Exhibit 10.1


 


[    ], 2021


 


ION Acquisition Corp 3 Ltd.


89 Medinat Hayehudim Street


Herzliya 4676672,
Israel


 


		Re:	Initial Public Offering



 


Ladies and Gentlemen:


 


This letter (this “Letter Agreement”)
is being delivered to you in accordance with the Underwriting Agreement (the “Underwriting Agreement”) entered
into by and among ION Acquisition Corp 3 Ltd., a Cayman Islands exempted company (the “Company”), and Morgan
Stanley & Co. LLC and Goldman Sachs & Co. LLC, as the representatives (the “Representatives”) of the
several underwriters named therein (the “Underwriters”), relating to an underwritten initial public offering
(the “Public Offering”), of up to 28,750,000 of the Company’s units (including up to 3,750,000 units that
may be purchased to cover over-allotments, if any) (the “Units”), each comprised of one of the Company’s
Class A ordinary shares, par value $0.0001 per share (the “Class A Ordinary Shares”), and one-eighth of
one redeemable warrant. Each whole warrant (each, a “Warrant”) entitles the holder thereof to purchase one Class
A Ordinary Share at a price of $11.50 per share, subject to adjustment as described in the Prospectus (as defined below). The Units will
be sold in the Public Offering pursuant to a registration statement on Form S-1 and prospectus (the “Prospectus”)
filed by the Company with the U.S. Securities and Exchange Commission (the “Commission”) and the Company has
applied to have the Units listed on the New York Stock Exchange. Certain capitalized terms used herein are defined in paragraph 11 hereof.


 


In order to induce the Company and the Underwriters
to enter into the Underwriting Agreement and to proceed with the Public Offering and for other good and valuable consideration, the receipt
and sufficiency of which are hereby acknowledged, each of ION Holdings 3, LP (the “Sponsor”), acting by its
sole general partner, ION Acquisition Corp GP Ltd., a company incorporated in the State of Israel, and the undersigned individuals, each
of whom is a member of the Company’s board of directors and/or management team (each of the undersigned individuals, an “Insider”
and collectively, the “Insiders”), hereby agrees with the Company as follows:


 


		1.	The Sponsor and each Insider agrees that if the Company seeks
shareholder approval of a proposed Business Combination, then in connection with such proposed Business Combination, it, he or she shall
(i) vote any Ordinary Shares (as defined below) owned by it, him or her in favor of any proposed Business Combination and (ii) not redeem
any Ordinary Shares owned by it, him or her in connection with such shareholder approval. If the Company seeks to consummate a proposed
Business Combination by engaging in a tender offer, the Sponsor and each Insider agrees that it, he or she will not sell or tender any
Ordinary Shares owned by it, him or her in connection therewith.



 


		2.	The Sponsor and each Insider hereby agrees that in the event
that the Company fails to consummate a Business Combination within 24 months from the closing of the Public Offering, or such later period
approved by the Company’s shareholders in accordance with the Company’s amended and restated memorandum and articles of association
(as it may be amended from time to time, the “Charter”), the Sponsor and each Insider shall take all reasonable
steps to cause the Company to (i) cease all operations except for the purpose of winding up, (ii) as promptly as reasonably possible
but not more than ten (10) business days thereafter, redeem 100% of the Class A Ordinary Shares sold as part of the Units in the Public
Offering (the “Offering Shares”), at a per-share price, payable in cash, equal to the aggregate amount then
on deposit in the Trust Account (as defined below), including interest earned on the funds held in the Trust Account (less taxes payable
and up to $100,000 of interest to pay dissolution expenses), divided by the number of then outstanding Offering Shares, which redemption
will completely extinguish all Public Shareholders’ (as defined below) rights as shareholders (including the right to receive further
liquidating distributions, if any), and (iii) as promptly as reasonably possible following such redemption, subject to the approval of
the Company’s remaining shareholders and the Company’s board of directors, liquidate and dissolve, subject in each case to
the Company’s obligations under Cayman Islands law to provide for claims of creditors and in all cases subject to the other requirements
of applicable law. The Sponsor and each Insider agrees to not propose any amendment to the Charter (A) to modify the substance or timing
of the Company’s obligation to allow redemption in connection with the Company’s initial Business Combination or to redeem
100% of the Offering Shares if the Company does not complete a Business Combination within the required time period set forth in the
Charter or (B) with respect to any other material provisions relating to shareholders’ rights or pre-initial Business Combination
activity, unless the Company provides its Public Shareholders with the opportunity to redeem their Offering Shares upon approval of any
such amendment at a per-share price, payable in cash, equal to the aggregate amount then on deposit in the Trust Account, including interest
earned on the funds held in the Trust Account and not previously released to the Company to pay its taxes, divided by the number of then
outstanding Offering Shares.



 




     


     


    

 


The Sponsor and each Insider acknowledges that
it, he or she has no right, title, interest or claim of any kind in or to any monies held in the Trust Account or any other asset of the
Company as a result of any liquidation of the Company with respect to the Founder Shares held by it, him or her. The Sponsor and each
Insider hereby further waives, with respect to any Ordinary Shares held by it, him or her, if any, any redemption rights it, he or she
may have in connection with (a) the consummation of a Business Combination, including, without limitation, any such rights available in
the context of a shareholder vote to approve such Business Combination, or (b) a shareholder vote to approve an amendment to the Charter
(A) to modify the substance or timing of the Company’s obligation to allow redemption in connection with the Company’s initial
Business Combination or to redeem 100% of the Offering Shares if the Company has not consummated a Business Combination within the time
period set forth in the Charter or (B) with respect to any other material provisions relating to shareholders’ rights or pre-initial
Business Combination activity or in the context of a tender offer made by the Company to purchase Offering Shares (although the Sponsor,
the Insiders and their respective affiliates shall be entitled to redemption and liquidation rights with respect to any Offering Shares
it or they hold if the Company fails to consummate a Business Combination within the time period set forth in the Charter).


 


		3.	During the period commencing on the effective date of the
Underwriting Agreement and ending 180 days after such date, the Sponsor and each Insider shall not, without the prior written consent
of the Representatives, (i) sell, offer to sell, contract or agree to sell, hypothecate, pledge, grant any option to purchase or otherwise
dispose of or agree to dispose of, directly or indirectly, or establish or increase a put equivalent position or liquidate or decrease
a call equivalent position within the meaning of Section 16 of the Securities Exchange Act of 1934, as amended (the “Exchange
Act”), and the rules and regulations of the Commission promulgated thereunder, with respect to, any Units, Ordinary Shares
(including, but not limited to, Founder Shares), Warrants or any securities convertible into, or exercisable, or exchangeable for, Ordinary
Shares owned by it, him or her, (ii) enter into any swap or other arrangement that transfers to another, in whole or in part, any of
the economic consequences of ownership of any Units, Ordinary Shares (including, but not limited to, Founder Shares), Warrants or any
securities convertible into, or exercisable, or exchangeable for, Ordinary Shares owned by it, him or her, whether any such transaction
is to be settled by delivery of such securities, in cash or otherwise, or (iii) publicly announce any intention to effect any transaction
specified in clause (i) or (ii). The provisions of this paragraph will not apply to any transfer permitted under paragraph 7(c) hereof
or if the release or waiver is effected solely to permit a transfer not for consideration and the transferee has agreed in writing to
be bound by the same terms described in this Letter Agreement to the extent and for the duration that such terms remain in effect at
the time of the transfer.



 



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		4.	In the event of the liquidation
of the Trust Account upon the failure of the Company to consummate its initial Business Combination within the time period set forth
in the Charter, the Sponsor (the “Indemnitor”) agrees to indemnify and hold harmless the Company against any
and all loss, liability, claim, damage and expense whatsoever (including, but not limited to, any and all legal or other expenses reasonably
incurred in investigating, preparing or defending against any litigation, whether pending or threatened) to which the Company may become
subject as a result of any claim by (i) any third party (other than the Company’s independent registered public accounting firm)
for services rendered or products sold to the Company or (ii) any prospective target business with which the Company has entered into
a written letter of intent, confidentiality or other similar agreement or Business Combination agreement (a “Target”);
provided, however, that such indemnification of the Company by the Indemnitor (x) shall apply only to the extent necessary
to ensure that such claims by a third party or a Target do not reduce the amount of funds in the Trust Account to below the lesser of
(i) $10.00 per Offering Share and (ii) the actual amount per Offering Share held in the Trust Account as of the date of the liquidation
of the Trust Account, if less than $10.00 per Offering Share is then held in the Trust Account due to reductions in the value of the
trust assets, less taxes payable, (y) shall not apply to any claims by a third party (other than the Company’s independent registered
public accounting firm) or a Target which executed a waiver of any and all rights to the monies held in the Trust Account (whether or
not such waiver is enforceable) and (z) shall not apply to any claims under the Company’s indemnity of the Underwriters
against certain liabilities, including liabilities under the Securities Act of 1933, as amended. The Indemnitor shall have the right
to defend against any such claim with counsel of its choice reasonably satisfactory to the Company if, within 15 days following written
receipt of notice of the claim to the Indemnitor, the Indemnitor notifies the Company in writing that it shall undertake such defense.



 


		5.	To the extent that the Underwriters do not exercise their
over-allotment option to purchase up to an additional 3,750,000 Units within 45 days from the date of the Prospectus (and as further
described in the Prospectus), (x) the Sponsor agrees to forfeit, at no cost, a number of Founder Shares in the aggregate equal to 937,500
multiplied by a fraction, (i) the numerator of which is 3,750,000 minus the number of Units purchased by the Underwriters upon the exercise
of their over-allotment option, and (ii) the denominator of which is 3,750,000. The forfeiture will be adjusted to the extent that the
over-allotment option is not exercised in full by the Underwriters so that the Founder Shares will represent an aggregate of 20.0% of
the Company’s issued and outstanding Ordinary Shares after the Public Offering (not including Class A Ordinary Shares underlying
the Warrants or the Private Placement Warrants (as defined below)). The Initial Shareholders further agree that to the extent that the
size of the Public Offering is increased or decreased, the Company will purchase or sell Units or effect a share repurchase or share
capitalization, as applicable, immediately prior to the consummation of the Public Offering in such amount as to maintain the ownership
of the Initial Shareholders prior to the Public Offering at 20.0% of its issued and outstanding Ordinary Shares upon the consummation
of the Public Offering. In connection with such increase or decrease in the size of the Public Offering, then (A) the references to 3,750,000
in the numerator and denominator of the formula in the first sentence of this paragraph shall be changed to a number equal to 15% of
the number of Offering Shares included in the Units issued in the Public Offering and (B) the references to 825,000 in the formula set
forth in the first sentence of this paragraph shall be adjusted to, respectively, such number of Founder Shares that the Sponsor would
have to return to the Company in order for the Sponsor and its permitted transferees to hold an aggregate of 20.0% of the Company’s
issued and outstanding Ordinary Shares after the Public Offering (not including Class A Ordinary Shares underlying the Warrants or Private
Placement Warrants).



 


		6.	The Sponsor and each Insider hereby agrees and acknowledges
that: (i) the Underwriters and the Company would be irreparably injured in the event of a breach by such Sponsor or an Insider of its,
his or her obligations under paragraphs 1, 2, 3, 4, 5, 7(a), 7(b), and 9 as applicable, of this Letter Agreement, (ii) monetary damages
may not be an adequate remedy for such breach and (iii) the non-breaching party shall be entitled to seek injunctive relief, in addition
to any other remedy that such party may have in law or in equity, in the event of such breach.



 



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		7.	(a) The Sponsor and each Insider agrees that it, he or she
shall not Transfer any Founder Shares (or any Class A Ordinary Shares issuable upon conversion thereof), except to permitted transferees
as described herein, until the earlier of (A) one year after the completion of the Company’s initial Business Combination or earlier
if, subsequent to our initial Business Combination, the closing price of the Class A Ordinary Shares equals or exceeds $12.00 per share
(as adjusted for share sub-divisions, share capitalizations, reorganizations, recapitalizations and the like) for any 20 trading days
within any 30-trading day period commencing at least 150 days after the Company’s initial Business Combination, and (B) the date
on which the Company completes a liquidation, merger, share exchange or other similar transaction that results in all of the Company’s
shareholders having the right to exchange their Class A Ordinary Shares for cash, securities or other property (the “Founder
Shares Lock-up Period”).



 


(b) The Sponsor and each Insider agrees that it,
he or she shall not Transfer any Private Placement Warrants (or any Class A Ordinary Shares underlying the Private Placement Warrants),
until 30 days after the completion of a Business Combination (the “Private Placement Warrants Lock-up Period”,
together with the Founder Shares Lock-up Period, the “Lock-up Periods”).


 


(c) Notwithstanding the provisions
set forth in paragraphs 7(a) and (b), Transfers of the Founder Shares, Private Placement Warrants and the Class A Ordinary Shares
underlying the Private Placement Warrants that are held by the Sponsor or any Insider or any of their permitted transferees (that
have complied with this paragraph 7(c)), are permitted (a) to the Company’s officers or directors, any affiliate or family
member of any of the Company’s officers or directors, any members or partners of the Sponsor or their affiliates, any
affiliates of the Sponsor, or any employees of such affiliates; (b) in the case of an individual, by gift to a member of such
individual’s immediate family or to a trust, the beneficiary of which is a member of such individual’s immediate family,
an affiliate of such individual or to a charitable organization; (c) in the case of an individual, by virtue of laws of descent
and distribution upon death of such individual; (d) in the case of an individual, pursuant to a qualified domestic relations
order; (e) by private sales or transfers made in connection with any forward purchase agreement or similar arrangement or in
connection with the consummation of an initial Business Combination at prices no greater than the price at which the securities were
originally purchased; (f) in the event of the Company’s liquidation prior to the completion of an initial Business
Combination; (g) by virtue of the laws of the Cayman Islands or the Sponsor’s exempted limited partnership agreement upon
termination and winding-up of the Sponsor; or (h) in the event of the Company’s liquidation, merger, share exchange or
other similar transaction which results in all of the Company’s shareholders having the right to exchange their Class A
Ordinary Shares for cash, securities or other property subsequent to the Company’s completion of an initial Business
Combination; provided, however, that in the case of clauses (a) through (e) or (g), these permitted transferees
must enter into a written agreement with the Company agreeing to be bound by the transfer restrictions herein and the other
restrictions contained in this Agreement (including provisions relating to voting, the Trust Account and liquidating
distributions).


 


		8.	The Sponsor and each Insider represents and warrants that
it, he or she has never been suspended or expelled from membership in any securities or commodities exchange or association or had a
securities or commodities license or registration denied, suspended or revoked. Each Insider’s biographical information furnished
to the Company (including any such information included in the Prospectus) is true and accurate in all respects and does not omit any
material information with respect to the Insider’s background. The Sponsor and each Insider’s questionnaire furnished to
the Company is true and accurate in all respects. The Sponsor and each Insider represents and warrants that: it, he or she is not subject
to or a respondent in any legal action for, any injunction, cease-and-desist order or order or stipulation to desist or refrain from
any act or practice relating to the offering of securities in any jurisdiction; it, he or she has never been convicted of, or pleaded
guilty to, any crime (i) involving fraud, (ii) relating to any financial transaction or handling of funds of another person, or (iii)
pertaining to any dealings in any securities and it, he or she is not currently a defendant in any such criminal proceeding.



 




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		9.	Except as disclosed in the Prospectus, neither the Sponsor
nor any officer or director of the Company, nor any affiliate of the Sponsor or any officer, or director of the Company, shall receive
from the Company any finder’s fee, reimbursement, consulting fee, non-cash payments, monies in respect of any repayment of a loan
or other compensation prior to, or in connection with any services rendered in order to effectuate, the consummation of the Company’s
initial Business Combination (regardless of the type of transaction that it is), other than the following, none of which will be made
from the proceeds held in the Trust Account prior to the completion of the initial Business Combination: repayment of a loan and advances
up to an aggregate of $300,000 made to the Company by the Sponsor; payment to the Sponsor for certain office space, utilities and
administrative and support services as may be reasonably required by the Company for a total of $10,000 per month; reimbursement
for any out-of-pocket expenses related to identifying, investigating, negotiating and completing an initial Business Combination, and
repayment of loans, if any, and on such terms as to be determined by the Company from time to time, made by the Sponsor or an affiliate
of the Sponsor or any of the Company’s officers or directors to finance transaction costs in connection with an intended initial
Business Combination, provided, that, if the Company does not consummate an initial Business Combination, a portion of the working capital
held outside the Trust Account may be used by the Company to repay such loaned amounts so long as no proceeds from the Trust Account
are used for such repayment. Up to $1,500,000 of such loans may be convertible into private placement warrants of the post-business combination
entity at a price of $1.00 per warrant at the option of the lender. Such warrants would be identical to the Private Placement Warrants,
including as to exercise price, exercisability and exercise period.



 


		10.	The Sponsor and each Insider has full right and power, without
violating any agreement to which it is bound (including, without limitation, any non-competition or non-solicitation agreement with any
employer or former employer), to enter into this Letter Agreement and, as applicable, to serve as an officer and/or director on the board
of directors of the Company and hereby consents to being named in the Prospectus as an officer and/or director of the Company.



 


		11.	As used herein, (i) “Business Combination”
shall mean a merger, share exchange, asset acquisition, share purchase, reorganization or similar business combination, involving the
Company and one or more businesses; (ii) “Ordinary Shares” shall mean the Class A Ordinary Shares and
Class B ordinary shares, par value $0.0001 per share (the “Class B Ordinary Shares”); (iii) “Founder
Shares” shall mean the 7,187,500 Class B Ordinary Shares issued and outstanding (up to 937,500 of which are subject to
complete or partial forfeiture if the over-allotment option is not exercised by the Underwriters); (iv) “Initial Shareholders”
shall mean the Sponsor and any Insider that holds Founder Shares; (v) “Private Placement Warrants” shall
mean the 7,500,000 warrants (or 8,250,000 warrants if the over-allotment option is exercised in full) that the Sponsor has agreed to
purchase for an aggregate purchase price of $7,500,000 (or $8,250,000 if the over-allotment option is exercised in full) or $1.00 per
warrant, in a private placement that shall occur simultaneously with the consummation of the Public Offering; (vi) “Public
Shareholders” shall mean the holders of securities issued in the Public Offering; (vii) “Trust Account”
shall mean the trust fund into which a portion of the net proceeds of the Public Offering and the sale of the Private Placement Warrants
shall be deposited; and (viii) “Transfer” shall mean the (a) sale of, offer to sell, contract or agreement
to sell, hypothecate, pledge, grant of any option to purchase or otherwise dispose of or agreement to dispose of, directly or indirectly,
or establishment or increase of a put equivalent position or liquidation with respect to or decrease of a call equivalent position within
the meaning of Section 16 of the Exchange Act, and the rules and regulations of the Commission promulgated thereunder with respect to,
any security, (b) entry into any swap or other arrangement that transfers to another, in whole or in part, any of the economic consequences
of ownership of any security, whether any such transaction is to be settled by delivery of such securities, in cash or otherwise, or
(c) public announcement of any intention to effect any transaction specified in clause (a) or (b).



 


		12.	The Company will maintain an insurance policy or policies
providing directors’ and officers’ liability insurance, and each director shall be covered by such policy or policies, in
accordance with its or their terms, to the maximum extent of the coverage available for any of the Company’s directors or officers.



 




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		13.	This Letter Agreement constitutes the entire agreement and
understanding of the parties hereto in respect of the subject matter hereof and supersedes all prior understandings, agreements, or representations
by or among the parties hereto, written or oral, to the extent they relate in any way to the subject matter hereof or the transactions
contemplated hereby. This Letter Agreement may not be changed, amended, modified or waived (other than to correct a typographical error)
as to any particular provision, except by a written instrument executed by all parties hereto.



 


		14.	No party hereto may assign either this Letter Agreement or
any of its rights, interests, or obligations hereunder without the prior written consent of the other parties. Any purported assignment
in violation of this paragraph shall be void and ineffectual and shall not operate to transfer or assign any interest or title to the
purported assignee. This Letter Agreement shall be binding on the Sponsor and each Insider and their respective successors, heirs and
assigns and permitted transferees.



 


		15.	Nothing in this Letter Agreement shall be construed to confer
upon, or give to, any person or corporation other than the parties hereto any right, remedy or claim under or by reason of this Letter
Agreement or of any covenant, condition, stipulation, promise or agreement hereof. All covenants, conditions, stipulations, promises
and agreements contained in this Letter Agreement shall be for the sole and exclusive benefit of the parties hereto and their successors,
heirs, personal representatives and assigns and permitted transferees; provided, however, that the Underwriters shall
benefit from the provisions set forth in paragraphs 3 and 7, which such paragraphs shall not be amended or modified without the written
consent of the Representatives.



 


		16.	This Letter Agreement may be executed in any number of original
or facsimile counterparts and each of such counterparts shall for all purposes be deemed to be an original, and all such counterparts
shall together constitute but one and the same instrument.



 


		17.	This Letter Agreement shall be deemed severable, and the invalidity
or unenforceability of any term or provision hereof shall not affect the validity or enforceability of this Letter Agreement or of any
other term or provision hereof. Furthermore, in lieu of any such invalid or unenforceable term or provision, the parties hereto intend
that there shall be added as a part of this Letter Agreement a provision as similar in terms to such invalid or unenforceable provision
as may be possible and be valid and enforceable.



 


		18.	This Letter Agreement shall be governed by and construed and
enforced in accordance with the laws of the State of New York. The parties hereto (i) all agree that any action, proceeding, claim or
dispute arising out of, or relating in any way to, this Letter Agreement shall be brought and enforced in the courts of New York City,
in the State of New York, and irrevocably submit to such jurisdiction and venue, which jurisdiction and venue shall be exclusive and
(ii) waive any objection to such exclusive jurisdiction and venue or that such courts represent an inconvenient forum.



 


		19.	Any notice, consent or request to be given in connection with
any of the terms or provisions of this Letter Agreement shall be in writing and shall be sent by express mail or similar private courier
service, by certified mail (return receipt requested), by hand delivery or facsimile transmission.



 


		20.	This Letter Agreement shall terminate on the earlier of (i)
the expiration of the Lock-up Periods or (ii) the liquidation of the Company; provided, however, that this Letter Agreement shall
earlier terminate in the event that the Public Offering is not consummated and closed by December 31, 2021; provided further that
paragraph 4 of this Letter Agreement shall survive such liquidation.



 


[Signature Page
Follows] 


 



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	 	Sincerely,
	 	 
	 	ION HOLDINGS 3, LP
	 	By its General Partner
	 	 
	 	ION ACQUISITION CORP GP LTD.
	 	 	 
	 	By:	 
	 	 	Name: Anthony Reich
	 	 	Title: Authorized Signatory
	 	 	 
	 	By:	 
	 	 	 Name: Jonathan Kolber
	 	 	 
	 	By:	 
	 	 	 Name: Gilad Shany
	 	 	 
	 	By:	 
	 	 	 Name: Avrom Gilbert
	 	 	 
	 	By:	 
	 	 	 Name: Anthony Reich
	 	 	 
	 	By:	 
	 	 	 Name: Gabriel Seligsohn
	 	 	 
	 	By:	 
	 	 	 Name: Rinat Gazit
	 	 	 
	 	By:	 
	 	 	 Name: Lior Shemesh


 


	Acknowledged and Agreed:	 
	 	 
	ION ACQUISITION CORP 3 LTD.	 
	 	 	 
	By:	 	 
	 	Name: 	Anthony Reich	 
	 	Title:	Chief Financial Officer	 


 


 


[Signature Page to Letter Agreement]