which you propose to disclose; and

 

(b)consult with the Company as to the form of the disclosure.

 

7.3By your counter-signature hereto, you acknowledge that:

 

7.3.1the Company and each Group Company possess a valuable body of Confidential
Business Information;

 

7.3.2the Company has given and will continue to give you access to Confidential
Business Information in order that you may carry out your duties hereunder;

 

7.3.3your duties include, without limitation, a duty of care and a duty of
loyalty as provided under the DGCL; and

 

7.3.4the disclosure of any Confidential Business Information other than for the
legitimate business purposes of the Company or any Group Company, including
(without limitation) to an actual or potential competitor of the Company or any
Group Company could place such company at a serious competitive disadvantage and
could cause immeasurable (financial and other) damage to the Businesses

 

and that the obligations of confidentiality assumed under the provisions of this
clause 7 are reasonable and necessary for the protection of the Group, the
Businesses and the Confidential Business Information.

 

8Other Interests and Restrictions

 

8.1It is accepted and acknowledged that you have business interests other than
those of the Company and that you have declared any potential conflicts that are
apparent at present. If you become aware of any potential conflicts of interest
after the date hereof, these should be disclosed to the Chairman of the Company
and company secretary as soon as you become aware thereof.

 

 

 

 

8.2By your counter-signature hereto, you agree and undertake that, during the
term of Your Appointment, you shall not, without the Company’s written
permission, assume or hold any Material Interest in any person, firm or company
which:

 

8.2.1impairs or might reasonably be thought by the Board to impair your ability
to act at all times in the best interests of the Company; or

 

8.2.2requires or might reasonably be thought by the Board to require you to
disclose any Confidential Business Information in order properly to discharge
your duties to or to further your interest in such person, firm or company.

 

8.3By your counter-signature hereto, you agree and undertake that you will not,
without the Company’s written permission, during the term of Your Appointment
and for the period of 12 months after the Termination Date, in any part of the
world, whether directly or indirectly:

 

8.3.1assume or hold a Material Interest in a business which manufactures,
distributes or utilizes the Group’s Biopump technology using Biopumps;

 

8.3.2solicit, or by any other means induce or seek to induce, any person, firm
or company with whom or which any Group Company transacts business (whether as
customer, supplier, contractor, licensor, adviser or otherwise in relation to
the Business) to cease dealing with such Group Company or to restrict or vary
the terms upon which it deals with such Group Company;

 

8.3.3solicit or entice away or employ or engage or seek to entice away from any
Group Company any person who is and was at the Termination Date or at any time
during the six (6) months prior to the Termination Date a director, scientific
adviser, regulatory adviser, bioscience engineer or other scientific, program,
product development, marketing, sales, licensing, research and development
and/or other senior manager, key salesperson or secretary (if any) assigned to
you; and

 

8.3.4enter into a license with Yissum Research Development Company of the Hebrew
University of Jerusalem (“Yissum”) for any of the technologies that are
currently expressly excluded from the “Scope” of the Agreement between Yissum
and the Company dated November 23, 2005 (the “Yissum License”), as set forth on
Appendix A of the Yissum License.

 

8.4By your counter-signature hereto, you agree and undertake that you will not
at any time after the Termination Date, represent or hold yourself out or permit
yourself to be represented or held out by any person, firm or company as being
in any way then currently connected with or interested in the Company or any
Group Company other than (if such be the case) as the holder of shares, options
and/or warrants in the Company.

 

8.5Each of the provisions of clauses 8.2, 8.3 and 8.4 and (where applicable) the
sub-clauses thereof is independent and severable from the remaining provisions
and enforceable accordingly. If any provision of the said clauses/sub-clauses
shall be unenforceable for any reason but would be enforceable if part of the
wording thereof were deleted, it shall apply with such deletions as may be
necessary to make it enforceable.

 

8.6You have given the undertakings contained in this clause 8 to the Company
itself and to the Company as trustee for the benefit of each Group Company and
will, at the request and cost of the Company, promptly enter into direct
undertakings with any Group Company which correspond to the undertakings in this
clause 8.

 

8.7The Company agrees that each Material Interest that you assume or hold as of
the date hereof is hereby permitted.

 

 

 

 

9Independent Legal Advice

 

Occasions may arise when you consider that you will need professional advice in
connection with the performance of your duties as a director of the Company and
you will be able to consult the Company’s advisors for this purpose. Exceptional
circumstances may occur when it may be appropriate for you to seek such advice
from independent advisors, at the Company’s expense. In such an event, you
should, where reasonably practical and not (in your reasonable judgment)
prejudicial to the interests of the Company, consult with the Board or, if you
consider appropriate, the non-executive directors, prior to such advice being
sought or expense being incurred.

 

10Governing law and jurisdiction

 

This Letter shall be governed by and shall be interpreted in accordance with the
DGCL. The parties irrevocably submit to the non-exclusive jurisdiction of the
state courts of Delaware, USA in relation to all matters arising out of or in
connection with this appointment letter.

 

On a more personal note, I want to tell you how pleased I am that you are
joining the Medgenics Board of Directors. I know that I speak for the other
directors in saying that we look forward to your leadership and contributions as
a director. As required by AIM rules, I should be grateful if you would please
confirm your acceptance of the terms of your appointment by signing and
returning the duplicate of this Letter.

 

With kind regards,

 

 

/s/ Sol J. Barer

 

Sol J. Barer, Ph.D.

Duly authorized for and on behalf of the Board

 

 

I hereby acknowledge the above terms and agree and undertake in the above terms.

 

 

SIGNED AS A DEED )       by Wilbur H. Gantz )       in the presence of:- )   /s/
Wilbur H. Gantz         Wilbur H. Gantz                       Witness Signature:
  . Name:     Address:         ..     .. Occupation:   .