Exhibit 10.1

SHARE PURCHASE AGREEMENT

BY AND AMONG

HYPERION THERAPEUTICS, INC.,

HYPERION THERAPEUTICS ISRAEL HOLDING CORP. LTD.

ANDROMEDA BIOTECH LTD.,

AND

CLAL BIOTECHNOLOGY INDUSTRIES LTD.

April 23, 2014

[*] Certain information in this document has been omitted and filed separately
with the Securities and Exchange Commission. Confidential treatment has been
requested with respect to the omitted portions.

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TABLE OF CONTENTS

 

          Page   ARTICLE 1 THE SHARE PURCHASE      1   

1.1

  

Closing

     1   

1.2

  

Closing Deliveries.

     2   

1.3

  

The Share Purchase

     4   

1.4

  

Payment and Exchange Procedures

     5   

1.5

  

No Further Ownership Rights in the Company Ordinary Shares

     6   

1.6

  

Lost, Stolen or Destroyed Certificates

     6   

1.7

  

Tax Consequences

     7   

1.8

  

Certain Taxes

     7   

1.9

  

Withholding Rights

     7   

1.10

  

Taking of Necessary Action; Further Action

     8   

1.11

  

Contingent Payments

     8   

1.12

  

Payment of Contingent Payments.

     14    ARTICLE 2 REPRESENTATIONS AND WARRANTIES OF THE COMPANY      18   

2.1

  

Organization, Standing, Power and Subsidiaries

     18   

2.2

  

Capital Structure

     18   

2.3

  

Authority; Noncontravention

     21   

2.4

  

Financial Statements

     21   

2.5

  

Absence of Certain Changes

     23   

2.6

  

Litigation

     24   

2.7

  

Restrictions on Business Activities

     25   

2.8

  

Compliance with Laws; Governmental Permits

     25   

2.9

  

Title to, Condition and Sufficiency of Assets

     25   

2.10

  

Intellectual Property Rights

     26   

2.11

  

Confidentiality Agreements

     30   

2.12

  

Environmental Matters

     30   

2.13

  

Taxes

     31   

2.14

  

Employee Benefit Plans and Employee Matters

     34   

2.15

  

Interested Party Transactions

     35   

2.16

  

Insurance

     35   

2.17

  

Books and Records

     35   

2.18

  

Material Contracts

     36   

2.19

  

Certain Regulatory Matters

     37   

2.20

  

Accounts Receivable and Payable

     39   

2.21

  

Inventory

     39   

2.22

  

Transaction Fees

     39   

2.23

  

Data Protection and Privacy

     40   

2.24

  

Anti-Corruption

     40   

2.25

  

Representations Complete

     40    ARTICLE 3 REPRESENTATIONS AND WARRANTIES OF THE COMPANY SHAREHOLDER
     40   

3.1

  

Power and Capacity

     40   

3.2

  

Enforceability; Non-contravention

     40   

3.3

  

Title to Shares

     41   

3.4

  

Litigation

     41   

 

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3.5

 

Solvency

     41   

3.6

 

Tax Withholding Information

     41    ARTICLE 4 REPRESENTATIONS AND WARRANTIES OF PARENT AND PURCHASER     
41   

4.1

 

Organization and Standing

     41   

4.2

 

Authority; Noncontravention

     42   

4.3

 

Capitalization

     42   

4.4

 

Litigation

     43   

4.5

 

No Israeli Presence

     43   

4.6

 

SEC Filings and Financial Statements

     43   

4.7

 

Solvency

     43   

4.8

 

Issuance of Shares

     43   

4.9

 

Financing

     43    ARTICLE 5 CONDUCT PRIOR TO THE CLOSING      44   

5.1

 

Conduct of Business of the Company

     44   

5.2

 

Restrictions on Conduct of Business of the Company

     44    ARTICLE 6 ADDITIONAL AGREEMENTS      47   

6.1

 

No Solicitation

     47   

6.2

 

Confidentiality; Public Disclosure

     49   

6.3

 

Regulatory Approvals

     49   

6.4

 

Reasonable Efforts

     50   

6.5

 

Third Party Consents; Notices

     51   

6.6

 

Litigation

     51   

6.7

 

Access to Information

     51   

6.8

 

Spreadsheet

     52   

6.9

 

Expenses

     52   

6.10

 

Certain Closing Certificates and Documents

     52   

6.11

 

Corporate Matters

     52   

6.12

 

Tax Matters

     53   

6.13

 

Termination and Release

     53   

6.14

 

Investment Representation Letter and Lock-up Agreement

     53   

6.15

 

Additional Company Shareholders

     53   

6.16

 

Repurchase

     53   

6.17

 

CBI Loan Amendment

     53   

6.18

 

Financial Reporting

     53   

6.19

 

Additional CBI Loans

     54   

6.20

 

Rule 144

     54   

6.21

 

Employees

     54   

6.22

 

CBI Cooperation

     54   

6.23

 

Compliance with Obligations

     54   

6.24

 

Pay-off Letter or Assignment of Guarantee

     54    ARTICLE 7 CONDITIONS TO THE SHARE PURCHASE      55   

7.1

 

Conditions to Obligations of Each Party to Effect the Share Purchase

     55   

7.2

 

Additional Conditions to Obligations of the Company and the Company Shareholder

     55   

7.3

 

Additional Conditions to the Obligations of Purchaser

     56    ARTICLE 8 TERMINATION, AMENDMENT AND WAIVER      57   

 

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8.1

 

Termination

     57   

8.2

 

Effect of Termination

     58   

8.3

 

Amendment

     58   

8.4

 

Extension; Waiver

     58   

ARTICLE 9 INDEMNIFICATION

     58   

9.1

 

Unilateral Right of Set-Off

     58   

9.2

 

Indemnification

     58   

9.3

 

Indemnifiable Damage Threshold; Other Limitations

     59   

9.4

 

Period for Claims

     60   

9.5

 

Claims

     61   

9.6

 

Resolution of Objections to Claims

     61   

9.7

 

Third-Party Claims

     62   

9.8

 

Indemnification by Purchaser

     62   

9.9

 

Treatment of Indemnification Payments

     63   

9.10

 

Tail D&O Insurance

     63    ARTICLE 10 GENERAL PROVISIONS      63   

10.1

 

Survival of Representations and Warranties and Covenants

     63   

10.2

 

Release and Waiver

     64   

10.3

 

Notices

     65   

10.4

 

Interpretation

     66   

10.5

 

Counterparts

     67   

10.6

 

Entire Agreement; Nonassignability; Parties in Interest

     67   

10.7

 

Assignment

     67   

10.8

 

Severability

     67   

10.9

 

Remedies Cumulative

     67   

10.10

 

Governing Law; Submission to Jurisdiction

     68   

10.11

 

Rules of Construction

     68   

10.12

 

Parent’s and Purchaser’s Due Diligence Investigation

     68   

10.13

 

WAIVER OF JURY TRIAL

     68   

10.14

 

Waiver of Conflicts Regarding Representation

     68   

EXHIBITS

Exhibit A     -     Definitions

Exhibit B     -     Form of Waiver and Termination Agreement

Exhibit C     -     Form of Instruction Letter

Exhibit D     -     Form of Company Legal Opinion

Exhibit E     -     Form of Investment Representation Letter and Lock-up
Agreement

Exhibit F     -     Form of Amendment to Loan Agreements

 

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SHARE PURCHASE AGREEMENT

This SHARE PURCHASE AGREEMENT (this “Agreement”) is made and entered into as of
April 23, 2014 (the “Agreement Date”), by and among Hyperion Therapeutics, Inc.,
a Delaware corporation (“Parent”), Hyperion Therapeutics Israel Holding Corp.
Ltd. an Israeli company and a wholly-owned subsidiary of Parent (“Purchaser”),
Clal Biotechnology Industries Ltd. (the “Company Shareholder”), and Andromeda
Biotech Ltd., an Israeli company (the “Company”).

RECITALS

A. The Company Shareholder will represent the holders and the legal and
beneficial owners of all of the Company Ordinary Shares as of the Closing Date
(as defined below).

B. Purchaser desires, subject to the terms and conditions set forth in this
Agreement, to purchase from the Company Shareholder and the Company Shareholder
desires to sell to Purchaser all Company Ordinary Shares owned by the Company
Shareholder free from any Encumbrances and subject to the terms and conditions
set forth in this Agreement (the “Share Purchase”).

C. The Company, Company Shareholder, Parent and Purchaser desire to make certain
representations, warranties, covenants and other agreements in connection with
the Share Purchase as set forth herein.

D. The Board of Directors of the Company (the “Board of Directors”) has
unanimously approved this Agreement and the transfer of the Company Ordinary
Shares contemplated hereby in accordance with all applicable Legal Requirements.

E. Prior to the Closing (as defined below) and as a condition and material
inducement to the willingness of Purchaser to consummate the transactions
contemplated by this Agreement, certain employees of the Company are executing
an employee offer letter (each an “Offer Letter”) together with an employee
invention assignment agreement, in each case to become effective upon the
Closing.

F. Prior to the Closing and as a condition and material inducement to the
willingness of Purchaser to enter into this Agreement all of the employees of
the Company are entering into a waiver and termination agreement, in
substantially the form attached hereto as Exhibit B (the “Termination and
Release”).

NOW, THEREFORE, in consideration of the representations, warranties, covenants
and other agreements contained herein, and for other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged, the
parties hereto hereby agree as follows:

ARTICLE 1

THE SHARE PURCHASE

1.1 Closing. Unless this Agreement is earlier terminated in accordance with
Section 8.1, the closing (the “Closing”) of the transactions contemplated hereby
(the “Transactions”) shall take place (i) as promptly as practicable (and in any
event within five (5) Business Days) after the satisfaction or waiver of each of
the conditions set forth in ARTICLE 7 (other than those conditions that by their
nature are to be satisfied at the Closing, but subject to the fulfillment or
waiver of those conditions) or (ii) as such other time and date as Purchaser and
the Company may agree in writing. The Closing shall take place remotely via the
exchange of documents and signature pages or at such location as the parties
hereto agree. The date on which the Closing occurs is herein referred to as the
“Closing Date.”

 

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1.2 Closing Deliveries.

(a) Parent and Purchaser Deliveries. Parent and/or Purchaser (jointly and
severally) shall deliver to the Company and the Company Shareholder, as
applicable, at or prior to the Closing, each of the following:

(i) the CBI Cash Closing Amount;

(ii) documentation satisfactory to the Company evidencing the appointment by
Purchaser of at least one director of the Company, which appointment is to
become effective at the Closing;

(iii) a share transfer deed duly executed by Purchaser, for the receipt by
Purchaser of the Company Ordinary Shares;

(iv) a certificate, dated as of the Closing Date and executed on behalf of the
Parent by its Secretary, certifying true and correct copies of the resolutions
adopted by the Board of Directors of the Parent authorizing the execution and
delivery of this Agreement and the other agreements to which the Parent and/or
Purchaser is a party pursuant to this Agreement, the issuance of shares of
Parent Common Stock contemplated hereby, and the consummation of the other
transactions contemplated hereby;

(v) a certificate, dated as of the Closing Date and executed on behalf of the
Purchaser by a director of the Purchaser, certifying true and correct copies of
the resolutions adopted by the Board of Directors of the Purchaser authorizing
the execution and delivery of this Agreement and the other agreements to which
the Purchaser is a party pursuant to this Agreement, and the consummation of the
transactions contemplated hereby;

(vi) an executed copy of the Instruction Letter in the form attached hereto as
Exhibit C to be sent by Parent to its transfer agent immediately after the
Closing, instructing the transfer agent to issue the certificate representing
the Share Consideration;

(vii) a certificate, dated as of the Closing Date, executed on behalf of Parent
by a duly authorized officer of Parent to the effect that each of the conditions
set forth in clause (a) of Section 7.2 has been satisfied;

(viii) either (x) documentation satisfactory to the Company evidencing the
wiring by Purchaser to Bank Hapoalim of the total amount then required to cover
the outstanding balance and to close such credit line, all in accordance with
the Pay-off Letter (as defined below) to be delivered at least 3 Business Days
prior to the Closing or (y) the fully executed Guarantee Assignment
Documentation (as defined below).

(b) Company Deliveries. The Company shall deliver to Purchaser, at or prior to
the Closing, each of the following:

(i) a certificate, dated as of the Closing Date and executed on behalf of the
Company by its Chief Executive Officer, to the effect that each of the
conditions set forth in Section 7.3(a) and Section 7.3(e) has been satisfied;

(ii) a certificate, dated as of the Closing Date and executed on behalf of the
Company by its Chief Executive Officer, certifying the Company’s (A) a true and
complete copy of the Company’s articles of association, including all amendments
thereto (the “Articles of Association”), (B) a

 

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complete list of the officers and directors of the Company, and (C) copies of
resolutions adopted by the Board of Directors and shareholders of the Company
authorizing the execution and delivery of this Agreement and the other
agreements to which the Company is a party pursuant to this Agreement and the
consummation of the Transactions;

(iii) a printout from the Israeli Registrar of Companies with respect to the
Company, dated as of the Closing Date, reflecting that (x) the Company is not
delinquent in payment of its annual dues or filing of an annual report, and
(y) the Company has not been noted as being in breach of its legal filing
requirements; and a printout from the Israeli Registrar of Companies with
respect to the Company, dated as of the Closing Date, reflecting that no
Encumbrance is registered on any of the Company Ordinary Shares.

(iv) a written opinion from the Company’s legal counsel, in the form set forth
on Exhibit D, dated as of the Closing Date and addressed to Purchaser;

(v) an Offer Letter, together with an employee invention assignment agreement,
effective as of Closing, executed by each of the Company’s four (4) key
employees set forth on Schedule 1.2(b)(v) and by an additional four
(4) employees that are not key employees (collectively, “Designated Employees”)
(and such Offer Letters shall be in full force and effect and shall not have
been repudiated through the Closing);

(vi) documentation satisfactory to Purchaser evidencing the resignation of each
of the directors of the Company in office immediately prior to the Closing as
directors of the Company, effective no later than immediately prior to the
Closing;

(vii) certificates representing the Company Ordinary Shares accompanied by a
share transfer deed, duly executed by Company Shareholder, for transfer of such
Company Ordinary Shares to Purchaser, in form and substance satisfactory to
Purchaser, together with a copy of the share registry of the Company indicating
that Purchaser is the sole shareholder of the Company all effective as of the
Closing Date;

(viii) the Spreadsheet (as defined below) completed to include all of the
information specified in Section 6.8 in a form reasonably acceptable to
Purchaser, and a certificate executed on behalf of the Company by the Chief
Executive Officer of the Company, dated as of the Closing Date, certifying on
behalf of the Company that such Spreadsheet is true, correct and complete;

(ix) the Closing Expenses Certificate, which certificate shall be accompanied by
such supporting documentation, information and calculations as are reasonably
necessary for Purchaser to verify and determine the amount of Transaction
Expenses;

(x) complete and correct copies of an investment representation letter and
lock-up agreement addressed to Purchaser, in substantially the form attached
hereto as Exhibit E (the “Investment Representation Letter and Lock-up
Agreement”), executed by the Company Shareholder;

(xi) executed copies of the Termination and Release, executed by all of the
employees of the Company;

(xii) an executed amendment to each of the CBI Loan Agreements, in substantially
the form of Amendment to Loan Agreements attached hereto as Exhibit F (the “CBI
Loan Amendment”); and

(xiii) either the Pay-off Letter or the Guarantee Assignment Documentation.

 

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(c) Receipt by any party hereto of any of the agreements, instruments,
certificates or documents delivered pursuant to this Section 1.2 shall not be
deemed to be an agreement by such party that the information or statements
contained therein are true, correct or complete, and shall not diminish such
party’s remedies hereunder if any of the foregoing agreements, instruments,
certificates or documents are not true, correct or complete.

1.3 The Share Purchase; Consideration.

(a) Payments to the Company Shareholder. Upon the terms and subject to the
conditions set forth herein, the Company Shareholder agrees to sell, transfer
and deliver to Purchaser at the Closing, and Purchaser agrees to purchase from
the Company Shareholder, all rights, title and interest in and to the Company
Ordinary Shares owned by the Company Shareholder as of immediately prior to the
Closing (as set forth on the Spreadsheet) free and clear of all Encumbrances, in
exchange for the payment and issuance by the Parent and/or Purchaser (jointly
and severally) to the Company Shareholder of the following consideration:

(i) at Closing – (a) an amount of cash (without interest) equal to the CBI Cash
Closing Amount, and (b) a number of shares of Parent Common Stock equal to the
Share Consideration,

(ii) when and if Contingent Payments are required to be made in accordance with
the provisions of Section 1.11 and Section 1.12 and subject to the Set-Off
Rights (as defined below), an amount of cash (without interest) equal to the
product of (x) the amount of such Contingent Payment, multiplied by (y) the then
applicable CBI Ratio,

in the case of clauses (i) and (ii) of this Section 1.3(a), until the Initial
Threshold Payment (as defined below) has been made to Teva,

(iii) after the Initial Threshold Payment has been made to Teva, when and if
Contingent Payments are required to be made in accordance with the provisions of
Section 1.11 and Section 1.12 and subject to the Set-Off Rights, an amount of
cash (without interest) equal to the product of (x) the amount of such
Contingent Payment, multiplied by (y) fifty percent (50%), until the Final
Threshold Payment (as defined below) has been made to Teva,

(iv) after the Final Threshold Payment has been made to Teva, when and if
Contingent Payments are required to be made in accordance with the provisions of
Section 1.11 and Section 1.12 and subject to the Set-Off Rights, the full amount
of the Contingent Payments.

(b) Payments to Teva. Upon the terms and subject to the conditions set forth
herein, the Parent and/or Purchaser (jointly and severally) shall pay to Teva,
through the Company, the following payments in accordance with Section 5 of the
Teva Share Purchase Agreement:

(i) at Closing - an amount of cash (without interest) equal to the Teva Cash
Closing Amount,

(ii) when and if Contingent Payments are required to be made in accordance with
the provisions of Section 1.11 and Section 1.12 and subject to the Set-Off
Rights, an amount of cash (without interest) equal to the product of (x) the
amount of such Contingent Payment, multiplied by (y) the then applicable Teva
Ratio,

in the case of clauses (i) and (ii) of this Section 1.3(b), only until such time
as the aggregate payments made to Teva pursuant to clauses (i) and (ii) of this
Section1.3(b), when combined with the aggregate amounts paid to Teva pursuant to
Section 4 of the Teva Share Purchase Agreement, equal $36,210,545 (the “Initial
Threshold Payment”),

 

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(iii) after the Initial Threshold Payment has been made, when and if Contingent
Payments are required to be made in accordance with the provisions of
Section 1.11 and Section 1.12 and subject to the Set-Off Rights, an amount of
cash (without interest) equal to the product of (x) the amount of such
Contingent Payment, multiplied by (y) fifty percent (50%), until such time as
the aggregate payments made to Teva pursuant to clauses (i), (ii) and (iii) of
this Section1.3(b), when combined with the aggregate amounts paid to Teva
pursuant to Section 4 of the Teva Share Purchase Agreement, equal $72,421,089
(the “Final Threshold Payment”).

(c) Adjustments. In the event of any stock split, reverse stock split, stock
dividend (including any dividend or distribution of securities convertible into
capital stock), bonus shares, reorganization, reclassification, combination,
recapitalization or other like change with respect to the Company Ordinary
Shares or Parent Common Stock occurring after the date hereof and prior to the
Closing, all references in this Agreement to specified numbers of shares of any
class or series affected thereby, and all calculations provided for that are
based upon numbers of shares of any class or series (or trading prices therefor)
affected thereby, shall be equitably adjusted to the extent necessary to provide
the parties the same economic effect as contemplated by this Agreement prior to
such stock split, reverse stock split, stock dividend, reorganization,
reclassification, combination, recapitalization or other like change.

(d) Rights Not Transferable. The rights of the Company Shareholder under this
Agreement as of immediately prior to the Closing are personal to such Company
Shareholder and shall not be transferable for any reason otherwise than by
operation of law, will or the laws of descent and distribution. Any attempted
transfer of such right by any holder thereof (otherwise than as permitted by the
immediately preceding sentence) shall be null and void.

(e) Fractional Shares. No fractional shares of Parent Common Stock will be
issued in connection with the Share Purchase, but in lieu thereof the Company
Shareholder who would otherwise be entitled to a fraction of a share of Parent
Common Stock (after aggregating for each particular stock certificate
representing Company Ordinary Shares all fractional shares of Parent Common
Stock to be received by such holder) shall receive from Purchaser an amount of
cash (rounded to the nearest whole cent) equal to the product of (i) such
fraction and (ii) the Parent Stock Price, which shall be deemed to be the value
of each share of Parent Common Stock for all purposes.

1.4 Payment and Exchange Procedures.

(a) Payment Procedures.

(i) At the Closing Date, the Company Shareholder shall deliver to the Purchaser
all share certificates formerly representing Company Ordinary Shares, or in the
event that any such share certificate has been lost, stolen, or destroyed, an
affidavit of lost certificate executed by the Company Shareholder thereof in
form and substance reasonably satisfactory to Purchaser.

(ii) Against delivery to Purchaser of the applicable share certificate, or in
the event that any such share certificate has been lost, stolen, or destroyed,
an affidavit of lost certificate executed by the Company Shareholder thereof in
form and substance reasonably satisfactory to Purchaser, the Parent and/or
Purchaser (jointly and severally) shall deliver to the Company Shareholder
(i) at the Closing, a check or amount via wire transfer, of immediately
available funds, representing the cash amount that the Company Shareholder has
the right to receive pursuant to Section 1.3(a), and (ii) promptly after
Closing, a certificate representing the number of shares of Parent Common Stock
that the Company Shareholder has the right to receive pursuant to
Section 1.3(a).

 

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(iii) The Parent or Purchaser shall deliver to Teva at the Closing, a check or
amount via wire transfer, of immediately available funds, representing the cash
amount that Teva has the right to receive pursuant to Section1.3(b).

(iv) At or promptly following the Closing, and when and if Contingent Payments
are required to be made in accordance with the provisions of Section 1.11 and
Section 1.12 and subject to the Set-Off Rights in connection with each of
Milestones 1 through 5, the Parent and/or Purchaser (jointly and severally)
shall pay (or cause the Company to pay) each of the employees of the Company a
check or amount via wire transfer, of immediately available funds, representing
the portion of the Employee Closing Payment Amount or the portion of the
Employee Contingent Payment Amount associated with such Contingent Payment, as
the case may be, that such employee has the right to receive pursuant to his or
her respective Termination and Release on the Closing or upon the payment of
such Contingent Payment, as the case may be, as set forth opposite such
employee’s name on the Spreadsheet. The Purchaser may (in which case it shall
cause the Company to have sufficient funds to) make all payments required to
made to the employees of the Company in respect of each Termination and Release
through the Company’s regular payroll system. All amounts payable pursuant to
the Termination and Release shall be subject to any withholding of Taxes
required by Legal Requirements to be withheld and shall be paid without
interest.

(b) No Interest. Notwithstanding anything to the contrary contained herein, no
interest shall accumulate on any cash payable in connection with the Share
Purchase and the other Transactions.

(c) Transfers of Ownership. If any cash amount payable pursuant to
Section 1.3(a) is to be paid to a Person other than the Person to which the
certificate surrendered in exchange therefor is registered, it shall be a
condition of the payment thereof that the certificate so surrendered shall be
properly endorsed and otherwise in proper form for transfer and that the person
requesting such exchange shall have paid to Purchaser or any agent designated by
it any transfer or other Taxes required by reason of the payment of cash in any
name other than that of the registered holder of the certificate surrendered, or
established to the satisfaction of Purchaser or any agent designated by it that
such Tax has been paid or is not payable.

(d) No Liability. Notwithstanding anything to the contrary in this Section 1.4,
none of the Company, Purchaser or any party hereto shall be liable to any Person
for any amount properly paid to a public official pursuant to any applicable
abandoned property, escheat or similar law.

1.5 No Further Ownership Rights in the Company Ordinary Shares. All cash paid or
payable following the surrender for exchange of Company Ordinary Shares in
accordance with the terms hereof shall be so paid or payable in full
satisfaction of all rights pertaining to such Company Ordinary Shares and there
shall be no further registration of transfers on the records of the Company of
Company Ordinary Shares, which were issued and outstanding immediately prior to
the Closing. If, after the Closing, any certificate or agreement is presented to
Purchaser for any reason, such certificate shall be canceled and exchanged as
provided in this ARTICLE 1.

1.6 Lost, Stolen or Destroyed Certificates. In the event any certificate shall
have been lost, stolen or destroyed, Purchaser shall issue in exchange for such
certificate, following the making of an affidavit of that fact by the record
holder thereof, such cash as may be required pursuant to Section 1.3(a) in
respect of such certificate.

 

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1.7 Tax Consequences. Without derogating from the representations under Sections
2.13 and 3.6 below, no party to this Agreement makes any representations or
warranties to the other parties hereto or to any of the Company Securityholders
regarding the Tax treatment of the Share Purchase, or any of the Tax
consequences of such other parties to this Agreement, the Share Purchase or any
of the other transactions or agreements contemplated hereby. Each party to this
Agreement acknowledges that such party is relying solely on its own Tax advisors
in connection with this Agreement, the Share Purchase and the other transactions
and agreements contemplated hereby.

1.8 Certain Taxes. All transfer, documentary, sales, use, stamp, registration
and other such similar Taxes and fees (including any penalties and interest)
incurred by the Company Securityholders in connection with this Agreement
(together, “Transfer Taxes”) shall be paid by the Company Securityholders when
due, and each Company Securityholder shall, at its own expense, file all
necessary Tax Returns and other documentation with respect to all Transfer
Taxes.

1.9 Withholding Rights.

(a) Each of the Company, Parent and Purchaser shall be entitled to deduct and
withhold from any consideration otherwise deliverable under this Agreement
(including with respect to the making of Contingent Payments under Sections 1.11
and 1.12) and from any other payments otherwise required pursuant to this
Agreement, to any continuing employee, holder of any Company Ordinary Shares or
Company Option or Teva, subject to its payment to the relevant Tax Authority,
such amounts in cash or shares as the Company, Parent, or Purchaser is required
to deduct and withhold with respect to any such deliveries and payments under
the Code, the ITO or any provision of state, local, provincial or foreign Tax
law. To the extent that amounts are so withheld, such withheld amounts shall,
subject to its timely payment to the relevant Tax Authority, be treated for all
purposes of this Agreement as having been delivered and paid to such holders in
respect of which such deduction and withholding was made. Parent and/or
Purchaser shall provide to payees a certificate confirming that such withholding
has been made.

(b) Notwithstanding the provisions of Section 1.9(a) above, with respect to
Israeli Tax, neither Parent, Purchaser nor their agents shall withhold or shall
withhold a reduced amount of Israeli Tax if the payee has provided to Parent or
Purchaser a Valid Certificate at least two (2) Business Days prior to any
payment to each payee pursuant to this Agreement. A “Valid Certificate” shall be
a valid and applicable (in light of the timing, scope and the nature of the
payment) certification or ruling issued by the ITA, (x) exempting Parent and
Purchaser from the duty to withhold Israeli Taxes with respect to such payee,
(y) determining the applicable rate of Israeli Tax to be withheld from such
payee or (z) providing any other instructions regarding the payment or
withholding with respect to the applicable consideration of such payee. Unless
otherwise required by the ITA or applicable law, a valid certificate pursuant to
the Israeli Income Tax Regulations (Withholding from Payments for Services or
Assets), 5737 - 1977 (“Services and Assets Certificate”) will be deemed a Valid
Certificate with respect to any cash consideration paid for the Company Ordinary
Shares if in force and applicable to payee on the date that payment is to be
made, provided however that such payee has filed an application to the ITA with
respect to consideration payable to the payee in which it is expressly disclosed
that the payee intends to rely on a Services and Assets Certificate with respect
to the current and future payments of cash consideration to such payee. In the
event that a payee submits a Valid Certificate, no later than two (2) Business
Days prior to the date that any payment is required to be made to the payee
pursuant to the Agreement, then the deduction and withholding of any Israeli
Taxes shall be made only in accordance with the provisions of such Valid
Certificate and the balance of the payment that is not withheld shall be
promptly paid to such payee. If such payee (i) does not provide Parent or
Purchaser with a Valid Certificate by no later than two (2) Business Days before
the date payment is due under this agreement, or (ii) submits a written request
with Parent or Purchaser to release his, her or its payment and fails to submit
a Valid Certificate, then the amount to be withheld from such payment shall be
calculated by the

 

7

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Parent or Purchaser in its reasonable discretion according to the applicable
withholding rate, and shall be promptly delivered to the ITA by Parent or
Purchaser or their agent. The balance of the consideration due to such payee
that is not so withheld shall be promptly delivered to such payee. Without
derogating from the foregoing, the Company Shareholder shall provide Purchaser
in advance with drafts of all applications and submissions to the ITA in order
to allow for good faith coordination.

1.10 Taking of Necessary Action; Further Action. If, at any time after the
Closing, any further action is necessary or desirable to carry out the purposes
of this Agreement and to vest Purchaser with full right, title and interest in
and to the Company Ordinary Shares, the officers and directors of the Company
are fully authorized, in the name and on behalf of the Company or otherwise, to
take all lawful action necessary or desirable to accomplish such purpose or
acts, so long as such action is not inconsistent with this Agreement.

1.11 Contingent Payments.

(a) Certain Definitions. For purposes of this Agreement, the following
definitions shall apply:

(i) “Buyer Group” means Parent, Purchaser (“Buyer”) and their respective direct
and indirect subsidiaries and Affiliates including, after the Closing, the
Company, individually and collectively.

(ii) “Canada” means Canada, its territories and possessions.

(iii) “Company Eligible Product” means any of the following: (a) the Company
Product, (b) any modifications, variations, derivative works, enhancements,
developments, and customizations of or to the Company Product, (c) any product
that contains the Company Product or any of the other peptides sequences that
are currently covered by the Patent Rights owned or licensed by the Company as
of the Closing Date, or any composition or formulation comprising these
peptides; and (d) if covered by (1) a current, valid claim of an issued patent
owned or licensed by the Company as of the Closing Date, or (2) any other valid
claim of an issued patent within the Company Eligible IP, or (3) any other
Patent Rights within the Company Eligible IP - any product that is comprised of,
contains or incorporates, is developed from, is based on, makes use of, or is
otherwise covered by any of the Company Eligible IP.

(iv) “Company Eligible IP” means (1) all Intellectual Property owned or licensed
by the Company as of the Closing Date, and (2) all Patent Rights arising after
the Closing Date that claim priority to or are primarily based on any of the
Intellectual Property described in clause (1).

(v) “Patent Rights” means patents and all continuations, continuations-in-part,
divisionals, reissues, reexaminations and extensions or substitutions thereof
and supplemental protection certificates relating thereto, any confirmation
patents or registration patents or patents of addition based on any such
patents, and all counterparts thereof or substantial equivalents in any country,
including utility models and industrial designs (collectively, “Patents”) and
any applications or provisional applications for any of the foregoing (“Patent
Applications”).

(vi) “EMA” means the European Medicines Agency or any successor agency thereto.

(vii) “European Union” or “EU” means all of the European Union member states as
of the applicable time, and its respective territories and possessions.

 

8

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(viii) “FDA” means the United States Food and Drug Administration or any
successor entity thereto.

(ix) “Generic Competition” shall mean, with respect to Company Eligible Product
in a country, when (a) one or more Generic Product(s) are being marketed in such
country and (b) all patents included in Company Eligible IP covering Company
Eligible Product in such country have expired and there is no remaining
applicable regulatory or other exclusivity rights covering such Company Eligible
Product, or the entity seeking marketing approval in such country has alleged
that the patents in the Company Eligible IP are unenforceable and/or not
infringed by the Generic Product or challenges the scope or validity of any
applicable regulatory or other exclusivity rights covering such Company Eligible
Product.

(x) “Generic Product” in a certain country, shall mean a product (a) whose
active pharmaceutical ingredient is the same as that of the Company Eligible
Product being sold in a country, (b) that obtained regulatory approval as a
generic product by the applicable regulatory authorities in such country by
means of establishing equivalence to such Company Eligible Product, and (c) that
is legally marketed in such country by an entity other than the Buyer Group and
its distributors and other sublicensees. A product shall not be considered as a
Generic Product if the Buyer Group, any of their Affiliates, or any one on their
respective behalf was involved in its development, approval or
commercialization.

(xi) “Milestones” means, collectively, the milestones set forth in the Milestone
Table.

(xii) “Net Sales” means the all amounts invoiced by or on behalf of the Buyer
Group or any of its sublicensees from the sale of the Company Eligible Products
to un-Affiliated third parties (including distributors) in bona fide, arms
length transactions, as determined in accordance with the Buyer Group’s or
sublicensee’s usual and customary accounting methods consistently applied by the
Buyer Group or sublicensee, as applicable, less deductions for the following
items to the extent they are actually incurred and as directly related to such
Company Eligible Products and are booked by the Buyer Group or its sublicensee
in accordance with generally accepted accounting standards in the U.S. to
calculate the recorded net revenues from gross revenues, provided they are
indicated as a separately invoiced line item (where applicable):

(1) normal trade and cash discounts given in respect of such sales;

(2) allowances, amounts repaid or credited by reasons of defects, rejections,
recalls or returns;

(3) discounts, rebates and chargebacks to customers and third parties
(including, without limitation, Medicare, Medicaid, Managed Healthcare or any
other governmental discounts, rebates or chargebacks);

(4) Taxes (including value added taxes, sales taxes, or similar taxes, but
excluding withholding Taxes and Taxes paid by the Buyer Group on the net income
derived from sales of the Company Eligible Product), tariffs, customs duties,
surcharges and other governmental charges incurred in connection with the
production, sale, transportation, delivery, use, exportation or importation of
the Company Eligible Product that are incurred at time of sale and are directly
related to the sale and not otherwise previously deducted; and;

(5) insurance, customs charges and duties, freight, postage, shipping, handling,
and other transportation costs;

 

9

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(6) an allowance for uncollectible or bad debts determined in accordance with
generally accepted accounting principles;

(7) any other adjustments of specifically identifiable amounts related to
products sold and reasonably allocated to the Company Product as a portion of
the total products sold, , deducted for reasons similar to those listed above in
accordance with GAAP;

With respect to the calculation of Net Sales:

(1) Sales between or among members of the Buyer Group and authorized
sublicensees shall be disregarded for purposes of calculating Net Sales, but
resales by any such Buyer Group members and authorized sublicensees will be
included in Net Sales; provided that a distributor (that is not part of the
Buyer Group) shall not be considered a sublicensee and sales to such distributor
shall be included in Net Sales, and provided further that sales to Group Members
or sublicensees that are the end users of the sold product shall be included in
Net Sales;

(2) If the Company Eligible Product is delivered to the third party before being
invoiced (or is not invoiced), Net Sales will be calculated at the time all the
revenue recognition criteria under the generally applicable accounting standards
in the U.S. are met;

(3) any consideration received not in cash or not on arms’ length terms shall be
valued at the fair market value thereof assuming a transaction between
un-Affiliated third parties on bona fide arm’s length terms.

(4) If the Company Eligible Product is sold in combination with with an Other
Component (as defined below), then for purposes of calculating “Net Sales” of
such Company Eligible Product, the Net Sales of such combination of Company
Eligible Product and Other Components (after taking the above deductions) shall
first be multiplied by the fraction equal to the quotient of A/(A+B), where A is
the weighted (by sales volume) average sale price in the relevant country of the
Company Eligible Product that does not have an Other Component when sold as the
sole active ingredient in finished form, and B is the weighted average sale
price (by sales volume) in that country of the product(s) containing the Other
Component(s) as the sole active ingredient(s) in finished form. If the weighted
average sale price cannot be determined for the Company Eligible Product or for
the Other Component included in the combination product, such unavailable
weighted average sale price will be as reasonably determined by Parent and
Purchaser, provided that in any event shall fraction shall not be less than 50%,
and such resulting amount shall be the “Net Sales” with respect to such Company
Eligible Product. “Other Component” means an active pharmaceutical ingredient
which has a clinical effect and is not derived from the Company Product or
otherwise covered by any Company Eligible IP.

(xiii) “ROW Distributor Revenues” means, with respect to any ROW territory, the
Net Sales received by the Buyer Group from third party distributor in such
territory for or in connection with the sales of the Company Eligible Product.
Amounts received to reimburse the Buyer Group for costs actually incurred to
perform research, development or similar services conducted for the Company
Eligible Product or for reimbursement of patent or other out-of-pocket expenses
relating to the Company Eligible Product, or in consideration for the purchase
of any debt or securities of the Buyer, in each case pursuant to arms-length,
bona fide transactions, shall not be considered ROW Distributor Revenues.

(xiv) “Sublicense Fees” means the aggregate consideration received by the Buyer
and its Affiliates from non-affiliated third party sublicensees in consideration
for or in connection with the grant of a right or permission (or an option
therefor) to develop, make, use or sell the Company Eligible Product or the
Company Eligible IP, but excluding (a) Net Sales or any portion of Net Sales
that

 

10

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may be paid by the sublicensee, and (b) amounts received to reimburse the Buyer
Group for costs actually incurred to perform research, development or similar
services conducted for the Company Eligible Product or for reimbursement of
patent or other out-of-pocket expenses relating to the Company Eligible Product,
or in consideration for the purchase of any debt or securities of the Buyer, in
each case pursuant to arms-length, bona fide transactions.

(xv) “U.S.” means the United States of America, its territories and possessions.

(xvi) “ROW” means all counties outside of the EU and the U.S., and, in each
case, their respective territories and possessions.

(b) Contingent Payments. As additional consideration for the Share Purchase, and
subject to the set-off rights of Purchaser pursuant to Section 1.12(h) (the
“Set-Off Rights”), Parent and/or Purchaser (jointly and severally) shall pay
contingent payments (collectively, the “Contingent Payments”) when and if
required to be made in accordance with the provisions of the Section 1.11 and
Section 1.12, which shall be allocated in accordance with Section 1.3 above. The
Contingent Payments shall include the Milestone Payments (as defined below) and
the Contingent Sales Payments (as defined below); provided, however, that
notwithstanding anything to the contrary contained herein, each Contingent
Payments shall be reduced by the amount paid or payable in connection with such
Contingent Payment as set forth on Schedule 1.11(b).

(c) Contingent Milestone Payments. Subject to the Set-Off Rights, Parent and/or
Purchaser (jointly and severally) shall make the one-time payments (the
“Milestone Payments”) set forth in the following table (the “Milestone Table”)
to the Company Shareholder and Teva in accordance with Section 1.3(a) and
Section 1.3(b), respectively, after and subject to, and conditioned on the
achievement of each Milestone (for the avoidance of doubt, each Milestone
Payment is only due one time on the first occurrence of the applicable
Milestone):

 

    

Milestone

   Milestone
Payment Amount   Milestone 1    The filing by Buyer Group and acceptance of a
New Drug Application by the FDA for authorization to market a Company Eligible
Product in the U.S.    $ [ *]  Milestone 2    The filing by Buyer Group and
acceptance of a Marketing Authorization Application by the EMA for authorization
to market a Company Eligible Product in the European Union.    $ [ *]  Milestone
3    The filing by Buyer Group and acceptance of an application for [*] in [*].
   $ [ *]  Milestone 4    The earlier to occur of the (i) the [*] approval of
[*] filed by Buyer Group for authorization to [*] in the [*] and (ii) the [*]
approval of [*] filed by Buyer Group for [*] in [*].    $ [ *]  Milestone 5   
The later to occur of the (i) the [*] approval of [*] filed by Buyer Group for
[*] in the [*] and (ii) the [*] approval of [*] filed by Buyer Group for [*] in
[*].    $ [ *] 

 

11

 

[*] Certain information in this document has been omitted and filed separately
with the Securities and Exchange Commission. Confidential treatment has been
requested with respect to the omitted portions.

--------------------------------------------------------------------------------

Milestone 6    The [*] in [*] received by Buyer Group.    $ [ *]  Milestone 7   
The [*] approval of [*] filed by Buyer Group for a Company Eligible Product in
the [*] with [*] indication.    $ [ *]  Milestone 8    The [*] approval of [*]
filed by Buyer Group for a Company Eligible Product in the [*] with [*]
indication.    $ [ *]  Milestone 9    The first consecutive twelve calendar
month period during which the aggregate of worldwide Net Sales (inclusive of ROW
Distributor Revenues) and Sublicense Fees exceed $450,000,000.    $ [ *] 
Milestone 10    The first consecutive twelve calendar month period during which
the aggregate of worldwide Net Sales (inclusive of ROW Distributor Revenues) and
Sublicense Fees exceed $[*].    $ [ *]  Milestone 11    The first consecutive
twelve calendar month period during which the aggregate of worldwide Net Sales
(inclusive of ROW Distributor Revenues) and Sublicense Fees exceed $[*].    $ [
*]  Milestone 12    The first consecutive twelve calendar month period during
which the aggregate of worldwide Net Sales (inclusive of ROW Distributor
Revenues) and Sublicense Fees exceed $[*].    $ [ *]  Milestone 13    The first
consecutive twelve calendar month period during which the aggregate of worldwide
Net Sales (inclusive of ROW Distributor Revenues) and Sublicense Fees exceed
$[*].    $ [ *] 

The Milestone Payments for Milestones 9-13 are separate payments in respect of
each Milestone, and two or more Milestone Payments shall be paid simultaneously,
on an accumulated basis, if the respective Milestones to which such Milestone
Payments apply are achieved simultaneously (e.g. if the first consecutive twelve
calendar month period during which the aggregate of worldwide Net Sales
(inclusive of ROW Distributor Revenues) and any Sublicense Fees received from
sublicensees for the licensing of Company Eligible IP exceed $[*], is also the
first consecutive twelve calendar month period during which such aggregate
exceeds $[*], thereby achieving Milestones 9 and 10 at the same time).

 

12

 

[*] Certain information in this document has been omitted and filed separately
with the Securities and Exchange Commission. Confidential treatment has been
requested with respect to the omitted portions.

--------------------------------------------------------------------------------

(d) Contingent Sales Consideration. Subject to the Set-Off Rights, Parent and/or
Purchaser (jointly and severally) shall make the following payments to the
Company Shareholder and Teva in accordance with Section 1.3, (i) on all ROW
Distributor Revenues - at the rate of 25% of such ROW Distributor Revenues, and
(ii) on all Net Sales (excluding such Net Sales that are ROW Distributor
Revenues to distributors in ROW that are subject to clause (i) above), at the
respective rates set forth in the below tables (clauses (i) and (ii),
collectively, the “Contingent Sales Payments”):

 

Aggregate Annual worldwide Net Sales, ROW Distributor Revenues and Sublicense
Fees:

  

Contingent Payment Rate

Annual worldwide Net Sales, ROW Distributor Revenues and Sublicense Fees are of
$300,000,000 or less.    10% of Net Sales (but not of ROW Distributor Revenues)
Annual worldwide Net Sales, ROW Distributor Revenues and Sublicense Fees of more
than $[*] but equal to or less than $[*].    [*]% of Net Sales (but not of ROW
Distributor Revenues) Annual worldwide Net Sales, ROW Distributor Revenues and
Sublicense Fees of more than $[*] but equal to or less than $1,200,000,000.   
[*]% of Net Sales (but not of ROW Distributor Revenues) Annual worldwide Net
Sales, ROW Distributor Revenues and Sublicense Fees of more than $1,200,000,000.
   17% of Net Sales (but not of ROW Distributor Revenues)

(e) Contingent Sales Consideration Reductions.

(i) Anti-Stacking. If the Buyer Group or its sublicensees are required to pay
royalties to any third party in order to make, have made, use, sell, offer to
sale or import Company Eligible Product, including under any existing licenses
by the Company, then none of such third party royalty payments shall be credited
against the Contingent Sales Payments due under this Agreement.

(ii) Generic Competition. Upon commencement of Generic Competition with respect
to Company Eligible Product in a country, and thereafter for so long as such
Generic Competition persists, the Contingent Sales Payments due under clause
(ii) of Section 1.11(d) above with respect to such Company Eligible Product sold
in such country shall be:

(1) reduced by [*] percent ([*]%) if such Generic Product(s) represent a total
prescription volume of at least [*] percent ([*]%) but less than [*] percent
([*]%) of such Company Eligible Product and such Generic Product(s), in the
aggregate, in such country in such calendar year, determined by the number of
unit equivalents for such Company Eligible Product and such Generic Product(s),
in the aggregate, during such calendar year (as measured by an IMS audit or
other mechanism agreed upon by the parties), and

(2) reduced by [*] percent ([*]%) if such Generic Product(s) represent a total
prescription volume of at least [*] percent ([*]%) of such Company Eligible
Product and such Generic Product(s), in the aggregate, in such country in such
calendar year, determined by the number of unit equivalents for such Company
Eligible Product and such Generic Product(s), in the aggregate, during such
calendar year (measured as described above).

(f) Contingent Payments Not Certain. The Company Shareholder hereby acknowledges
that receipt of the Contingent Payments is uncertain and that the Buyer Group
may not achieve any of the Milestones or generate any Net Sales and it is
therefore not assured that Purchaser will be required to pay the Contingent
Payments at all.

(g) Purchaser Discretion. The Buyer Group shall have sole and absolute
discretion over all matters relating to the Company Eligible Product from and
after the Closing, including, but not limited to, any matter relating to the
development, testing, regulatory submission, regulatory approval, manufacturing,
marketing, sales, pricing, service or maintenance thereof. Furthermore, the
Company

 

13

 

[*] Certain information in this document has been omitted and filed separately
with the Securities and Exchange Commission. Confidential treatment has been
requested with respect to the omitted portions.

--------------------------------------------------------------------------------

Shareholder acknowledges that circumstances may exist that (i) delay or prevent
the achievement of the Milestones or (ii) limit, reduce or otherwise negatively
impact the amount of Net Sales, if any, thereby correspondingly eliminating or
reducing the amount of any Contingent Payments based thereon. Accordingly,
nothing herein shall be deemed to be an agreement on the part of the Buyer Group
to achieve the Milestones or to generate any amount of Net Sales. From time to
time and at the reasonable request of the Company Shareholder, Parent and
Purchaser shall provide the Company Shareholder with updates concerning the
progress and planning of the Buyer Group’s research and development activities,
testing, clinical results, regulatory filings, commercialization efforts and
strategy for achieving the Milestones and Net Sales.

(h) Subject to the provisions of Section 1.11(g), Buyer shall make, and shall
cause the Company and the other Buyer Group members to make such commercially
reasonable and continuous efforts, all as are consistent with the commercial
efforts generally applied to innovative products of similar potential at similar
states in their life cycles, in order to pursue the development and
commercialization of the Company Product, and if the Buyer Group in its sole
discretion develops a different Company Eligible Product, to pursue the
commercialization of such Company Eligible Product, (A) to achieve, and to
implement and conduct all development, regulatory and manufacturing activities
that are components of or related to or required for the achievement of each of
the Milestones, and (B) to achieve, and to implement and conduct all
manufacturing and commercialization activities that are components of or
directly related to or required for the achievement of the Contingent Sales
Payments, which may involve conducting clinical trials, preparing, submitting,
seeking approval for, maintaining and updating Marketing Approval applications,
Marketing Approvals and other regulatory approvals and applications for
regulatory approvals in respect of the Company Product in the applicable
countries, obtainment of pricing and reimbursement for Company Product (or such
Company Eligible Product, as applicable), marketing, promotion and other
commercialization activities. If the Buyer (or the applicable member of the
Buyer Group) terminates or abandons applicable development and, if commenced as
of such time, commercialization activities with respect to any Company Product
(or such Company Eligible Product, as applicable), then, promptly following such
termination, the Buyer shall send written notice thereof to the Company
Shareholder together with an explanation of the reasons for such cessation of
activities.

(i) Following the Closing, neither Purchaser nor the Company or any other Buyer
Group member may sell or transfer the Company or any Company Eligible IP or any
right to a Company Eligible Product (either directly or through a stock sale,
merger or other change in control of the Company), or assign or exclusively
license any Company Eligible IP or any right to a Company Eligible Product to
any third party who is not a Buyer Group member, unless such third party
expressly assumes in writing to the Company Shareholder the obligations of
Parent and Purchaser under this Agreement.

1.12 Payment of Contingent Payments.

(a) Milestone Payments. On or prior to the thirtieth (30th) day following the
achievement of any Milestone, Parent and/or Purchaser (jointly and severally)
shall notify the Company Shareholder in writing of the occurrence of such an
event shall deliver to each of the Company Shareholder and Teva that portion of
the respective Milestone Payment amount allocated to the Company Shareholder and
Teva pursuant to Section 1.3(a) and Section 1.3(b), as applicable.

(b) Contingent Sales Payments. Beginning with the Buyer Group’s first receipt of
a Marketing Authorization for marketing any Company Eligible Product, on or
prior to the forty-fifth (45th)

 

14

 

[*] Certain information in this document has been omitted and filed separately
with the Securities and Exchange Commission. Confidential treatment has been
requested with respect to the omitted portions.

--------------------------------------------------------------------------------

day following the last day of each successive three month period (such period, a
“Payment Quarter”), Parent and Purchaser shall deliver to the Company
Shareholder a certificate (each, a “Contingent Payment Certificate”), setting
forth for such Payment Quarter (i) the amount of Net Sales and ROW Distributor
Revenues for the Payment Quarter and (ii) Parent’s and Purchaser’s determination
of the amount of the Milestone Payment and/or Contingent Sales Payment due for
such Payment Quarter (including the calculation thereof, in reasonable detail);
together with a reasonably detailed report, detailing the Company Eligible
Products sold, the prices invoiced therefor, the deduction made, and the
Sublicense Fees or ROW Distributor Revenues received, during such quarter. The
Contingent Sales Payment will be due and payable by Parent and Purchaser within
ten (10) days following delivery of the Contingent Payment Certificate.

(c) Company Shareholder Audit Rights. The Buyer Group hereby grants the Company
Shareholder and its representatives and advisers, at the Company Shareholder’s
expense, the right, exercisable no more than once during each six (6) month
period following the end of a calendar year, subject to the execution of, and
compliance with, a standard confidentiality agreement, to examine and have full
access to the Buyer Group’s books of account and records of the applicable
Company Eligible Products, Net Sales, Sublicense Fees and ROW Distributor
Revenues with respect to which the Contingent Payment Certificates that have
been delivered during such preceding calendar year, at the location of such
records on prior written notice of at least ten (10) days, for the purpose of
verifying and assessing the amount of the applicable Net Sales, Sublicense Fees
and ROW Distributor Revenues, as well as the determination (or lack thereof) of
the Company Eligible Products (each such review shall be referred to herein as
an “Audit”); provided, however that the Audit to assess and verify the
determination (or lack thereof) of whether or not a certain product that is
being sold is a Company Eligible Product may only occur once and only in respect
of the first two (2) calendar years in which such product is sold. For the
purpose of conducting an Audit, the Company Shareholder may hire, at its
expense, one or more auditors or attorneys, or other applicable experts, of the
Company Shareholder’s choosing to assist in such examination; provided, that
such auditors or attorneys have entered into standard confidentiality
agreements. The Company Shareholder and such representatives shall have access
to all of the books and records required in the good faith judgment of the
Company Shareholder to perform any Audit for a thirty (30) day period, beginning
on the date on which access to substantially all of such books and records is
first given to the Company Shareholder. Nothing in this Section shall be deemed
to require any member of the Buyer Group to keep any books of account or records
other than those which it maintains in the ordinary course of business in its
usual and customary practice, to retain any such books of account or records for
any period in excess of the period for which it retains such records in the
ordinary course of business in its usual and customary practice, or to provide
access to any books and records other than that specified above.

(d) Dispute Notice. In the event that the Company Shareholder does not agree
with the amount of Net Sales, Sublicense Fees or ROW Distributor Revenues, or
the determination (or lack thereof) of Company Eligible Products set forth on
any Contingent Payment Certificate that was delivered during such preceding
calendar year, the Company Shareholder shall be entitled, during the period
following the end of such preceding calendar year and ending on the earlier of
(i) one hundred eighty days (180) days after the end of such calendar year and
(ii) thirty (30) days following the completion of an Audit (the “Dispute
Period”), to give Parent written notice (a “Dispute Notice”) of such
disagreement. In the event that the Company Shareholder does not deliver a
Dispute Notice during the Dispute Period, the amount of Net Sales, Sublicense
Fees or ROW Distributor Revenues, or the determination (or lack thereof) of
Company Eligible Products set forth on the Contingent Payment Certificates that
were delivered during such calendar year shall irrevocably be deemed to be the
final Net Sales, Sublicense Fees or ROW Distributor Revenues amount, and Company
Eligible Products, for the period covered by such Contingent Payment Certificate
for all purposes of this Agreement.

 

15

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(e) Agreed Contingent Payment. In the event that the Company Shareholder
delivers a Dispute Notice within the Dispute Period, the Company Shareholder and
Parent shall for a period of not less than thirty (30) days after delivery of
the Dispute Notice attempt in good faith to resolve the amount of Net Sales,
Sublicense Fees or ROW Distributor Revenues, or the determination (or lack
thereof) of Company Eligible Products that is in dispute (the “Disputed
Contingent Payment Matters”), and mutually determine any adjustments to such
amount of Net Sales, Sublicense Fees or ROW Distributor Revenues, or the
determination (or lack thereof) of Company Eligible Products and the resulting
Contingent Sales Payment (the “Agreed Contingent Payment Amount”). The Buyer
Group and the Company Shareholder shall provide each other with such
information, records and material kept in the ordinary course of business in
such party’s possession and which such party may disclose without violating
confidentiality obligations to third parties, as is reasonably necessary and
appropriate in attempting to resolve such Disputed Contingent Payment Matters,
including the delivery of a copy to the Company Shareholder of any such
information, records and material, to the extent then available, that was used
to calculate the amount of Net Sales.

(f) Arbitration of Disputes. In the event that no agreement can be reached by
the Company Shareholder and Parent as to the calculation of the Disputed
Contingent Payment Matters within ninety (90) days after delivery of a Dispute
Notice, then either party shall have the right to submit the Disputed Contingent
Payment Amount to arbitration by one (1) of the following entities, or such
other accountants (or other applicable experts who have the appropriate
expertise to be able to assess whether or not the product in question is a
Company Eligible Product), as the Company Shareholder and Parent may mutually
agree, so long as such entity is not the principal regularly-engaged outside
accountant or other applicable expert to Parent or the Company or any auditor or
applicable expert that may have assisted the Company Shareholder in any Audit:
Ernst & Young LLP or BDO USA LLP or any successor entity to the foregoing
(individually, an “Accountant,” and collectively, the “Accountants”). The
Company Shareholder and Parent shall jointly select which of the Accountants
will perform the calculation within thirty (30) days after the Company
Shareholder and Parent determine that they are unable to settle the Disputed
Contingent Payment Matters independently; provided, that in the event that the
Company Shareholder and Parent are unable to agree upon the Accountant to
perform such calculation within such thirty (30) day period, then each of the
Company Shareholder and Parent shall select one of the Accountants and such
Accountants shall jointly select a third Accountant to perform such calculation.
The Accountant selected in accordance with the foregoing sentence (the
“Appraiser”) shall be responsible for the determination of the Disputed
Contingent Payment Matters. The engagement and charge of the Appraiser shall be
limited to determining the Net Sales, Sublicense Fees or ROW Distributor
Revenues, or the determination of Company Eligible Products, as the case may be,
for the applicable Payment Quarter(s). The Appraiser shall determine the
Disputed Contingent Payment Matters within the limitations set forth above
within ninety (90) days after the date of such Appraiser’s engagement and the
Appraiser shall be provided with such information and records, which may include
on-site access and access to personnel, relating to such dispute as it may
reasonably request. Any Disputed Contingent Payment Matters determined by an
Appraiser in accordance with this Section shall be deemed to be the final Net
Sales, Sublicense Fees or ROW Distributor Revenues, or the determination of
Company Eligible Products, as the case may be, for the applicable Payment
Quarter(s) for all purposes of this Agreement. The fees and expenses of the
Appraiser shall be paid by the Company Shareholder, provided, that if the final
determination by the Appraiser in any examination conducted pursuant to this
Section is greater than the Net Sales, Sublicense Fees or ROW Distributor
Revenues, as the case may be, set forth on the relevant Contingent Payment
Certificate by an amount equal to 5% or more, then Parent shall pay all of the
fees and expenses of the Appraiser and all reasonable out-of-pocket costs and
expenses actually incurred by the Company Shareholder in connection with any
Audit.

 

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(g) Final Calculation and Payment of Contingent Sales Payment. With respect to
any Contingent Sales Payment for any Payment Quarter:

(i) In the event the Company Shareholder does not deliver a Dispute Notice with
respect to the Contingent Sales Payment set forth on the Contingent Payment
Certificate delivered for such Payment Quarter within the Dispute Period, or the
Company Shareholder delivers to Parent a written notice informing Parent of its
agreement with the Contingent Sales Payment set forth on such Contingent Payment
Certificate, the Contingent Sales Payment set forth in the relevant Contingent
Payment Certificate shall irrevocably be deemed to be the final such Contingent
Sales Payment for such Payment Quarter for all purposes of this Agreement.

(ii) In the event that the Company Shareholder delivers a Dispute Notice with
respect to a Contingent Sales Payment, and Parent and the Company Shareholder
shall mutually determine the Agreed Contingent Payment Amount, then the Agreed
Contingent Payment Amount shall irrevocably be deemed to be the final such
Contingent Sales Payment for such Payment Quarter for all purposes of this
Agreement and Parent shall, within ten (10) days after such Agreed Contingent
Payment Amount is determined, pay the amounts required to be paid based on such
Agreed Contingent Payment Amount.

(iii) In the event that the final Contingent Sales Payment for such Payment
Quarter is determined by an Appraiser, and additional amounts are owed by Parent
or Purchaser, then Parent and Purchaser shall, within ten (10) days after such
determination, pay such additional amounts, and if Parent and Purchaser paid in
excess of what was due, then Parent and Purchaser will have the right to offset
future the excess against future Contingent Sales Payment.

(iv) The determination of any Contingent Sales Payment shall, in the absence of
fraud and willful misconduct, be conclusive, and in the absence of fraud and
willful misconduct, the Buyer Group, the Company Shareholder and Appraiser shall
each be free from any and all liability resultant from such determination except
as expressly set forth herein.

(h) Unilateral Right of Set-Off. Subject to the express limitations and
procedures set forth in ARTICLE 9 hereof, the obligation of Purchaser to make
any Contingent Payment shall be qualified by the right of Purchaser to reduce
the amount of any one or more of the Milestone Payments or the Contingent Sales
Payments, by the amount of any Indemnifiable Damages for which an Indemnified
Person may be entitled to indemnification pursuant to ARTICLE 9; provided, that
the right of Purchaser to reduce any Contingent Payment pursuant to this Section
is subject to the limitations, notice requirements and procedures set forth in
ARTICLE 9. In the event that (A) Purchaser sets off the amount of any Contingent
Payment by the amount of any Indemnifiable Damages that have not been, at the
time such Contingent Payment is made, incurred by Purchaser or (B) the Company
Shareholder objects to a Claim Certificate as set forth in Section 9.6, and it
is later finally determined that the full amount of such Indemnifiable Damages
will not be incurred by Indemnified Person, or the applicable Indemnified Person
is not entitled to indemnification pursuant to ARTICLE 9 with respect to any
portion of such Indemnifiable Damages, as the case may be, then, following such
determination, Purchaser shall pay to the Company Shareholder and Teva, promptly
after such determination and without interest, the amount of the prior reduction
attributable to such Indemnifiable Damages that will not be incurred by
Purchaser (or for which the applicable Indemnified Person is not entitled to
indemnification) in the form of an additional Contingent Payment that is
otherwise paid in accordance with the terms of this Agreement.

(i) No Security. The Company Shareholder understands and agrees that (a) the
contingent rights to receive any Contingent Payment will not be represented by
any form of certificate, are not transferable, except by operation of law
relating to descent and distribution, divorce and community property, and do not
constitute an equity or ownership interest in any member of the Buyer Group,
(b) neither the Company Shareholder nor Teva shall have any rights as a security
holder of any member of the Buyer Group as a result of the Company Shareholder’s
or Teva’s contingent right to receive any Contingent Payment hereunder and
(c) no interest is payable with respect to any Contingent Payment.

 

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(j) Contingent Payments Not Royalties. The Contingent Payments provided for
pursuant to this Agreement are provided as a result of bona fide difficulties in
determining the present value of the Company. The Contingent Payments represent
(and shall be reported by Parent and Purchaser as) additional consideration for
the Company Ordinary Shares and are not intended to be royalty payments.

ARTICLE 2

REPRESENTATIONS AND WARRANTIES OF THE COMPANY

Subject to the disclosures set forth in the disclosure letter of the Company
delivered to Purchaser concurrently with the parties’ execution of this
Agreement (the “Company Disclosure Letter”) (each of which disclosures, in order
to be effective, shall clearly indicate the Section and, if applicable, the
Subsection of this ARTICLE 2 to which it relates (unless and only to the extent
the relevance to other representations and warranties is readily apparent from
the actual text of the disclosures without any reference to extrinsic
documentation or any independent knowledge on the part of the reader regarding
the matter disclosed), and each of which disclosures shall also be deemed to be
representations and warranties made by the Company to Purchaser under this
ARTICLE 2), the Company represents and warrants to Purchaser, as of the date
hereof and as of the Closing Date, as follows:

2.1 Organization, Standing, Power and Subsidiaries.

(a) The Company is a corporation duly organized and validly existing under the
laws of the State of Israel. The Company has the corporate power to own its
properties and to conduct its business as now being conducted and as currently
proposed by it to be conducted and is duly qualified to do business and is in
good standing in each jurisdiction where the failure to be so qualified and in
good standing, individually or in the aggregate with any such other failures,
would reasonably be expected to result in liability that is material to the
Company. The Company is not in violation of any of the provisions of its
Articles of Association.

(b) Except as set forth on Schedule 2.1(b) of the Company Disclosure Letter, the
Company has and, since its inception has had, no subsidiaries or any Equity
Interest, whether direct or indirect, in, or any loans to, any corporation,
partnership, limited liability company, joint venture or other business entity.

(c) Schedule 2.1(c) of the Company Disclosure Letter sets forth a true, correct
and complete list of: (i) the names of the members of the Board of Directors (or
similar body) of the Company; (ii) the names of the members of each committee of
the Board of Directors (or similar body) of the Company; and (iii) the names and
titles of the officers of the Company.

(d) Schedule 2.1(d) of the Company Disclosure Letter sets forth (i) a list of
all jurisdictions throughout the world in which the Company is authorized or
qualified to do business as a foreign corporation, (ii) a true, correct and
complete listing of the locations of all sales office, manufacturing facilities,
and any other office or facilities of the Company and (iii) a true and complete
list of all jurisdictions in which the Company maintains any employees or
contractors.

2.2 Capital Structure.

(a) The authorized share capital of the Company consists of NIS 20,000, divided
into 2,000,000 Company Ordinary Shares. As of the Agreement Date, (i) a total of
1,317,398 Company

 

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Ordinary Shares are issued and outstanding and (ii) there are no other issued
and outstanding share capital or other securities of the Company and no
outstanding commitments or Contracts to issue any share capital or other
securities of the Company other than pursuant to the exercise of outstanding
Company Options under the Company Option Plans. As of the Closing Date, (i) a
total of 1,102,021 Company Ordinary Shares are issued and outstanding and
(ii) there are no outstanding Company Options or other issued and outstanding
share capital or other securities of the Company and no outstanding commitments
or Contracts to issue any share capital or other securities of the Company. The
Company holds no treasury shares. Schedule 2.2(a) of the Company Disclosure
Letter accurately sets forth, as of the Agreement Date, the name of each Person
that is the registered owner of any Company Ordinary Shares and the number of
such shares so owned by such Person. The number of such shares set forth as
being so owned by such Person constitutes the entire interest of such Person in
the issued and outstanding capital stock or voting securities of the Company.
All issued and outstanding Company Ordinary Shares are duly authorized, validly
issued, fully paid and non-assessable and are free of any Encumbrances,
preemptive rights, rights of first refusal or “put” or “call” rights created by
statute, the Articles of Association of the Company or any Contract to which the
Company is a party or by which the Company is bound. All corporate actions and
proceedings on the part of the Company in connection with all transactions
involving the sale of the Company’s securities among and between the Company’s
present and past shareholders have complied with all applicable securities laws.
The Company has never declared or paid any dividends on any Company Ordinary
Shares. There is no liability for dividends accrued and unpaid by the Company.
The Company is not under any obligation to register under any securities laws
any Company Ordinary Shares or any other securities of the Company, whether
currently outstanding or that may subsequently be issued. All issued and
outstanding Company Ordinary Shares were issued in compliance with any
applicable Legal Requirements and all requirements set forth in the Articles of
Association and any applicable Contracts to which the Company is a party or by
which the Company or any of its assets is bound. The Company Shareholder is the
sole legal and beneficial owner of the Company Ordinary Shares set forth on
Schedule 2.2(a) of the Company Disclosure Letter as being so owned by the
Company Shareholder and constitute the entire interest of the Company
Shareholder in the issued and outstanding share capital or voting securities of
the Company, and, to the Company’s knowledge, no other Person has any right,
title or interest in or to such Company Ordinary Shares. As of the Agreement
Date, Teva is the sole legal and, to the Company’s knowledge, beneficial owner
of the Company Ordinary Shares set forth on Schedule 2.2(a) of the Company
Disclosure Letter as being so owned by Teva and constitute the entire interest
of Teva in the issued and outstanding share capital or voting securities of the
Company, and, to the Company’s knowledge, no other Person has any right, title
or interest in or to such Company Ordinary Shares.

(b) As of the Agreement Date, the Company has reserved 52,632 Company Ordinary
Shares for issuance to employees, non-employee directors and consultants
pursuant to the Company Option Plans, of which 51,450 shares are subject to
outstanding and unexercised Company Options, and 1,182 shares remain available
for issuance thereunder. Schedule 2.2(b)-1 of the Company Disclosure Letter sets
forth, as of the Agreement Date, a true, correct and complete list of all
holders of outstanding Company Options, whether or not granted under the Company
Option Plan, including the number of Company Ordinary Shares subject to each
Company Option, the date of grant, the exercise or vesting schedule (and the
terms of any acceleration thereof), the exercise price per share, the tax track
under which such Options were granted under the ITO, the term of each Company
Option, and the plan from which such Company Option was granted. In addition,
Schedule 2.2(b)-2 of the Company Disclosure Letter sets forth a true, correct
and complete list (which schedule shall be a subset Schedule 2.2(b)-1 of the
Company Disclosure Letter) of all holders of outstanding Company Options that
are held by Persons that are not employees of the Company (including
non-employee directors, consultants, advisory board members, vendors, service
providers or other similar persons), including a description of the relationship
between each such Person and the Company. Correct and complete copies of each
Company Option Plan, all agreements and instruments relating to or issued under
each Company Option Plan (including executed copies of all Contracts relating to
each Company Option and the Company Ordinary Shares

 

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purchased under such option) have been provided to Purchaser’s counsel, and such
plans and Contracts have not been amended, modified or supplemented since being
provided to Purchaser’s counsel, and there are no agreements, understandings or
commitments to amend, modify or supplement such plans or Contracts in any case
from those provided to Purchaser’s counsel. No benefits under any of such
Company Option Plans will accelerate in connection with the Share Purchase. No
other outstanding Company Options, whether under the Company Option Plans or
otherwise, will be accelerated in connection with the Share Purchase. All
Company Options were issued in compliance with all applicable Legal Requirements
and all requirements set forth in applicable Contracts, including, but not
limited to the Company Option Plans. Each Option granted under the “capital gain
track” described in Section 102(b)(2) of the ITO was notified to and deposited
with the Section 102 Trustee in a timely manner in accordance with the
requirements of current ITA guidelines so as to qualify as capital gain track
grants.

(c) Other than as set forth on Schedules 2.2(a), 2.2(b)-1, and 2.2(b)-2 of the
Company Disclosure Letter, as of the Agreement Date, no Person has any right to
acquire any Company Ordinary Shares or any Company Options or other rights to
purchase Company Ordinary Shares or other securities of the Company, from the
Company or the Company Shareholder or, to the Company’s knowledge, Teva.

(d) No bonds, debentures, notes or other indebtedness of the Company
(i) granting its holder the right to vote on any matters on which shareholders
may vote (or which is convertible into, or exchangeable for, securities having
such right) or (ii) the value of which is any way based upon or derived from
capital or voting stock of the Company, is issued or outstanding as of the
Agreement Date (collectively, “Company Voting Debt”).

(e) Except for the Company Options described in Schedule 2.2(b)-1 and 2.2(b)-2
of the Company Disclosure Letter, there are no options, warrants, calls, rights
or Contracts of any character to which the Company is a party or by which it is
bound obligating the Company to issue, deliver, sell, repurchase or redeem, or
cause to be issued, delivered, sold, repurchased or redeemed, any Company
Ordinary Shares, Company Options or other rights to purchase Company Ordinary
Shares or other securities of the Company, or any Company Voting Debt, or
obligating the Company to grant, extend, accelerate the vesting and/or
repurchase rights of, change the price of, or otherwise amend or enter into any
such Company Option, call, right or Contract. There are no Contracts relating to
voting, purchase, sale or transfer of any Company Ordinary Shares (i) between or
among the Company and any Company Securityholder, other than written contracts
granting the Company the right to purchase unvested shares upon termination of
employment or service, and (ii) to the knowledge of the Company, between or
among any of the Company Securityholders. Neither the Company Option Plan nor
any Contract of any character to which the Company is a party to or by which the
Company is bound relating to any Company Options requires or otherwise provides
for any accelerated vesting of any Company Options in connection with the Share
Purchase or any other transaction contemplated by this Agreement or upon
termination of employment or service with the Company or with Purchaser, or any
other event, whether before, upon or following the Share Purchase or otherwise.

(f) The Spreadsheet will accurately set forth, as of the Closing, the name of
each Person that is the registered owner of any Company Ordinary Shares and the
number and kind of such shares so owned. The number of such shares set forth as
being so owned by such Person will constitute the entire interest of such person
in the issued and outstanding capital stock, voting securities or other
securities of the Company. As of the Closing, no other Person not disclosed in
the Spreadsheet will have a right to acquire any Company Ordinary Shares and/or
Company Options from the Company. In addition, the Company Ordinary Shares
disclosed in the Spreadsheet will be, as of the Closing, free and clear of any
Encumbrances created by the Articles of Association of the Company or any
Contract to which the Company is a party or by which it is bound.

 

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2.3 Authority; Noncontravention.

(a) The Company has all requisite corporate power and authority to enter into
this Agreement and to consummate the transactions contemplated hereby. The
execution and delivery of this Agreement and the consummation of the
transactions contemplated hereby have been duly authorized by all necessary
corporate action on the part of the Company. This Agreement has been duly
executed and delivered by the Company and constitutes the valid and binding
obligation of the Company enforceable against the Company in accordance with its
terms subject only to the effect, if any, of (i) applicable bankruptcy and other
similar laws affecting the rights of creditors generally and (ii) rules of law
governing specific performance, injunctive relief and other equitable remedies.
The Board of Directors, by resolutions duly adopted (and not thereafter modified
or rescinded) by the unanimous vote of the Board of Directors, has approved and
adopted this Agreement and approved the Share Purchase. The vote of the Company
Shareholders is required in connection with the execution, delivery or
performance of this Agreement by the Company or the Company Shareholder and the
consummation of the Share Purchase and the other transactions contemplated by
this Agreement.

(b) The execution and delivery of this Agreement by the Company does not, and
the consummation of the transactions contemplated hereby will not, (i) result in
the creation of any Encumbrance on any of the material properties or assets of
the Company or to the knowledge of the Company, any of the Company Ordinary
Shares or (ii) conflict with, or result in any violation of or default under
(with or without notice or lapse of time, or both), or give rise to a right of
termination, cancellation or acceleration of any obligation or loss of any
benefit under, or require any consent, approval or waiver from any Person
pursuant to, (A) any provision of the Articles of Association, in each case as
amended to date, (B) any Contract of the Company or any Contract applicable to
any of their respective material properties or assets, or (C) any Legal
Requirements applicable to the Company or any of their respective material
properties or assets.

(c) No consent, approval, order or authorization of, or registration,
declaration or filing with, any Governmental Entity is required by or with
respect to the Company in connection with the execution and delivery of this
Agreement or the consummation of the transactions contemplated hereby, except
for (i) the filing of the OCS Notice and the execution by Purchaser of an
undertaking in customary form in favor of the OCS to comply with the applicable
Israeli Encouragement of Industrial Research and Development Law, 1984, and
(ii) such other consents, authorizations, filings, approvals, notices and
registrations which, if not obtained or made, would not be material to the
Company’s ability to consummate the Share Purchase or to perform its obligations
under this Agreement and would not prevent, materially alter or delay any of the
transactions contemplated by this Agreement.

(d) The Company, its Board of Directors and the Company Shareholders have taken
all actions such that the restrictive provisions of any “fair price,”
“moratorium,” “control share acquisition,” “business combination,” “interested
shareholder” or other similar anti-takeover statute or regulation, and any
anti-takeover provision in the governing documents of the Company will not be
applicable to any of the Company or Purchaser or to the execution, delivery of,
or performance of the transactions contemplated by this Agreement or to the
Transactions.

2.4 Financial Statements.

(a) The Company has delivered to Purchaser its audited consolidated financial
statements for each of its fiscal years ending December 31, 2013, December 31,
2012 and December 31, 2011 (including, in each case, balance sheets, statements
of operations and statements of cash flows (collectively, the “Financial
Statements”), which are included as Schedule 2.4(a) of the Company Disclosure
Letter. The Financial Statements (i) are derived from and in accordance with the
books and records of the Company, (ii) complied as to form in all material
respects with applicable accounting

 

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requirements with respect thereto as of their respective dates, (iii) have been
prepared in accordance with International Financial Reporting Standards (“IFRS”)
applied on a consistent basis throughout the periods indicated and consistent
with each other, (iv) fairly and accurately present the consolidated financial
condition of the Company at the dates therein indicated and the consolidated
results of operations and cash flows of the Company for the periods therein
specified, and (v) are true, complete and correct in all material respects.

(b) The Company has no Liabilities of the type that would be required to be
disclosed as a liability on a balance sheet prepared in accordance with IFRS, or
in footnotes that would be included with financial statements prepared in
accordance with IFRS, other than (i) those set forth or adequately provided for
in the balance sheet included in the Financial Statements as of December 31,
2013 (the “Company Balance Sheet”), (ii) those incurred in the conduct of the
Company’s business since December 31, 2013 (the “Company Balance Sheet Date”) in
accordance with the Company’s budget as approved by its Board of Directors, a
copy of which has been made available to Purchaser (the “Company Budget”), and
(iii) those incurred by the Company in connection with the execution of this
Agreement. Except for Liabilities reflected in the Financial Statements, the
Company has no off balance sheet Liability of any nature to, or any financial
interest in, any third party or entities, the purpose or effect of which is to
defer, postpone, reduce or otherwise avoid or adjust the recording of expenses
incurred by the Company. Without limiting the generality of the foregoing, the
Company has never guaranteed any debt or other obligation of any other Person.
All reserves that are set forth in or reflected in the Company Balance Sheet
have been established in accordance with IFRS consistently applied and are
adequate.

(c) The Company has established and maintains a system of internal accounting
controls sufficient to provide reasonable assurances (i) that transactions of
the Company are being executed and made only in accordance with appropriate
authorizations of management and the Board of Directors of Company, (ii) that
transactions are recorded as necessary (A) to permit preparation of financial
statements in conformity with IFRS and (B) to maintain accountability for
assets, (iii) that access to assets is permitted only in accordance with
management authorization, and (iv) that the amount recorded for assets on the
books and records of the Company is compared with the existing assets at
reasonable intervals and appropriate action is taken with respect to any
differences. Neither the Company nor the Company’s independent auditors, nor to
the Company’s knowledge, any current or former employee, consultant or director
of Company, has identified or been made aware of any fraud, whether or not
material, that involves Company’s management or other current or former
employees, consultants directors of Company, or any claim or allegation
regarding any of the foregoing. Neither the Company nor, to the Company’s
knowledge, any director, officer, employee, auditor, accountant or
representative of the Company has received or otherwise had or obtained
knowledge of any material complaint, allegation, assertion or claim, whether
written or oral, in each case, regarding deficient accounting or auditing
practices, procedures, methodologies or methods of the Company or their
respective internal accounting controls or any material inaccuracy in the
Company’s financial statements. No attorney representing the Company, whether or
not employed by the Company, has reported to the Board of Directors or any
committee thereof or to any director or officer of the Company evidence of a
material violation of securities laws, breach of fiduciary duty or similar
violation by the Company or its officers, directors, employees or agents. There
are no significant deficiencies or material weaknesses in the design or
operation of the Company’s internal controls which could adversely affect the
Company’s ability to record, process, summarize and report financial data. At
the Company Balance Sheet Date, there were no material loss contingencies (as
such term is used in International Accounting Standards No. 37 (“IAS 37”),
Provisions, Contingent Liabilities and Contingent Assets, issued by the
International Accounting Standards Board in September 1998) that are not
adequately provided for in the Company Balance Sheet as required by said IAS 37.
There has been no change in the Company accounting policies since the Company’s
inception, except as described in the Financial Statements.

 

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(d) Schedule 2.4(d) of the Company Disclosure Letter sets forth the names and
locations of all banks, trust companies, savings and loan associations and other
financial institutions at which the Company maintains accounts of any nature and
the names of all Persons authorized to draw thereon or make withdrawals
therefrom.

(e) Schedule 2.4(e) of the Company Disclosure Letter accurately lists all
indebtedness of Company for money borrowed (“Company Debt”), including, for each
item of Company Debt, the agreement governing the Company Debt and the interest
rate, maturity date and any assets or properties securing such Company Debt. All
Company Debt may be prepaid at the Closing without penalty under the terms of
the Contracts governing such Company Debt.

2.5 Absence of Certain Changes. Since the Company Balance Sheet Date, the
Company has conducted its business only in the ordinary course consistent with
past practice and:

(a) there has not occurred a Material Adverse Effect on the Company,

(b) the Company has not made or entered into any Contract or letter of intent
with respect to, or otherwise effected, any acquisition, sale, license,
disposition or transfer of any asset of the Company,

(c) except as required by IFRS, there has not occurred any change in accounting
methods or practices (including any change in depreciation or amortization
policies or rates or revenue recognition policies or establishment of reserves)
by the Company or any revaluation by the Company of any of its assets,

(d) the Company has not made any Tax election, prepared any Tax Returns in a
manner which is inconsistent with the past practices of the Company with respect
to the treatment of items on such Tax Returns, incurred any material liability
for Taxes other than in the ordinary course of business consistent with past
practice, filed an amended Tax Return or a claim for refund of Taxes with
respect to the income, operations or property of the Company, or settled any
claim relating to Taxes,

(e) there has not occurred any declaration, setting aside, or payment of a
dividend or other distribution with respect to any securities of the Company, or
any direct or indirect redemption, purchase or other acquisition by the Company
of any of its securities, or any change in any rights, preferences, privileges
or restrictions of any of its outstanding securities,

(f) the Company has not entered into, amended, renewed or terminated any
Material Contract, and there has not occurred any default or breach under any
Material Contract to which the Company is a party or by which it is, or any of
its assets and properties are, bound,

(g) there has not occurred any amendment or change to the Articles of
Association,

(h) there has not occurred any increase in or modification of the compensation
or benefits payable or to become payable by the Company to any of its directors,
officers, employees or consultants (other than increases in the base salaries of
employees who are not officers in an amount that does not exceed 10% of such
base salaries), any adoption or modification of any employee benefit plan or any
new loans or advances or extension of existing loans or advances to any such
Persons (other than routine expense advances to employees of the Company
consistent with past practice), and neither the Company has entered into any
Contract to grant or provide (nor has granted any) severance, acceleration of
vesting or other similar benefits to any such Persons,

 

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(i) there has not occurred the execution of any Contracts or the extension of
the term of any existing Contract with any Person in the employ or service of
the Company,

(j) there has not occurred any change in title, office or position, or material
reduction in the responsibilities of, or change in identity with respect to the
management, supervisory or other key personnel of the Company, any termination
of employment of any such employees, or any labor dispute or claim of unfair
labor practices involving the Company,

(k) the Company has not incurred, created or assumed any Encumbrance (other than
a Permitted Encumbrance) on any of its assets or properties, any Liability for
borrowed money or any Liability as guarantor or surety with respect to the
obligations of any other Person,

(l) the Company has not paid or discharged any Encumbrance or Liability which
was not shown on the Company Balance Sheet or incurred in the ordinary course of
business consistent with past practice since the Company Balance Sheet Date,

(m) the Company has not incurred any Liability to its directors, officers or
shareholders (other than Liabilities to pay compensation or benefits in
connection with services rendered in the ordinary course of business, consistent
with past practice),

(n) the Company has not cancelled or waived any Liabilities owed to it,

(o) the Company has not made any deferral of the payment of any accounts payable
other than in the ordinary course of business, consistent with past practice, or
in an amount in excess of $100,000, or given any discount, accommodation or
other concession other than in the ordinary course of business, consistent with
past practice, in order to accelerate or induce the collection of any
receivable,

(p) there has been no material damage, destruction or loss, whether or not
covered by insurance, affecting the assets, properties or business of the
Company,

(q) the Company has not sold, disposed of, transferred or licensed to any Person
any rights to any Company-Owned IP Rights,

(r) there has been no application for or receipt of a Government Grant, and

(s) there has not occurred any announcement of, any negotiation by or any entry
into any Contract by the Company to do any of the things described in the
preceding clauses (a) through (q) (other than negotiations and agreements with
Purchaser and its representatives regarding the transactions contemplated by
this Agreement).

2.6 Litigation. There is no private or governmental action, suit, proceeding,
claim (including any claim for injury by participants in clinical studies),
mediation, arbitration or investigation pending before any Governmental Entity
(a “Legal Proceeding”), or, to the knowledge of the Company, threatened against
the Company or any of its assets or properties or any of its directors, officers
or employees (in their capacities as such or relating to their employment,
services or relationship with the Company), nor, to the knowledge of the
Company, is there any reasonable basis for any such action, suit, proceeding,
claim, mediation, arbitration or investigation. There is no judgment, decree,
injunction or order against the Company, any of its assets or properties, or, to
the knowledge of the Company, any of their respective directors, officers or
employees (in their capacities as such or relating to their employment, services
or relationship with the Company). To the knowledge of the Company, there is no
reasonable basis for any Person to assert a claim against the Company based upon
the Company entering into this Agreement or any of the other transactions or
agreements contemplated hereby. The Company

 

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does not have any Legal Proceeding pending against any other Person. Schedule
2.6 of the Company Disclosure Letter contains a complete and accurate
description of all Legal Proceedings, during the past seven (7) years, to which
the Company has been a party or which relate to any its assets or properties or
any of its officers or directors (in their capacities as such or relating to
their employment, services or relationship with the Company), or any such Legal
Proceedings which were settled prior to the institution of formal proceedings,
other than Legal Proceedings brought by the Company for collection of monies
owed in the ordinary course of business.

2.7 Restrictions on Business Activities. There is no Contract, judgment,
injunction, order or decree binding upon the Company that has or would
reasonably be expected to have, whether before or after consummation of the
Share Purchase, the effect of prohibiting, restricting or impairing any current
or presently proposed business practice of the Company, any acquisition of
property by the Company or the conduct or operation of the Business or limiting
the freedom of the Company to engage in any line of business, to sell, license
or otherwise distribute services or the Company Product in any market or
geographic area, or to compete with any Person.

2.8 Compliance with Laws; Governmental Permits.

(a) The Company has complied in all material respects with, is not in violation
of, and has not received any notices of violation with respect to, any
applicable Legal Requirement with respect to the conduct of its business, or the
ownership or operation of its business. To the Company’s knowledge, no event has
occurred, and no condition or circumstance exists, that will (with or without
notice or lapse of time) constitute or result in a material violation by the
Company of, or a failure on the part of the Company to comply with, any Legal
Requirement. Neither the Company nor any director, officer, or employee thereof
(in their capacities as such or relating to their employment, services or
relationship with the Company), has given, offered, paid, promised to pay or
authorized payment of any money, any gift or anything of value, with the purpose
of influencing any act or decision of the recipient in his or her official
capacity or inducing the recipient to use his or her influence to affect an act
or decision of a government official or employee, to any (i) governmental
official or employee, (ii) political party or candidate thereof, or (iii) Person
while knowing that all or a portion of such money or thing of value would be
given or offered to a governmental official or employee or political party or
candidate thereof.

(b) The Company has obtained each federal, state, county, local or foreign
governmental consent, license, permit, grant, or other authorization of a
Governmental Entity (i) pursuant to which the Company currently operates or
holds any interest in any of its assets or properties or (ii) that is required
for the operation of the Business or the holding of any such interest (all of
the foregoing consents, licenses, permits, grants, and other authorizations,
collectively, the “Company Authorizations”), and all of the Company
Authorizations are in full force and effect. The Company has not received any
notice or other communication from any Governmental Entity regarding (i) any
actual or possible violation of law or any Company Authorization or any failure
to comply with any term or requirement of any Company Authorization or (ii) any
actual or possible revocation, withdrawal, suspension, cancellation, termination
or modification of any Company Authorization. The Company has materially
complied with all of the terms of the Company Authorizations. None of the
Company Authorizations will be terminated or impaired, or will become
terminable, in whole or in part, as a result of the consummation of the
transactions contemplated by this Agreement.

2.9 Title to, Condition and Sufficiency of Assets.

(a) The Company has good and valid title to, or valid leasehold interests in,
all of its respective properties, and interests in properties and assets, real
and personal, reflected on the Company Balance Sheet or acquired after the
Company Balance Sheet Date (except properties and assets, or

 

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interests in properties and assets, sold or otherwise disposed of since the
Company Balance Sheet Date in the ordinary course of business consistent with
past practice), or, with respect to leased properties and assets, valid
leasehold interests in such properties and assets that afford the Company valid
leasehold possession of the properties and assets that are the subject of such
leases, in each case, free and clear of all Encumbrances, except (i) Permitted
Encumbrances incurred in the ordinary course of business consistent with past
practice for obligations not past due, (ii) such imperfections of title and
non-monetary Encumbrances as do not and will not detract from or interfere with
the use of the properties subject thereto or affected thereby, or otherwise
impair business operations involving such properties, and (iii) liens securing
indebtedness that is reflected on the Company Balance Sheet. The plant, property
and equipment of each of the Company that are used in the operations of their
its businesses are (i) in good operating condition and repair, subject to normal
wear and tear and (ii) not obsolete, dangerous or in need of renewal or
replacement, except for renewal or replacement in the ordinary course of
business, consistent with past practice. All properties used in the operations
of the Company are reflected on the Company Balance Sheet to the extent required
under IFRS to be so reflected. Schedule 2.9(a) of the Company Disclosure Letter
identifies each parcel of real property leased by the Company. The Company has
adequate rights of ingress and egress into any real property used in the
operation of the Business. The Company has heretofore provided to Purchaser’s
counsel true, correct and complete copies of all leases, subleases and other
agreements under which the Company uses or occupies or has the right to use or
occupy, now or in the future, any real property or facility, including all
modifications, amendments and supplements thereto. The Company does not
currently own any real property.

(b) The assets owned by the Company constitute all of the assets that are
necessary for the Company to conduct, operate and continue the business of the
Company as such business is currently conducted , and (ii) constitute all of the
assets that are used in the business of the Company as such business is
currently conducted, without the breach or violation of any Contract.

2.10 Intellectual Property Rights.

(a) The Company (i) owns and has independently developed or acquired, or
(ii) has the valid right or license to, all Company IP Rights. The Company IP
Rights are sufficient for the conduct of the business of the Company as
currently conducted and as currently proposed by the Company to be conducted by
the Company.

(b) The Company has not transferred ownership of any Intellectual Property that
is or was Company-Owned IP Rights to any third party, or knowingly permitted the
Company’s rights in any Intellectual Property that is or was Company-Owned IP
Rights to enter the public domain or, with respect to any Intellectual Property
for which the Company have submitted an application or obtained a registration,
lapse (other than through the expiration of registered Intellectual Property at
the end of its maximum statutory term).

(c) The Company owns and has good and exclusive title to each item of
Company-Owned IP Rights and each item of Company Registered Intellectual
Property, free and clear of any Encumbrances (other than Permitted
Encumbrances). To the knowledge of the Company, the right, license and interest
of the Company in and to all Third Party Intellectual Property Rights licensed
by the Company from a third party are free and clear of all Encumbrances
(excluding restrictions contained in the applicable written license agreements
with such third parties and Permitted Encumbrances) (for clarity, Company does
not make any representation or warranty that the Third Party Intellectual
Property Rights are free of Encumbrances).

(d) Neither the execution and delivery or effectiveness of this Agreement nor
the performance of the Company’s obligations under this Agreement will cause the
forfeiture or termination of, or give rise to a right of forfeiture or
termination of, any Company-Owned IP Right, or impair the right of the Company
or Purchaser to use, possess, sell or license any Company-Owned IP Right or
portion thereof.

 

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(e) Schedule 2.10(e) of the Company Disclosure Letter sets forth a true, correct
and complete list as of the Agreement Date of all Company Registered
Intellectual Property, including the owner(s) of each such item of Company
Registered Intellectual Property and the jurisdictions in which each such item
of Company Registered Intellectual Property has been issued or registered or in
which any application for such issuance and registration has been filed, or in
which any other filing or recordation has been made. Schedule 2.10(e) of the
Company Disclosure Letter sets forth a list of all actions that are required to
be taken by the Company within 120 days of the Agreement Date with respect to
any of the Company Registered Intellectual Property in order to avoid prejudice
to, impairment or abandonment of such Company Registered Intellectual Property.

(f) To the knowledge of the Company, each item of Company Registered
Intellectual Property is valid and enforceable (or in the case of applications,
subsisting), and no such item has been abandoned or allowed to lapse. The
Company Registered Intellectual Property listed in Schedule 2.10(f) of the
Company Disclosure Letter has been filed, prosecuted and maintained in good
faith and in a commercially reasonable manner and in compliance with applicable
Legal Requirements, and is in good administrative standing. All registration,
maintenance and renewal fees currently due in connection with the Company
Registered Intellectual Property listed in Schedule 2.10(f) of the Company
Disclosure Letter have been paid and all documents, recordations and
certificates in connection with such Company Registered Intellectual Property
currently required to be filed have been filed with the relevant patent,
copyright, trademark or other authorities in the United States, Israel or
foreign jurisdictions, as the case may be, for the purposes of prosecuting,
maintaining and perfecting such Company Registered Intellectual Property and
recording the Company’s or the relevant licensor’s ownership interests therein.
To the knowledge of the Company, none of the Company Registered Intellectual
Property is currently involved in any interference, inventorship dispute,
reissue, reexamination, opposition, or cancellation claim or proceeding or any
claim or proceeding, and the Company has not received any written notice from
any Person regarding any such claim or proceeding and to the Company’s knowledge
no grounds exist for any such action or proceeding. To the knowledge of the
Company, there is no threatened claim or proceeding of the nature described in
the immediately preceding sentence, nor any facts or circumstances that could
reasonably be expected to give rise to the same. The Company has not entered
into any Contract granting any person the right to control the prosecution of
any of the Company Registered Intellectual Property listed in Schedule 2.10(f)
of the Company Disclosure Letter.

(g) The Company is not or shall not be as a result of the execution and delivery
or effectiveness of this Agreement or the performance of the Company’s
obligations under this Agreement, in breach of Company IP Rights Agreements and
the consummation of the transactions contemplated by this Agreement will not
result in the modification, cancellation, termination, suspension of, or
acceleration of any payments with respect to the Company IP Rights Agreements,
or give any non-Company party to any Company IP Rights Agreement the right to do
any of the foregoing. Following the Closing, the Company (as wholly-owned by
Purchaser) will be permitted to exercise all of the Company’s rights under the
Company IP Rights Agreements to the same extent the Company would have been able
to had the transactions contemplated by this Agreement not occurred and without
the payment of any additional amounts or consideration other than ongoing fees,
royalties or payments which the Company would otherwise be required to pay.

(h) None of the Company IP Rights Agreements grants any third party exclusive
rights to or under any Company IP Rights or grants any third party the right to
sublicense any Company IP Rights.

 

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(i) There are no royalties, honoraria, fees or other payments payable by the
Company to any Person (other than (i) one time, lump-sum fees payable for
end-user or other licenses to generally commercially available software or
products and (ii) salaries payable to employees, consultants and independent
contractors not contingent on or related to use of their work product) as a
result of the ownership, use, possession, license-in, license-out, sale,
marketing, advertising or disposition of any Company IP Rights by the Company.

(j) To the knowledge of the Company, there is no unauthorized use, unauthorized
disclosure, infringement or misappropriation of any Company-Owned IP Rights, by
any third party, including any employee or former employee of the Company. The
Company has not brought any action, suit or proceeding for infringement or
misappropriation of any Intellectual Property or breach of any Company IP Rights
Agreement. The Company has not entered into any Contract granting any Person the
right to bring infringement, or misappropriation actions with respect to, or
otherwise to enforce rights with respect to, any of the Company-Owned IP Rights.

(k) The Company has not been sued in any suit, action or proceeding (or received
any written notice or, to the knowledge of the Company, threat) which involves a
claim of infringement or misappropriation of any Third Party Intellectual
Property Rights or which contests the validity, ownership or right of the
Company to own or exercise any Intellectual Property right and to the Company’s
knowledge no grounds exist for any such suit, action or proceeding. The Company
has not received any written communication that involves an offer to license or
grant any other rights or immunities under any Third Party Intellectual Property
Rights.

(l) To the knowledge of the Company, the Company has no Liability for
infringement or misappropriation of Third Party Intellectual Property Rights or
for unfair competition or unfair trade practices under the laws of any
jurisdiction. To the knowledge of the Company, the operation of the business of
the Company as such business is currently conducted and as currently proposed by
the Company to be conducted by the Company has not and does not infringe(d) or
misappropriate(d) any Third Party Intellectual Property Rights and does not
constitute unfair competition or unfair trade practices under the laws of any
jurisdiction and there is no substantial basis for a claim that the operation of
the business of the Company will infringe, is infringing or has infringed on or
misappropriated any Third Party Intellectual Property Rights, or constitutes or
has constituted unfair competition or unfair trade practices under the laws of
any jurisdiction. The Company has not received any opinion of counsel that any
Company Product or the operation of the business of the Company as previously or
currently conducted by the Company infringes or misappropriates any Third Party
Intellectual Property Rights.

(m) None of the Company-Owned IP Rights, the Company Products, or the Company is
subject to any proceeding or outstanding order, or stipulation (A) restricting
in any manner the use, transfer, or licensing by the Company of any
Company-Owned IP Right or any Company Product, or which may affect the validity,
use or enforceability of any such Company-Owned IP Right or Company Product, or
(B) restricting the conduct of the business of the Company in order to
accommodate Third Party Intellectual Property Rights.

(n) The Company has secured from all Persons who independently or jointly
contributed to the conception, reduction to practice, creation or development of
any Company-Owned IP Rights and Company Registered Intellectual Property
unencumbered and unrestricted exclusive ownership of, all such third party’s
Intellectual Property in such contribution that the Company does not already own
by operation of law and such third party has not retained any rights or licenses
with respect thereto. Without limiting the foregoing, the Company has obtained
proprietary information and invention disclosure and assignment agreements from
all current and former employees and consultants of the Company, waiving all
moral rights (to the extent applicable), and waiving any right or interest in
and to any royalty or other remuneration provided by local custom,
administrative regulation, governmental statute or otherwise (including under
Section 134 of the Israeli Patent Law 1967 and any other applicable Legal
Requirement).

 

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(o) To the knowledge of the Company, no current or former employee, consultant
or independent contractor of the Company: (i) is in violation of any term or
covenant of any Contract relating to employment, invention disclosure (including
patent disclosure), invention assignment, non-disclosure or any other Contract
with any other party by virtue of such employee’s, consultant’s or independent
contractor’s being employed by, or performing services for, the Company or using
trade secrets or proprietary information of others without permission; or
(ii) has developed, created or discovered any Company-Owned IP Rights for the
Company that is subject to any agreement under which such employee, consultant
or independent contractor has assigned or otherwise granted to any third party
any rights to any Intellectual Property in the Company-Owned IP Rights.

(p) The employment of any employee of the Company or the use by the Company of
the services of any consultant or independent contractor does not subject the
Company to any Liability to any third party for improperly soliciting such
employee, consultant or independent contractor to work for the Company, whether
such Liability is based on contractual or other legal obligations to such third
party.

(q) No current or former employee, consultant or independent contractor of the
Company has any right, license, claim or interest whatsoever in or with respect
to any Company-Owned IP Rights, nor any option to obtain any such right,
license, claim or interest.

(r) The Company has taken all commercially reasonable steps to protect and
preserve the confidentiality of all confidential or non-public information
included in the Company IP Rights, including, but not limited to, trade secrets
(“Confidential Information”). All use, disclosure or appropriation of
Confidential Information owned by the Company by or to a third party has been
pursuant to the terms of a written Contract between the Company and such third
party. All use, disclosure or appropriation of Confidential Information by the
Company not owned by the Company has been pursuant to the terms of a written
agreement between the Company or such Affiliate and the owner of such
Confidential Information, or is otherwise lawful. All current and former
employees and consultants of the Company having access to Confidential
Information or proprietary information of any of their respective customers or
business partners have executed and delivered to the Company an agreement
regarding the protection of such Confidential Information or proprietary
information (in the case of proprietary information of the Company’s customers
and business partners, to the extent required by such customers and business
partners).

(s) To the knowledge of the Company, all Company Products sold or delivered by
the Company and all services provided by or through the Company on or prior to
the Closing Date conform to applicable contractual commitments, express and
implied warranties (to the extent not subject to legally effective express
exclusions thereof) and applicable Legal Requirements.

(t) Neither the Company nor, to the knowledge of the Company, any other Person
then acting on the Company’s behalf has disclosed, delivered or licensed to any
third party Person, agreed to disclose, deliver or license to any third party
Person, or permitted the disclosure or delivery to any escrow agent or other
third party Person of, any Company Proprietary Specifications. To the knowledge
of the Company, no event has occurred, and no circumstance or condition exists,
that (with or without notice or lapse of time, or both) will, or would
reasonably be expected to, result in the disclosure, delivery or license by the
Company or any Person then acting on the Company’s behalf to any third party
Person of any Company Proprietary Specifications.

 

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(u) The Company has complied with all applicable Legal Requirements and its
internal privacy policies relating to the use, collection, storage, disclosure
and transfer of any personally identifiable information collected by the
Company. The execution, delivery and performance of this Agreement, will comply
with all applicable Legal Requirements relating to privacy and with the
Company’s privacy policies. The Company has not received a complaint regarding
the Company’s collection, use or disclosure of personally identifiable
information.

(v) The Company has implemented and maintains a comprehensive security plan
which (i) identifies internal and external risks to the security of the
Confidential Information, including personally identifiable information;
(ii) implements, monitors and improves adequate and effective administrative,
electronic and physical safeguards to control those risks; and (ii) maintains
notification procedures in compliance with applicable Legal Requirements in the
case of any breach of security compromising unencrypted data containing
personally identifiable information. To the knowledge of the Company, the
Company has not experienced any breach of security or otherwise unauthorized
access by third parties to the Confidential Information, including personally
identifiable information in the Company’s possession, custody or control.

(w) Except as set forth in Schedule 2.10(w), no funding from any granting agency
and no government funding (including OCS funding), facilities of a university,
college, other educational institution or research center, or funding from any
Person was used in the creation or development of any Company-Owned IP Rights.
To the knowledge of the Company, no current or former employee, consultant or
independent contractor, who was involved in, or who contributed to, the creation
or development of any Company-Owned IP Rights, has performed services for any
Governmental Entity, a university, college, or other educational institution, or
a research center, during a period of time during which such employee,
consultant or independent contractor was also performing services used in the
creation or development of the Company-Owned IP Rights, or performed such
services prior to the period of time during which such employee, consultant or
independent contractor performed services for the Company such that a
government, university, college or other educational institution or research
center is entitled to notice or any other right or benefit in connection with
any Company-Owned IP Rights. The Company is not a party to any contract, license
or agreement with any Governmental Entity that grants to such Governmental
Entity any right or license with respect to any Company-Owned IP Rights.

2.11 Confidentiality Agreements. Commercially reasonable measures have been
taken to maintain the confidentiality of the inventions, trade secrets,
formulae, know-how, technical information, research data, research raw data,
laboratory notebooks, procedures, designs, proprietary technology and
information of the Company, and all other information the value of which to the
Company is contingent upon maintenance of the confidentiality thereof. Without
limiting the generality of the foregoing, except as listed in Schedule 2.11-A,
each current or former employee, officer, director of the Company or consultant
or agent or independent contractor of the Company who had, has or is proposed to
have access to confidential and/or proprietary information of the Company is a
signatory to and bound by a confidentiality agreement in the form attached as
Schedule 2.11-B.

2.12 Environmental Matters.

(a) As used in this Agreement, the following terms shall have the meanings
indicated below:

(i) “Environmental and Safety Laws” shall mean any federal, state or local laws,
ordinances, codes, regulations, rules, policies and orders that are intended to
assure the protection of the environment, or that classify, regulate, call for
the remediation of, require reporting with respect to, or list or define air,
water, groundwater, solid waste, hazardous or toxic substances, materials,
wastes, pollutants or contaminants, or which are intended to assure the safety
of employees, workers or other persons, including the public, including without
limitation the Israeli Hazardous Substances Law, 1993 and related regulations.

 

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(ii) “Hazardous Materials” shall mean any toxic or hazardous substance, material
or waste or any pollutant or contaminant, or infectious or radioactive
substance, material or waste defined in or regulated under any Environmental and
Safety Laws, but excludes office and janitorial supplies properly and safely
maintained.

(iii) “Property” shall mean all real property leased or owned by the Company
either currently or in the past.

(iv) “Facilities” shall mean all buildings and improvements on the Property.

(b) (i) All Hazardous Materials and wastes of the Company have been disposed of
in accordance in all material respects with all Environmental and Safety Laws;
(ii) the Company has not received any notice of any noncompliance of the
Facilities or its past or present operations with Environmental and Safety Laws;
(iii) no notices or Legal Proceedings are pending or threatened relating to an
actual or alleged violation of any applicable Environmental and Safety Laws by
the Company; (iv) the Company is not a potentially responsible party under the
federal Comprehensive Environmental Response, Compensation, and Liability Act of
1980, as amended to date, or any analogous state, local or foreign laws arising
out of events occurring prior to the Closing Date; (v) to the Company’s
knowledge, there have not been in the past, and are not now, any Hazardous
Materials on, under or migrating to or from any of the Facilities or any
Property; (vi) to the Company’s knowledge, there have not been in the past, and
are not now, any underground tanks or underground improvements at, on or under
any Property, including treatment or storage tanks, sumps, or water, gas or oil
wells; and (vii) the Facilities and the Company’s uses and activities therein
have at all times materially complied with all Environmental and Safety Laws.

(c) Complete and accurate copies of all written environmental reports, audits or
assessments, which have been conducted, either by the Company, or any Person
engaged by the Company for such purpose, at any Facility or Property owned of
formerly owned by the Company have been made available to Purchaser and a list
of all such reports, audits and assessments is set forth on Schedule 2.12(c) of
the Company Disclosure Letter. The listing of such reports on Schedule 2.12(c)
of the Company Disclosure Letter does not in any way create any exceptions to
the representations and warranties of this Schedule 2.12, and any such
exceptions shall be specifically set forth in the appropriate paragraph of
Schedule 2.12 of the Company Disclosure Letter.

2.13 Taxes.

(a) The Company, and any consolidated, combined, unitary or aggregate group for
Tax purposes of which the Company is or has been a member, have properly
completed and timely filed all Tax Returns required to be filed by them and have
timely paid all Taxes required to be paid. All Tax Returns were complete and
accurate in all material respects and have been prepared in compliance with all
applicable Legal Requirements. The Company has delivered to Purchaser correct
and complete copies of all Tax Returns, examination reports, and statements of
deficiencies assessed against or agreed to by the Company. The Company has not
requested or received any legal or accounting opinions relating to any position
taken on any Tax Return that has not been made available to Purchaser.

(b) (i) the Company Balance Sheet reflects all Liabilities for unpaid Taxes of
the Company for periods (or portions of periods) through the Company Balance
Sheet Date, (ii) the Company does not have any Liability for unpaid Taxes
accruing after the Company Balance Sheet Date except for Taxes arising in the
ordinary course of business subsequent to the Company Balance Sheet Date, and
(iii) the Company has no Liability for unpaid Taxes for any period (or portions
of any period) prior to or through the Closing Date.

 

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(c) All Tax deficiencies that have been claimed, proposed, or asserted in
writing by any Governmental Entity against the Company have been fully paid or
finally settled.

(d) To the knowledge of the Company, there is (i) no claim for Taxes being
asserted against the Company that has resulted in a lien against the property of
the Company other than liens for Taxes not yet due and payable, (ii) no formal
or informal audit or pending audit of, administrative or judicial Tax
proceedings, or Tax controversy associated with, any Tax Return of the Company
being conducted by a Tax Authority, (iii) no extension of any statute of
limitations on the assessment of any Taxes granted by the Company currently in
effect, (iv) no agreement to any extension of time for filing any Tax Return
which has not been filed and (v) no power of attorney granted by or with respect
to the Company relating to Taxes that is currently in force. The Company has not
received from any Governmental Entity any (i) notice, whether or not in written
form, indicating an intent to open an audit or other review with respect to
Taxes, (ii) written request for information related to Tax matters, or
(iii) notice, whether or not in written form, of deficiency or proposed
adjustment for any amount of Tax.

(e) To the Company’s knowledge, no written claim has ever been made by any
Governmental Entity in a jurisdiction where the Company does not file Tax
Returns that the Company is or may be subject to taxation by that jurisdiction.

(f) The Company has timely reported, withheld and paid all Taxes required to
have been withheld and paid in connection with any amounts paid or owing to any
employee, independent contractor, equity interest holder, or other third party.

(g) The Company is not a party to or bound by any Tax sharing, Tax indemnity, or
Tax allocation agreement nor does the Company have any Liability or potential
Liability to another party under any such agreement.

(h) Neither the Company nor any predecessor of the Company has ever been a
member of a consolidated, combined, unitary or aggregate group of which the
Company or any predecessor of the Company was not the ultimate parent
corporation.

(i) To the Company’s knowledge, the Company will not be required to include in
income, or exclude any item of deduction from, Taxable income for any Taxable
period (or portion thereof) ending on or prior to the Closing Date as a result
of any (i) change in method of accounting for a Taxable period ending on or
prior to the Closing Date; (i) agreement in writing with any Tax Authority
relating to the liability of the Company in respect of any Tax for any taxable
period ending on or prior to; (iv) installment sale or open transaction
disposition made on or prior to the Closing Date; or (ii) prepaid amount
received on or prior to the Closing Date.

(j) The Company has provided to Purchaser all material information and
documentation relating to any Tax attributes (including net operating loss carry
forwards and general business Tax credits) of the Company and all such
documentation and information are true and correct in all material aspects.

(k) The Company has in its possession official foreign government receipts for
any Taxes paid by it to any foreign Tax Authority.

(l) The Company has provided to Purchaser all documentation relating to any
applicable Tax holidays or incentives. To the knowledge of the Company, the
Company is in compliance with the requirements for any applicable Tax holidays
or incentives and none of the Tax holidays or incentives will be jeopardized by
the transaction contemplated in this Agreement.

 

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(m) The Company has timely and properly collected and maintained all resale
certificates, exemption certificates and other documentation required to qualify
for any exemption from the collection of sales Taxes imposed on or due from the
Company.

(n) The Company is not and has not been a “United States real property holding
corporation” within the meaning of Section 897 of the Code during the applicable
period specified in Section 897(c)(1)(A)(ii) of the Code.

(o) The Company has complied (and until the Closing will comply) with all
applicable Legal Requirements relating to the payment, reporting and withholding
of withholding of Taxes pursuant to Sections 1441, 1442, 1445 and 1446 of the
Code or similar provisions under any applicable foreign law, has, within the
time and in the manner prescribed by law, withheld from Taxes (including
employee wages or consulting compensation and paid over to the proper
governmental authorities (or is properly holding for such timely payment) all
amounts required to be so withheld and paid over under all applicable Legal
Requirements, including federal and state income Taxes, Federal Insurance
Contribution Act, Medicare, Federal Unemployment Tax Act, relevant state income
and employment Tax withholding laws, and has timely filed all withholding Tax
Returns, for all periods through and including the Closing Date.

(p) None of the Company or the Company Shareholder (with respect to the Shares
held by it) is subject to restrictions or limitations pursuant to Part E2 of the
ITO or pursuant to any Tax ruling made in connection with the provisions of Part
E2 of the ITO.

(q) The Company has not undertaken any transaction which will require special
reporting in accordance with Section 131(g) of the ITO and the Israeli Income
Tax Regulations (Tax Planning Requiring Reporting), 2006, regarding aggressive
tax planning.

(r) The Company has collected all amounts on account of any Israeli Value Added
Tax (“VAT”) required by the Israeli Laws and Regulations to be collected by it,
and has remitted to the appropriate Governmental Entity any such amounts
required by applicable Israeli Legal Requirements within the time prescribed by
such requirements. The Company has not deducted any input VAT, received any
refund of VAT or claimed zero rate VAT that such the Company was not so entitled
to deduct, receive or claim, as applicable.

(s) Any related party transactions subject to Section 85A of the ITO conducted
by the Company have been on an arms-length basis in accordance with Section 85A
of the ITO and the regulations promulgated thereunder.

(t) Except as otherwise provided in Schedule 2.13(t) of the Company Disclosure
Letter, the Company has not received any “taxation decision” (hachlatat
misui)from the ITA.

(u) Except as otherwise provided in Schedule 2.13(u) of the Company Disclosure
Letter, neither the Company nor any Company Shareholder (on behalf of or in
connection with the Company) has applied for or received any Government Grants
from any supranational, national, local or foreign Governmental Entity,
including the OCS. The Company has made available to Purchaser copies of all
material documents requesting or evidencing Government Grants, Government Grants
received and of all letters of approval, certificates of completion, and
supplements and amendments thereto and all material correspondence related
thereto. Section 2.13(u) of the Company Disclosure Letter sets forth: (a) all
material undertakings of the Company given in connection with the Government
Grants; (b) the

 

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aggregate amount of each Government Grant; (c) the aggregate outstanding
obligations of the Company under each Government Grant with respect to royalties
or other payments; (d) the outstanding amounts to be paid by any Governmental
Entity to the Company under the Government Grants, if any and (e) the
composition of such obligations or amount by the patent, other Intellectual
Property, product or product family to which it relates. The Company is in
compliance, in all material respects, with the terms and conditions of all
Government Grants and have duly fulfilled, in all material respects, all the
undertakings required to be fulfilled thereby prior to the date hereof. To the
knowledge of the Company, there is no event or other set of circumstances which
would reasonably be expected to lead to the revocation or material modification
of any of the Government Grants. To the knowledge of the Company, neither the
execution, delivery or performance of this Agreement, nor the consummation of
the transactions contemplated under this Agreement, would reasonably be expected
to (with or without notice or lapse of time) give rise to any right to revoke,
withdraw, suspend, cancel, terminate or modify any Government Grant identified
or required to be identified in Schedule 2.13(u) of the Company Disclosure
Letter.

(v) The Company has provided to Purchaser all material information,
documentation and records relating to the costs and expenses of all research and
development, activities, testing, clinical results, regulatory filings,
commercialization efforts, and manufacturing relating to the Company Eligible
Product and the Company Eligible IP, and all such information, documentation and
records are true and correct in all material aspects.

2.14 Employee Benefit Plans and Employee Matters. The Company does not have any
employees who reside or work outside of the State of Israel. With respect to
employees of the Company who reside or work in Israel (each, an “Israeli
Employee”), except as set forth in Schedule 2.14: (i) the employment of each
Israeli Employee is subject to termination upon not more than thirty (30) days
prior written notice under the termination notice provisions included in the
employment Contract with such Israeli Employee or applicable Legal Requirements,
(ii) all obligations of the Company to provide statutory severance pay to all
Israeli Employees pursuant to the Severance Pay Law, 1963, are fully funded or
accrued on the Financial Statements, whether in accordance with Section 14 or
otherwise, (iii) no Israeli Employee’s employment by the Company requires any
special license, permit or other authorization of a Governmental Entity,
(iv) there are no foreign employees employed by the Company in Israel; (v) there
are no material unwritten policies, practices or customs of the Company that, by
extension, could reasonably be expected to entitle any Israeli Employee to
benefits in addition to what such Israeli Employee is entitled to by applicable
Legal Requirements or under the terms of such Israeli Employee’s employment
Contract (including, by way of example, material unwritten customs or practices
concerning bonuses, the payment of statutory severance pay when it is not
required under applicable Legal Requirements), (vi) all amounts that the Company
is legally or contractually required either (A) to deduct from Israeli
Employees’ salaries or to transfer to such Israeli Employees’ pension or
provident, life insurance, incapacity insurance, continuing education fund
(‘keren hishtalmut’) or other similar funds or (B) to withhold from their
Israeli Employees’ salaries and benefits and to pay to any Governmental Entity
as required by the ITA and National Insurance Law or otherwise, have, in each
case, been duly deducted, transferred, withheld and paid, and the Company does
not have any outstanding obligation to make any such deduction, transfer,
withholding or payment (other than routine payments to be made in the ordinary
course of business, consistent with past practice), and (vii) the Company is in
compliance in all material respects with all applicable Legal Requirements and
Contracts relating to employment, employment practices, wages, bonuses, pension
benefits and other compensation matters and terms and conditions of employment
related to Israeli Employees, including The Prior Notice to the Employee Law,
2002, The Notice to Employee (Terms of Employment) Law, 2002, the Prevention of
Sexual Harassment Law, 1998, the Hours of Work and Rest Law, 1951, the Annual
Leave Law, 1951, the Salary Protection Law, 1958, The Employment by Human
Resource Contractors Law, 1996, and Law for Increased Enforcement of Labor Laws,
2011, and (viii) the Company has not engaged any consultants, sub-contractors or
freelancers, in a full-time position engaged on the Company’s premises. The
Company is not subject to, and no employee of the Company benefits from, any
extension order (‘tzavei harchava’)

 

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except for such extension orders which generally apply to all private sector
employees in Israel. The Company has furnished to Purchaser (x) copies of all
Contracts with Israeli human resource contractors, or with Israeli consultants,
sub-contractors or freelancers and (y) copies of material manuals and material
written policies relating to the employment of Israeli Employees or termination
thereof. There is no liability with respect to pension or provident funds and/or
severance pay and/or in any other respect in connection with the employment of
former employees of the Company and/or the termination of their employment.

2.15 Interested Party Transactions. None of the officers and directors of the
Company and, to the knowledge of the Company, none of the employees or
shareholders of the Company, nor any immediate family member of an officer,
director, employee or shareholder of the Company, has any direct or indirect
ownership, participation, royalty or other interest in, or is an officer,
director, employee of or consultant or contractor for any firm, partnership,
entity or corporation that competes with, or does business with, or has any
contractual arrangement with, the Company (except with respect to any interest
in less than 5% of the stock of any corporation whose stock is publicly traded).
None of said officers, directors, employees or shareholders or any member of
their immediate families, is a party to, or to the knowledge of the Company,
otherwise directly or indirectly interested in, any Contract to which the
Company is a party or by which the Company or any of its assets or properties
may be bound or affected, except for normal compensation for services as an
officer, director or employee thereof. To the knowledge of the Company, none of
said officers, directors, employees, shareholders or immediate family members
has any interest in any property, real or personal, tangible or intangible
(including any Intellectual Property) that is used in, or that relates to, the
business of the Company, except for the rights of shareholders under applicable
Legal Requirements.

2.16 Insurance. The Company maintains the policies of insurance and bonds set
forth in Schedule 2.16 of the Company Disclosure Letter. Schedule 2.16 of the
Company Disclosure Letter sets forth the name of the insurer under each such
policy and bond, the type of policy or bond, the coverage amount and any
applicable deductible and any other material provisions as of the Agreement Date
as well all material claims made under such policies and bonds since inception.
The Company has provided to Purchaser correct and complete copies of all such
policies of insurance and bonds issued at the request or for the benefit of the
Company. There is no claim pending under any of such policies or bonds as to
which coverage has been questioned, denied or disputed by the underwriters of
such policies or bonds. All premiums due and payable under all such policies and
bonds have been timely paid and the Company is otherwise in compliance with the
terms of such policies and bonds. All such policies and bonds remain in full
force and effect, and the Company has no knowledge of any threatened termination
of, or material premium increase with respect to, any of such policies.

2.17 Books and Records. The Company has provided to Purchaser or its counsel
correct and complete copies of each document that has been requested by
Purchaser or its counsel in connection with their legal and accounting review of
the Company (other than any such document that does not exist or is not in the
Company’s possession or subject to its control). Without limiting the foregoing,
the Company has provided to Purchaser or its counsel complete and correct copies
of (a) all documents identified on the Company Disclosure Letter, (b) the
Articles of Association as currently in effect, (c) the minute books containing
records of all proceedings, consents, actions and meetings of the Board of
Directors, committees of the Board of Directors and shareholders of the Company,
(d) the shareholder registry, journal and other records reflecting all share
issuances and transfers and all stock option and warrant grants and agreements
of the Company, and (e) all permits, orders and consents issued by any
regulatory agency with respect to the Company, or any securities of the Company,
and all applications for such permits, orders and consents. The minute books of
the Company provided to Purchaser contain a complete and accurate summary of all
meetings of directors and shareholders or actions by written consent since the
time of incorporation of the Company through the date of this Agreement. The
books, records and accounts of the Company (i) are true, correct and complete in
all material respects, (ii) have

 

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been maintained in accordance with reasonable business practices on a basis
consistent with prior years, (iii) are stated in reasonable detail and
accurately and fairly reflect all of the transactions and dispositions of the
assets and properties of the Company, and (iv) accurately and fairly reflect the
basis for the Financial Statements.

2.18 Material Contracts.

(a) Schedule 2.18, which identifies each contract by applicable subsection(s),
sets forth all of the Contracts, to which the Company is a party or by which the
Company or its assets may be bound (each, a “Material Contract” and
collectively, “Material Contracts”):

(i) all licenses, sublicenses and other Contracts pursuant to which the Company
has (A) granted any Person any right or interest in any Company IP Rights
(except with respect to manufacturers and other service providers who were
granted a non-exclusive license to use Company IP Rights solely in connection
with the provision of their services to the Company), or (B) agreed to any
restriction on the right of the Company to use or enforce any Company-Owned IP
Rights or pursuant to which the Company agrees to encumber, transfer or sell
rights in or with respect to any Company-Owned IP Rights;

(ii) other than end-user licenses to generally commercially available software
that have an individual acquisition cost of $1,000 or less, all licenses,
sublicenses and other Contracts pursuant to which the Company acquired or is
authorized to exercise any rights in Intellectual Property;

(iii) any Contract limiting the freedom of the Company to engage or participate,
or compete with any other Person, in any line of business, market, therapeutic
or geographic area, or to make use of any Intellectual Property, or any Contract
granting most favored nation pricing, exclusive sales, distribution, marketing
or other exclusive rights, rights of refusal, rights of first negotiation or
similar rights and/or terms to any Person, or any Contract otherwise limiting
the right of the Company to sell, distribute or manufacture any products or
services or to purchase or otherwise obtain any products or services;

(iv) any Contract providing for the development of any compound, product or
product candidate, technology or Intellectual Property, independently or
jointly, by or for the Company, including, but not limited to, any
proof-of-concept, collaboration, development or co-development agreement; any
Contract to license or authorize any third party to manufacture any Company
Products;

(v) any Contract involving a supply or tolling agreement or arrangement
(including without limitation, any Contract for the supply of raw materials,
intermediates, bulk or finished drug product, research, clinical trial,
development, distribution, or sale) that commits the Company to purchase goods
or services or to sell any supplies for clinical studies or commercial use;

(vi) Contracts of the Company with any current or former employees, officers,
directors of the Company or consultants or agent or independent contractors are
parties;

(vii) partnership or joint venture Contracts with any Person;

(viii) leases from or to any Person of any real or personal property;

(ix) Contracts under which the Company has created, incurred, assumed or
guaranteed (or may create, incur, assume or guarantee) Company Debt or which
provides for the imposition of any Encumbrance on any of its assets, tangible or
intangible;

 

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(x) Contracts which restrict the ability of the Company to solicit for hire or
to hire any Person;

(xi) Contracts obligating any Person to maintain confidentiality of information
relating to the Company or obligating the Company to maintain confidentiality of
information relating to any Person;

(xii) stock Contracts, asset Contracts or other acquisition or divestiture
Contracts entered into by the Company at any time since its inception;

(xiii) Contracts with respect to the lending or investing of funds by the
Company to or in any Person;

(xiv) collective bargaining Contracts with any labor union;

(xv) settlement Contracts of any nature;

(xvi) Contracts relating to Government Grants

(xvii) Contracts not otherwise required to be disclosed by this Section 2.18,
requiring payments after the date hereof to or by the Company of more than
$100,000 over the life of the Contract unless terminable by the Company on less
than 10 days’ notice without payment or penalty; or

(xviii) Contracts which, individually or with all other Contracts with the same
or Affiliated parties (whether or not required to be disclosed under any of the
other clauses of this Section 2.18), are material to the Company irrespective of
amount.

(b) The Company has delivered to Purchaser a true and complete copy of each
Material Contract (including all amendments thereto) required to be listed in
Schedule 2.18. Neither the Company nor, to the Company’s knowledge, any other
party to any Material Contract, is in breach or violation of, or default under,
any of the Material Contracts and no event has occurred which, with notice or
lapse of time or both would constitute a breach, violation or default thereof or
permit termination or modification thereof or acceleration thereunder. The
Company has not waived any material rights under any Material Contract. Each
Material Contract is a valid agreement, binding, in full force and effect and
enforceable by the Company in accordance with its terms, except in each case
where enforceability may be limited by (i) bankruptcy, insolvency, fraudulent
conveyance, reorganization, moratorium or similar Legal Requirements affecting
the enforcement of creditors’ rights and (ii) general rules governing specific
performance, injunctive relief and other equitable remedies.

2.19 Certain Regulatory Matters.

(a) The Company has conducted, and is conducting, its business in full
compliance with all applicable rules and regulations including, without
limitation, applicable portions of the FD&C Act, the PHSA, and applicable
similar laws outside of the United States.

(b) The Company has complied with all Regulatory Authority regulations and
requirements including, without limitation, those relating to drug development,
the Investigational New Drug Application (“IND”) (or its equivalent if filed
outside of the United States), clinical and preclinical testing, manufacture,
storing, recordkeeping, distribution, as well as Good Laboratory Practices, Good
Clinical Practices, Good Manufacturing Practices (as such terms are defined by
applicable Regulatory Authorities and applicable ICH guidelines and guidances
issued by a Regulatory Authority in effect at the relevant time).

 

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(c) The Company has not (nor, to Company’s knowledge, has any supplier, contract
manufacturer or clinical or laboratory site) received any Warning Letter, Form
483, untitled letter, or similar letters or notices issued by a Regulatory
Authority or any other Governmental Entity, domestic or foreign, alleging any
violation of any applicable Legal Requirement. The Company has not received any
notice from any Regulatory Authority or Governmental Entity of any intent to
bring any enforcement action against the Company, including, but not limited to,
any consent decree, injunction, seizure, or criminal or civil prosecution.
Schedule 2.19(c) lists all serious as well as non-serious adverse experiences
with the Company Product or compounds and all such serious and frequent
non-serious adverse experiences from all clinical sites. The Company has
provided Purchaser with any finding from tests in laboratory animals that
suggests a significant risk for human subjects, including reports of
mutagenicity, teratogenicity, or carcinogenicity. The Company has reported all
serious and/or unexpected adverse events to the appropriate Regulatory Authority
in accordance with applicable reporting obligations, and has provided Purchaser
with copies of all such reports. There have been no product recalls conducted by
or issued to the Company and no requests from any Regulatory Authority
requesting the Company to cease to investigate, test, manufacture or distribute
the Company Product or study drugs.

(d) To the knowledge of the Company, all animal studies or other preclinical
tests performed in connection with or intended to be submitted to any Regulatory
Authority in support of approval or clearance of the Company Product either
(i) have been conducted in accordance, in all material respects, with applicable
Good Laboratory Practice requirements contained in 21 CFR Part 58 (“GLPs”), and,
where applicable, the Israeli Prevention of Cruelty to Animals Law (Research
Using Animals), 1994, and regulations promulgated thereunder, or (ii) involved
experimental research techniques that could not be performed by a registered GLP
testing laboratory (with appropriate notice being given to the FDA) and have
employed in all material respects the procedures and controls generally used by
qualified experts in animal or preclinical study of products comparable to those
being developed by the Company. The Company has not received any written notice
or other written communication from any Governmental Entity requiring the
termination or suspension of any preclinical study with respect to the Company
Product.

(e) All studies and clinical trials conducted by or on behalf of the Company are
listed on Schedule 2.19(e)-1. True, complete and accurate copies of all data and
reports with respect to the studies and trials listed in Schedule 2.19(e)-1 have
been provided for review to Purchaser and the Company has otherwise provided for
review all preclinical and clinical studies and trials and all other information
regarding the efficacy and safety of the Company Product or study drugs. The
Company has heretofore provided for review to Purchaser all correspondence and
contact information between the Company and any Regulatory Authority or other
Governmental Entities regarding the Company Product and study drugs, and, to the
extent provided to the Company, between any Regulatory Authority and other
Governmental Entities relating to the Company, its clinical studies or trials,
or the Company Product and study drugs. All clinical trials conducted by or on
behalf of the Company have been, or are being, conducted in full compliance with
Good Clinical Practice (“GCP”) requirements, as that term is defined by
applicable Regulatory Authorities. The Company has not received any written
notice or other written communication from any Governmental Entity requiring the
termination or suspension of any clinical trial with respect to the Company
Product.

(f) (i) the Company has obtained all consents, clearances, approvals,
certifications, authorizations, licenses and permits of, and has made all
filings with, or notifications to, all Regulatory Authorities pursuant to
applicable requirements of all Regulatory Authority regulations, and all
applicable Legal Requirements, including all consents, clearances, approvals,
certifications, authorizations, licenses, and permits to permit the design,
development, testing, and manufacture of the Company Product in jurisdictions
where it currently conducts such activities, including any authorizations
required to be obtained with respect to the conduct of clinical studies pursuant
to the Guidelines for Clinical Trials in Human Subjects implemented pursuant to
the Israeli Public Health Regulations (Clinical Trials in Human

 

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Subjects), as was in effect at the relevant time; and (ii) all representations
made by the Company in connection with any such consents, clearances, approvals,
certifications, authorizations, licenses, permits, filings and notifications
were true and correct in all material respects at the time such representations
and warranties were made.

(g) Neither the Company nor, to the Company’s knowledge, any officer, employee
or agent of the Company, has made an untrue statement of a material fact or
fraudulent statement to any Regulatory Authority or other Governmental Entity,
failed to disclose a material fact required to be disclosed to any Regulatory
Authority or other Governmental Entity, or committed an act, made a statement,
or failed to make a statement that, at the time such disclosure was made, would
reasonably be expected to provide a basis for any Regulatory Authority or other
Governmental Entity to invoke its policy respecting “Fraud, Untrue Statements of
Material Facts, Bribery, and Illegal Gratuities”, set forth in 56 Fed. Reg.
46191 (September 10, 1991) or any similar law outside of the United States.

(h) To the Company’s knowledge, the Company has not used in any capacity the
services of any Persons debarred under any country’s debarment provisions,
including, but not limited to, subsections 306(a) or 306(b) of the Generic Drug
Enforcement Act of 1992, disqualified as a testing facility under CFR Part 58,
subpart K, or disqualified as a clinical investigator under 21 CFR 312.70, in
connection with any of the services performed by Company or its contractors. To
the Company’s knowledge, there are no pending or threatened actions, suits,
claims, investigations or legal or administrative proceedings relating to the
debarment or disqualification of any Person performing any services for Company.
Neither the Company nor, to the Company’s knowledge, any officer, employee or
agent of the Company or any of its Subsidiaries, has been convicted of any crime
or engaged in any conduct for which such person or entity could be excluded from
participating in the federal health care programs under Section 1128 of the
Social Security Act or any similar applicable Legal Requirement.

(i) The Company either directly or indirectly through its clinical sites has
obtained all necessary patient consents, including privacy authorizations,
informed consent, and applicable institutional review board approvals (initial
and ongoing) of patient consents and protocols to conduct all clinical studies.

2.20 Accounts Receivable and Payable.

(a) As determined in accordance with IFRS, the Company does not have any
accounts receivable.

(b) All accounts payable and notes payable of the Company arose in the ordinary
course of business, consistent with past practices in bona fide arms’ length
transactions and no such account payable or note payable is delinquent by more
than sixty (60) days in its payment.

2.21 Inventory. Schedule 2.21 sets forth a complete and accurate list of all
inventory of raw materials, components, active pharmaceutical ingredients,
packaging materials and final finished products as well as the location of such
inventory and expiration dates for all such inventory, if applicable. All such
inventory is in good and usable condition, has been manufactured and stored in
accordance with Good Manufacturing Practices and can reasonably be anticipated
to be used and consumed in the ordinary course of business.

2.22 Transaction Fees. The Company is not obligated for the payment of any fees
or expenses of any investment banker, broker, advisor, finder or similar party
in connection with the origin, negotiation or execution of this Agreement or in
connection with the Share Purchase or any other transaction contemplated by this
Agreement.

 

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2.23 Data Protection and Privacy. The Company has (i) complied in all material
respects with all applicable Legal Requirements with respect to data protection
and privacy (including Israel’s Protection of Privacy Law, 1981, and related
regulations and directives) and other applicable Legal Requirement regarding the
disclosure of data, and (ii) without derogation from subsection (i), otherwise
taken commercially reasonable steps to protect and maintain the confidential
nature of the personal information provided to the Company by any party in
accordance with its applicable law or privacy policies.

2.24 Anti-Corruption. Neither the Company nor any of its officers, directors,
employees, shareholders, agents or representatives, nor to the Company’s
knowledge, any Person associated with or acting for or on behalf of the Company,
have directly or indirectly, unlawfully: (a) made or attempted to make or
promised any contribution, gift, bribe, rebate, payoff, influence payment,
kickback, or other payment to any Person, private or public, regardless of what
form, whether in money, property, or services in order (i) to obtain favorable
treatment for business or Contracts secured, (ii) to pay for favorable treatment
for business or Contracts secured, (iii) to obtain special concessions or for
special concessions already obtained, or (iv) in violation of any requirement of
applicable Legal Requirements, or (b) established or maintained any fund or
asset that has not been recorded on the Company’s books and records.

2.25 Representations Complete. None of the representations or warranties made by
the Company herein or in any exhibit or schedule hereto, including the Company
Disclosure Letter, or in any certificate furnished by the Company pursuant to
this Agreement, when all such documents are read together in their entirety,
contains any untrue statement of a material fact, or omits to state any material
fact necessary in order to make the statements contained herein or therein, in
the light of the circumstances under which made, not misleading.

ARTICLE 3

REPRESENTATIONS AND WARRANTIES OF THE COMPANY SHAREHOLDER

The Company Shareholder represents and warrants to Purchaser as follows:

3.1 Power and Capacity. The Company Shareholder possesses all requisite capacity
necessary to carry out the transactions contemplated by this Agreement.

3.2 Enforceability; Non-contravention.

(a) This Agreement has been duly executed and delivered by the Company
Shareholder, and constitutes a valid and legally binding obligation, enforceable
against the Company Shareholder in accordance with its terms, except as may be
limited by (i) applicable bankruptcy, insolvency, reorganization or other laws
of general application relating to or affecting the enforcement of creditors’
rights generally and (ii) the effect of rules of law governing the availability
of specific performance, injunctive relief and other equitable remedies.

(b) The execution, delivery and performance by the Company Shareholder of this
Agreement does not, and the consummation of the transactions contemplated hereby
will not, conflict with, or result in any violation of or default under (with or
without notice or lapse of time, or both), or give rise to a right of
termination, cancellation or acceleration of any obligation or loss of any
benefit under, or require any consent, approval or waiver from any Person
pursuant to, or result in the creation of any Encumbrance upon the Company
Ordinary Shares pursuant to (i) any Contract or Order to which the Company
Shareholder is subject or (ii) any applicable Legal Requirements, except where
such conflict, violation, default, termination, cancellation or acceleration,
individually or in the aggregate, would not be material to the Company
Shareholder’s ability to consummate the Share Purchase or to perform its
obligations under this Agreement.

 

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(c) No consent, approval, order or authorization of, or registration,
declaration or filing with, any Governmental Entity or any other Person is
required by or with respect to the Company Shareholder in connection with the
execution and delivery of this Agreement or the consummation of the transactions
contemplated hereby that would reasonably be expected to adversely affect the
ability of the Company Shareholder to consummate the Share Purchase or any of
the other transactions contemplated hereby, except for (i) such filings and
notifications as may be required to be made by the Company Shareholder in
connection with the Share Purchase and other Transactions under the HSR Act, the
RTPA and other applicable foreign antitrust laws and the expiration or early
termination of applicable waiting periods under the HSR Act, the RTPA and other
applicable foreign antitrust laws.

3.3 Title to Shares. The Company Shareholder owns of record and beneficially the
Company Ordinary Shares as set forth opposite the Company Shareholder’s name on
Schedule 2.2(a) of the Company Disclosure Letter, and has good and valid title
to such Company Ordinary Shares, free and clear of all Encumbrances and, at
Closing and contingent thereon, shall deliver to Purchaser good and valid title
to such Company Ordinary Shares, free and clear of all Encumbrances and Taxes.
The Company Shareholder does not own, and does not have the right to acquire,
directly or indirectly, any other Company Ordinary Shares, except as set forth
in Schedule 2.2(a) of the Company Disclosure Letter. The Company Shareholder is
not a party to any option, warrant, purchase right, or other Contract or
commitment that could require the Company Shareholder to sell, transfer, or
otherwise dispose of any Company Ordinary Shares (other than this Agreement).
The Company Shareholder is not a party to any voting trust, proxy, or other
agreement or understanding with respect to the voting of any share capital of
the Company, except as set forth on the Company Disclosure Letter.

3.4 Litigation. There are no actions, suits, arbitrations, mediations,
proceedings or claims pending or, to the knowledge of the Company Shareholder,
threatened against the Company Shareholder that seek to restrain or enjoin the
consummation of the transactions contemplated hereby.

3.5 Solvency. The Company Shareholder is not bankrupt or insolvent and has not
proposed a voluntary arrangement or made or proposed any arrangement or
composition with the Company Shareholder’s creditors or any class of such
creditors, and no petition in respect of any such arrangement or composition has
been presented to the Company Shareholder. The consummation of the Share
Purchase and the other transactions contemplated hereby shall not constitute a
fraudulent transfer by the Company Shareholder under applicable bankruptcy and
other similar laws relating to bankruptcy and insolvency of the Company
Shareholder.

3.6 Tax Withholding Information. All information, if any, provided or to be
provided to the Purchaser, by or on behalf of the applicable Company Shareholder
for purposes of enabling Purchaser to determine the amount to be deducted and
withheld, if any, from the consideration payable to such Shareholder pursuant to
this Agreement under applicable Legal Requirements is and will be accurate and
complete when provided.

ARTICLE 4

REPRESENTATIONS AND WARRANTIES OF PARENT AND PURCHASER

Parent and Purchaser represent and warrant to the Company as follows:

4.1 Organization and Standing. Each of Parent and Purchaser is a corporation
duly organized, validly existing and in good standing under the laws of its
jurisdiction of organization. Niether Parent nor Purchaser is in violation of
any of the provisions of its Certificate of Incorporation or Bylaws

 

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(or similar organizational documents). Each of Parent and Purchaser and have the
requisite corporate power and authority to conduct its business as it is
presently being conducted and as currently proposed to be conducted by Parent
and Purchaser and to own, lease or operate its respective properties and assets.

4.2 Authority; Noncontravention.

(a) Each of Parent and Purchaser have all requisite corporate power and
authority to enter into this Agreement and to consummate the transactions
contemplated hereby. The execution and delivery of this Agreement and the
consummation of the transactions contemplated hereby have been duly authorized
by all necessary corporate action on the part of Parent and Purchaser. This
Agreement has been duly executed and delivered by Parent and Purchaser and
constitutes the valid and legally binding obligation of Parent and Purchaser
enforceable against Parent and Purchaser, in accordance with its terms, subject
only to the effect, if any, of (i) applicable bankruptcy and other similar laws
affecting the rights of creditors generally and (ii) rules of law governing
specific performance, injunctive relief and other equitable remedies.

(b) The execution, delivery and performance of this Agreement by Parent and
Purchaser does not, and the consummation of the transactions contemplated hereby
will not, conflict with, or result in any violation of, or default under (with
or without notice or lapse of time, or both), or give rise to a right of
termination, cancellation or acceleration of any obligation or loss of any
benefit under, or require any consent, approval or waiver from any Person
pursuant to, or result in the creation of any Encumbrance upon any of the
properties or assets of Parent or Purchaser to (i) any Contract or Order to
which Parent or Purchaser is subject, (ii) any provision of the Certificate of
Incorporation or Bylaws (or similar organizational documents) of Parent or
Purchaser, in each case as amended to date, or (iii) any applicable Legal
Requirement, except where such conflict, violation, default, termination,
cancellation or acceleration, individually or in the aggregate, would not be
material to Parent or Purchaser’s ability to consummate the Share Purchase or to
perform its obligations under this Agreement.

(c) No consent, approval, order or authorization of, or registration,
declaration or filing with, any Governmental Entity or any other Person, is
required by or with respect to Parent or Purchaser in connection with the
execution and delivery of this Agreement or the consummation of the transactions
contemplated hereby, except for (i) the execution by Purchaser of an undertaking
in customary form in favor of the OCS to comply with the applicable Israeli
Encouragement of Industrial Research and Development Law, 1984, (ii) such
filings and notifications as may be required to be made by Parent or Purchaser
in connection with the Share Purchase and other Transactions under the HSR Act,
the RTPA or other applicable foreign antitrust laws and the expiration or early
termination of applicable waiting periods under the HSR Act, the RTPA or other
applicable foreign antitrust laws, and (iii) such other consents,
authorizations, filings, approvals, notices and registrations which, if not
obtained or made, would not be material to Parent or Purchaser’s ability to
consummate the Share Purchase or other Transactions or to perform its
obligations under this Agreement and would not prevent, alter or delay any of
the transactions contemplated by this Agreement.

4.3 Capitalization. As of the Agreement Date, the authorized capital stock of
Parent consists of (i) 100,000,000 shares of Parent Common Stock and
(ii) 10,000,000 shares of preferred stock, par value $0.0001 per share (“Parent
Preferred Stock”). As of December 31, 2013, 20,137,145 shares of Parent Common
Stock were issued and outstanding and no shares of Parent Preferred Stock were
outstanding. As of the date of this Agreement, no bonds, debentures, notes or
other indebtedness of Parent having the right to vote (or convertible into, or
exchangeable for, securities having the right to vote) on any matters on which
shareholders of Parent may vote are issued or outstanding. All outstanding
shares of capital stock of Parent are, and all shares which may be issued in
connection with the transactions contemplated hereby will be, when issued, duly
authorized, validly issued, fully paid and nonassessable and not subject to
preemptive rights.

 

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4.4 Litigation. There are no actions, suits, arbitrations, mediations,
proceedings or claims pending or, to the knowledge of the Parent or Purchaser,
threatened against or affecting Parent or Purchaser or any of their Affiliates
or any of their respective properties, that, individually or in the aggregate,
seek to restrain or enjoin the consummation of the transactions contemplated
hereby or would otherwise prevent or materially delay the consummation by Parent
and Purchaser of the transactions contemplated hereby or the performance by
Parent and Purchaser of its covenants and obligations hereunder.

4.5 No Israeli Presence. Parent maintains no operations in Israel, other than
its ownership of Purchaser. Except for Purchaser, which is a newly incorporated
wholly-owned subsidiary of Parent that has no operations in Israel, neither
Parent nor Purchaser has any subsidiaries incorporated in or operating in
Israel, and neither Parent nor Purchaser conducts business on a regular basis in
Israel.

4.6 SEC Filings and Financial Statements. Parent has filed all forms, reports
and documents required to be filed with the Securities and Exchange Commission
(the “SEC”) since December 31, 2013 (the “SEC Reports”). As of its respective
date (or, if amended or superseded by a filing prior to the Agreement Date, then
on the date of such subsequent filing), each SEC Report (i) complied in all
material respects with the requirements of the Exchange Act or the Securities
Act applicable to the SEC Reports, as the case may be, and (ii) did not at the
time they were filed (or, if subsequently amended or superseded by a filing
prior to the Agreement Date, then on the date of such subsequent filing) contain
any 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. The consolidated financial statements (including, in each case, any
related notes thereto) contained in the SEC Reports were prepared in accordance
with GAAP (except, in the case of unaudited statements, as permitted by
Form 10-Q of the SEC) and fairly present the consolidated financial position of
Parent and its consolidated subsidiaries as of the respective dates thereof and
the consolidated results of their operations and cash flows for the periods
indicated (subject, in the case of unaudited statements, to normal year-end
audit adjustments).

4.7 Solvency. Neither Parent nor Purchaser is bankrupt or insolvent nor proposed
a voluntary arrangement or made or proposed any arrangement or composition with
the Parent’s or Purchaser’s creditors or any class of such creditors, and no
petition in respect of any such arrangement or composition has been presented to
Parent or Purchaser. The consummation of the Share Purchase and the other
transactions contemplated hereby shall not constitute a fraudulent transfer by
Parent or Purchaser under applicable bankruptcy and other similar laws relating
to bankruptcy and insolvency of Parent or Purchaser.

4.8 Issuance of Shares. The shares of Parent Common Stock comprising a portion
of the Total Consideration when issued by Parent in accordance with the terms of
this Agreement, assuming the accuracy of the representations and warranties of
the Company Shareholder contained in this Agreement and the Investment
Representation Letter and Lock-up Agreement will be duly issued, fully paid and
nonassessable, and issued in compliance with Israeli Legal Requirements and
United States federal and state securities laws.

4.9 Financing. Parent and Purchaser have, or have available to it, sufficient
funds to consummate the transactions contemplated by this Agreement.

 

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ARTICLE 5

CONDUCT PRIOR TO THE CLOSING

5.1 Conduct of Business of the Company. During the period from the Agreement
Date and continuing until the earlier of the termination of this Agreement and
the Closing:

(a) the Company shall conduct its business solely in the usual, regular and
ordinary course in substantially the same manner as heretofore conducted (except
to the extent expressly provided otherwise in this Agreement or as consented to
in writing by Purchaser) and in compliance with all applicable Legal
Requirements;

(b) the Company shall (A) pay all of its debts and Taxes when due, subject to
good faith disputes with the relevant Tax Authority over such debts or Taxes,
(B) pay or perform its other obligations when due, (C) use commercially
reasonable efforts consistent with past practice and policies to collect
accounts receivable when due and not extend credit outside of the ordinary
course of business consistent with past practices, and (D) use its commercially
reasonable efforts consistent with past practice and policies to preserve intact
its present business organizations, keep available the services of its present
officers and key employees and preserve its relationships with suppliers,
licensors, licensees, and others having business dealings with it to the end
that its goodwill and going business shall be unimpaired;

(c) the Company shall promptly notify Purchaser of any change, occurrence or
event not in the ordinary course of its business, or of any change, occurrence
or event which, individually or in the aggregate with any other changes,
occurrences and events, would reasonably be expected to be materially adverse to
the Company taken together or cause any of the conditions to closing set forth
in ARTICLE 7 not to be satisfied;

(d) the Company shall assure that each of its Contracts other than with Parent
and Purchaser) entered into after the Agreement Date will not require the
procurement of any consent, waiver or novation or provide for any change in the
obligations of any party in connection with, or terminate as a result of the
consummation of, the Share Purchase or other Transactions, and shall give
reasonable advance notice to Purchaser prior to allowing any Material Contract
or right thereunder to lapse or terminate by its terms; and

(e) the Company shall maintain each of its leased premises in accordance with
the terms of the applicable lease.

5.2 Restrictions on Conduct of Business of the Company. Without limiting the
generality or effect of the provisions of Section 5.1, except as set forth on
Schedule 5.2 of the Company Disclosure Letter, during the period from the
Agreement Date and continuing until the earlier of the termination of this
Agreement and the Closing, the Company shall not do, cause or permit any of the
following (except to the extent expressly provided otherwise in this Agreement
or as consented to in writing by Purchaser):

(a) Charter Documents. Cause or permit any amendments to its Articles of
Association;

(b) Dividends; Changes in Share Capital. Declare or pay any dividends on or make
any other distributions (whether in cash, stock or property) in respect of any
of its share capital, or split, combine or reclassify any of its share capital
or issue or authorize the issuance of any other securities in respect of, in
lieu of or in substitution for share capital, or repurchase or otherwise
acquire, directly or indirectly, any shares capital except from former
employees, non-employee directors and consultants in accordance with agreements
providing for the repurchase of shares in connection with any termination of
service, except in accordance with the Teva Share Purchase Agreement;

(c) Material Contracts. Enter into any Contract that would constitute a Material
Contract, other material Contract or a Contract requiring a novation or consent
in connection with the Share Purchase, or violate, terminate, amend, or
otherwise modify (including by entering into a new Contract with such party or
otherwise) or waive any of the terms of any of its Material Contracts;

 

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(d) Issuance of Securities. Issue, deliver or sell or authorize or propose the
issuance, delivery or sale of, or purchase or propose the purchase of, any
Company Voting Debt or any Company Ordinary Shares or securities convertible
into, or subscriptions, rights, warrants or options to acquire, or other
Contracts of any character obligating it to issue any such shares or other
convertible securities, other than the issuance of Company Ordinary Shares
pursuant to the exercise of Company Options that are outstanding as of the
Agreement Date or pursuant to the conversion of the CBI Total Loan Amounts;

(e) Employees; Consultants; Independent Contractors. (i) Hire any additional
officers or other employees, or any consultants or independent contractors,
(ii) terminate the employment, change the title, office or position, or
materially reduce the responsibilities of any management, supervisory or other
key personnel of the Company, (iii) enter into, amend or extend the term of any
employment or consulting agreement with any officer, employee, consultant or
independent contractor, or (iv) enter into any Contract with a labor union or
collective bargaining agreement (unless required by applicable Legal
Requirements);

(f) Loans and Investments. Make any loans or advances (other than routine
expense advances to employees of the Company consistent with past practice) to,
or any investments in or capital contributions to, any Person, or forgive or
discharge in whole or in part any outstanding loans or advances, or prepay any
indebtedness for borrowed money;

(g) Intellectual Property. Transfer or license from any Person any rights to any
Intellectual Property, or transfer or license to any Person any rights to any
Company Intellectual Property;

(h) Patents. Take any action regarding a patent, patent application or other
Intellectual Property right, other than filing continuations for existing patent
applications or completing or renewing registrations of existing patents, domain
names, trademarks or service marks in the ordinary course of business;

(i) Exclusive Rights and Most Favored Party Provisions. Enter into or amend any
agreement pursuant to which any other party is granted exclusive rights or “most
favored party” rights of any type or scope with respect to the Company Product,
technology, Intellectual Property or business, or containing any non-competition
covenants or other restrictions relating to its or Parent’s business activities;

(j) Dispositions. Sell, lease, license or otherwise dispose of any of its
properties or assets;

(k) Indebtedness. Incur any indebtedness for borrowed money or guarantee any
such indebtedness;

(l) Leases. Enter into any operating lease requiring an annual payment in excess
of $50,000 or any leasing transaction of the type required to be capitalized in
accordance with IFRS;

(m) Payment of Obligations. Pay, discharge or satisfy (i) any Liability to any
Person who is an officer, director or shareholder of the Company (other than
compensation due for services as an officer or director), or (ii) any claim or
Liability arising otherwise than in the ordinary course of business, other than
the payment, discharge or satisfaction of Liabilities reflected or reserved
against in the Financial Statements and Transaction Expenses, or defer payment
of any accounts payable other than in the ordinary course of business consistent
with past practice, or give any discount, accommodation or other concession
other than in the ordinary course of business consistent with past practice, in
order to accelerate or induce the collection of any receivable;

 

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(n) Non-Budgeted Expenditures. Make any expenditures not included in the Company
Budget;

(o) Insurance. Materially change the amount of any insurance coverage;

(p) Termination or Waiver. Cancel, release or waive any claims or rights held by
it;

(q) Employee Benefit Plans; Pay Increases. Adopt or materially amend any
employee or compensation benefit plan, including any stock issuance or stock
option plan, or materially amend any compensation, benefit, entitlement, grant
or award provided or made under any such plan, except in each case as required
under applicable Legal Requirements, materially amend any deferred compensation
plan, pay any special bonus or special remuneration to any employee or
non-employee director or consultant or increase the salaries, wage rates or fees
of its employees or consultants (other than pursuant to preexisting plans,
policies or Contracts which have been disclosed to Purchaser and are set forth
on Schedule 5.2(q) of the Company Disclosure Letter);

(r) Severance Arrangements. Grant or pay, or enter into any Contract providing
for the granting of any severance (other than statutory severance), retention or
termination pay, or the acceleration of vesting or other benefits, to any Person
(other than payments or acceleration made pursuant to preexisting plans,
policies or Contracts which have been disclosed to Purchaser and are set forth
on Schedule 5.2(r) of the Company Disclosure Letter);

(s) Lawsuits; Settlements. (i) Commence a lawsuit other than (A) for the routine
collection of bills, (B) in such cases where it in good faith determines that
failure to commence suit would result in the material impairment of a valuable
aspect of its business (provided that it consults with Purchaser prior to the
filing of such a suit), or (C) for a breach of this Agreement or (ii) settle or
agree to settle any pending or threatened lawsuit or other dispute;

(t) Acquisitions. Acquire or agree to acquire by merging or consolidating with,
or by purchasing a substantial portion of the assets of, or by any other manner,
any business or any corporation, partnership, association or other business
organization or division thereof, or otherwise acquire or agree to acquire any
assets which are material, individually or in the aggregate, to its business, or
enter into any Contract with respect to a joint venture, strategic alliance or
partnership;

(u) Taxes. Make or change any election in respect of Taxes, adopt or change any
accounting method in respect of Taxes, file any federal, state, or foreign
income Tax Return or any other Tax Return, file any amendment to a federal,
state, or foreign income Tax Return or any other Tax Return, enter into any Tax
sharing or similar agreement or closing agreement, settle any claim or
assessment in respect of Taxes, or consent to any extension or waiver of the
limitation period applicable to any claim or assessment in respect of Taxes, or
enter into intercompany transactions giving rise to deferred gain or loss of any
kind, or take any other similar action relating to the filing of any Tax Return
or the payment of any Tax, if such election, adoption or other action would have
the effect of increasing the Tax liability of the Company for any period ending
after the Closing Date or decreasing any Tax attribute of the Company existing
on the Closing Date, or apply for or receive a Tax ruling from the ITA on behalf
of the Company, or any shareholder of the Company, other than an application to
or receipt of a Tax ruling from the ITA with respect to the tax generated from
any transaction under this Agreement, including without limitations, an
application for a tax arrangement under Section 104H of the ITO;

(v) Accounting. Change accounting methods or practices (including any change in
depreciation or amortization policies) or revalue any of its assets (including
writing down the value of inventory or writing off notes or accounts receivable
otherwise than in the ordinary course of business), except in each case as
required by changes in IFRS as concurred with its independent accountants and
after notice to Purchaser;

 

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(w) Real Property. Enter into any agreement for the purchase, sale or lease of
any real property;

(x) Encumbrances. Place or allow the creation of any Encumbrance (other than a
Permitted Encumbrance) on any of its properties;

(y) Interested Party Transactions. Enter into any Contract in which any officer,
director, employee, agent or shareholder of the Company (or any member of their
immediate families) has an interest under circumstances that, if entered
immediately prior to the Agreement Date, would require that such Contract be
listed on Schedule 2.18 of the Company Disclosure Letter;

(z) Government Grants. Apply for, negotiate or receive a Government Grant;

(aa) Other. Take or agree in writing or otherwise to take, any of the actions
described in clauses (a) through (y) in this Section 5.2, or any action which
would reasonably be expected to make any of the Company’s representations or
warranties contained in this Agreement untrue or incorrect (such that the
condition set forth in the first sentence of Section 7.3(a) would not be
satisfied) or prevent the Company from performing or cause the Company not to
perform one or more covenants required hereunder to be performed by the Company
(such that the condition set forth in the second sentence of Section 7.3(a)
would not be satisfied).

ARTICLE 6

ADDITIONAL AGREEMENTS

6.1 No Solicitation.

(a) From and after the date of this Agreement until the Closing or termination
of this Agreement pursuant to ARTICLE 8, neither the Company nor the Company
Shareholder will, nor will any of them authorize or permit any of their
respective officers, directors, Affiliates, shareholders or employees or any
investment banker, attorney or other advisor or representative retained by any
of them (all of the foregoing collectively being the “Company Representatives”)
to, directly or indirectly, (i) solicit, initiate, seek, entertain, encourage,
facilitate, support or induce the making, submission or announcement of any
inquiry, expression of interest, proposal or offer that constitutes, or could
reasonably be expected to lead to, an Acquisition Proposal (as defined below),
(ii) enter into, participate in, maintain or continue any communications (except
solely to provide written notice as to the existence of these provisions) or
negotiations regarding, or deliver or make available to any Person any
non-public information with respect to, or take any other action regarding, any
inquiry, expression of interest, proposal or offer that constitutes, or could
reasonably be expected to lead to, an Acquisition Proposal, (iii) agree to,
accept, approve, endorse or recommend (or publicly propose or announce any
intention or desire to agree to, accept, approve, endorse or recommend) any
Acquisition Proposal, (iv) enter into any letter of intent or any other Contract
contemplating or otherwise relating to any Acquisition Proposal, (v) submit any
Acquisition Proposal to the vote of any securityholders of Company or (vi) enter
into any other transaction or series of transactions not in the ordinary course
of the Company’s business consistent with past practice, the consummation of
which could reasonably be expected to impede, interfere with, prevent or
materially delay the Share Purchase. The Company will (A) immediately cease and
cause to be terminated any and all existing activities, discussions or
negotiations with any Persons conducted prior to or on the date of this
Agreement with respect to any Acquisition Proposal and (B) immediately revoke or
withdraw access of any Person (other than Purchaser and its representatives) to
any data room (virtual or actual) containing any non-public information with
respect to the Company in connection with an

 

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Acquisition Proposal and request from each Person (other than Purchaser and its
representatives) the prompt return or destruction of all non-public information
with respect to the Company previously provided to such Person in connection
with an Acquisition Proposal. If any Company Representative, whether in his or
her capacity as such or in any other capacity, takes any action that the Company
or a Company Shareholder is obligated pursuant to this Section 6.1 not to
authorize or permit such Company Representative to take, then the Company and
the Company Shareholder, respectively, shall be deemed for all purposes of this
Agreement to have breached this Section 6.1.

“Acquisition Proposal” shall mean, with respect to the Company, any agreement,
offer, proposal or bona fide indication of interest (other than this Agreement
or any other offer, proposal or indication of interest by Parent or Purchaser),
or any public announcement of intention to enter into any such agreement (other
than in respect of this Agreement) or of (or intention to make) any offer,
proposal or bona fide indication of interest, relating to, or involving: (A) any
acquisition or purchase from the Company, or from the shareholders of the
Company, by any Person or Group (as defined below) of more than a 10% interest
in the total outstanding voting securities of Company or any tender offer or
exchange offer that if consummated would result in any Person or Group
beneficially owning 10% or more of the total outstanding voting securities of
the Company or any merger, consolidation, business combination or similar
transaction involving the Company; (B) any sale, lease, mortgage, pledge,
exchange, transfer, license (other than in the ordinary course of business
consistent with past practice), acquisition, or disposition of more than 10% of
the assets of the Company in any single transaction or series of related
transactions; (C) any liquidation, dissolution, recapitalization or other
significant corporate reorganization of the Company, or any extraordinary
dividend, whether of cash or other property; or (D) any other transaction
outside of the ordinary course of the Company’s business consistent with past
practice the consummation of which would reasonably be expected to materially
impede, interfere with, prevent or delay the Share Purchase or other
Transactions.

“Group” shall have the definition ascribed to such term under Section 13(d) of
the Exchange Act, the rules and regulations thereunder.

(b) The Company shall immediately (but in any event, within 48 hours) notify
Purchaser in writing after receipt by the Company (or, to the knowledge of the
Company, by any of the Company Representatives), of (i) any Acquisition
Proposal, (ii) any inquiry, expression of interest, proposal or offer that
constitutes, or would reasonably be expected to lead to, an Acquisition
Proposal, (iii) any other notice that any Person is considering making an
Acquisition Proposal, or (iv) any request for nonpublic information relating to
the Company or for access to any of the properties, books or records of the
Company by any Person or Persons other than Parent, Purchaser and their
Representatives. Such notice shall describe the material terms and conditions of
such Acquisition Proposal, inquiry, expression of interest, proposal, offer,
notice or request. The Company shall keep Purchaser fully informed of the status
and details of, and any modification to, any such inquiry, expression of
interest, proposal or offer and any correspondence or communications related
thereto and shall provide to Purchaser a true, correct and complete copy of such
inquiry, expression of interest, proposal or offer and any amendments,
correspondence and communications related thereto, if it is in writing, or a
reasonable summary thereof, if it is not in writing, without, however,
disclosing the identity of the Person or Group making any such Acquisition
Proposal, inquiry, expression of interest, proposal, offer, notice or request,
or any amendments, correspondence and communications related thereto. The
Company shall provide Purchaser with 48 hours prior notice (or such lesser prior
notice as is provided to the members of the Board of Directors) of any meeting
of the Board of Directors at which the Board of Directors is reasonably expected
to discuss any Acquisition Proposal.

 

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6.2 Confidentiality; Public Disclosure.

(a) The parties hereto acknowledge that Parent and the Company have previously
executed a Mutual Nondisclosure Agreement, dated as of December 5, 2013 (the
“Confidentiality Agreement”) which shall continue in full force and effect in
accordance with its terms, and Purchaser hereby agrees to be bound by such
Confidentiality Agreement as if a party thereto to the same extent to which it
applies to and is binding upon Parent. The Company Shareholder hereby agrees to
be bound by the terms and conditions of the Confidentiality Agreement to the
same extent as though the Company Shareholder was a party thereto. With respect
to the Company Shareholder, as used in the Confidentiality Agreement the term
“Information” shall include information relating to the Share Purchase or this
Agreement received by the Company Shareholder after the Closing or relating to
the period after the Closing.

(b) Neither Parent, Purchaser nor the Company shall, and each of the Parent,
Purchaser and the Company shall cause each of their respective representatives
not to, directly or indirectly, issue any press release or other public
statement relating to the terms of this Agreement or the transactions
contemplated hereby or use each of Parent’s, Purchaser’s or Company’s name or
refer to Parent, Purchaser or the Company directly or indirectly in connection
with the transaction contemplated hereby in any media interview, advertisement,
news release, press release or professional or trade publication, or in any
print media, whether or not in response to an inquiry, without the prior written
approval of Parent or the Company, as the case maybe, unless required by law or
stock exchange regulations (in which event the disclosing or announcing party
shall, to the extent feasible, give Parent or the Company, as the case may be,
the opportunity to comment on such disclosure prior to the making of such
disclosure) and except as reasonably necessary for the Company to obtain the
consents and approvals of third parties contemplated by this Agreement.
Notwithstanding anything herein or in the Confidentiality Agreement, after the
Closing, Parent and Purchaser may issue such press releases or make such other
public statements regarding this Agreement or the transactions contemplated
hereby as Parent or Purchaser may, in their sole discretion, determine;
provided, however, that in the event of any such press releases or other public
statement, in Parent’s good faith judgment, is reasonably likely to include
material nonpublic information regarding the Company Product or the Contingent
Payments, then Parent shall use commercially reasonable efforts to advise the
Company Shareholder in writing of its intention to make such press releases or
other public statement (subject, if requested by Parent, the Company
Shareholder’s agreement to maintain the confidentiality of such information
until such press releases or other public statement is made).

(c) For purposes of securities Law compliance, Parent, Purchaser and the Company
Shareholder reserve the right, without the Company’s or Parent’s or Purchaser’s,
as the case may be, prior consent, to make any public disclosure it believes in
good faith is required by applicable securities laws or securities listing
standards, in which case the Parent, Purchaser and the Company Shareholder, as
the case may be, agrees to (i) advise Parent or the Company Shareholder, as the
case may be, of its intention to make such disclosure and (ii) give Parent or
the Company Shareholder, as the case may be, and their respective advisors the
opportunity to comment on such disclosure prior to the making of such
disclosure.

6.3 Regulatory Approvals.

(a) The Company shall, promptly execute and file, or join in the execution and
filing of, any application, notification (including any notification or
provision of information, if any, that may be required under the HSR Act, the
RTPA or other applicable foreign antitrust laws) or other document that may be
necessary in order to obtain the authorization, approval or consent of any
Governmental Entity, whether federal, state, local or foreign, which may be
reasonably required, or which Purchaser may reasonably request, in connection
with the consummation of the Share Purchase and the other transactions
contemplated by this Agreement, including an OCS Notice. The Company shall use
commercially reasonable efforts to obtain, and to cooperate with Purchaser to
promptly obtain, all such authorizations, approvals and consents and shall pay
any associated filing fees payable by the Company

 

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with respect to such authorizations, approvals and consents. The Company shall
promptly inform Purchaser of any material communication between the Company and
any Governmental Entity regarding any of the transactions contemplated hereby.
If the Company receives any formal or informal request for supplemental
information or documentary material from any Governmental Entity with respect to
the transactions contemplated hereby, then the Company shall make, or cause to
be made, as soon as reasonably practicable, a response in compliance with such
request. The Company shall direct, in its sole discretion, the making of such
response, but shall consider in good faith the views of Purchaser.

(b) Parent and Purchaser shall promptly execute and file, or join in the
execution and filing of, any application, notification (including any
notification or provision of information, if any, that may be required under the
HSR Act, the RTPA or other applicable foreign antitrust laws) or other document
that may be necessary in order to obtain the authorization, approval or consent
of any Governmental Entity, whether foreign, federal, state, local or municipal,
which may be reasonably required in connection with the consummation of the
Share Purchase and the other transactions contemplated by this Agreement. Parent
and Purchaser shall use commercially reasonable efforts to obtain all such
authorizations, approvals and consents and shall pay any associated filing fees
payable by Parent or Purchaser with respect to such authorizations, approvals
and consents. Parent and Purchaser shall promptly inform the Company of any
material communication between Parent or Purchaser and any Governmental Entity
regarding any of the transactions contemplated hereby. If Parent or Purchaser or
any affiliate of Parent or Purchaser receives any formal or informal request for
supplemental information or documentary material from any Governmental Entity
with respect to the transactions contemplated hereby, then Parent and Purchaser
shall make, or cause to be made, as soon as reasonably practicable, a response
in compliance with such request. Parent and Purchaser shall direct, in its sole
discretion, the making of such response, but shall consider in good faith the
views of the Company.

(c) Notwithstanding anything in this Agreement to the contrary, if any
administrative or judicial action or proceeding is instituted (or threatened to
be instituted) challenging any transaction contemplated by this Agreement as
violative of any federal, state or foreign statutes, rules, regulations, orders
or decrees that are designed to prohibit, restrict or regulate actions having
the purpose or effect of monopolization or restraint of trade (collectively,
“Antitrust Laws”), it is expressly understood and agreed that: (i) neither
Purchaser nor the Company or the Company Shareholder shall have any obligation
to litigate or contest any administrative or judicial action or proceeding or
any decree, judgment, injunction or other order, whether temporary, preliminary
or permanent; and (ii) neither Purchaser nor the Company or the Company
Shareholder shall be under any obligation to make proposals, execute or carry
out agreements or submit to orders providing for (1) the sale, license, transfer
or other disposition or holding separate (through the establishment of a trust
or otherwise) of any assets or categories of assets of such party or any of its
Affiliates or the Company, (2) the discontinuation of any product or service of
such part or any of its Affiliates or the, (3) the licensing or provision of any
technology, software or other Intellectual Property of such party or any of its
Affiliates or the Company to any Person, (4) the imposition of any limitation or
regulation on the ability of such party or any of its Affiliates to freely
conduct their business or own their respective assets, or (3) the holding
separate of the Company Ordinary Shares or any limitation or regulation on the
ability of Purchaser or any of its Affiliates to exercise full rights of
ownership of the Company Ordinary Shares (any of the foregoing, an “Antitrust
Restraint”). Nothing in this Section 6.3 shall limit a party’s right to
terminate this Agreement pursuant to Section 8.1(b) if such party has, until
such date, complied in all material respects with its obligations under this
Section 6.3.

6.4 Reasonable Efforts. Subject to the limitations set forth in Section 6.3,
each of the parties hereto agrees to use its commercially reasonable efforts,
and to cooperate with each other party hereto, to take, or cause to be taken,
all actions, and to do, or cause to be done, all things necessary, appropriate
or desirable to consummate and make effective, in the most expeditious manner
practicable, the Share Purchase and the other transactions contemplated hereby,
including the satisfaction of the respective

 

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conditions set forth in ARTICLE 7, and including to execute and deliver such
other instruments and do and perform such other acts and things as may be
necessary or reasonably desirable for effecting completely the consummation of
the Share Purchase and the other transactions contemplated hereby.

6.5 Third Party Consents; Notices. The Company shall use commercially reasonable
efforts to obtain prior to the Closing, and deliver to Purchaser at or prior to
the Closing, all consents, waivers and approvals under each Contract (if any)
entered into after the Agreement Date that would have been required to be listed
or described on Schedule 2.3(b)(ii)(B) of the Company Disclosure Letter if
entered into prior to the Agreement Date.

6.6 Litigation. During the period commencing on the date hereof and continuing
until the earlier of the termination of this Agreement and the Closing:

(a) The Company will (i) notify Purchaser in writing promptly after learning of
any Legal Proceeding initiated by or against it, or known by the Company to be
threatened against the Company or any of its directors, officers, employees or
shareholders in their capacity as such (a “Company New Litigation Claim”),
(ii) notify Purchaser of ongoing material developments in any Company New
Litigation Claim and (iii) consult in good faith with Purchaser regarding the
conduct of the defense of any Company New Litigation Claim.

(b) The Parent and Purchaser will (i) notify the Company in writing promptly
after learning of any Legal Proceeding initiated by or against any of it, or
known by the Parent or Purchaser to be threatened against the Parent or
Purchaser or any of their respective directors, officers, employees or
shareholders in their capacity as such that, seek to restrain or enjoin the
consummation of the transactions contemplated hereby or which could reasonably
be expected to impede, interfere with, prevent or materially delay the Share
Purchase (a “Purchaser New Litigation Claim”), (ii) notify Company of ongoing
material developments in any such Purchaser New Litigation Claim and
(iii) consult in good faith with Company regarding the conduct of the defense of
any Purchaser New Litigation Claim.

6.7 Access to Information.

(a) During the period commencing on the date hereof and continuing until the
earlier of the termination of this Agreement and the Closing, (i) the Company
shall afford Purchaser and its accountants, counsel and other representatives,
reasonable access during business hours to (A) all of the Company’s properties,
books, Contracts and records and (B) all other information concerning the
business, properties and personnel of the Company as Purchaser may reasonably
request, and (ii) the Company shall provide to Purchaser and its accountants,
counsel and other representatives correct and complete copies of the Company’s
(A) internal financial statements, (B) Tax Returns, and all other records and
workpapers relating to Taxes, and (C) a schedule of any deferred intercompany
gain or loss with respect to transactions to which the Company has been a party.

(b) Subject to compliance with applicable Legal Requirements, from the date
hereof until the earlier of the termination of this Agreement and the Closing,
the Company shall confer from time to time as reasonably requested by Purchaser
with one or more representatives of Purchaser to discuss any material changes or
developments in the operational matters of the Company and the general status of
the ongoing operations of the Company.

(c) No information or knowledge obtained by Purchaser during the pendency of the
transactions contemplated by this Agreement in any investigation pursuant to
this Section 6.7 shall affect or be deemed to modify any representation,
warranty, covenant, condition or obligation under this Agreement.

 

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6.8 Spreadsheet. The Company shall prepare and deliver to Purchaser, at or prior
to the Closing, a spreadsheet (in Microsoft Excel form) (the “Spreadsheet”)
reasonably acceptable to Purchaser, which:

(a) shall set forth all of the following information (in addition to the other
required data and information specified therein) as of the Closing Date and
immediately prior to the Closing: (i) the name of the Company Shareholder and
its addresses and taxpayer identification number; (ii) the number of Company
Ordinary Shares held by such Person and the respective certificate numbers;
(iii) the calculation of the CBI Cash Closing Amount, CBI Initial Loan Amount,
CBI Total Loan Amount, CBI Recent Loan Amount, Closing Cash Consideration,
Closing Value, Employee Closing Payment Amount, Employee Contingent Payment
Amount, the percentage and maximum dollar amount payable to each employee in
connection with each of Milestones 1 through 5 in connection with such
employee’s Termination and Release, the percentage and, with respect to
Milestone Payments, the maximum dollar amount, payable to MTS Securities LLC
(“MTS”) in connection with each Contingent Payment pursuant to that certain
Letter Agreement, dated as of October 3, 2013, between MTS and the Company, as
amended by that certain letter agreement between the Company and MTS, dated as
of February 5, 2014 (together, the “MTS Agreement”), the Share Consideration,
Teva Cash Closing Amount (including a footnote that all such amounts are subject
to withholding of Taxes in accordance with Section 1.9 hereof); and (iv) the CBI
Net New Funding Amount, CBI Ratio, Teva Net New Funding Amount and Teva Ratio
(in each case calculated as of the Closing Date); and

(b) shall include a set of formulas (within the spreadsheet cells) which assumes
that all Milestone Payments occur in a consecutive chronological order and that
no Set-Off is applied with respect to such payments that accurately, and in a
manner consistent with the terms and requirements of the Teva Share Purchase
Agreement, calculate for each Contingent Payment that may be made under this
Agreement: (i) the CBI Net New Funding Amount, CBI Ratio, Teva Net New Funding
Amount and Teva Ratio that apply to such Contingent Payment and (ii) the amount
of such Contingent Payment to be paid to Teva in accordance with the
requirements of the Teva Share Purchase Agreement.

6.9 Expenses. Whether or not the Share Purchase is consummated, all costs and
expenses incurred in connection with this Agreement and the transactions
contemplated hereby (including Transaction Expenses) shall be paid by the party
incurring such expense; provided, however, that if the Share Purchase is
consummated, Purchaser shall pay all Transaction Expenses; provided, further,
that all Transaction Expenses shall be taken into account in the calculation of
the Total Consideration according to the definition of such term.

6.10 Certain Closing Certificates and Documents. The Company shall prepare and
deliver to Purchaser, a draft of each of the Closing Expenses Certificate and
the Spreadsheet not later than three Business Days prior to the Closing Date.
The Company shall prepare and deliver to Purchaser at or prior to the Closing
the Closing Expenses Certificate. Without limiting the generality or effect of
the foregoing or the provisions of Section 6.7(c), Company shall provide to
Purchaser, promptly after Purchaser’s request, copies of the documents or
instruments evidencing the amounts set forth on any such draft or final
certificate.

6.11 Corporate Matters. The Company shall at the Closing, deliver to Purchaser
the minute books containing the records of all proceedings, consents, actions
and meetings of the Board of Directors, committees of the Board of Directors and
shareholders of the Company and the share registries, journals and other records
reflecting all share issuances and transfers.

 

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6.12 Tax Matters.

(a) Allocation of Tax Liability. For all purposes under this Agreement, in the
case of any Taxable period that includes (but does not end on) the Closing Date,
the portion of such Tax which relates to the portion of such Taxable period
ending on the end of the Closing Date shall (x) in the case of any Tax other
than Tax based upon or related to income or receipts, be deemed to be the amount
of such Tax for the entire Taxable period multiplied by a fraction the numerator
of which is the number of days in the Taxable period ending on the end of the
Closing Date and the denominator of which is the number of days in the entire
Taxable period, and (y) in the case of any Tax based upon or related to income
or receipts be deemed equal to the amount which would be payable if the relevant
Taxable period ended on the end of the Closing Date.

(b) Each of Parent, Purchaser, the Company Shareholder and the Company shall
cooperate fully, as and to the extent reasonably requested by the other party,
in connection with the filing of Tax Returns and any audit, litigation or other
proceeding with respect to Taxes, including any proceeding with the OCS. Such
cooperation shall include the retention and (upon the other party’s request) the
provision of records and information reasonably relevant to any such audit,
litigation, or other proceeding and making employees available on a mutually
convenient basis to provide additional information and explanation of any
material provided hereunder. Parent, Purchaser, the Company Shareholder and the
Company agree to retain all books and records with respect to Tax and OCS
matters pertinent to the Company relating to any Taxable period beginning before
the Closing Date until expiration of the statute of limitations of the
respective Taxable periods, and to abide by all record retention agreements
entered into with any Taxing Authority.

(c) The Company shall cause the Company Shareholder to further agree, upon
request, to use their reasonable best efforts to obtain any certificate or other
document from any Governmental Entity or any other Person as may be necessary to
mitigate, reduce or eliminate any Tax that could be imposed (including with
respect to the transactions contemplated hereby).

6.13 Termination and Release. Prior to the Closing, the Company shall use
commercially reasonable efforts to obtain an executed Termination and Release
from all of the employees of the Company.

6.14 Investment Representation Letter and Lock-up Agreement. The Company shall
use commercially reasonable efforts to obtain an executed Investment
Representation Letter and Lock-up Agreement from CBI.

6.15 Additional Company Shareholders. The Company shall not issue additional
Company Ordinary Shares, Company Options or any other securities of the Company,
other than the issuance of Company Ordinary Shares pursuant to the exercise of
Company Options that are outstanding as of the Agreement Date or pursuant to the
conversion of the CBI Total Loan Amounts.

6.16 Repurchase. The Company shall use commercially reasonable effort to
repurchase all of the Company Ordinary Shares held by Teva in accordance with
the terms of the Teva Share Purchase Agreement.

6.17 CBI Loan Amendment. Prior to the Closing, the Company shall obtain an
executed CBI Loan Amendment from CBI with respect to each of the CBI Loan
Agreements.

6.18 Financial Reporting. The Company shall provide Purchaser with the financial
statements (including, balance sheets, statements of operations, statements of
cash flows and related footnotes) and the other financial information listed on
Schedule 6.18 attached hereto that is reasonably necessary or appropriate for
Purchaser to comply with its financial reporting obligations (the “Required
Financial Reports”).

 

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6.19 Additional CBI Loans. Between the date hereof and the Closing Date, the
Company may borrow additional money from CBI; provided, however, that such loans
shall covert into Company Ordinary Shares in accordance with the terms of the
CBI Loan Amendment and shall include no right or obligation that survives such
conversion (other than the right to receive the Company Ordinary Shares pursuant
to such conversion).

6.20 Rule 144. With a view to making available to the Company Shareholder the
benefits of Rule 144 and any other rule or regulation of the SEC that may at any
time permit the Company Shareholder to sell shares of Parent Common Stock to the
public without registration, so long as the Company Shareholder owns any shares
of Parent Common Stock acquired pursuant to this Agreement, the Parent shall use
commercially reasonable efforts to:

(a) make and keep available adequate current public information, as those terms
are understood and defined in SEC Rule 144, at all times after the date of this
Agreement;

(b) file with the SEC in a timely manner all reports and other documents
required of Parent under the Securities Act and the Exchange Act; and

(c) furnish to the Company Shareholder, so long as it owns any shares of Parent
Common Stock, forthwith upon request, to the extent accurate, a written
statement by Parent that it has complied with the reporting requirements of SEC
Rule 144, the Securities Act, and the Exchange Act.

6.21 Employees. The Purchaser shall offer continued employment with the Company
to all employees of the Company. Nothing in this Section 6.21 will be or be
deemed to be an amendment of any employment agreement or benefit plan of the
Company or will require Purchaser to continue the service relationship (whether
as an employee, director, consultant, or otherwise) of any particular individual
for any particular period of time.

6.22 CBI Cooperation. CBI agrees to use its commercially reasonable efforts, and
to cooperate with Purchaser, to take, or cause to be taken, all actions, and to
do, or cause to be done, all things reasonably necessary, appropriate or
desirable to facilitate the orderly transition of the Company to Purchaser, but
only to the extent that such activities and things required to be taken by CBI
are consistent with CBI’s past practice with the Company during the year
preceding the Closing.

6.23 Compliance with Obligations. Parent hereby agrees to cause Purchaser to
honor Purchaser’s obligations under this Agreement and the other agreements to
which Purchaser is a party pursuant to this Agreement.

6.24 Pay-off Letter or Assignment of Guarantee. Prior to the Closing, the
Purchaser and the Company shall each use its commercially reasonable efforts to
either (x) obtain an executed pay-off letter (the “Pay-off Letter”) in a form
reasonably satisfactory to Purchaser and Company Shareholder from Bank Hapoalim,
which Pay-off Letter shall include: (i) the balance required to pay-off all
amounts owed to Bank Hapoalim in full at Closing (including any prepayment
penalties); (ii) the per-diem interest amount; and (iii) wiring instructions or
(y) assign Company Shareholder’s guarantee of the Company’s indebtedness owed to
Bank Hapoalim to the Purchaser or Parent on terms reasonably satisfactory to CBI
(such documentation reflecting the assignment described in clause (y), the
“Guarantee Assignment Documentation”).

 

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ARTICLE 7

CONDITIONS TO THE SHARE PURCHASE

7.1 Conditions to Obligations of Each Party to Effect the Share Purchase. The
respective obligations of each party hereto to consummate the transactions
contemplated hereby shall be subject to the satisfaction at or prior to the
Closing of each of the following conditions:

(a) Illegality. No temporary restraining order, preliminary or permanent
injunction or other order issued by any court of competent jurisdiction or other
legal or regulatory restraint or prohibition preventing the consummation of the
Share Purchase shall be in effect, nor shall any action have been taken by any
Governmental Entity seeking any of the foregoing, and no statute, rule,
regulation or order shall have been enacted, entered, enforced or deemed
applicable to the Share Purchase, which makes the consummation of the Share
Purchase illegal.

(b) Governmental Approvals. Parent, Purchaser and the Company shall have timely
obtained from each Governmental Entity all approvals, waivers and consents, if
any, necessary for consummation of, or in connection with, the Share Purchase
and the other transactions contemplated hereby. All applicable waiting periods
under the HSR Act, the RTPA or other applicable foreign antitrust laws shall
have expired or early termination of such waiting periods shall have been
granted by both the Federal Trade Commission and the United States Department of
Justice (or, with respect to foreign antitrust laws, the applicable foreign
Governmental Entity).

7.2 Additional Conditions to Obligations of the Company and the Company
Shareholder. The obligations of the Company and the Company Shareholder to
consummate the transactions contemplated hereby shall be subject to the
satisfaction at or prior to the Closing of each of the following conditions (it
being understood that each such condition is solely for the benefit of the
Company and the Company Shareholder and may be waived by the Company and the
Company Shareholder in writing in its sole discretion without notice or
Liability to any Person):

(a) Representations, Warranties and Covenants. The representations and
warranties of Parent and Purchaser in this Agreement shall be true and correct
in all material respects (except for such representations and warranties that
are qualified by their terms by a reference to materiality or Material Adverse
Effect, which representations and warranties as so qualified shall be true and
correct in all respects) on and as of the date hereof and on and as of the
Closing Date as though such representations and warranties were made on and as
of such date (except for representations and warranties which address matters
only as to a specified date, which representations and warranties shall be true
and correct with respect to such specified date). Parent and Purchaser shall
have performed and complied in all material respects with all covenants,
obligations and conditions of this Agreement required to be performed and
complied with by it at or prior to the Closing.

(b) Receipt of Closing Deliveries. The Company and the Company Shareholder, as
applicable, shall have received each of the agreements, instruments and other
documents and deliveries set forth in Section 1.2(a) ; provided, however, that
such receipt shall not be deemed to be an agreement by the Company and Company
Shareholder that any of the agreements, instruments or documents set forth in
Section 1.2(a) is accurate and shall not diminish the Company’s and the
Company’s Shareholder’s remedies hereunder if any of the foregoing documents is
not accurate.

(c) No Material Adverse Effect. There shall not have occurred a Material Adverse
Effect with respect to the Parent or Purchaser.

(d) No Legal Proceedings. No Governmental Entity shall have commenced any Legal
Proceeding challenging or seeking the recovery of a material amount of damages
in connection with the Share Purchase or seeking to prohibit or limit the
exercise by Purchaser of any material right pertaining to ownership of stock of
the Company. No Governmental Entity shall have threatened to commence any
material Legal Proceeding challenging or seeking the recovery of a material
amount of damages in connection with the Share Purchase or seeking to prohibit
or limit the exercise by Purchaser of any material right pertaining to ownership
of stock of the Company.

 

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7.3 Additional Conditions to the Obligations of Purchaser. The obligations of
Purchaser to consummate the transactions contemplated hereby shall be subject to
the satisfaction at or prior to the Closing of each of the following conditions
(it being understood that each such condition is solely for the benefit of
Purchaser and may be waived by Purchaser in writing in its sole discretion
without notice or Liability to any Person):

(a) Representations, Warranties and Covenants. The representations and
warranties of the Company and the Company Shareholder in this Agreement shall be
true and correct in all material respects (except for such representations and
warranties that are qualified by their terms by a reference to materiality or
Material Adverse Effect and the representations and warranties contained in
Section 2.2, which representations and warranties shall be true and correct in
all respects) on and as of the date hereof and on and as of the Closing Date as
though such representations and warranties were made on and as of such date
(except for representations and warranties which address matters only as to a
specified date, which representations and warranties shall be true and correct
with respect to such specified date). The Company and the Company Shareholder
shall have each performed and complied in all material respects with all
respective covenants, obligations and conditions of this Agreement required to
be performed and complied with by the Company or the Company Shareholder, as
applicable, at or prior to the Closing.

(b) Receipt of Closing Deliveries. Purchaser shall have received each of the
agreements, instruments and other documents set forth in Section 1.2(b);
provided, however, that such receipt shall not be deemed to be an agreement by
Purchaser that the amounts set forth on the Closing Expenses Certificate or the
Spreadsheet or any of the other agreements, instruments or documents set forth
in Section 1.2(b) is accurate and shall not diminish Purchaser’s remedies
hereunder if any of the foregoing documents is not accurate.

(c) Injunctions or Restraints on Conduct of Business. No temporary restraining
order, preliminary or permanent injunction or other order issued by any court of
competent jurisdiction or other legal or regulatory restraint provision limiting
or restricting Purchaser’s ownership, conduct or operation of the business of
the Company, following the Closing shall be in effect nor shall there be pending
or threatened any Legal Proceeding seeking any of the foregoing, any Antitrust
Restraint or any other injunction, restraint or material damages in connection
with the Share Purchase or the other transactions contemplated hereby.

(d) No Legal Proceedings. No Governmental Entity shall have commenced any Legal
Proceeding challenging or seeking the recovery of a material amount of damages
in connection with the Share Purchase or seeking to prohibit or limit the
exercise by Purchaser of any material right pertaining to ownership of stock of
the Company. No Governmental Entity shall have threatened to commence any
material Legal Proceeding challenging or seeking the recovery of a material
amount of damages in connection with the Share Purchase or seeking to prohibit
or limit the exercise by Purchaser of any material right pertaining to ownership
of stock of the Company.

(e) No Material Adverse Effect. There shall not have occurred a Material Adverse
Effect with respect to the Company.

(f) No Outstanding Securities. Other than Company Ordinary Shares issued and
outstanding as of immediately prior to the Closing, there shall be no
outstanding securities, warrants, options, commitments or agreements of the
Company immediately prior to the Closing that purport to obligate the Company to
issue any Company Ordinary Shares, Company Options or any other securities under
any circumstances.

 

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(g) Company Securityholders. CBI shall be the sole Company Shareholder and there
shall be no Company Optionholders.

(h) Employees. All of the Company’s Designated Employees shall have remained
continuously employed with the Company from the date of this Agreement through
the Closing and shall have signed each of the documents set forth in
Section 1.2(b)(v), and no action shall have been taken by any such individual to
rescind any such document.

(i) Repurchase. The Company shall have repurchased all of the Company Ordinary
Shares held by Teva in accordance with the terms of the Teva Share Purchase
Agreement.

(j) CBI Loan Amendment. The Company shall have obtain an executed CBI Loan
Amendment from CBI with respect to each of the CBI Loan Agreements.

(k) Financial Reporting. The Company shall have provided Purchaser with the
Required Financial Reports.

ARTICLE 8

TERMINATION, AMENDMENT AND WAIVER

8.1 Termination. At any time prior to the Closing, this Agreement may be
terminated and the Share Purchase abandoned by authorized action taken by the
terminating party:

(a) by mutual written consent duly authorized by the Company’s Board of
Directors and Parent;

(b) by either Purchaser or the Company, if the Closing shall not have occurred
on or before June 15, 2014, or such other date that Purchaser and the Company
may agree upon in writing (the “Termination Date”); provided, further, that the
right to terminate this Agreement under this clause (b) of Section 8.1 shall not
be available to any party whose breach of any covenant or agreement hereunder
will have been the principal cause of, or will have directly resulted in, the
failure of the Closing to occur on or before the Termination Date;

(c) by either Purchaser or the Company, if any permanent injunction or other
order of a Governmental Entity of competent authority preventing the
consummation of the Share Purchase shall have become final and nonappealable;

(d) by Purchaser, if (i) the Company or the Company Shareholder shall have
breached any representation, warranty, covenant or agreement contained herein
and such breach shall not have been cured within five Business Days after
receipt by the Company or the Company Shareholder, as applicable, of written
notice of such breach (provided, however, that no such cure period shall be
available or applicable to any such breach which by its nature cannot be cured)
and if not cured within the timeframe above and at or prior to the Closing, such
breach would result in the failure of any of the conditions set forth in
Section 7.1 or Section 7.3 to be satisfied, (ii) the Company shall have breached
Section 6.1 or Section 6.2, or (iii) there shall have been a Material Adverse
Effect with respect to the Company; or

(e) by the Company, if Parent or Purchaser shall have breached any
representation, warranty, covenant or agreement contained herein and such breach
shall not have been cured within five Business Days after receipt by Purchaser
of written notice of such breach (provided, however, that no such cure period
shall be available or applicable to any such breach which by its nature cannot
be cured) and if not cured within the timeframe above and at or prior to the
Closing, such breach would result in the

 

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failure of any of the conditions set forth in Section 7.1 or Section 7.2 to be
satisfied, (ii) the Parent or Purchaser shall have materially breached
Section 6.2, or (iii) there shall have been a Material Adverse Effect with
respect to the Parent or Purchaser.

8.2 Effect of Termination. In the event of termination of this Agreement as
provided in Section 8.1, this Agreement shall forthwith become void and there
shall be no liability or obligation on the part of Parent, Purchaser, the
Company or their respective officers, directors, shareholders or affiliates;
provided, however, that (a) the provisions of this Section 8.2 (Effect of
Termination), ARTICLE 10 (General Provisions) and any related definition
provisions and the Confidentiality Agreement shall remain in full force and
effect and survive any termination of this Agreement and (b) nothing herein
shall relieve any party hereto from liability in connection with any breach of
such party’s representations, warranties or covenants contained herein.

8.3 Amendment. Subject to the provisions of applicable Legal Requirements, the
parties hereto may amend this Agreement by authorized action pursuant to an
instrument in writing signed on behalf of each of the parties hereto. To the
extent permitted by applicable Legal Requirements, Purchaser and the Company
Shareholder may cause this Agreement to be amended at any time after the Closing
by execution of an instrument in writing signed on behalf of Purchaser and the
Company Shareholder. Notwithstanding the foregoing, in event that the Company
borrows additional money from CBI in accordance with Section 6.19, then Schedule
A-1 and Schedule A-2 may be updated without the consent of the other parties
hereto to add such additional loans.

8.4 Extension; Waiver. At any time at or prior to the Closing, any party hereto
may, to the extent legally allowed, (a) extend the time for the performance of
any of the obligations or other acts of the other parties hereto, (b) waive any
inaccuracies in the representations and warranties made to such party contained
herein or in any document delivered pursuant hereto, and (c) waive compliance
with any of the agreements or conditions for the benefit of such party contained
herein. At any time after the Closing, the Company Shareholder and Purchaser
may, to the extent legally allowed, (i) extend the time for the performance of
any of the obligations or other acts of the other, (ii) waive any inaccuracies
in the representations and warranties made to such party contained herein or in
any document delivered pursuant hereto, and (iii) waive compliance with any of
the agreements or conditions for the benefit of such Person contained herein.
Any agreement on the part of a party hereto or the Company Shareholder to any
such extension or waiver shall be valid only if set forth in an instrument in
writing signed on behalf of such party. Without limiting the generality or
effect of the preceding sentence, no delay in exercising any right under this
Agreement shall constitute a waiver of such right, and no waiver of any breach
or default shall be deemed a waiver of any other breach or default of the same
or any other provision in this Agreement.

ARTICLE 9

INDEMNIFICATION

9.1 Unilateral Right of Set-Off. In accordance with Section 1.12(h), the
obligation of Parent and/or Purchaser to make any Contingent Payment shall be
qualified by the right of Parent and/or Purchaser to reduce the amount of any
one or more of the Milestone Payments or the Contingent Sales Payments, by the
amount of any Indemnifiable Damages for which an Indemnified Person may be
entitled to indemnification pursuant to this ARTICLE 9.

9.2 Indemnification. Subject to the limitations set forth in this ARTICLE 9,
from and after the Closing, the Company Shareholder shall indemnify and hold
harmless Parent, Purchaser and their officers, directors, agents and employees,
and each Person, if any, who controls or may control Parent within the meaning
of the Securities Act (each of the foregoing being referred to individually as
an “Indemnified Person” and collectively as “Indemnified Persons”) from and
against any and all losses, Liabilities, damages, fees, Tax, reductions in
value, costs and expenses, including costs of investigation

 

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and defense and reasonable fees and reasonable expenses of lawyers, experts and
other professionals, whether or not due to a third-party claim (collectively,
“Indemnifiable Damages”), incurred or accrued and arising out of, resulting from
or in connection with (i) any failure of any representation or warranty made by
the Company or a Company Shareholder in this Agreement or the Company Disclosure
Letter (including any exhibit or schedule to the Company Disclosure Letter) to
be true and correct as of the Agreement Date and as of the Closing Date as
though such representation or warranty were made as of the Closing Date (except
in the case of representations and warranties which by their terms speak only as
of a specific date or dates, which representations and warranties shall be true
and correct as of such date), (ii) any failure of any certification,
representation or warranty made by the Company in any certificate (other than
the Spreadsheet and the Closing Expenses Certificate) delivered to Purchaser
pursuant to any provision of this Agreement to be true and correct as of the
date such certificate is delivered to Purchaser, (iii) any breach of or default
in connection with any of the covenants or agreements made by the Company in
this Agreement, (iv) any matter set forth on Schedule 2.6 to the Company
Disclosure Letter or that is or would be an exception to the representations and
warranties made on each date in Section 2.6 (Litigation), (v) any inaccuracies
in the Spreadsheet, and (vi) any Indemnifiable Transaction Expenses or any
inaccuracies in the Closing Expenses Certificate. Materiality standards or
qualifications, and qualifications by reference to the defined term “Material
Adverse Effect” in any representation, warranty or covenant shall only be taken
into account in determining whether a breach of or default in connection with
such representation, warranty or covenant (or failure of any representation or
warranty to be true and correct) exists, and shall not be taken into account in
determining the amount of any Indemnifiable Damages with respect to such breach,
default or failure to be true and correct. The Company Shareholder shall not
have any right of contribution, indemnification or right of advancement from the
Company, Parent or Purchaser with respect to any Indemnifiable Damages claimed
by an Indemnified Person. It is understood that neither the Company nor the
Company Shareholder shall be liable to the Indemnified Persons for fraud or
intentional misrepresentation with respect a representation or warranty set
forth in this Agreement, if and to the extent (and only if and to the extent)
the alleged fraud or intentional misrepresentation is based on information or
knowledge obtained by Parent or Purchaser prior to the Closing.

9.3 Indemnifiable Damage Threshold; Other Limitations.

(a) Notwithstanding anything contained herein to the contrary, except with
regard to claims involving (i) fraud or intentional misrepresentation by the
Company or the Company Shareholder or (ii) any failure to be true and correct of
any of the representations and warranties in Section 2.1 (Organization,
Standing, Power and Subsidiaries), Section 2.2 (Capital Structure),
Section 2.3(a) (Authority), Section 2.13 (Taxes) (the “Tax Representation”),
Section 3.1 (Power and Capacity), Section 3.2 Enforceability; Non-Contravention
Section 3.3(Title to Share) and Section 3.5 (Solvency); (the preceding eight
sections, collectively, the “Special Representations”), no Indemnified Person
may make a claim in respect of any claim for indemnification that may be made
pursuant to clause (i) or (ii) of the first sentence of Section 9.2 unless and
until a Claim Certificate (as defined below) describing Indemnifiable Damages in
an aggregate amount greater than $500,000 (the “Aggregate Threshold”) has been
delivered, in which case the Indemnified Person may make claims for
indemnification and may exercise its Set-Off Rights for all Indemnifiable
Damages (including the amount of the Aggregate Threshold).

(b) Except with regard to (i) claims involving fraud or intentional
misrepresentation by the Company Shareholder (for which there shall be no
maximum aggregate limit) and claims involving fraud or intentional
misrepresentation by the Company (for which the limit is set forth in subsection
(c) below), (ii) any failure of any of the Special Representations to be true
and correct as aforesaid (for which the limit is set forth in subsection
(c) below) and (iii) any failure to be true and correct of any of the
representations and warranties in Section 2.10 (Intellectual Property) (the “IP
Representation”) or Section 2.19 (Regulatory Matters) (the “Regulatory
Representation”) (for which the limit is set forth in

 

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subsection (d) below), the maximum aggregate amount the Indemnified Persons may
recover from the Company Shareholder pursuant to clauses (i), (ii), and (iv) of
the first sentence of Section 9.2 shall be an amount equal to 15% of the Total
Consideration paid or due and payable pursuant to Section 1.3.

(c) In the case of claims involving fraud or intentional misrepresentation by
the Company or in the case of the failure of the Special Representations to be
true and correct as aforesaid, the maximum aggregate amount the Indemnified
Persons may recover from the Company Shareholder pursuant to clauses (i), (ii),
(iii), (v) and (vi) of the first sentence of Section 9.2 shall be an amount
equal to 100% of the Total Consideration paid or due and payable pursuant to
Section 1.3.

(d) In the case of the failure of the IP Representation or the Regulatory
Representation to be true and correct as aforesaid, the maximum aggregate amount
the Indemnified Persons may recover from the Company Shareholder pursuant to
clauses (i) and (ii) of the first sentence of Section 9.2 with respect a failure
of the IP Representation or the Regulatory Representation to be true and correct
as aforesaid shall be an amount equal to 35% of the Total Consideration paid or
due and payable pursuant to Section 1.3.

(e) Indemnifiable Damages shall be calculated net of actual recoveries under
existing insurance policies (net of any actual collection costs and reserves);
provided, however, that neither Parent nor Purchaser shall have no obligation to
pursue any claims for insurance. In no event shall any party be indemnified
under different provisions of this Agreement more than once for the same dollar
of Indemnifiable Damages.

(f) Notwithstanding any provision of this Agreement to the contrary, (i) except
in the case of fraud or intentional misrepresentation by the Company Shareholder
Parent or the Purchaser, the indemnification obligations set forth in this
Article 9 shall be the sole and exclusive remedies available to the parties
hereto with respect to or in connection with this Agreement or any agreement,
document, certificate or instrument delivered hereunder, or any of the
transactions contemplated hereunder or thereunder and (ii) except in the case of
fraud or intentional misrepresentation by the Company Shareholder, the
Indemnified Persons right to indemnification from the Company Shareholder under
this Agreement shall be exclusively by the Set-Off Rights; provided, however,
that nothing in this provision shall limit any equitable remedy, including
injunctions and specific performance, that a party hereto may have pursuant to
this Agreement.

(g) Notwithstanding anything to the contrary contained herein, no party hereto
shall be liable for any loss of profits or anticipated savings, loss of goodwill
or injury to reputation, loss of business opportunity, punitive damages or
any indirect, consequential or special losses or damages.

9.4 Period for Claims . Except as set forth below, the period during which
claims for Indemnifiable Damages may be made (the “Claims Period”) for
Indemnifiable Damages arising from or in connection with all of the matters
listed in the first sentence of Section 9.2, shall commence at the Closing and
terminate the day after the date that is eighteen (18) months following the
Closing Date (the “General Claims Period”). The Claims Period for Indemnifiable
Damages arising out of, resulting from or in connection with (x) any failure of
the Tax Representation to be true and correct, or (y) any of the matters listed
in clauses (iii) and (v) of the first sentence of Section 9.2, shall commence at
the Closing and terminate upon the expiration of the applicable statute of
limitations (giving effect to any waiver, mitigation or extension thereof) for
such claim. The Claims Period for Indemnifiable Damages arising out of,
resulting from or in connection with any failure of the IP Representation or the
Regulatory Representation to be true and correct, shall commence at the Closing
and terminate upon the day after the date that is twenty-four (24) months
following the Closing Date. The Claims Period for Indemnifiable Damages arising
out of, resulting from or in connection with (i) fraud, willful breach or
intentional misrepresentation by the Company or the Company Shareholder, and
(ii) any failure of any of the Special

 

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Representations to be true and correct, shall commence at the Closing and
terminate upon the expiration of the applicable statute of limitations (giving
effect to any waiver, mitigation or extension thereof) for such claim. The
indemnification obligations of the Indemnified Persons will be determined
without regard to any right to indemnification that the Company Shareholder may
have in its capacity as an agent of the Company and the Company Shareholder will
not be entitled to any indemnification from the Company for amounts paid for
indemnification under this ARTICLE 9.

9.5 Claims.

(a) On or before the last day of the applicable Claims Period, Purchaser may
deliver to the Company Shareholder a certificate signed by any officer of
Purchaser (a “Claim Certificate”):

(i) stating that an Indemnified Person has incurred or paid, or in good faith
reasonably anticipates that it may incur or pay, Indemnifiable Damages (or that
with respect to any Tax matters, that any Tax Authority may raise such Tax
Matter in audit of Purchaser or its subsidiaries, which could give rise to
Indemnifiable Damages);

(ii) stating the amount of such Indemnifiable Damages (which, in the case of
Indemnifiable Damages not yet incurred or paid, may be the maximum amount
reasonably anticipated by Purchaser in good faith to be incurred or paid); and

(iii) specifying in reasonable detail (based upon the information then possessed
by Purchaser) the individual items of such Indemnifiable Damages included in the
amount so stated and the nature of the claim to which such Indemnifiable Damages
are related.

No delay in providing such Claim Certificate within the Claims Period shall
affect an Indemnified Person’s rights hereunder, unless (and then only to the
extent that) the Company Shareholder is materially prejudiced thereby.

9.6 Resolution of Objections to Claims.

(a) If the Company Shareholder does not contest, by written notice to Purchaser,
any claim or claims by Purchaser made in any Claim Certificate within the 30-day
period following receipt of such Claim Certificate pursuant to Section 9.5, then
Purchaser shall retain from the Contingent Payments an amount equal to the
amount of any Indemnifiable Damages corresponding to such claim or claims as set
forth in such Claim Certificate.

(b) If the Company Shareholder objects in writing to any claim or claims by
Purchaser made in any Claim Certificate within such 30-day period, Purchaser and
the Company Shareholder shall attempt in good faith for 45 days after
Purchaser’s receipt of such written objection to resolve such objection. If
Purchaser and the Company Shareholder shall so agree, a memorandum setting forth
such agreement shall be prepared and signed by both parties.

(c) If no such agreement can be reached during the 45-day period for good faith
negotiation, upon the expiration of such 45-day period either Purchaser or the
Company Shareholder may bring suit in the courts of the State of Delaware and
the Federal courts of the United States of America, in each case, located within
the State of Delaware to resolve the matter. The decision of the trial court as
to the validity and amount of any claim in such Claim Certificate shall be
nonappealable, binding and conclusive upon the parties to this Agreement and the
parties shall be entitled to act in accordance with such decision.

 

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9.7 Third-Party Claims. In the event Purchaser becomes aware of a third-party
claim which Purchaser believes may result in a claim for indemnification
pursuant to this ARTICLE 9 by or on behalf of an Indemnified Person, Purchaser
shall have the right in its sole discretion to conduct the defense of and to
settle or resolve any such claim (and the costs and expenses incurred by
Purchaser in connection with such defense, settlement or resolution (including
reasonable attorneys’ fees, other professionals’ and experts’ fees and court or
arbitration costs) shall be included in the Indemnifiable Damages for which
Purchaser may seek indemnification pursuant to a claim made hereunder). The
Company Shareholder shall have the right to receive copies of all pleadings,
notices and communications with respect to the third-party claim to the extent
that receipt of such documents does not affect any privilege relating to any
Indemnified Person and shall be entitled, at its expense, to participate in, but
not to determine or conduct, any defense of the third-party claim or settlement
negotiations with respect to the third-party claim. However, except with the
consent of the Company Shareholder, which consent shall not be unreasonably
withheld, conditioned or delayed and which shall be deemed to have been given
unless the Company Shareholder shall have objected within 15 days after a
written request for such consent by Purchaser, no settlement or resolution by
Purchaser of any claim that gives rise to a claim by or on behalf of an
Indemnified Person shall be determinative of the existence of or amount of
Indemnifiable Damages relating to such matter. In the event that the Company
Shareholder has consented to any such settlement or resolution, the Company
Shareholder shall not have any power or authority to object under Section 9.5 or
any other provision of this ARTICLE 9 to the amount of any claim by or on behalf
of any Indemnified Persons for indemnity with respect to and in accordance with
such consented settlement or resolution.

9.8 Indemnification by Purchaser. From and after the Closing, Parent and
Purchaser will indemnify, defend and hold harmless the Company Shareholder and
its officers, directors, agents and employees, and each Person, if any, who
controls or may control the Company Shareholder within the meaning of the
Securities Act (each of the foregoing being referred to individually as an
“Shareholder Indemnified Person” and collectively as “Shareholder Indemnified
Persons”) from and against any and all Indemnifiable Damages, incurred or
accrued and arising out of, resulting from or in connection with (i) any failure
of any representation or warranty made by the Parent or Purchaser in this
Agreement (including any exhibit or schedule hereto) to be true and correct as
of the Agreement Date and as of the Closing Date as though such representation
or warranty were made as of the Closing Date (except in the case of
representations and warranties which by their terms speak only as of a specific
date or dates, which representations and warranties shall be true and correct as
of such date), (ii) any failure of any certification, representation or warranty
made by the Parent or Purchaser in any certificate delivered to Company
Shareholder pursuant to any provision of this Agreement to be true and correct
as of the date such certificate is delivered to Company Shareholder, (iii) any
breach of or default in connection with any of the covenants or agreements made
by the Parent or Purchaser in this Agreement. Except as set forth below, the
period during which claims for Indemnifiable Damages may be made for
Indemnifiable Damages arising from or in connection with all of the matters
listed in this Section 9.8, shall commence at the Closing and terminate the day
after the date that is eighteen (18) months following the Closing Date. The
Claims Period for Indemnifiable Damages arising out of, resulting from or in
connection with (x) any failure of the representations and warranties in
Section 4.1 (Organization and Standing), Section 4.2 (Authority;
Noncontravention), Section 4.3 (Capitalization), Section 4.7 (Solvency),
Section 4.8 (Issuance of Shares), Section 4.9 (Financing), and the
representations and warranties of the Parent and Purchaser contained in any
certificate delivered to Company Shareholder regarding the same subject matter
as those covered by such representations and warranties pursuant to any
provision of this Agreement to be true and correct or (y) any breach of or
default in connection with any of the covenants or agreements made by the Parent
and Purchaser in this Agreement and the other certificates contemplated hereby,
shall commence at the Closing or at such later time on which such covenant,
agreement or certificate is to be performed or delivered, as the case may be,
and terminate upon the expiration of the applicable statute of limitations
(giving effect to any waiver, mitigation or extension thereof) for such claim.

 

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9.9 Treatment of Indemnification Payments. The Company Shareholder, the Company
Shareholder, Parent and Purchaser agree to treat any payment received pursuant
to this ARTICLE 9 as adjustments to the Total Consideration for all Tax
purposes, to the maximum extent permitted by Legal Requirements.

9.10 Tail D&O Insurance. Prior to the Closing, the Company shall purchase a
“tail” officers’ and directors’ liability and professional liability insurance
policy (the “D&O Insurance”), which by its terms shall survive the Closing for
not less than seven years for the benefit of the Company’s past and present
directors, officers and employees that are insured under the Company’s current
directors’ and officers’ liability insurance policy in effect as of the date of
this Agreement. The Company shall not be required to pay an annual premium for
the D&O Insurance in excess of $50,000 of the last annual premium paid prior to
the date of this Agreement (it being understood and agreed that in the event
such D&O Insurance cannot be obtained for $50,000 of such last annual premium or
less, in the aggregate, the Company shall provide the greatest D&O Insurance
coverage as may be obtained for such amount).

ARTICLE 10

GENERAL PROVISIONS

10.1 Survival of Representations and Warranties and Covenants. If the Share
Purchase is consummated, the representations and warranties and covenants of the
Company and the Company Shareholder contained in this Agreement, the Company
Disclosure Letter (including any exhibit or schedule to the Company Disclosure
Letter), and the other certificates contemplated hereby shall survive the
Closing and remain in full force and effect, regardless of any investigation or
disclosure made by or on behalf of any of the parties to this Agreement, until
the date that is eighteen (18) months following the Closing Date; provided,
however, that the Special Representations and the representations and warranties
of the Company contained in any certificate delivered to Purchaser regarding the
same subject matter as those covered by the Special Representations pursuant to
any provision of this Agreement, will remain operative and in full force and
effect, regardless of any investigation or disclosure made by or on behalf of
any of the parties to this Agreement, until the expiration of the applicable
statute of limitations (giving effect to any waiver, mitigation or extension
thereof) for claims against the Company Shareholder which seek recovery of
Indemnifiable Damages arising out of an inaccuracy or breach of such
representations or warranties; provided, further, that the IP Representation and
the Regulatory Representation and the representations and warranties of the
Company contained in any certificate delivered to Purchaser regarding the same
subject matter as those covered by the IP Representation or the Regulatory
Representation pursuant to any provision of this Agreement, will remain
operative and in full force and effect, regardless of any investigation or
disclosure made by or on behalf of any of the parties to this Agreement, until
the date that is twenty-four (24) months following the Closing Date for claims
against the Company Shareholder which seek recovery of Indemnifiable Damages
arising out of an inaccuracy or breach of such representations or warranties;
provided, further, that the Tax Representation and the representations and
warranties of the Company contained in any certificate delivered to Purchaser
regarding the same subject matter as those covered by Tax Representation
pursuant to any provision of this Agreement, will remain operative and in full
force and effect, regardless of any investigation or disclosure made by or on
behalf of any of the parties to this Agreement, until the expiration of the
applicable statute of limitations (giving effect to any waiver, mitigation or
extension thereof) for such claim against the Company Shareholder which seek
recovery of Indemnifiable Damages arising out of an inaccuracy or breach of such
representations or warranties; provided, further, that no right to
indemnification pursuant to ARTICLE 9 in respect of any claim that is set forth
in a Claim Certificate delivered to the Company Shareholder prior to the
expiration of the applicable Claims Period set forth above shall be affected by
the expiration of such representations and warranties; and provided, further,
that such expiration shall not affect the rights of any Indemnified Person to
seek recovery of Indemnifiable Damages arising out of any fraud, willful breach
or intentional misrepresentation by the Company (subject to the limitations set
forth in ARTICLE 9) or the Company Shareholder. If the Share

 

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Purchase is consummated, the representations, warranties and covenants of Parent
and Purchaser contained in this Agreement and the other certificates
contemplated hereby shall survive the Closing and remain operative and in full
force and effect regardless of any investigation or disclosure made by or on
behalf of any of the parties to this Agreement, until the date that is eighteen
(18) months following the Closing Date; provided, however, that the
representations and warranties in Section 4.1 (Organization and Standing),
Section 4.2 (Authority; Noncontravention), Section 4.3 (Capitalization),
Section 4.7 (Solvency), Section 4.8 (Issuance of Shares), Section 4.9
(Financing), and the representations and warranties of the Parent and Purchaser
contained in any certificate delivered to Company and Company Shareholder
regarding the same subject matter as those covered by such representations and
warranties pursuant to any provision of this Agreement, will remain operative
and in full force and effect, regardless of any investigation or disclosure made
by or on behalf of any of the parties to this Agreement, until the expiration of
the applicable statute of limitations (giving effect to any waiver, mitigation
or extension thereof) for claims against the Parent and Purchaser which seek
recovery of Indemnifiable Damages arising out of an inaccuracy or breach of such
representations or warranties; and provided further that the covenants of the
Parent and Purchaser contained in this Agreement and the other certificates
contemplated hereby shall survive until the expiration of the applicable statute
of limitations (giving effect to any waiver, mitigation or extension thereof)
following the date such covenant was or is to be performed; provided, further;
that no right to indemnification pursuant to ARTICLE 9 in respect of any claim
that is delivered to the Parent or Purchaser prior to the expiration of the
applicable claims period set forth above shall be affected by the expiration of
such representations and warranties or covenants; and provided, further, that
such expiration shall not affect the rights of any Shareholder Indemnified
Person to seek recovery of Indemnifiable Damages arising out of any fraud,
willful breach or intentional misrepresentation by the Parent or Purchaser. If
the Share Purchase is consummated, all covenants of the Company and the Company
Shareholder (including the covenants set forth in ARTICLE 5 and ARTICLE 6)
contained in this Agreement and the other certificates contemplated hereby shall
expire and be of no further force or effect as of the Closing, except to the
extent such covenants provide that they are to be performed after the Closing;
provided, however, that no right to indemnification pursuant to ARTICLE 9 in
respect of any claim based upon any breach of a covenant shall be affected by
the expiration of such covenant.

10.2 Release and Waiver. The Company Shareholder, for itself and on behalf of
its heirs, legal representatives, successors and assigns (collectively, the
“Relevant Persons”), hereby irrevocably, unconditionally and forever acquits,
releases, waives and discharges Parent, Purchaser, and the Company and each of
their respective officers, directors, employees, agents, Affiliates,
representatives, successors and assigns (individually and collectively, the
“Released Parties”) from any and all past, present and future debts, losses,
costs, bonds, suits, actions, causes of action, liabilities, contributions,
attorneys’ fees, interest, damages, punitive damages, expenses, claims,
potential claims, counterclaims, cross-claims, or demands, in law or in equity,
asserted or unasserted, express or implied, known or unknown, matured or
unmatured, contingent or vested, liquidated or unliquidated, of any kind or
nature or description whatsoever, that any of the Relevant Persons had,
presently has or may hereafter have or claim or assert to have against any of
the Released Parties, except for such Relevant Person’s or Relevant Persons’, as
applicable, rights under this Agreement and each agreement attached as an
exhibit hereto (the “Shareholder Claims”). The Company Shareholder further
acknowledges and agrees that the Total Consideration is conclusive and binding
on the Company Shareholder and such other Relevant Persons. The release is
intended to be complete, global and all encompassing and specifically includes
claims that are known, unknown, fixed, contingent or conditional. With respect
to such Shareholder Claims, the Company Shareholder hereby expressly waives any
and all rights conferred upon it by any statute or rule of law which provides
that a release does not extend to claims which the claimant does not know or
suspect to exist in its favor at the time of executing the release, which if
known by him, her or it must have materially affected its settlement with the
released party.

 

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10.3 Notices. All notices and other communications hereunder shall be in writing
and shall be deemed given if delivered personally or by commercial delivery
service, or mailed by registered or certified mail (return receipt requested) or
sent via facsimile (with confirmation of receipt) to the parties hereto at the
following address (or at such other address for a party as shall be specified by
like notice):

 

  (i) if to Purchaser:

Hyperion Therapeutics Israel Holding Corp. Ltd.

2000 Sierra Point Parkway, Suite 400

Brisbane, California 94005

Attention: Chief Executive Officer

Facsimile No.: (650) 871-7029

Telephone No.: (650) 745-7802

with a copy (which shall not constitute notice) to:

Fenwick & West LLP

555 California Street

12th Floor

San Francisco, CA 94104

Attention: Effie Toshav and Matthew Rossiter

Facsimile No.: (415) 281-1350

Telephone No.: (415) 875-2372

and with a copy (which shall not constitute notice) to:

Yigal Arnon & Co.

22 Joseph Rivlin Street

Jerusalem 94240

Israel

Attention: Barry P. Levenfeld and Ben Sandler, Advs.

Facsimile No.: +972-2-623 9236

Telephone No.: +972-2-6239200

Email: barry@arnon.co.il; bens@arnon.co.il

 

  (ii) if to Parent:

Hyperion Therapeutics, Inc.

2000 Sierra Point Parkway, Suite 400

Brisbane, California 94005

Attention: Chief Executive Officer

Facsimile No.: (650) 871-7029

Telephone No.: (650) 745-7802

with a copy (which shall not constitute notice) to:

Fenwick & West LLP

555 California Street

12th Floor

San Francisco, CA 94104

Attention: Effie Toshav and Matthew Rossiter

Facsimile No.: (415) 281-1350

Telephone No.: (415) 875-2372

 

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and with a copy (which shall not constitute notice) to:

Yigal Arnon & Co.

22 Joseph Rivlin Street

Jerusalem 94240

Israel

Attention: Barry P. Levenfeld and Ben Sandler, Advs.

Facsimile No.: +972-2-623 9236

Telephone No.: +972-2-6239200

Email: barry@arnon.co.il; bens@arnon.co.il

 

  (iii) if to the Company, to:

Andromeda Biotech Ltd.

42 Ha’Yarkon St.,

Yavne 8122745, Israel

Attention: Shlomo Dagan, Ph.D.

Facsimile No.: +972 8 940 7737

Telephone No.: +972 8 938 7777

with a copy (which shall not constitute notice) to:

Meitar Liquornik Geva Leshem Tal, Law Offices

16 Abba Hillel Road

Ramat-Gan 5250608

Israel

Attention: Haim Gueta, Advocate

Facsimile No.: 972-3-610-3731

Telephone No.: +972-3-6103100

 

  (iv) if to the Company Shareholder, to:

Clal Biotechnology Industries Ltd.

12 Abba Hillel Silver St.,

Ramat Gan 5250605, Israel

Attention: Orit Lidor and Ofer Gonen

Telephone No.: +972 3 6121616

with a copy (which shall not constitute notice) to:

Meitar Liquornik Geva Leshem Tal, Law Offices

16 Abba Hillel Road

Ramat-Gan 5250608

Israel

Attention: Haim Gueta, Advocate

Facsimile No.: 972-3-610-3731

Telephone No.: +972-3-6103100

10.4 Interpretation. When a reference is made in this Agreement to Articles,
Sections, Schedule or Exhibits, such reference shall be to an Article or Section
of, or a Schedule or an Exhibit to

 

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this Agreement unless otherwise indicated. The headings contained in this
Agreement are for reference purposes only and shall not affect in any way the
meaning or interpretation of this Agreement. The words “include,” “includes” and
“including” when used herein shall be deemed in each case to be followed by the
words “without limitation.” The phrases “provided to,” “furnished to,” and
phrases of similar import when used herein, unless the context otherwise
requires, shall mean that a true, correct and complete paper copy of the
information or material referred to has been made available to the party to whom
such information or material is to be provided. Unless the context of this
Agreement otherwise requires: (i) words of any gender include each other gender;
(ii) words using the singular or plural number also include the plural or
singular number, respectively; and (iii) the terms “hereof,” “herein,”
“hereunder” and derivative or similar words refer to this entire Agreement.

10.5 Counterparts. This Agreement may be executed in one or more counterparts,
all of which shall be considered one and the same instrument and shall become
effective when one or more counterparts have been signed by each of the parties
hereto and delivered to the other parties hereto; it being understood that all
parties hereto need not sign the same counterpart.

10.6 Entire Agreement; Nonassignability; Parties in Interest. This Agreement and
the documents and instruments and other agreements specifically referred to
herein or delivered pursuant hereto, including all the schedules and exhibits
attached hereto, the Schedules, including the Company Disclosure Letter,
(a) constitute the entire agreement among the parties hereto with respect to the
subject matter hereof and supersede all prior agreements and understandings,
both written and oral, among the parties hereto with respect to the subject
matter hereof, except for the Confidentiality Agreement, which shall continue in
full force and effect, and shall survive any termination of this Agreement, in
accordance with its terms, (b) are not intended to confer, and shall not be
construed as conferring, upon any Person other than the parties hereto any
rights or remedies hereunder (except that ARTICLE 9 is intended to benefit
Indemnified Persons) and (c) shall not be assigned by operation of law or
otherwise except as otherwise specifically provided herein.

10.7 Assignment. Neither this Agreement nor any of the rights, interests or
obligations under this Agreement may be assigned or delegated, in whole or in
part, by operation of law or otherwise by any of the parties hereto without the
prior written consent of the other parties hereto, and any such assignment
without such prior written consent shall be null and void, except that Parent or
Purchaser may assign this Agreement to any direct or indirect wholly owned
subsidiary of Parent or, in the case of Purchaser, Parent, without the prior
consent of the Company; provided, however, that Parent and Purchaser shall
remain liable for all of their obligations under this Agreement. Subject to the
preceding sentence, this Agreement shall be binding upon, inure to the benefit
of, and be enforceable by, the parties hereto and their respective successors
and assigns, and not to any third party.

10.8 Severability. In the event that any provision of this Agreement, or the
application thereof, becomes or is declared by a court of competent jurisdiction
to be illegal, void or unenforceable, the remainder of this Agreement shall
continue in full force and effect and shall be interpreted so as reasonably
necessary to effect the intent of the parties hereto. The parties hereto shall
use all reasonable efforts to replace such void or unenforceable provision of
this Agreement with a valid and enforceable provision that shall achieve, to the
extent possible, the economic, business and other purposes of such void or
unenforceable provision.

10.9 Remedies Cumulative. Except as otherwise provided herein, any and all
remedies herein expressly conferred upon a party hereto shall be deemed
cumulative with and not exclusive of any other remedy conferred hereby, or by
law or equity upon such party, and the exercise by a party hereto of any one
remedy shall not preclude the exercise of any other remedy and nothing in this
Agreement shall be deemed a waiver by any party of any right to specific
performance or injunctive relief. It is accordingly agreed that the parties
shall be entitled to an injunction or injunctions to prevent breaches of this

 

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Agreement and to enforce specifically the terms and provisions hereof, this
being in addition to any other remedy to which they are entitled at law or in
equity, and the parties hereby waive the requirement of any posting of a bond in
connection with the remedies described herein.

10.10 Governing Law; Submission to Jurisdiction. This Agreement shall be
governed by and construed in accordance with the laws of the State of Delaware
without reference to such state’s principles of conflicts of law. The parties
hereto hereby irrevocably submit to the exclusive jurisdiction of the courts of
the State of Delaware and the Federal courts of the United States of America
located within the District of Delaware, in respect of the interpretation and
enforcement of the provisions of this Agreement and of the documents referred to
in this Agreement, and in respect of the transactions contemplated hereby and
thereby (including resolution of disputes under Section 9.6), and hereby waive,
and agree not to assert, as a defense in any action, suit or proceeding for the
interpretation or enforcement hereof or thereof, that it is not subject thereto
or that such action, suit or proceeding may not be brought or is not
maintainable in said courts or that the venue thereof may not be appropriate or
that this Agreement or any such document may not be enforced in or by such
courts, and the parties hereto irrevocably agree that all claims with respect to
such action or proceeding shall be heard and determined in such a Delaware State
or Federal court. The parties hereby consent to and grant any such court
jurisdiction over the person of such parties and over the subject matter of such
dispute and agree that mailing of process or other papers in connection with any
such action or proceeding in the manner provided in Section 10.3 or in such
other manner as may be permitted by applicable Legal Requirements, shall be
valid and sufficient service thereof. With respect to any particular action,
suit or proceeding, venue shall lie solely in the County of Newcastle, Delaware.

10.11 Rules of Construction. The parties hereto have been represented by counsel
during the negotiation, preparation and execution of this Agreement and,
therefore, hereby waive, with respect to this Agreement, each Schedule and each
Exhibit attached hereto, the application of any law, regulation, holding or rule
of construction providing that ambiguities in an agreement or other document
shall be construed against the party drafting such agreement or document.

10.12 Parent’s and Purchaser’s Due Diligence Investigation. Parent and Purchaser
have, for the sole purpose of determining whether to enter into and negotiate
the transactions contemplated by this Agreement, conducted a review of
information provided to it regarding the Company’s commercial, financial, legal
and other affairs. The parties agree and acknowledge that the representations
and warranties of the Company set forth in this Agreement (and in the Company
Disclosure Letter) shall in no way be limited, qualified, impaired or affected
by Parent’s or Purchaser’s conduct of such investigation.

10.13 WAIVER OF JURY TRIAL. EACH OF THE PARTIES HERETO HEREBY IRREVOCABLY WAIVES
ALL RIGHT TO TRIAL BY JURY IN ANY ACTION, PROCEEDING OR COUNTERCLAIM (WHETHER
BASED ON CONTRACT, TORT, OR OTHERWISE) ARISING OUT OF OR RELATING TO THIS
AGREEMENT OR THE ACTIONS OF ANY PARTY HERETO IN NEGOTIATION, ADMINISTRATION,
PERFORMANCE OR ENFORCEMENT HEREOF.

10.14 Waiver of Conflicts Regarding Representation. Recognizing that Meitar
Liquornik Geva Leshem Tal (“Meitar”) has acted as legal counsel to the Company
and the Company Shareholder prior to the Closing, and that Meitar may act as
legal counsel to the Company Shareholder of the Company after the Closing Date,
each of the Parent, Purchaser and Company hereby waives, on its own behalf and
agrees to cause its subsidiaries to waive, any conflicts that may arise in
connection with Meitar representing the Company Shareholder after the Closing
Date. Following the Closing, Parent and Purchaser agree that it will not request
from Meitar or use or intentionally access any of the communications among
Meitar, the Company and the Company Shareholder relating to the Share Purchase
(the “Communications”) in connection with any dispute arising under this
Agreement; provided, however, that nothing contained herein shall prevent Parent
or Purchaser from requesting, using

 

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or accessing any Communications in connection with document production requests
or discovery in any legal proceeding so long as such Communications would not be
subject to an attorney-client privilege if they were being requested in a legal
proceeding by an unrelated third party and such Communications are produced or
required to be produced in response to such document production requests or
discovery

[SIGNATURE PAGE NEXT]

 

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IN WITNESS WHEREOF, Parent, Purchaser, the Company and the Company Shareholder
have caused this Share Purchase Agreement to be executed and delivered by their
respective officers thereunto duly authorized, all as of the date first written
above.

 

PARENT: HYPERION THERAPEUTICS, INC.

By:

 

/s/ Donald J. Santel

Name:

 

Donald J. Santel

Title:

 

Chief Executive Officer

PURCHASER: HYPERION THERAPEUTICS ISRAEL HOLDING CORP. LTD.

By:

 

/s/ Natalie Holles

Name:

 

Natalie Holles

Title:

 

Chief Executive Officer

[SIGNATURE PAGE TO STOCK PURCHASE AGREEMENT]

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IN WITNESS WHEREOF, Parent, Purchaser, the Company and the Company Shareholder
have caused this Share Purchase Agreement to be executed and delivered by their
respective officers thereunto duly authorized, all as of the date first written
above.

 

COMPANY: ANDROMEDA BIOTECH LTD. By:   /s/ Shlomo Dagan   /s/ Elder Chaim Name:  
Shlomo Dagan   Elder Chaim Title:   CEO   CFO

[SIGNATURE PAGE TO STOCK PURCHASE AGREEMENT]

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IN WITNESS WHEREOF, Parent, Purchaser, the Company and the Company Shareholder
have caused this Share Purchase Agreement to be executed and delivered by their
respective officers thereunto duly authorized, all as of the date first written
above.

 

COMPANY SHAREHOLDER: CLAL BIOTECHNOLOGY INDUSTRIES LTD.

By:

 

/s/ Ofer Gonen

 

/s/ Ruben Krupik

Name:

 

Ofer Gonen

 

Ruben Krupik

Title:

 

Vice President

 

Chief Executive Officer

[SIGNATURE PAGE TO STOCK PURCHASE AGREEMENT]

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EXHIBIT A

Definitions

As used in this Agreement, the following terms shall have the meanings indicated
below. Unless indicated otherwise, all mathematical calculations contemplated
hereby shall be rounded to the tenth decimal place.

“Affiliate” has the meaning set forth in Rule 144 promulgated under the
Securities Act.

“Business” means the business of the Company as currently conducted and as
currently proposed by the Company to be conducted.

“Business Day” means a day (i) other than Friday, Saturday or Sunday and (ii) on
which commercial banks are open for business in San Francisco, California and in
Israel.

“CBI” means Clal Biotechnology Industries Ltd.

“CBI Cash Closing Amount” means an amount of cash equal to the difference
between (i) the Closing Cash Consideration, minus (ii) the Teva Cash Closing
Amount.

“CBI Initial Loan Amount” means, an amount equal to the aggregate outstanding
principal and accrued and unpaid interest on all indebtedness of the Company to
CBI incurred prior to January 1, 2013, which is outstanding as of immediately
prior to the Closing and the conversion contemplated by the CBI Loan Amendments,
and as reflected on Schedule A-3 (as shall be updated by the Company prior to
the Closing).

“CBI Total Loan Amount” means, collectively, the CBI Initial Loan Amount and the
CBI Recent Loan Amount.

“CBI Loan Agreements” means those certain Loan Agreements by and among the
Company and CBI identified on Schedule A-1, as may be updated by the Company
prior to the Closing.

“CBI Net New Funding Amount” means, as of the date of determination, an amount
equal to (x) the then outstanding CBI Recent Loan Amount, plus (y) the total
amounts paid by CBI to the Company in consideration for any shares that were
issued by the Company to CBI since January 1, 2013 (including such consideration
that was paid by way of a conversion of any indebtedness of the Company to CBI
incurred since January 1, 2013), less (y) the product of (A) the quotient
obtained by dividing (i) the sum of clauses (x) and (y), by (ii) the CBI Total
Loan Amount, multiplied by (B) the aggregate amounts that were paid until such
date of determination to CBI pursuant to this Agreement in consideration for the
shares referred to in clause (y).

“CBI Ratio” means, as of the date of determination, a fraction (x) the numerator
of which is the then applicable CBI Net New Funding Amount and (y) the
denominator of which is the sum of (i) clause (x), plus (ii) the then applicable
Teva Net Funding Amount.

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“CBI Recent Loan Amount” means an amount equal to the aggregate principal and
accrued and unpaid interest on all indebtedness of the Company to CBI incurred
since January 1, 2013, which is outstanding as of immediately prior to the
Closing and the conversion contemplated by the CBI Loan Amendments, and as
reflected on Schedule A-2 (as shall be updated by the Company prior to the
Closing).

“Closing Cash Consideration” means (A) $12,500,000, less (B) the sum of (1) the
Transaction Expenses, plus (2) the Employee Closing Payment Amount.

“Closing Expenses Certificate” means a certificate executed on behalf of the
Company by the Chief Financial Officer of the Company dated as of the Closing
Date, certifying the amount of Transaction Expenses that are then outstanding or
that were paid after April 1, 2014 (including an itemized list of each
Transaction Expense with a description of the nature of such expense and the
Person to whom such expense was or is owed). The Closing Expenses Certificate
shall include a representation of the Company, certified by the Chief Financial
Officer of the Company on behalf of the Company, that such certificate includes
all of the Transaction Expenses of the sort described above, paid or payable at
any time prior to, at or following the Closing Date, it being the expressed
intent of the Company and Purchaser that to the maximum extent possible all the
Transaction Expenses be deducted in the calculation of the Closing Cash
Consideration and that there be no Indemnifiable Transaction Expenses.

“Closing Value” means the sum of (A) the Closing Cash Consideration, plus
(B) $7,850,000.

“Code” shall mean the Internal Revenue Code of 1986, as amended.

“Company IP Rights” means (A) any and all Intellectual Property that is licensed
by the Company which Intellectual Property is used (x) in the conduct of the
business of the Company as currently conducted by the Company or (y) in the
design, development, manufacturing, reproduction, branding, marketing,
advertising, promotion, licensing, sale, offer for sale, importation,
distribution, provision and/or use of any and all Company Products as currently
conducted and as currently proposed by the Company to be conducted; and
(B) Company-Owned IP Rights.

“Company IP Rights Agreements” means any licenses, sublicenses, and other
agreements, permissions, and understandings of any kind or nature, under which
the Company is (A) a licensee or otherwise is authorized to use or practice, or
is otherwise granted any right or immunity with respect to, any Company IP
Rights, or (B) a licensor or otherwise authorizes the use or practice of, or
otherwise grants any right or immunity with respect to any Company IP Rights.
Company IP Rights Agreements include any license agreements, options, settlement
agreements, coexistence agreements, consent agreements and assignments governing
Company IP Rights.

“Company Option Plan” means the Andromeda Biotech Ltd 2007 Share Option Plan.

“Company Optionholders” means the holders of Company Options.

“Company Options” means options to purchase Company Ordinary Shares.

“Company Ordinary Shares” means the Ordinary Shares, nominal value of New
Israeli Shekel 0.01 per share, of the Company.

 

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“Company-Owned IP Rights” means any and all Intellectual Property that is owned
by the Company.

“Company Product” means the peptide DiaPep277 consisting of the amino acid
sequence VLGGGVALLRVIPALDSLTPANED or any composition or formulation comprising
this peptide.

“Company Proprietary Specifications” means, collectively, any confidential
manufacturing specifications or designs, any material portion or aspect of
confidential manufacturing specifications or designs, or any material
proprietary information contained in or relating to any confidential
manufacturing specifications or designs, of any Company-Owned IP Rights or
Company Products.

“Company Registered Intellectual Property” means all United States, Israeli,
international and foreign: (A) patents and patent applications (including
provisional applications); (B) registered trademarks, applications to register
trademarks or service marks, intent-to-use applications, or other registrations
or applications related to trademarks or service marks; (C) registered Internet
domain names; (D) registered copyrights and applications for copyright
registration; and (E) any other Intellectual Property that is the subject of an
application, certificate, filing, registration or other document issued, filed
with, or recorded by any Governmental Entity, in each case, owned by or
registered or filed in the name of, the Company.

“Company Securityholders” means the Company Shareholder and Company
Optionholders, collectively.

“Company Shareholder” means the holder of outstanding Company Ordinary Shares as
of the Closing Date.

“Contract” means any written or oral legally binding contract, agreement,
instrument, commitment or undertaking of any nature (including leases, licenses,
mortgages, notes, guarantees, sublicenses, subcontracts, letters of intent and
purchase orders), including all amendments, supplements, exhibits and schedules
thereto, as of the Agreement Date or as may hereafter be in effect prior to
Closing.

“Employee Closing Payment Amount” the aggregate payments at Closing to Company
employees under the Termination and Release agreements, as set forth in the
Spreadsheet.

“Employee Contingent Payment Amount” the maximum aggregate amount payable to the
employees of the Company under the Termination and Release agreements contingent
on the achievement of Milestones 1 through 5 and the payment of the Contingent
Payments associated with such Milestones in accordance with the provisions of
the Section 1.11 and Section 1.12, as set forth in the Spreadsheet, which shall
be reduced proportionally in the event of the exercise by Purchaser of its
Set-Off Rights in connection with any of such Contingent Payments.

“Encumbrance” means, with respect to any asset, any mortgage, deed of trust,
lien, pledge, charge, security interest, title retention device, conditional
sale or other security arrangement, collateral assignment, claim, charge,
adverse claim of title, ownership or right to use, restriction or other
encumbrance of any kind in respect of such asset (including any restriction on
(i) the voting of any security or the transfer of any security or other asset,
(ii) the receipt of any income derived from any asset, (iii) the use of any
asset, and (iv) the possession, exercise or transfer of any other attribute of
ownership of any asset).

“Equity Interests” means, with respect to any Person, any capital stock of, or
other ownership, membership, partnership, joint venture or equity interest in,
such Person or any indebtedness,

 

3

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securities, options, warrants, call, subscription or other rights of, or granted
by, such Person or any of its Affiliates that are convertible into, or are
exercisable or exchangeable for, or giving any Person any right to acquire any
such capital stock or other ownership, partnership, joint venture or equity
interest, in all cases, whether vested or unvested.

“Exchange Act” means the Securities Exchange Act of 1934, as amended.

“FD&C Act” means the United States Federal Food, Drug, and Cosmetic Act, as
amended.

“Governmental Entity” means any supranational, national, state, municipal, local
or foreign government, any court, tribunal, arbitrator, administrative agency,
commission or other governmental official, authority or instrumentality, in each
case whether domestic or foreign, any stock exchange or similar self-regulatory
organization or any quasi-governmental or private body exercising any
regulatory, Taxing or other governmental or quasi-governmental authority
(including any governmental division, department, agency, commission,
instrumentality, official, organization, unit, body or entity and any court or
other tribunal).

“Government Grant” means any pending and outstanding grants, incentives,
exemptions and subsidies from the Government of the State of Israel or any
Governmental Entity thereof, or from any non-Israeli Governmental Entity,
granted to (or transferred to, assigned to or purchased by) the Company.

“HSR Act” means the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as
amended.

“Indemnifiable Transaction Expenses” means any Transaction Expenses that have
not been taken into account in the calculation of the Total Consideration. All
Indemnifiable Transaction Expenses shall constitute “Indemnifiable Damages” for
purposes of ARTICLE 9 without regard to the Aggregate Threshold.

“Intellectual Property” means any and all industrial and intellectual property
rights and all rights associated therewith, throughout the world, including all
patents and applications therefor and all reissues, divisions, renewals,
extensions, provisionals, continuations and continuations-in-part thereof, all
inventions (whether patentable or not), invention disclosures, improvements,
trade secrets, proprietary information, know how, technology, technical data,
proprietary processes and formulae, algorithms, specifications, customer lists
and supplier lists, all industrial designs and any registrations and
applications therefor, all trade names, logos, trade dress, trademarks and
service marks, trademark and service mark registrations, trademark and service
mark applications, and any and all goodwill associated with and symbolized by
the foregoing items, Internet domain name registrations, Internet and World Wide
Web URLs or addresses, all copyrights, copyright registrations and applications
therefor, all computer software, databases and data collections and all rights
therein, all moral and economic rights of authors and inventors, however
denominated, and any similar or equivalent rights to any of the foregoing, and
all tangible embodiments of the foregoing.

“ITA” shall mean the Israeli Tax Authority.

“ITO” shall mean the Israeli Income Tax Ordinance (New Version), 1961, as
amended, and all rules and regulations promulgated thereunder.

“knowledge” means, with respect to any fact, circumstance, event or other matter
in question, the knowledge of such fact, circumstance, event or other matter
after reasonable inquiry of (i) an individual, if used in reference to an
individual or (ii) with respect to any Person that is not an individual,

 

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the executive officers of such Person, or in the case of the Company any of the
directors of the Company and the following managers of the Company: Shlomo Dagan
and Chaim Eldar with respect to all matters and Rachel Eren for matters relating
to Company development programs and regulatory affairs (the individuals
specified in clause (ii) are collectively referred to herein as the “Entity
Representatives”). Any such individual or Entity Representative will be deemed
to have knowledge of a particular fact, circumstance, event or other matter if
(A) such fact, circumstance, event or other matter is reflected in one or more
documents (whether written or electronic, including electronic mails sent to or
by such individual or Entity Representative) in, or that have been in, the
possession of such individual or Entity Representative, including his or her
personal files, (B) such fact, circumstance, event or other matter is reflected
in one or more documents (whether written or electronic) contained in books and
records of such Person that would reasonably be expected to be reviewed by an
individual who has the duties and responsibilities of such individual or Entity
Representative in the customary performance of such duties and responsibilities,
or (C) such knowledge could be obtained from reasonable inquiry of the persons
employed by such Person charged with administrative or operational
responsibility for such matters for such Person. With respect to any matters
relating to Intellectual Property, “Knowledge” does not require the Company to
conduct, have conducted, obtain, or have obtained any freedom-to-operate
opinions or similar opinions of counsel or any patent, trademark or other
Intellectual Property Rights clearance searches and no knowledge of any
third-party Patent rights, trademark rights, or other intellectual property
rights that could have been revealed by such inquiries, opinions, or searches
will be imputed to the Company unless the Company has actually conducted or
procured the conduct of such searches.

“Legal Requirements” means any federal, state, foreign, local, municipal or
other law, statute, constitution, principle of common law, resolution,
ordinance, code, edict, decree, rule, regulation, ruling or requirement issued,
enacted, adopted, promulgated, implemented or otherwise put into effect by or
under the authority of any Governmental Entity and any orders, writs,
injunctions, awards, judgments and decrees applicable to the Company or to any
of their respective assets, properties or businesses.

“Liabilities” means all debts, liabilities and obligations, whether accrued or
fixed, absolute or contingent, matured or unmatured, determined or determinable,
asserted or unasserted, known or unknown, including those arising under any law,
action or governmental order and those arising under any Legal Requirement,
Legal Proceeding or Order of a Governmental Entity and those arising under any
Contract, regardless of whether such debt, liability or obligation would be
required to be disclosed on a balance sheet prepared in accordance with IFRS.

“Material Adverse Effect” with respect to any entity means any change, event,
violation, inaccuracy, circumstance or effect (each, an “Effect”) that,
individually or taken together with all other Effects, and regardless of whether
or not such Effect constitutes a breach of the representations or warranties
made by such entity in this Agreement, is, or would reasonably likely to, (i) be
or become materially adverse in relation to the near-term or longer-term
condition (financial or otherwise), properties, assets (including intangible
assets), liabilities, business, employees, operations or results of operations
of such entity and its subsidiaries, taken as a whole, except to the extent that
any such Effect directly results from (A) changes in general economic or
political conditions, (B) changes generally affecting the industry in which such
entity and its subsidiaries operate, (C) changes in Legal Requirements or
accounting requirements or principles (including GAAP), (D) any acts of
terrorism, sabotage, armed hostilities, military action or war, and (E) the
impact of the negotiation, announcement or performance of this Agreement and the
Share Purchase or any action taken by the Company at the written request of
Purchaser; provided, however, that the exceptions in clauses (A) through
(D) shall not apply if such changes or acts disproportionately affect such
entity and its subsidiaries, taken as a whole, as compared to other participants
in such entity’s industry, or (ii) materially impede such entity’s ability to
consummate the transactions contemplated by this Agreement in accordance with
its terms and applicable Legal Requirements.

 

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“OCS” shall mean the Office of the Chief Scientist of Israeli Ministry of the
Economy.

“OCS Notice” shall mean the written notice to the OCS regarding the change in
ownership of the Company effected as a result of the Share Purchase, required to
be submitted to the OCS in connection with the Share Purchase in accordance with
the Israeli Encouragement of Industrial Research and Development Law, 1984,
which may be submitted by the Company at any time following the date hereof but
not later than the Closing.

“Order” means any judgment, writ, decree, stipulation, determination, decision,
award, rule, preliminary or permanent injunction, temporary restraining order or
other order of any Governmental Entity.

“Permitted Encumbrances” means: (i) statutory liens for Taxes that are not yet
due and payable or liens for Taxes being contested in good faith by any
appropriate proceedings for which adequate reserves have been established; and
(ii) statutory liens to secure obligations to landlords, lessors or renters
under leases or rental agreements.

“Parent Common Stock” means the Common Stock, par value $0.0001 per share, of
Parent.

“Parent Stock Price” means the average of the daily closing sale prices of
Parent Common Stock as quoted on the NASDAQ Global Select Market for the fifteen
consecutive trading days ending with the trading day that is three trading days
prior to the date of this Agreement.

“Person” means any natural person, company, corporation, limited liability
company, general partnership, limited partnership, limited liability
partnership, trust, estate, proprietorship, joint venture, business organization
or Governmental Entity.

“PHSA” means the United States Public Health Service Act, as amended.

“Regulatory Authority” means any applicable government regulatory authority,
domestic or foreign, or any other supranational (e.g., the European Commission,
the Counsel of the European Union or the European Agency for the Evaluation of
Medical Products), national, regional, federal state, provincial or local
regulatory agency department, bureau, commission, counsel, or other Governmental
Entity, regulating or otherwise exercising authority over the research,
development, clinical testing, manufacture, distribution, marketing, storage,
transportation, use or sale of a pharmaceutical or biological product or
involved in granting approvals for the manufacturing, marketing, reimbursement
and/or pricing of a pharmaceutical or biological product, and any successor
Governmental Entity having substantially the same function.

“RTPA” means the Israeli Restrictive Trade Practices Act, 1988, as amended.

“Rule 144” means Rule 144 promulgated by the SEC under the Securities Act.

“SEC” means the Securities and Exchange Commission.

“Securities Act” means the Securities Act of 1933, as amended.

 

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“Share Consideration” means a number of shares of Parent Common Stock equal to
the quotient obtained by dividing $7,850,000 by the Parent Stock Price.

“Tax” (and, with correlative meaning, “Taxes” and “Taxable”) means (i) any
Israeli and/or U.S. federal, state, local or other foreign net income,
alternative or add-on minimum tax, gross income, estimated, gross receipts,
sales, use, ad valorem, value added, transfer, franchise, fringe benefit,
capital stock, profits, license, registration, withholding, payroll, social
security (or equivalent), employment, unemployment, disability, excise,
severance, stamp, occupation, premium, property (real, tangible or intangible),
environmental or windfall profit tax, custom duty or other tax, governmental fee
or other like assessment or charge of any kind whatsoever including any interest
or any penalty, addition to tax, inflation linkage or additional amount (whether
disputed or not) imposed by any Governmental Entity responsible for the
imposition of any such tax (domestic or foreign), including the ITA (each, a
“Tax Authority”), (ii) any Liability for the payment of any amounts of the type
described in clause (i) of this sentence as a result of being a member of an
affiliated, consolidated, combined, unitary or aggregate group for any Taxable
period, and (iii) any Liability for the payment of any amounts of the type
described in clause (i) or (ii) of this sentence as a result of being a
transferee of or successor to any Person or as a result of any express or
implied obligation to assume such Taxes or to indemnify any other Person.

“Tax Return” means any return, statement, declaration, report or form (including
estimated Tax returns and reports, withholding Tax returns and reports, any
schedule or attachment, and information returns and reports) filed or required
to be filed with respect to Taxes.

“Teva” means Teva Pharmaceutical Industries Ltd.

“Teva Cash Closing Amount” means an amount of cash equal to the product of
(i) the Closing Value, multiplied by (ii) Fifty percent (50%).

“Teva Net Funding Amount” means, as of the date of determination, the sum of
(1) $36,210,545 minus (2) the aggregate amounts that were paid to Teva until
such time in accordance with Sections 1.3 of this Agreement and Sections 4 and 5
of the Teva Share Purchase Agreement (without duplication).

“Teva Ratio” means, as of the date of determination, a fraction (x) the
numerator of which is the then applicable Teva Net Funding Amount and (y) the
denominator of which is the sum of (i) clause (x), plus (ii) the then applicable
CBI Net New Funding Amount.

“Teva Share Purchase Agreement” means that certain Share Purchase and Rights
Agreement, dated as of February 13, 2014, by and among the Company and Teva.

“Third Party Intellectual Property Rights” means any Intellectual Property owned
by a third party.

“Total Consideration” means the consideration payable pursuant to Section 1.3.

 

7

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“Transaction Expenses” means all third party fees, costs, expenses, payments,
and expenditures, including any VAT payable in connection therewith, incurred by
the Company in connection with the Share Purchase and this Agreement and the
transactions contemplated hereby whether or not billed or accrued (including any
fees, costs expenses, payments, and expenditures of legal counsel and
accountants, the maximum amount of fees costs, expenses, payments, and
expenditures payable to financial advisors, investment bankers and brokers of
the Company notwithstanding any contingencies for earnouts, escrows, etc., and
any such fees, costs, expenses, payments, and expenditures incurred by Company
Securityholders paid for after April 1, 2014 by the Company).

“Warning Letter” means a letter characterized by any Regulatory Authority as a
warning letter, a notice of adverse finding, observation of noncompliance or a
similar letter or report in which any Regulatory Authority expresses the opinion
that violations or non-compliance of law, regulation or guideline have occurred.

Other capitalized terms defined elsewhere in this Agreement and not defined in
this Exhibit A shall have the meanings assigned to such terms in this Agreement.

 

8

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EXHIBIT B

Form of Termination and Release

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EXHIBIT C

Form of Instruction Letter

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EXHIBIT D

Form of Company Legal Opinion

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EXHIBIT E

Form of Investment Representation Letter and Lock-up Agreement

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EXHIBIT F

Form of Form of CBI Loan Amendment

 

ii

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Schedule 1.2(b)(v)

Key Employees

 

iii

--------------------------------------------------------------------------------

Schedule 1.11(b)

Reductions in Milestone Payments

Reduction in Contingent Sales Payments

 

iv

--------------------------------------------------------------------------------

Schedule 6.18

 

v

--------------------------------------------------------------------------------

Schedule A-1

CBI Loan Agreements

 

vi

--------------------------------------------------------------------------------

Schedule A-2

CBI Recent Loan Amount

 

vii

--------------------------------------------------------------------------------

Schedule A-3

CBI Initial Loan Amount

 

viii