OWC PHARMACEUTICAL RESEARCH CORP.

 

2016 ISRAELI EMPLOYEE SHARE OPTION PLAN

 

1

 

 

PREFACE

 

This plan, as amended from time to time, shall be known as the “OWC
Pharmaceutical Research Corp.” -Israeli Employee Share Option Plan” (the
“Plan”).

 

1. PURPOSE OF THE PLAN

 

The purpose of this Plan is to foster and promote the long-term financial
success of OWC and its Affiliates and increase shareholder value by:

 

  (a) Motivating superior performance by means of performance-related
incentives;         (b) Encouraging and providing for the acquisition of an
ownership interest in the Company by eligible Employees; and         (c)
Enabling OWC to attract and retain the services of outstanding management team
and other qualified and dedicated Employees upon whose judgment, interest and
special effort the successful conduct of its operations is largely dependent.

 

2. DEFINITIONS

 

For purposes of this Plan and related documents, including the Grant Letter, the
following definitions shall apply:

 

  2.1 “102 Option” - means an Option that the Board intends to be a “102 Option”
which shall only be granted to Employees, and shall be subject to and construed
consistently with the requirements of Section 102 of the Ordinance. Approved 102
Options may either be classified as Capital Gains Track Options (CGTO) or
Ordinary Income Track Options (OITO). 102 Options may either be granted to a
Trustee or without a Trustee.         2.2 “3(i) Option” - means Options granted
pursuant to Section 3(i) of the Ordinance.         2.3 “Administrator” - means
the Board or the Committee as shall be administering this Plan, in accordance
with Section ‎3 מתחת.         2.4 “Affiliate” - means any company eligible to be
qualified as an “employing company”, with respect to the Company, within the
meaning of Section 102(a) of the Ordinance including any and all rules and
regulations promulgated thereunder, as now in effect or as hereafter amended.  
      2.5 “Approved 102 Option” - means an Option granted pursuant to Section
102(b) of the Ordinance, including any and all rules and regulations promulgated
thereunder, as now in effect or as hereafter amended, and held in trust by a
Trustee for the benefit of the Optionee, pursuant to Section 102.         2.6
“Articles of Association” - means the Articles of Association of the Company as
same are in effect from time to time.         2.7 “Board” - means the Board of
Directors of the Company.         2.8 “Capital Gains Track Option” or “CGTO” -
as defined in Section ‎5.4 מתחת.

 

2

 

 

  2.9 “Cashless Exercise” shall mean a way of paying the Exercise Price not in
cash but by getting a number of Shares that reflects only the economic benefit
the Optionee has at exercise point of time, so the Company allocates the
Optionee a smaller number of Shares comparing the number of Shares the Optionee
would receive according to the conversion rate set forth in the Grant Letter.  
      2.10 “Cause” - means, with respect to an Employee (i) as such term is
defined in the individual employment agreement or other engagement agreement
between an Employee and OWC or its any of Affiliates, or (ii) if no such
agreement is in place, then ‘Cause’ shall mean any one of the following: (a)
conviction of any felony involving moral turpitude or affecting OWC; (b) any
failure to carry out, as an Employee of OWC or its Affiliates, a reasonable
directive of the chief executive officer, OWC’s board or the Optionee’s direct
supervisor, which involves the business of OWC or its Affiliates and which was
capable of being lawfully performed by Optionee; (c) embezzlement or theft of
funds of OWC or its Affiliates; (d) any breach of the Optionee’s fiduciary
duties or duties of care of OWC, including, without limitation, self-dealing,
prohibited disclosure of confidential information of, or relating to, OWC,
engagement in any business competitive to the business of OWC or of its
Affiliates or breach of non-solicitation covenants; (e) any conduct (other than
conduct in good faith) reasonably determined by the Board to be materially
detrimental to OWC, and (f) any other circumstances under which OWC is entitled
to terminate Optionee’s employment with OWC without paying Optionee severance
pay under applicable law; and with respect to a Non-Employee (i) as such term is
defined in the individual engagement agreement between the Optionee and OWC or
its Affiliates, or (ii) if no such agreement is in place, then ‘Cause’ shall
mean any one of the circumstances set forth in (a) through and including (e)
herein, as applicable to such Non-Employee.         2.11 “Chairperson” - means
the chairperson of the Committee.         2.12 “Committee” - means a share
option compensation committee appointed by the Board, which shall consist of no
fewer than two members of the Board, and if no such compensation committee is
appointed, then the Board.         2.13 “Company” – means OWC Pharmaceutical
Research Corp., a company organized and existing under the laws of the state of
New York, USA, whose principal office is at Wall Street 40 NY, NY, USA 10005.  
      2.14 “Companies Law” - means the Israeli Companies Law, 5759-1999,
including any rules and regulations promulgated thereunder and any provisions of
the Companies Ordinance [New Version], 1983 still in effect, as amended from
time to time.         2.15 “Controlling Shareholder” - shall have the meaning
ascribed to it in Section 32(9) of the Ordinance.         2.16 “Cut-Off Date” –
as defined in Section ‎11.3‎(b) מתחת.         2.17 “Date of Grant” - means the
date of grant of an Option, as determined by the Board and set forth in the
Optionee’s Grant Letter, and in any event not earlier than the first date on
which the Company is permitted to effect Option grants under this ESOP and the
provisions of the Ordinance, including any and all rules and regulations
promulgated thereunder, as now in effect or as hereafter amended.         2.18
“Disability” – as defined in Section ‎9.5‎(v) מתחת.         2.19 “Election” – as
defined in Section ‎5.6 מתחת.

 

3

 

 

  2.20 “Employee” - means a person who is employed by the Company or its
Affiliates including an individual who is serving as a director or an office
holder, but excluding Controlling Shareholders.         2.21 “Event” – as
defined in Section ‎11.2 מתחת.         2.22 “Expiration Date” - means the date
upon which an Option shall expire, as set forth in Section ‎9.2 below.        
2.21 “Grant Letter” - means the grant letter given by the Company to the
Optionee and signed by the Optionee, and which sets out the terms and conditions
of an Option.         2.22 “ESOP” - means as defined in the preface hereto.    
    2.23 “ITA” - means the Israeli Tax Authority.         2.24 “NIS” – means,
New Israeli Shekels.         2.25 “Non-Employee” - means a consultant, adviser,
service provider, Controlling Shareholder or any other person who is not an
Employee.         2.26 “Ordinary Income Track Option” or “OITO” - as defined in
Section ‎5.5 מתחת.         2.27 “Option” - means an option to purchase one or
more Shares of the Company pursuant to this ESOP.         2.28 “Optionee” -
means a person who receives or holds an Option under this ESOP.         2.29
“Ordinance” - means the Israeli Income Tax Ordinance [New Version] 1961.        
2.30 “Exercise Price” - means the exercise price for each Share underlying an
Option, as determined in Section ‎0 מתחת.         2.31 “Representative” – as
defined in Section ‎9.1 מתחת.         2.32 “Restricted Period” – as defined in
Section ‎6.1 מתחת.         2.33 “Section 102” - means Section 102 of the
Ordinance, including any and all rules, regulations, orders and procedures
promulgated thereunder, as now in effect or as hereafter amended.         2.34
“Share” - means the Ordinary Shares of the Company, of nominal value NIS 0.1
each.         2.35 “Successor Company” - means any entity into or with which the
Company is merged or by which, the Company is acquired, pursuant to a
Transaction in which the Company is not the surviving entity.         2.36
“Transaction” – means (i) a merger, acquisition or reorganization of the Company
with one or more other entities in which the Company is not the surviving
entity, or (ii) a sale of all or substantially all of the assets or shares of
the Company.         2.37 “Trustee” - means any individual or entity appointed
by the Company to serve as a trustee and who has been approved by the ITA, all
in accordance with the provisions of Section 102(a) of the Ordinance, including
any and all rules and regulations promulgated thereunder, as now in effect or as
hereafter amended.         2.38 “US$” – means United States of America dollars.

 

4

 

 

  2.39 “Vested Option” – means any Option that has already become vested and
exercisable according to its Vesting Schedule or otherwise (e.g. acceleration
upon certain events).         2.40 “Vesting Schedule” - means, with respect to
any Option, the date(s) as of which the Optionee shall be entitled to exercise
such Option, as set forth Optionee’s individual Grant Letter, and if no such
date(s) are specified in Optionee’s individual Grant Letter, then as set out in
Section ‎10.2 מתחת.         2.41 “Unapproved 102 Option” - means an Option
granted pursuant to Section 102(c) of the Ordinance, including any and all rules
and regulations promulgated thereunder, as now in effect or as hereafter
amended, and not held in trust by a Trustee.

 

3. ADMINISTRATION OF THIS ESOP

 

This Plan shall be administered by the Board. The Board shall have the authority
in its sole discretion, subject and not inconsistent with the express provisions
of this Plan, to administer this Plan and to exercise all the powers and
authorities specifically granted to it under this Plan as necessary and
advisable in the administration of this Plan.

 

Provided that the Board is entitled by the Articles of Association and by law to
delegate all and any of its powers and authority granted to it under this Plan
to a Committee, then such powers and authority may be delegated to the
Committee. The Committee shall have the responsibility of construing and
interpreting this Plan and of establishing and amending such rules and
regulations, as it deems necessary or desirable for the proper administration of
this Plan.

 

  3.1 The Committee shall select one of its members as its Chairperson and shall
hold its meetings at such times and places, as the Chairperson shall determine
or as otherwise convened in accordance with the Articles of Association. The
Committee shall keep records of its meetings and shall make such rules and
regulations for the conduct of its business, as it shall deem advisable.        
3.2 The Committee shall have the power to recommend to the Board, and the Board
shall have the full power and authority to: (i) designate Optionees; (ii)
determine the Date of Grant, terms and provisions of the respective Grant
Letters (which need not be identical), including, but not limited to, the number
of Options to be granted to each Optionee, the number of Shares to be covered by
each Option, provisions concerning the time and extent to which the Options may
be exercised, and the nature and duration of restrictions as to the
transferability, or restrictions constituting substantial risk of forfeiture
upon occurrence of certain events; (iii) designate the type of Options; and (iv)
cancel or suspend Options, as necessary.         3.3 Subject to the provisions
of this Plan, the Articles of Association, the applicable laws and, the specific
duties delegated by the Board to the Committee, and subject to the approval of
any relevant authorities, the Committee shall have the authority, in its sole
discretion:

 

  (i) To construe and interpret the terms of this Plan and any Options granted
pursuant hereto;         (ii) To designate the Employees and Non-Employees to
whom Options may from time to time be granted hereunder;         (iii) To
determine the number of Shares to be covered by each such Option granted
hereunder;         (iv) To prescribe forms of agreements and/or Grant Letters
for use under this ESOP;

 

5

 

 

  (v) To determine the terms of any Option granted hereunder;         (vi) To
determine the Exercise Price of any Option granted hereunder;         (vii) To
prescribe, amend and rescind rules and regulations relating to this Plan,
provided that any such amendment or rescindment that would adversely affect the
rights of an Optionee that has received or been granted an Option shall not be
made without the Optionee’s written consent.         (viii) To take all other
action and make all other determinations necessary for the administration of
this Plan.         (ix) To determine the total number of Shares with in the pool
allocated for the purpose of this Plan from time to time, and or any additional
awards hereafter, subject to this Plan.

 

3.4Subject to the Articles of Association and applicable law, all decisions and
selections made by the Board or the Committee pursuant to the provisions of this
Plan shall be made by a majority of its members. Any decision reduced to writing
shall be executed in accordance with the provisions of the Articles of
Association, as the same may be in effect from time to time.     3.5Any decision
or action taken or to be taken by the Committee, arising out of or in connection
with the construction, administration, interpretation and effect of this Plan
and of its rules and regulations, shall, to the maximum extent permitted by
applicable law, be within its absolute discretion (except as otherwise
specifically provided herein) and shall be conclusive and binding upon all
Optionees and any person claiming under or through any Optionee.     3.6The
liability of any member of the Board or the Committee, with respect to this Plan
or any Option granted hereunder, shall be in accordance with the Articles of
Association and applicable law.     3.7Any member of the Committee shall be
eligible to receive Options under this Plan while serving on the Committee,
unless otherwise specified herein. No person shall be eligible to be a member of
the Committee if that person’s membership would prevent this Plan from complying
with exemptions provided under applicable laws.

 

4. DESIGNATION OF OPTIONEES

 

  4.1 The persons eligible for participation in this Plan as Optionees shall
include any Employees and/or Non-Employees of the Company or of any Affiliate
thereof; provided, however, that (i) Employees may only be granted 102 Options;
and (ii) Non-Employees may only be granted 3(i) Options.         4.2 Each Option
granted pursuant to this Plan shall be evidenced by a Grant Letter,
substantially in such form attached hereto as Exhibits A and B. Each Grant
Letter shall state, among other matters, the number of Shares to which the
Option relates, the type of Option granted thereunder (whether an CGTO, OITO,
Unapproved 102 Option or a 3(i) Option), the Vesting Schedule, the Exercise
Price per share, the Expiration Date and such other terms and conditions
included in the Grant Letter, including any such other terms that the Committee
or the Board in their discretion may prescribe, provided in all cases that they
are consistent with this Plan. The Grant Letter shall be delivered to the
Optionee and executed by the Optionee and shall incorporate the terms of this
Plan by reference and specify the terms and conditions thereof and any rules
applicable thereto.

 

6

 

 

  4.3 Neither this Plan nor any Grant Letter nor any offer of Options to an
Optionee shall impose any obligation on the Company to continue to employ or to
engage the services of any Optionee, and nothing in this Plan or in any Option
granted pursuant thereto shall give any Optionee any right to continued
employment, service with or engagement by the Company or restrict the right of
the Company to terminate such employment, services or engagement at any time.
Further, the Company and each Affiliate expressly reserves the right at any time
to dismiss an Optionee free from any liability, or any claim under thisPlan,
except as provided herein or in any agreement entered into with respect to an
Option.         4.4 The grant of an Option hereunder shall neither entitle the
Optionee to participate nor disqualify the Optionee from participating in, any
other grant of Options pursuant to this Plan or any other option or share plan
of the Company or any of its Affiliates.         4.5 Notwithstanding anything in
the Plan to the contrary, all grants of Options to directors and office holders
shall be authorized and implemented in accordance with the provisions of the
Companies Law.

 

5. DESIGNATION OF OPTIONS PURSUANT TO SECTION 102

 

  5.1 The Company may designate Options granted to Employees pursuant to Section
102 as Unapproved 102 Options or Approved 102 Options.         5.2 The grant of
Approved 102 Options under this ESOP shall be made in accordance with the
provisions herein, including the provisions of Section ‎6 below, and shall be
conditioned upon the approval of this Plan by the ITA.         5.3 An Approved
102 Option may either be classified as either a Capital Gains Track Option
(CGTO) or an Ordinary Income Track Option (OITO).         5.4 An Approved 102
Option elected and designated by the Company to qualify under the capital gain
tax treatment in accordance with the provisions of Section 102(b)(2) shall be
referred to herein as “CGTO”.         5.5 An Approved 102 Option elected and
designated by the Company to qualify under the ordinary income tax treatment in
accordance with the provisions of Section 102(b)(1) shall be referred to herein
as “OITO”.         5.6 The Company’s election of the type of Approved 102
Options as CGTO or OITO granted to Employees (the “Election”) shall be
appropriately filed with the ITA before the first Date of Grant of an Approved
102 Option under such Election. Such Election shall become effective beginning
the first Date of Grant of an Approved 102 Option under such Election and shall
remain in effect until changed, but in any case not earlier than the end of the
year following the year during which the Company first granted Approved 102
Options under such Election. The Election shall obligate the Company to grant
only the type of Approved 102 Option it has elected, and shall apply to all
Optionees who were granted Approved 102 Options during the period indicated
herein, all in accordance with the provisions of Section 102(g) of the
Ordinance, including any and all rules and regulations promulgated thereunder,
as now in effect or as hereafter amended. For avoidance of doubt, such Election
shall not prevent the Company from granting Unapproved 102 Options
simultaneously.         5.7 Designation of Approved 102 Options – if an Optionee
exercises and sells his Shares within the Restricted Period, the Company shall
not bear any tax liability arising due to the exercise and or sale of such
Shares resulting from Optionee’s termination of employment, except for the tax
liability mentioned in Section ‎21 מתחת.         5.8 All Approved 102 Options
must be held in trust by the Trustee, as described in Section ‎6 מתחת.        
5.9 For avoidance of doubt, the designation of Unapproved 102 Options and
Approved 102 Options shall be subject to the terms and conditions set forth in
Section 102.

 

7

 

 

6. TRUSTEE

 

  6.1 Approved 102 Options which shall be granted under this Plan and/or any
Shares allocated or issued upon exercise of such Approved 102 Options and/or
other shares received subsequently following any realization of rights,
including, without limitation, bonus shares, shall be allocated or issued to the
Trustee (and registered in the Trustee’s name in the Company’s shareholders
register) and held by the Trustee for the benefit of the Optionees to whom such
Approved 102 Options were granted for such period of time as required by Section
102 (the “Restricted Period”). All certificates representing Shares issued to
the Trustee under this ESOP shall be deposited with the Trustee, and shall be
held by the Trustee until such time that such Shares are released from the
aforesaid trust as herein provided. If the requirements for Approved 102 Options
are not met, the Approved 102 Options may be treated as Unapproved 102 Options,
all in accordance with the provisions of Section 102.         6.2
Notwithstanding anything to the contrary herein, the Trustee shall not release
any Shares allocated or issued upon exercise of Approved 102 Options prior to
the full payment of the Optionee’s tax liabilities arising from Approved 102
Options, which were granted to such Optionee and/or any Shares allocated or
issued upon exercise of such Options.         6.3 With respect to any Approved
102 Option, subject to the provisions of Section 102, an Optionee shall not sell
or release from trust any Share received upon the exercise of an Approved 102
Option and/or any share received subsequently following any realization of
rights, including without limitation, bonus shares, until the lapse of the
Restricted Period required under Section 102. Notwithstanding the above, if any
such sale or release occurs during the Restricted Period, the sanctions under
Section 102 shall apply to and shall be borne by such Optionee.         6.4 Upon
receipt of Approved 102 Option, the Optionee will sign an undertaking to release
the Trustee from any liability in respect of any action or decision duly taken
and bona fide executed in relation with this Plan, or any Approved 102 Option or
Share granted to him hereunder. Such release may be incorporated into the Grant
Letter.         6.5 3(i) Options which shall be granted under the Plan, may, but
need not, be issued to the Trustee, and if so issued to the Trustee, shall be
held for the benefit of the Optionee. The Trustee shall hold such Options and
the shares issued upon the exercise thereof (in the event of an exercise of such
Options) pursuant and subject to Section 3(i) of the Ordinance, including any
and all rules, regulations, orders and procedures promulgated thereunder, as now
in effect or as hereafter amended. Anything to the contrary notwithstanding, the
Trustee shall not release any 3(i) Options held by it and which were not already
exercised into shares of the Company by the Optionee, nor shall the Trustee
release any shares issued upon the exercise of 3(i) Options – in both cases -
prior to the full payment of the relevant Optionee’s tax liabilities arising
from those 3(i) Options which were granted to him and any shares issued upon the
exercise of such 3(i) Options.

 

7. SHARES RESERVED FOR THE PLAN; RESTRICTIONS THEREON

 

  7.1 The Company shall from time to time reserve, out of its authorized but
un-issued share capital, such number of Shares as the Board deems appropriate
(subject to the Articles of Association) for the purposes of this Plan and/or
for the purposes of any other share option plans which have previously been, or
may in the future be, adopted by the Company, subject to adjustment as set forth
in Section ‎11 below. Any Shares which remain un-issued and which are not
subject to then outstanding Options at the termination or expiration of this
Plan shall cease to be reserved for the purpose of this Plan, but may continue
to be reserved for other share option plans then in effect, and in any event,
until termination of this Plan the Company shall at all times reserve sufficient
number of Shares to meet the requirements of any then outstanding Options.
Should any Option for any reason expire or be canceled prior to its exercise or
relinquishment in full, the Shares subject to such Option may again be subjected
to a new Option under this Plan or under the Company’s other share option plans,
provided, however, that Shares that have actually been issued under this Plan
shall not be returned to the pool under this Plan and shall not become available
for future distribution under this Plan.

 

8

 

 

8. EXERCISE PRICE

 

  8.1 The Exercise Price of each Share subject to an Option shall be as
determined by the Committee in its sole and absolute discretion in accordance
with applicable law, subject to any guidelines as may be determined by the Board
from time to time. Each Grant Letter will contain the Exercise Price determined
for each Option covered thereby (but in any event, not less than the nominal
value of the Share issuable upon exercise thereof). In no event shall the
Exercise Price of an Option be less than the par value of the shares for which
such Option is exercisable. The Exercise Price shall also be subject to
adjustment as provided in Section ‎11.5 hereof.         8.2 The total
consideration to be paid for the Shares to be issued upon exercise of an Option,
including the method of payment, shall be determined by the Administrator and
may consist entirely of (1) cash, (2) check, or (3) any combination of the
foregoing methods of payment. In making its determination as to the type of
consideration to accept, the Administrator shall consider if acceptance of such
consideration may be reasonably expected to benefit the Company. The Committee
shall have the authority to postpone the date of payment on such terms as it may
determine.         8.3 The Exercise Price shall be denominated in NIS or US$ or
otherwise as determined by the Committee.         8.4 The proceeds received by
the Company from the issuance of Shares subject to the Options will be added to
the general funds of the Company and used for its corporate purposes.

 

9. TERM AND EXERCISE OF OPTIONS

 

  9.1 Options shall be exercised by the Optionee by giving written notice to the
Company and/or to any third party designated by the Company (the
“Representative”), in such form and method as may be determined by the Committee
and when applicable, by the Trustee in accordance with the requirements of
Section 102, which exercise shall be effective upon receipt of such notice by
the Company and/or the Representative and the payment of the Exercise Price at
the Company’s or the Representative’s principal office. The notice shall specify
the number of Shares with respect to which the Option is being exercised.      
  9.2 Options, to the extent not previously exercised, shall terminate forthwith
upon the earlier of: (i) the date set forth in the Grant Letter (and unless
otherwise determined in accordance with the provisions of this Plan with respect
to any Option(s), such date shall be ten (10) years from the respective Date of
Grant); or (ii) the expiration of any extended period in any of the events set
forth in Section ‎9.5 מתחת (the “Expiration Date”).         9.3 The Options may
be exercised by the Optionee in whole at any time or in part from time to time,
to the extent that the Options become vested and exercisable, prior to the
Expiration Date, and provided that, subject to the provisions of Section ‎9.5
מתחת, the Optionee who is an Employee is employed by or providing services to
the Company or any of its Affiliates, at all times during the period beginning
with the granting of the Option and ending upon the date of exercise. An
Optionee who is a Non-Employee may exercise the Options in whole at any time or
in part from time to time, to the extent that the Options have become vested and
exercisable, prior to the Expiration Date.

 

9

 

 

  9.4 Subject to the provisions of Section ‎9.5 מתחת, in the event of
termination of Optionee’s employment or services, with the Company or any of its
Affiliates, all Options granted to such Optionee that are at the time of
termination non-vested will immediately expire. A notice of termination of
employment or service shall be deemed to constitute termination of employment or
service. For the avoidance of doubt, in case of such termination of employment
or service, the unvested portion of the Optionee’s Option shall not vest and
shall not become exercisable and any unvested portion of the Optionee’s Option
shall revert to the pool of Shares under this Plan or that of other share option
plans then in effect.         9.5 Notwithstanding anything to the contrary
herein and unless otherwise determined in the Optionee’s Grant Letter, an Option
may be exercised after the date of termination of Optionee’s employment or
service with the Company or any Affiliates during an additional period of time
beyond the date of such termination, but only with respect to the number of
Vested Options at the time of such termination according to the Vesting
Schedule, as follows:

 

  (i) If termination is without Cause, then any Vested Option still in force and
un-expired may be exercised within a period of three (3) months after the date
of such termination, provided however, that no Option shall be exercisable prior
to the lapse of the first anniversary following the Date of Grant;         (ii)
If termination is the result of death, or Disability (defined below) of the
Optionee, then any Vested Option still in force and un-expired may be exercised
within a period of twelve (12) months after the date of such termination;      
  (iii) With respect to (i) and (ii) above, prior to the expiration of the
periods set out therein (i.e., the 3-month period in (i) above, and the 12-month
period in (ii) above), the Committee may authorize an extension of the terms of
exercise post-termination of all or part of the Vested Options beyond the date
of such termination for a period not to exceed the period during which the
Options by their terms would otherwise have been exercisable.         (iv) For
avoidance of any doubt, notwithstanding anything herein to the contrary, if
termination of employment or service is for Cause any outstanding unexercised
Option (whether vested or non-vested), will immediately expire and terminate,
and the Optionee shall not have any right in connection to such outstanding
Options.         (v) As used herein: the term “Disability” shall have the
meaning ascribed thereto in the individual employment or engagement agreement
between the Optionee and the Company or any of its Affiliates, as applicable and
if no such definition exists, then “Disability” shall mean Optionee’s inability
to perform his/her duties to the Company or to any of its Affiliates, for a
consecutive period of at least 180 days, by reason of any medically determinable
physical or mental impairment as determined by a medical doctor satisfactory to
the Committee.

 

  9.6 To avoid doubt, the Optionees shall not be deemed owners of the Shares
issuable upon the exercise of Options and shall not have any of the rights or
privileges of shareholders of the Company in respect of any Shares purchasable
upon the exercise of any Option, nor shall they be deemed to be a class of
shareholders of the Company for any purpose, including but not limited for the
purpose of the operation of Sections 350 and 351 of the Companies Law or any
successor to such section, until registration of the Optionee as holder of such
Shares in the Company’s register of shareholders upon exercise of the Option in
accordance with the provisions of this Plan, but in case of Options and Shares
held by the Trustee, subject to the provisions of Section ‎6 מעל.
Notwithstanding anything herein to the contrary, in no event shall the Optionees
be deemed a class of creditors of the Company for any purpose whatsoever,
including but not limited to for the purpose of the operation of Sections 350
and 351 of the Companies Law or any successor to such section.

 

10

 

 

  9.7 The form of Grant Letter customarily used by the Company in connection
with the grant of Options, provided it is consistent with the provisions of this
Plan, may contain such other provisions, as the Committee or the Board may, from
time to time, deem advisable.         9.8 The inability of the Company to obtain
authority from any regulatory body having jurisdiction, which authority is
deemed by the Company’s counsel to be necessary for the lawful issuance and sale
of any Shares hereunder, shall relieve the Company of any liability in respect
of the failure to issue or sell such Shares as to which such requisite authority
shall not have been obtained.         9.9 With respect to Unapproved 102
Options, if the Optionee ceases to be employed the Company or any Affiliate, the
Optionee shall extend to the Company and/or its Affiliate a security or
guarantee for the payment of tax due at the time of sale of Shares, all in
accordance with the provisions of Section 102. In respect of any employer’s tax
liability for the purpose of employment taxes such as in the case of social
taxes, see Section ‎21 מתחת.         9.10 Shares shall not be issued pursuant to
the exercise of an Option unless the exercise of such Option, the method of
payment and the issuance and delivery of such Shares shall comply with
applicable laws.         9.11 Upon their issuance, the Shares shall carry equal
voting rights on all matters where such vote is permitted by applicable laws of
the jurisdiction of incorporation of the Company.         9.12 It is hereby
clarified that the Company shall have no liability to an Optionee, or to any
other party, if an Option (or any part thereof), which is intended to be a 102
Option, does not eventually qualify as a 102 Option.         9.13 Voting Proxy.
The right to vote any Shares acquired under this Plan pursuant to a Grant Letter
shall, unless otherwise determined by the Committee, be given by the Optionee,
pursuant to an irrevocable proxy (in a form approved by the Board or the
Committee), to the Chairman of the Board of the Company or to any other person
or persons designated by such. Such a proxy shall include a provision according
to which such Shares shall be voted in the same proportion as the result of the
shareholder vote at the shareholders meeting or written consent in respect of
which such Shares will be voted. Unless otherwise determined by the Committee,
all Options granted hereunder shall be conditioned upon the execution of such
irrevocable proxy. So long as any such Shares are held by a Trustee, such Shares
shall be voted by the Trustee (or a proxy thereof designated by the Board or the
Committee), and such Shares shall be voted in the same proportion as the result
of the shareholder vote at the shareholders meeting or written consent in
respect of which the Shares held by the Trustee are being voted.

 

11

 

 

10. VESTING OF OPTIONS

 

  10.1 Subject to the provisions of this Plan, each Option shall vest and become
exercisable commencing on the Vesting Date thereof, as determined by the Board
or by the Committee, for the number of Shares as shall be provided in the Grant
Letter. However, no Option shall be exercisable prior to the lapse of the first
anniversary following the Date of Grant and after the Expiration Date.        
10.2 Unless otherwise determined by the Administrator, all Options granted
pursuant to this Plan, shall, subject to the Optionee’s continued employment
with or service to the Company or its Affiliate, become vested over a two (2)
year period from its Date of Grant, as follows:

 

  10.2.1 Thirty three percent (33%) of the Options shall vest on the Date of
Grant;         10.2.2 Eight and a quarter percent (8.25%) of the Options shall
vest on a quarterly basis from the Date of Grant and until the end of the first
anniversary of the Date of Grant; and         10.2.3 Eight and a half percent
(8.5%) of the Options shall vest on a quarterly basis from the first anniversary
of the Date of Grant and until the end of the second anniversary from the Date
of Grant.         10.2.4  

 

  10.3 An Option may be subject to such other terms and conditions on the time
or times when it may be exercised, as the Committee may deem appropriate. The
vesting provisions of individual Options may vary.         10.4 To remove any
doubt, no Option shall be exercisable prior to the lapse of the first
anniversary following the Date of Grant.

 

11. ADJUSTMENTS

 

  11.1 Changes in Capitalization. Subject to any required action by the
shareholders of the Company, the number of Shares covered by each outstanding
Option, the number of Shares which have been reserved for issuance under this
Plan and/or any other share option plan adopted by the Company, but as to which
no Options have yet been granted or which have been returned to this Plan or
such other share option plans upon cancellation or expiration of an Option, as
well as the Exercise Price per share of Shares covered by each such outstanding
Option, shall be proportionately adjusted for any increase or decrease resulting
from a share split, bonus shares (share dividend), combination or
reclassification of the Shares, or any other increase or decrease in the number
of issued Shares effected without receipt of consideration by the Company. The
adjustments described herein shall be made by the Administrator, whose
determination in that respect shall be final, binding and conclusive. Except as
expressly provided herein, no issuance by the Company of shares of any class, or
securities convertible into shares of any class, shall affect, and no adjustment
by reason thereof shall be made with respect to the number or the price of
Shares subject to an Option. If the Options or the Shares issued upon the
exercise of such Options will be deposited with a Trustee, as determined by the
Administrator, all of the Shares formed by these adjustments also will be
deposited with the Trustee on the same terms and conditions as the original
Options or Shares.

 

12

 

 

  11.2 Dissolution or Liquidation. In the event of any dissolution or
liquidation of the Company, whether voluntary or involuntary (the “Event”), the
Administrator shall notify each Optionee as soon as practicable prior to the
effective date of such Event. The Option holders shall then have fifteen (15)
days to exercise any unexercised Vested Options held by them at that time, in
accordance with the exercise procedure set forth herein. Upon the expiration of
such 15-day period, all remaining unexercised Options and any non-Vested Options
will terminate immediately. The Administrator in its sole discretion may allow
the exercise of any or all-outstanding Options, whether or not such Options are
Vested Options, during a longer period following such notification and prior to
the Event, all subject to the provisions of applicable laws. To the extent it
has not been previously exercised, an Option and all Optionee’s rights thereto
will terminate immediately prior to the Event.         11.3 Transaction.

 

  (a) In the event of a Transaction, and to the extent possible by the terms of
the Transaction, each outstanding Option shall be assumed for an equivalent
option or right substituted by the successor corporation or a parent or
subsidiary of the successor corporation, and appropriate adjustments shall be
made in the number of options in order to reflect such an action and to keep the
Optionee harmless due to the Transaction.         (b) In the event that as part
of the Transaction the successor corporation refuses to assume or substitute
outstanding Options, the vesting periods defined in the Grant Letters shall be
accelerated so that any unvested Option or any portion thereof shall be
immediately vested as of the date which is ten (10) days prior to the effective
date of the Transaction, in which event the Company shall notify the Optionee
that the Options are fully exercisable for a period of ten (10) days from the
date of such notice, and the Options shall terminate upon the expiration of such
period. [Odelia: Need to check if this does not cause a taxable event to the
Optionee Subject to the following paragraph of this Section ‎11.3‎(b), any
Vested Options shall be fully exercisable for such period as determined by the
Board, where any un-Vested or Vested but un-exercised Options shall terminate
upon the expiration of such period.           In any event, any Vested Option
not exercised by the date determined above (the “Cut-Off Date”), and any
un-Vested Options on such Cut-Off Date, shall immediately terminate and no
longer be exercisable by the Optionee as of the Cut-Off Date.         (c)
Without derogating from the provisions of paragraph ‎(b) מעל, if as a condition
precedent to a Transaction, all Optionees are required to sell or exchange their
Vested Options and/or any Shares issued upon exercise thereof as part of the
Transaction, then each Optionee shall be obligated to sell or exchange, as the
case may be, any Vested Options and/or Shares such Optionee holds or purchased
under this Plan, in accordance with the instructions of the Board, at its sole
and absolute discretion, in connection with the Transaction, and on the same
terms as shall be determined to all the holders of Ordinary Shares in the
Company. For avoidance of doubt, on the Cut-Off Date, any Vested Options not
sold or exchanged and any non-Vested Options shall terminate and expire as of
the Cut-Off Date.         (d) For the purposes of this paragraph, the Option
shall be considered assumed if, following a Transaction, the Optionee receives
the right to purchase or receive, for each Share subject to the Option
immediately prior to the Transaction, the consideration (whether in shares,
stocks, cash, other securities or property or any other manner as the
Administrator shall determine, which may include procedures for Cashless
Exercise) received in the Transaction by holders of Shares for each Share held
on the effective date of the Transaction (and if holders were offered a choice
of consideration, the type of consideration chosen by the holders of a majority
of the outstanding Shares); provided, however, that if such consideration
received in the Transaction is not solely shares of the successor corporation or
its parent or subsidiary, the Administrator may, with the consent of the
successor corporation, provide for each Optionee to receive solely Shares of the
successor company or its parent or subsidiary equal to the per share
consideration received by holders of Shares in the Transaction.

 

13

 

 

  11.4 No changes will be made to the terms of the Options upon the consummation
of a Transaction, except as the Board determines to be necessary or desired to
effect such Transaction.         11.5 Stock Dividend, Bonus Shares, Stock Split.

 

  (a) If the outstanding shares of the Company shall at any time be changed or
exchanged by declaration of a share dividend (bonus shares), share split,
combination or exchange of shares, recapitalization, or any other like event by
or of the Company, and as often as the same shall occur, then the number, class
and kind of the Shares subject to this Plan or subject to any Options therefor
granted, and the Exercise Prices, shall be appropriately and equitably adjusted
so as to maintain the proportionate number of Shares without changing the
aggregate Exercise Price, provided, however, that the Exercise Price shall not
be less than the nominal value of the Share underlying any such Options, and
provided further, that no adjustment shall be made by reason of the distribution
of subscription rights (rights offering) on outstanding shares. Upon the
occurrence of any of the foregoing, the class and aggregate number of Shares
issuable pursuant to this Plan (as set forth in Section 7 hereof), in respect of
which Options have not yet been exercised, shall be appropriately adjusted, all
as will be determined by the Board whose determination shall be final.        
(b) Except as expressly provided herein, no issuance by the Company of shares of
any class, or securities convertible into shares of any class, shall affect, and
no adjustment by reason thereof shall be made with respect to, the number or
price of Shares subject to an Option.

 

12. PURCHASE FOR INVESTMENT; REPRESENTATIONS

 

  12.1 The Company’s obligation to issue or allocate Shares upon exercise of an
Option granted under this Plan is expressly conditioned upon: (a) the Company’s
completion of any registration or other qualifications of such Shares under all
applicable laws, rules and regulations or (b) representations and undertakings
by the Optionee (or his legal representative, heir or legatee, in the event of
the Optionee’s death) to assure that the sale of the Shares complies with any
registration exemption requirements which the Company in its sole discretion
shall deem necessary or advisable. Such required representations and
undertakings may include representations and agreements that such Optionee (or
his legal representative, heir, or legatee): (a) is purchasing such Shares for
investment and not with any present intention of selling or otherwise disposing
thereof; and (b) agrees to have placed upon the face and reverse of any
certificates evidencing such Shares a legend setting forth (i) any
representations and undertakings which such Optionee has given to the Company or
a reference thereto; and (ii) that, prior to effecting any sale or other
disposition of any such Shares, the Optionee must furnish to the Company an
opinion of counsel, satisfactory to the Company, that such sale or disposition
will not violate the applicable laws, rules, and regulations, whether of the
State of Israel or of any other State having jurisdiction over the Company and
the Optionee.         12.2 The Optionee acknowledges that in the event that the
Company’s shares shall be registered for trading in any public market,
Optionee’s rights to sell the Shares may be subject to certain limitations
(including a lock-up period), as will be requested by the Company or its
underwriters, and the Optionee unconditionally agrees and accepts any such
limitations.

 

14

 

 

  12.3 If any Shares shall be registered under the United States Securities Act
of 1933, no public offering otherwise than a national securities exchange (as
defined in the United States Securities Exchange Act of 1934, as amended) of any
Shares shall be made by the Optionee (or any other person) under such
circumstances that he or she (or such other person) may be deemed an
underwriter, as defined in the United States Securities Act of 1933.        
12.4 Upon the grant of Options to an Optionee or the issuance of Shares upon the
exercise thereof, the Company shall obtain from the Optionee the representations
and undertakings as follows, and any other representations and warranties that
the Committee may deem advisable, and the giving of such representations and
warranties by the Optionee shall be a condition precedent to Optionee’s right to
receive the Option and/or be issued the Shares upon exercise thereof:

 

  (a) That the Optionee knows that there is no certainty that the exercise of
the Options will be financially worthwhile. The Optionee thereby undertakes not
to have any claim against the Company or any of its directors, employees,
stockholders or advisors if it emerges, at the time of exercising the Options,
that the Optionee’s investment in the Company’s Shares was not worthwhile, for
any reason whatsoever.         (b) That the Optionee knows and understands that
his rights regarding the Options and the Shares are subject for all intents and
purposes to the instructions of the Company’s documents of incorporation and to
the agreements of the shareholders in the Company.         (c) That the Optionee
knows that in addition to the allocations set forth above, the Company has
allocated and/or is entitled to allocate Options and Shares to other employees
and other people, and the Optionee shall have no claim regarding such
allocations, their quantity, the relationship among them and between them and
the other shareholders in the Company, exercising of the options or any matter
related to or stemming from them.         (d) That the Optionee knows that
neither this Plan nor the grant of Option or Shares thereunder shall impose any
obligation on OWC to continue the engagement of the Optionee, and nothing in
this Plan or in any Option or Shares granted pursuant thereto shall confer upon
any Optionee any right to continue being engaged by the Company, or restrict the
right of the Company to terminate such engagement at any time.

 

13. DIVIDENDS

 

With respect to all Shares (but excluding, for avoidance of any doubt, any
unexercised Options) allocated or issued upon the exercise of Options purchased
by the Optionee and held by the Optionee or by the Trustee, as the case may be,
the Optionee shall be entitled to receive dividends in accordance with the
quantity of such Shares, subject to the provisions of the Articles of
Association and subject to any applicable taxation on distribution of dividends,
and, when applicable, subject to the provisions of Section 102.

 

14. RESTRICTIONS ON ASSIGNABILITY AND SALE OF OPTIONS

 

  14.1 No Option or any right with respect thereto, purchasable hereunder,
whether fully paid or not, shall be assignable, transferable or given as
collateral or any right with respect to it given to any third party whatsoever,
except as specifically allowed under this Plan, and during the lifetime of the
Optionee each and all of such Optionee’s rights to purchase Shares hereunder
shall be exercisable only by the Optionee.           Any such action made
directly or indirectly, for an immediate validation or for a future one, shall
be void.         14.2 So long as Options and/or Shares are held by the Trustee
on behalf of the Optionee, all rights of the Optionee over the Shares are
personal, can not be transferred, assigned, pledged or mortgaged, other than by
will or pursuant to the laws of descent and distribution.

 

15

 

 

15. EFFECTIVE DATE AND DURATION OF THE PLAN

 

This Plan shall be effective as of the day it was adopted by the Board and shall
terminate at the end of ten (10) years from such day of adoption, unless
terminated earlier in accordance with Section ‎0 מתחת.

 

16. AMENDMENTS OR TERMINATION

 

The Board may at any time, but when applicable, after consultation with the
Trustee, amend, alter, suspend or terminate this Plan. No amendment, alteration,
suspension or termination of this Plan shall impair the rights of any Optionee,
unless mutually agreed otherwise between the Optionee and the Company, which
agreement must be in writing and signed by the Optionee and the Company.
Termination of this Plan shall not affect the Committee’s ability to exercise
the powers granted to it hereunder with respect to Options granted under this
Plan prior to the date of such termination.

 

17. GOVERNMENT REGULATIONS

 

This Plan, and the grant and exercise of Options hereunder, and the obligation
of the Company to sell and deliver Shares under such Options, shall be subject
to all applicable laws, rules, and regulations, whether of the State of Israel
any other State having jurisdiction over the Company and the Optionee,
including, without limitation, the United States Securities Act of 1933, the
Companies Law, the Securities Law, 1968, and the Ordinance (including any and
all rules and regulations promulgated thereunder, as now in effect or as
hereafter amended), and to such approvals by any governmental agencies or
national securities exchanges as may be required. Nothing herein shall be deemed
to require the Company to register the Shares under the securities laws of any
jurisdiction.

 

18. CONTINUANCE OF EMPLOYMENT OR HIRED SERVICES

 

Neither this Plan nor the Grant Letter with the Optionee shall impose any
obligation on the Company or an Affiliate thereof, to continue any Optionee in
its employ or service, and nothing in this Plan or in any Option granted
pursuant thereto shall confer upon any Optionee any right to continue in the
employ or service of the Company or an Affiliate thereof or restrict the right
of the Company or an Affiliate thereof to terminate such employment or service
at any time.

 

19. GOVERNING LAW & JURISDICTION

 

This Plan shall be governed by and construed and enforced in accordance with the
laws of the State of Israel applicable to contracts made and to be performed
therein, without giving effect to the principles of conflict of laws. The
competent courts of Tel Aviv district, Israel shall have sole and exclusive
jurisdiction in any matters pertaining to this Plan and any Grant Letters
effected hereunder.

 

20. INTEGRATION OF SECTION 102 AND TAX COMMISSIONER’S PERMIT

 

  20.1 With regards to Approved 102 Options, the provisions of this Plan and the
Grant Letter shall be subject to the provisions of Section 102 and the ITA
Commissioner’s permit, and the said provisions and permit shall be deemed an
integral part of this Plan and of the individual Grant Letters with each
Optionee.         20.2 Any provision of Section 102 and/or the said permit which
is necessary in order to receive and/or to keep any tax benefit pursuant to
Section 102, which is not expressly specified in this Plan or the individual
Grant Letter of the Optionees, shall be considered binding upon the Company and
the Optionees.

 

16

 

 

21. TAX CONSEQUENCES

 

  21.1 Any tax consequences arising from the grant or exercise of any Option,
from the payment for Shares covered thereby or from any other event or act (of
the Company and/or its Affiliates, the Trustee or the Optionee), hereunder,
shall be borne solely by the Optionee. The Company and/or its Affiliates and/or
the Trustee shall withhold taxes according to the requirements of any applicable
laws, rules, and regulations, including withholding taxes at source.
Furthermore, the Optionee shall agree to indemnify the Company and/or its
Affiliates and/or the Trustee and hold them harmless against and from any and
all liability for any such tax or interest or penalty thereon, including without
limitation, liabilities relating to the necessity to withhold, or to have
withheld, any such tax from any payment made to the Optionee.         21.2 The
Company and, when applicable, the Trustee shall not be required to release any
Share or share certificate representing such Shares to an Optionee until all
required payments have been fully made.         21.3 To the extent provided by
the terms of any Grant Letter, the Optionee may satisfy any tax withholding
obligation relating to the exercise or acquisition of Shares under an Option by
any of the following means (in addition to the Company’s right to withhold from
any compensation paid to the Optionee by the Company) or by a combination of
such means: (i) tendering a cash payment; (ii) subject to the Committee’s
approval on or prior to the payment date, authorizing the Company to withhold
Shares from the Shares otherwise issuable to the Optionee as a result of the
exercise or acquisition of Shares under the Option in an amount not to exceed
the minimum amount of tax required to be withheld by law; or (iii) subject to
Committee approval on or prior to the payment date, delivering to the Company
owned and unencumbered Shares; provided that Shares acquired on exercise of
Options have been held for at least 6 months from the date of exercise.        
21.4 The Company shall have the right to deduct from all amounts paid to an
Optionee in cash (whether under this Plan or otherwise) any taxes required by
law to be withheld in respect of Options under this Plan. In the case of any
Option satisfied by the issuance of Shares, no Shares shall be issued unless and
until arrangements satisfactory to the Committee shall have been made to satisfy
any withholding tax obligations applicable with respect to such Option. Without
limiting the generality of the foregoing and subject to such terms and
conditions as the Committee may impose, the Company shall have the right to
retain, or the Committee may, subject to such terms and conditions as it may
establish from time to time, permit Optionees to elect to tender, Shares to
satisfy, in whole or in part, the amount required to be withheld.         21.5
In respect of any employer’s tax liability arising only for the purpose of
employment taxes such as in the case of social taxes resulting from a breach of
Section 102, the Company shall not bear any tax due at the time of sale of
Shares, all in accordance with the provisions of Section 102.         21.6
Notwithstanding anything herein to the contrary of Section ‎21.5 above, only in
the event of termination of employment by the Company, other than termination
for Cause, Company should bear the tax liability arising only for the purpose of
employment taxes such as in the case of social taxes.         21.7 For avoidance
of any doubt, notwithstanding anything herein to the contrary, if termination of
employment or service is for Cause, the Company shall not bear any tax liability
derived due to the exercise and or sale of the Options as a result of Optionee’s
termination.

 

17

 

 

22. NON-EXCLUSIVITY OF THIS ESOP

 

The adoption of this Plan by the Board shall not be construed as amending,
modifying or rescinding any previously approved incentive arrangements or as
creating any limitations on the power of the Board to adopt such other incentive
arrangements as it may deem desirable, including, without limitation, the
granting of options to purchase shares of the Company otherwise than under this
Plan, and such arrangements may be either applicable generally or only in
specific cases.

 

For the avoidance of doubt, prior grant of options to Employees and/or
Non-Employees of the Company under their employment agreements or other
engagement agreements, and not in the framework of any previous option plan,
shall not be deemed an approved incentive arrangement for the purpose of this
Section ‎22.

 

23. MULTIPLE AGREEMENTS

 

The terms of each Option may differ from the terms of other Options granted
under this Plan at the same time, or at any other time. The Board may also grant
more than one Option to a given Optionee during the term of this Plan, either in
addition to, or in substitution for, one or more Options previously granted to
that Optionee.

 

24. DISPUTES

 

Any dispute or disagreement which may arise under or as a result of or pursuant
to this Plan or the individual Grant Letters shall be determined by the Board in
its sole discretion and any interpretation made by the Board of the terms of
this Plan or the individual Grant Letters shall be final, binding and
conclusive.

 

This ESOP was adopted by the Board on May 29, 2016.

 

/s/ Mordechai Bignitz, CEO

OWC Pharmaceutical Research Corp.

 

18

 

 

Exhibit A

 

Form of 102 Options Grant Letter

 

19

 

 

Exhibit B

 

Form of 3(i) Options Grant Letter

 

20