Document:

fgen-ex109i_141.htm

 

[*] = Certain confidential information contained in this document, marked by brackets, has been omitted and filed separately with the Securities and Exchange Commission pursuant to Rule 24b-2 of the Securities Act of 1934, as amended.

Exhibit 10.9(i)

Amendment No. 1 To Collaboration Agreement

This Amendment No. 1 (the “First Amendment”) is effective as of January 1, 2013 (the “First Amendment Effective Date”) by and between Astellas Pharma Inc. (“Astellas”) and FibroGen, Inc. (“FG”). This First Amendment amends the Collaboration Agreement entered into by and between Astellas and FG on June 1, 2005 (the “Agreement”). Astellas and FG shall be referred to individually herein as a “Party” and collectively as the “Parties”.

Whereas, under the Agreement, Astellas and FG have agreed to collaborate on the development and commercialization of certain small molecule prolyl hydroxylase inhibitors as therapeutics in the Astellas Territory;

Whereas, Section 12.2 of the Agreement provides that FG shall have the worldwide exclusive right to manufacture Lead Compound, and that Astellas and its Affiliates and Sublicensees shall not directly or indirectly make, produce or manufacture any Lead Compound;

Whereas, Section 12.3 of the Agreement provides that FG shall have the exclusive right and obligation to supply Lead Compound to Astellas and its Affiliates and Sublicensees for all development and commercial purposes, and that Astellas and its Affiliates and Sublicensees shall purchase such Lead Compound exclusively from FG;

Whereas, Section 12.4 of the Agreement provides that, upon Marketing Approval for any Lead Compound, FG’s obligation to supply Astellas with Lead Compound shall be limited to, and all payment obligations shall be based on, the supply of Bulk Product, as set forth in Section 9.2 of the Agreement;

Whereas, Article 9 of the Agreement contains certain transfer pricing provisions to compensate FG for the manufacture and supply of Lead Compound(s) to Astellas;

Whereas, the Parties hereby agree that the amendments to the Agreement contained in this First Amendment are not intended to be and shall not be deemed an Amendment to that certain Anemia License and Collaboration Agreement, by and between FG and Astellas, dated April 28, 2006 as amended (“EU Agreement”);

Whereas, subject to the terms and conditions of this First Amendment, and notwithstanding anything to the contrary contained in the Agreement, with respect solely to the compound designated by FG as FG-4592 and a current Lead Compound, FG shall not supply to Astellas Lead Compound formulated as bulk drug product, but shall instead supply Astellas with the active pharmaceutical ingredient of FG-4592, also known as roxadustat (“FG-4592”) (and, for the avoidance of doubt, only FG-4592) in the form of drug substance (“API”) solely for use by Astellas to formulate, fill, and finish into bulk drug product containing FG-4592, in a formulation and pursuant to the manufacturing method and process approved by FG (“Astellas Bulk Product”); and

Whereas, subject to the terms and conditions of this First Amendment, FG agrees that Astellas shall have the right to manufacture Astellas Bulk Product for non-commercial and commercial purpose (each such term to be used in this First Amendment as set forth in Article 9 of the Agreement) in the Astellas Territory (Japan) using API exclusively supplied by FG.

Now, Therefore, for good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, the Parties agree as follows:

	
1)
	
Unless otherwise defined herein, all capitalized terms and phrases used in this First Amendment shall have the meaning ascribed to them in the Agreement.

	
2)
	
With respect to FG-4592 only, references to the Lead Compound in the Agreement shall be deemed references to API, including pursuant to Article 12 of the Agreement and in Section 17.3 and in the exception clause at the end of Section 17.2 of the Agreement, Sections 9.1 and 9.2 and additional articles and sections, as amended hereby, to the extent applicable to accomplish the Parties’ intent under this First Amendment. In addition, with respect to FG-4592, the term “Product Specifications”, as defined in Section 1.56 of the Agreement will apply to API only, provided, however, that FG and Astellas shall agree on any specifications to any Astellas Bulk Product produced by Astellas in any form or formulation.

 

[*] = Certain confidential information contained in this document, marked by brackets, has been omitted and filed separately with the Securities and Exchange Commission pursuant to Rule 24b-2 of the Securities Act of 1934, as amended.

Exhibit 10.9(i)

	
3)
	
Astellas shall have the right to manufacture Astellas Bulk Product in the Astellas Territory solely from API supplied by FG pursuant to Article 12 of the Agreement as follows:

	
 
	
a)
	
Section 13.1 of the Agreement is amended to designate the existing paragraph subsection 13.1.1. and to add the following paragraph governing supply of FG-4592 as subsection 13.1.2:

13.1.2“With respect to FG-4592, and subject to the terms and conditions of this Agreement, FG hereby grants to Astellas an exclusive license under the FG Technology in the Astellas Territory to: (a) import API exclusively supplied by or on behalf of FG; and (b) manufacture and have manufactured Astellas Bulk Product from such API, solely for use pursuant to the license granted in Section 13.1.1.”

	
 
	
b)
	
Astellas shall manufacture Astellas Bulk Product (i) solely in the Astellas Territory for use and sale in the Astellas Territory in accordance with the terms of the Agreement and (ii) solely using API supplied by or on behalf of FG.

The intent of this Amendment is that the Astellas will subcontract manufacturing of Astellas Bulk Product to its Affiliate Astellas Pharma Tech Co., Ltd. to manufacture at its facility in [*]. Astellas may subcontract its manufacture of Astellas Bulk Product to another Affiliate and/or a third party for non-commercial and commercial manufacturing pursuant to an agreement pre-approved in writing by FG (any such third party, excluding Astellas Pharma Tech Co., Ltd., a “Subcontractor”), provided, [*]. Astellas shall be responsible for and ensure: (i) the compliance of each Subcontractor with the terms of the Agreement, (ii) that each Subcontractor undertakes in writing to (a) obligations of confidentiality and non-use regarding Confidential Information consistent with the terms of Article 16 of the Agreement; (b) a quality agreement between Astellas and Subcontractor that conforms with terms of the applicable Drug Product Agreement; and (c) an agreement that restricts Subcontractor from [*] after the expiration or termination of the agreement, and (iii) each Subcontractor agrees in writing to assign all inventions and other intellectual property made related to any such work in connection with Astellas Bulk Product to Astellas (and Astellas will in turn assign to FG as provided in the Agreement). For the avoidance of doubt, FG shall have the right to visit, conduct technical review and audit any Subcontractor with respect to all aspects of the manufacturing process and methods, and FG shall have the opportunity to review any agreements related to the manufacture of the Astellas Bulk Product between such pre-approved Subcontractor and Astellas prior to execution (other than financial terms); provided, further, that the technical review and audit process shall be conducted in accordance with the procedure set forth in Section 10 of this First Amendment.

	
4)
	
Astellas hereby expressly agrees that any API supplied by FG under the Agreement, as amended by this First Amendment shall be used only to manufacture Astellas Bulk Product, including any of the activities set forth in Exhibit A under the heading “Permitted Activities” (“Permitted Activities”) and any administrative related activities thereof. For clarity, Astellas shall not take any other action with respect to, or make any other use of such API for any other purpose, including without limitation any of the activities set forth in Exhibit A under the heading “Prohibited Activities” (“Prohibited Activities”). FG from time to time has transferred to Astellas API and other materials and permitted Astellas to conduct manufacturing development activities in anticipation of the execution of this First Amendment. Astellas represents and warrants that it has at all times complied with the terms of Material Transfer Agreement Letter dated January 31, 2013, Material Transfer Agreement Letter dated March 8, 2013, Material Transfer Agreement dated June 10, 2014 and Material Transfer Agreement dated June 15, 2018 between FG and Astellas (collectively, “MTAs”) regarding the materials provided thereunder, including without limitation performing only the permitted and not conducting any prohibited activities set forth in the applicable MTAs. The Parties hereby agree that (i) any use of API except for Permitted Activities under this Amendment after November 30, 2018 or (ii) any use of the materials provided under the MTAs by Astellas other than the permitted purposes specified in the applicable MTAs shall constitute a breach under Section 18.2.1 of the Agreement, and if any such material breach is not cured pursuant to Section 18.2.1 of the Agreement, FG shall have the right to terminate the Agreement thereunder. If Astellas wishes to conduct any other activities with the API, it may do so only upon prior written approval by FG.

 

[*] = Certain confidential information contained in this document, marked by brackets, has been omitted and filed separately with the Securities and Exchange Commission pursuant to Rule 24b-2 of the Securities Act of 1934, as amended.

Exhibit 10.9(i)

	
5)
	
The Parties agree that FG has provided all FG Technical Information necessary for Astellas or Subcontractor to manufacture Astellas Bulk Product from API according to the process approved by the Parties. In the event that Astellas wishes to conduct a technology transfer process to another Subcontractor, Astellas may do so provided that FG can, [*], review and approve in writing, the technology transfer protocol of Astellas and the Subcontractor prior to the commencement of technology transfer activity , and review the post-transfer report to confirm the transfer complied with the technology transfer protocol, and any deviations are reasonably acceptable to FG, provided that if any deviations are not reasonably acceptable, FG, Astellas and the applicable Subcontractor shall work together to agree on a resolution acceptable to all parties, provided further that FG shall use commercially reasonable efforts to prevent any delay on Astellas’s technology transfer activities.

	
6)
	
The Parties confirm that they have executed a Quality Assurance Agreement (“QAA”) dated November 17th, 2014, including a Product Technical Agreement governed thereby (“PTA”) dated November 17th, 2014, to govern the responsibilities of both Parties with respect to manufacture, storage, transportation, export/import, testing, specifications and release of API for non-commercial purposes, as amended by this First Amendment (“API QAA and PTA”). The Parties confirm that they have executed an API QAA and PTA for commercial purposes.

	
7)
	
FG shall approve, prior to the production of the Validation Batches, (i) the validation protocol, and (ii) any validation protocol amendments. In addition, Astellas shall send the validation report thereof to FG for review and comment prior to its finalization, as well as the final validation report after finalization. In addition to the foregoing, a separate agreement for Astellas Bulk Product (“Drug Product Agreement”) shall be negotiated and executed to govern manufacturing for commercial and non-commercial purposes. The Parties shall agree upon a Drug Product Agreement for commercial purposes as soon as reasonably practicable [*] and prior to earlier of (a) [*], and (b) [*]. The manufacturing methods and specifications, quality standards (i.e. compliance with Astellas SOPs and applicable laws and regulations), and applicable laws and regulations for Astellas Bulk Product for commercial purpose will be incorporated and described in the Drug Product Agreement at the same level of detail as the CTD Module 1 for the Marketing Approval Application in the Astellas Territory (Japan) plus any additional detail reasonably requested by FG. If Astellas proposes to make any change to the manufacturing methods, specifications, or quality provisions set forth in the Drug Product Agreement or that materially affect product quality, then Astellas shall notify FG of the proposed changes, and the Parties shall thereafter discuss and agree as to whether and what changes may be made pursuant to an amendment to the Drug Product Agreement, provided that the Parties shall take into consideration whether such change was requested by Japanese regulatory authorities.

	
8)
	
Astellas shall, by itself or through its Subcontractor, maintain all master batch records, batch records (including executed batch records) and all supporting documentation, quality control documentation (including deviation reports), stability reports, annual reviews, regulatory submissions, acceptance test results and other relevant information for each batch of Astellas Bulk Product (collectively, “Processing Data”) for [*], or such longer time as required by the applicable laws and regulations. FG shall have the right to review such Processing Data upon reasonable request, including without limitation in preparation of any anticipated inspections (e.g., a pre-approval inspection), by visiting at FG’s option Astellas’ or its Subcontractor’s facility and/or requesting a copy of such Processing Data, each Party to bear its own cost and expense.

	
9)
	
Astellas shall be responsible for obtaining and maintaining all necessary plant inspection standards, plant licenses, permits and approvals to manufacture and package (including label) Astellas Bulk Product as required under applicable law and regulations.

 

[*] = Certain confidential information contained in this document, marked by brackets, has been omitted and filed separately with the Securities and Exchange Commission pursuant to Rule 24b-2 of the Securities Act of 1934, as amended.

Exhibit 10.9(i)

	
10)
	
FG shall have the right, upon reasonable advance notice (which shall include the scope or purpose during regular business hours), to conduct technical visit and review of Astellas Bulk Product manufacturing facilities or other facilities utilized in the performance of related activities for Astellas Bulk Product (e.g. analytical testing, packaging, labeling, etc.) by Astellas (or its applicable Subcontractor) to ensure compliance with applicable laws, rules and regulations, including, without limitation, Japanese regulatory standards and quality and technical standards set forth in the Drug Product Agreement (the “Relevant Standards”). Such technical visit and review shall be conducted at FG’s cost and expense in a manner so as to minimize disruption of Astellas’ or its Subcontractor’s business operations. If FG finds any deficiencies arising in the review, FG shall send written notice detailing such deficiencies to Astellas, the Parties shall meet to discuss, and Astellas shall as soon as possible (but no later than [*] after receipt of such notice (or [*] for critical observations), submit a plan to FG outlining measures proposed to be taken to remedy such deficiencies, and the Parties shall discuss and agree upon any measures to be taken by Astellas, subject always to the requirements of the Japanese regulatory authorities and recognizing Astellas’ role and responsibilities as the marketing authorization holder in Japan.

	
11)
	
Astellas shall be responsible for procuring all excipients required for the manufacture of Astellas Bulk Product from raw material suppliers qualified by Astellas, and FG will have the right to review a statement and other documents relied upon for qualification status (including audit reports, to the extent Astellas obtained approval from such raw material suppliers to disclose them to FG, which approval Astellas shall use commercially reasonable efforts to obtain, if requested by FG) of such raw material suppliers and a summary of Astellas’ audit program. All such excipients must comply with all applicable specifications, standard operating procedures, all applicable laws and regulations, and any Marketing Approvals in the Astellas Territory for the Astellas Bulk Product.

	
12)
	
Upon execution of this Amendment, Astellas will provide a rolling [*] forecast of its anticipated API Batch (as defined below) requirements on a [*] basis, as well as the corresponding Astellas Bulk Product tablet manufacturing plan for such API Batches. Astellas will provide to FG written updates to such forecast by the [*] thereafter.

	
13)
	
Astellas acknowledges that FG will manufacture and supply API to Astellas [*], that each API batch equals to approximately [*] (“API Batch(es)”), and any API Firm Purchase Order (as defined below) shall be for [*].

	
14)
	
For any API that Astellas wishes to purchase, Astellas will provide FG with a binding purchase order specifying (a) the [*], (b) the requested date of Delivery, and (c) all other relevant information as agreed by FG and Astellas, as early as possible and in no event less than [*] prior to requested Delivery date (“API Firm Purchase Order”). FG will manufacture and deliver API Batches as requested in an API Firm Purchase Order(s). All forecasts and API Firm Purchase Orders will be prepared in good faith in order to facilitate FG's manufacture and shipment of API in compliance with the Agreement.

	
15)
	
Subject always to the requirements under Sections 13 and 14, Astellas shall submit API Firm Purchase Orders to FG from time to time, and FG shall supply the quantity of API Batches requested in each API Firm Purchase Order that complies with this Agreement and Section 14 of this Amendment, provided that (i) if Astellas has submitted a forecast for the time periods listed below in (a) – (c) it shall provide API Firm Purchase Orders that fall within the ranges set forth therein, and (ii) the [*] ordered in a calendar quarter is within all of the following ranges:

	
 
	
a)
	
[*] and [*] of the amount forecast for such API for the calendar quarter [*] from the calendar quarter of the Delivery date;

	
 
	
b)
	
[*] and [*] of the amount forecast for such API for the calendar quarter [*] from the calendar quarter of the Delivery date;

	
 
	
c)
	
[*] and [*] of the amount forecast for such Bulk Product for the calendar quarter [*] from the calendar quarter of the Delivery date; provided however, that

	
 
	
d)
	
if, due to the limitations in Section 13 and in (a) – (c) above, the number of batches forecasted for any calendar year by Astellas is insufficient to allow for the ordering of [*] in any calendar quarter, notwithstanding such limitations, Astellas shall be entitled to order and purchase pursuant to an API Firm Purchase Order [*] in such calendar year.

 

[*] = Certain confidential information contained in this document, marked by brackets, has been omitted and filed separately with the Securities and Exchange Commission pursuant to Rule 24b-2 of the Securities Act of 1934, as amended.

Exhibit 10.9(i)

Within [*] after its receipt of an API Firm Purchase Order complying with the requirements of this section 15, FG shall acknowledge its receipt of such order and shall confirm the requested Delivery Date of the Bulk Product. For API requested in any Purchase Order exceeding the quantity or Delivery Date parameters set forth above, FG agrees that it shall use reasonable efforts to fill as much of such excess order as FG can reasonably manufacture and supply in a timely manner. FG shall include in its response to Astellas such excess amount and Delivery Date which FG is able to supply.

Astellas and FG shall enter into a commercial supply agreement by [*]. Such commercial supply agreement shall govern the detailed conditions of supply of API by FG to Astellas, including the full forecasting and permitted variation provisions, binding order commitments, etc. contained herein, as well as other standard commercial supply agreement provisions which shall be consistent with the terms and conditions herein and in the Agreement in all aspects, and contain other reasonable and customary provisions, including without limitation provisions for security of the product (defined as procedures to reasonably protect against diversion, counterfeit, etc.), full accounting and reconciliation of API and Astellas Bulk Product.

	
16)
	
For API supplied by FG to Astellas for a non-commercial purpose, Astellas shall compensate FG pursuant to the provisions of Section 9.1 of the Agreement. For API supplied by FG to Astellas for commercial purposes, including Astellas Bulk Product manufactured in the validation process (“Validation Batch”), Astellas shall pay FG on a per batch basis an amount calculated pursuant to the provisions of Section 9.2 of the Agreement (the “API Batch Transfer Price”), as defined below. In 2018, FG shall deliver to Astellas [*] batches of API (the “2018 API Batches”), a portion [*] of which has been delivered to Astellas in advance of the execution of this First Amendment and the remaining portion [*] for which Astellas shall deliver to FG a purchase order within [*]. Astellas shall pay to FG for the 2018 API Batches the API Batch Transfer Price agreed by the Parties under the letter from FG to Astellas dated June 15, 2018 (“2018 API Batch Transfer Price”) subject to the adjustment set forth in Section 17 below. Astellas shall pay for the API supplied by FG for the Validation Batches within [*] of the date of invoice.

The “API Batch Transfer Price” shall be calculated based on (a) the [*] calculated based on (i) the [*] to be manufactured by Astellas for the upcoming Astellas fiscal year derived from the manufacturing plan presented in the then-current Astellas supply forecast, and (ii) the [*] and (b) the [*] less (c) the Bulk Product Manufacturing Cost.

“Astellas Yield” shall be defined as the [*] from the manufacture by Astellas (or its subcontractor) of [*] for the prior calendar year on a [*] basis.

“FG Yield” shall be defined as the average yield per strength from the manufacture by FG (or its subcontractor) of [*] for the prior calendar year on a [*] basis.

“Bulk Product Manufacturing Cost” shall mean an amount equal to [*].

	
17)
	
The API Batch Transfer Price shall be updated by FG annually based on the updated inputs provided under the following process:

	
 
	
a)
	
No later than the end of February of each calendar year, FG shall provide to Astellas:

	
 
	
(1)
	
the [*]for the prior calendar year, with the basis of calculation, and

	
 
	
(2)
	
the [*]for the upcoming Astellas fiscal year, with the basis of calculation, including the [*] to be manufactured by Astellas for the upcoming Astellas fiscal year based on the manufacturing plan presented in the then-current Astellas supply forecast.

	
 
	
b)
	
No later than [*] after updated Listed Price is announced in the notice through official gazette of Japan (“Kanpo”), Astellas shall provide to FG an updated Listed Price issued by the Japanese Ministry of Health, Labour and Welfare on a per strength basis for the upcoming year. If the Listed Price is not updated, Astellas shall notify FG by March 15 of such calendar year.

	
 
	
c)
	
No later than [*] after the receipt of the notice pursuant to (b) above, FG shall provide to Astellas the updated API Batch Transfer Price for API Batches to be delivered during the following Astellas Fiscal Year.

 

[*] = Certain confidential information contained in this document, marked by brackets, has been omitted and filed separately with the Securities and Exchange Commission pursuant to Rule 24b-2 of the Securities Act of 1934, as amended.

Exhibit 10.9(i)

	
 
	
d)
	
No later than [*] of the receipt of the updated API Batch Transfer Price from FG in each calendar year, but in no event no later than March 31 of such calendar year, Astellas shall review and approve the updated API Batch Transfer Price.

	
 
	
e)
	
The updated API Batch Transfer Price takes effect as of the date upon which Astellas has amended the price of Astellas Bulk Product to wholesalers reflecting the updated Listed Price (the “Invoice Price Effective Date”) but in any event no later than March 15 of any calendar year. Astellas shall inform FG of the Invoice Price Effective Date within [*] from the date of announcement on the updated Listed Price.

For the transfer of 2018 API Batches, upon FG and Astellas shall determine an updated API Batch Transfer Price following the procedures set forth in this Section, provided that the timeline therefor shall be discussed and agreed separately, but in all cases it shall be determined within [*] of the date on which the initial issuance of the Listed Price by the Japanese Ministry of Health, Labour and Welfare. Following the agreement of the updated API Batch Transfer Price for the 2018 API Batches based on the actual Listed Price (the “2018 Updated Price”), FG shall issue to Astellas an invoice or Astellas shall issue to FG an invoice, as the case may be, and the party receiving such invoice shall pay for the true-up which shall be defined as (i) difference of the 2018 API Batch Transfer Price and the 2018 Updated Price, (ii) multiplied by the volume of 2018 API Batch, within [*] of the date of invoice.

	
18)
	
Commencing the first year after the issuance of the initial Listed Price, within [*] from the Invoice Price Effective Date in each calendar year, Astellas shall provide to FG the “API Year End Inventory”, defined as (i) the [*] and (ii) [*] (as defined below) with the basis of calculation. Regarding the API Year End Inventory True-Up which shall be implemented at the [*], Astellas shall provide to FG the API Year End Inventory as of the end of the last business day of the month preceding the month during which the Listed Price is issued, and such API Year End Inventory True-Up shall be provided to FG within [*] of the date on which the API Batch Transfer Price corresponding to initial Listed Price is determined. FG shall review and approve the API Year End Inventory True Up within [*] of receipt thereof. Astellas shall pay to FG, or FG shall pay for the API Year End Inventory True Up within [*] of the date of invoice, which invoice FG shall deliver to Astellas, or Astellas shall deliver to FG, upon FG’s approval of API Year End Inventory True Up.

The API Year End Inventory True Up shall be defined as:

	
 
	
i)
	
the difference between

	
 
	
(1)
	
[*], and

	
 
	
(2)
	
[*]

	
 
	
ii)
	
multiplied by [*]

	
19)
	
The parties shall true up the API Batch Transfer Price annually, according to the following process:

	
 
	
a)
	
Within [*] from the date of the Invoice Price Effective Date in each calendar year, Astellas shall notify FG (i) the actual weighted average of the tablet strengths (by percentage) which was manufactured by Astellas for the current Astellas fiscal year; and (ii) amount of API actually used by Astellas for the manufacture of the Astellas Bulk Product for the current Astellas fiscal year (the “Actually Used API”).

	
 
	
b)
	
Within [*] thereafter, FG shall provide to Astellas the amount of true-up of the API Batch Transfer Price for the Actually Used API (the “Transfer Price True Up”), with the basis of calculation.

The Transfer Price True Up shall be defined as the difference of i and ii below:

	
 
	
i)
	
[*].

	
 
	
ii)
	
[*].

	
 
	
c)
	
Within [*] thereafter, but no later than April 15 of such calendar year, Astellas shall review and approve the calculations provided for the Transfer Price True Up.

 

[*] = Certain confidential information contained in this document, marked by brackets, has been omitted and filed separately with the Securities and Exchange Commission pursuant to Rule 24b-2 of the Securities Act of 1934, as amended.

Exhibit 10.9(i)

	
 
	
d)
	
Within [*] thereafter, FG shall issue to Astellas an invoice or Astellas shall issue to FG an invoice, as the case may be, and the party receiving such invoice shall pay for the Transfer Price True Up within [*] of the date of invoice.

	
 
	
e)
	
Regarding the Transfer Price True Up which shall be applicable to 2018 API Batches, FG and Astellas shall implement the true-up following the procedures set forth in this Section, immediately after [*].

	
20)
	
Astellas will be solely responsible for all costs related to the loss, non-conformity or destruction of API Batch(es) purchased under API Firm Purchase Order and any materials produced therefrom following Delivery of API pursuant to Section 12.7 of the Agreement.

	
21)
	
Astellas shall bear all costs relating to and associated with any Permitted Activities, including without limitation transporting, importing, receiving and testing API and manufacturing, testing and releasing Astellas Bulk Product, as well as any related support provided by FG upon written request by Astellas, whether by its employees, consultants or contractors, to the extent related to the Permitted Activities. If FG is to provide support to Astellas, FG shall provide the estimated costs to Astellas beforehand, and Astellas shall pay the actual costs incurred within [*] of receipt of invoice from FG therefor.

	
22)
	
FG is and shall be the exclusive owner of all inventions and other intellectual property made related to the Protected Field, which includes for the avoidance of doubt, any process manufacturing or other activities undertaken by Astellas or its Subcontractor under this First Amendment or otherwise relating to the manufacture of FG-4592, subject to certain Astellas’ rights, pursuant to the provisions of Sections 14.1 and 14.2 of the Agreement. Neither Astellas nor its Subcontractor shall use any proprietary drug delivery system technology in connection with FG-4592 or Astellas Bulk Product without FG’s prior written consent. Astellas shall grant, and hereby grants, a worldwide, fully paid non-exclusive license to FG pursuant to the provisions of Section 14.1.

 

[*] = Certain confidential information contained in this document, marked by brackets, has been omitted and filed separately with the Securities and Exchange Commission pursuant to Rule 24b-2 of the Securities Act of 1934, as amended.

Exhibit 10.9(i)

	
23)
	
The Parties agree that the JDC shall appoint a Joint Manufacturing Subcommittee (the “JMS”) to oversee the manufacture of the product and to provide for discussion forum for any supply related issues, which committee shall meet on a quarterly basis, telephonically or in person, unless otherwise agreed by the Parties, and as needed to address urgent issues related to manufacturing and supply. Each Party shall initially appoint three (3) representatives to serve on the JMS. Each representative appointed to the JMS shall have sufficient seniority within the applicable Party or its Affiliate to make decisions arising within the scope of the JMS responsibilities which scope shall be mutually discussed and agreed by the Parties. Either party may propose agenda items, which shall be discussed by the Parties at the JMS meetings. The representatives from each Party will have, collectively, one (1) vote on behalf of that Party, and all decision making shall be by consensus. Disputes at the JMS shall be handled under Section 19 of the Agreement, with initial referral to the Authorized Designees, rather than the JDC, unless otherwise agreed by the Parties.

	
24)
	
In the event of a termination for any reason, and so as to avoid any interruption of supply, including for reasons of patient safety, and subject to the requirements of this Section 22, Astellas shall continue to manufacture Astellas Bulk Product sufficient to meet FG’s requirements in the Astellas Territory until earlier of (i) [*]. In connection therewith, Astellas and FG shall mutually agree on manufacturing forecast for Astellas Bulk Product, based on FG’s reasonable projections and timelines requirements as agreed by the Parties. Astellas shall notify FG in writing within [*] of the issuance by Astellas of a notice of termination to FG or receipt by Astellas of a notice of termination from FG, of its then-current inventory at Astellas and the inventory expected to be held at Astellas at the effective date of such termination. Any inventory of Astellas Bulk Product in Astellas’ possession (including that of any Subcontractor, including any third party labeling or packaging Astellas Bulk Product), at the effective date of termination and requested by FG, shall be transferred to FG for its use, including for commercial sale, within the reasonable timeline as agreed by the Parties, provided that both Parties [*] to prevent any material disruption in the market. For such Astellas Bulk Product, and any finished (packaged) product resulting therefrom, FG shall pay to Astellas [*]. FG may sell, at its own responsibility, any Astellas Bulk Product in Astellas packaging, provided that FG shall put additional labeling on Astellas Bulk Product as required under applicable laws and regulations at its cost. In furtherance thereof, and commencing upon the receipt of a valid notice of such termination (unless such termination is capable of being cured and the breaching party is actively attempting to cure), Astellas shall provide all technical and manufacturing information and documents sufficient and necessary to enable cGMP bulk product manufacturing by FG, including without limitation, a technology transfer from Astellas to FG and/or its Affiliates or subcontractor(s) of Astellas technical information, including but not limited to methods, specifications, processes, and other information or parameters as FG and Astellas deem reasonable to continue and complete the manufacture of Astellas Bulk Product and archival or storage of any finished product resulting therefrom; and Astellas shall conduct all such transfer to FG or its Affiliate or Subcontractor in accordance with the timeline agreed by the Parties. FG will use reasonable efforts to minimize the burden on Astellas to create additional documentation needed to ensure continued supply of product and efficient response to regulatory requirements, etc., provided that FG shall bear Astellas’s reasonable cost necessary to create additional documentation. The period of transitional manufacture and archival and storage of any finished product resulting therefrom shall not exceed [*] following the effective date of the termination. In the event that Astellas utilizes a Subcontractor(s) for manufacture of Astellas Bulk Product (including any vendor involved in packaging or labeling), upon FG’s request, Astellas shall use commercially reasonable effort to cooperate to enable FG to (i) enter into a new commercial manufacturing and supply agreement with any requested Subcontractor; or (ii) assign existing agreement(s) between Astellas and such Subcontractor(s) to FG; in either case except for the financial terms to be negotiated between FG and such Subcontractor(s).

	
25)
	
In addition to any reports required to be delivered to FG under Section 10.1 of the Agreement, in order that FG may comply with its financial reporting obligations, Astellas shall, within [*] after the end of each calendar quarter, provide FG with a manufacturing and inventory report for all API and Astellas Bulk Product (including, for the avoidance of doubt, finished and/or labeled and packaged product, and product designated as samples, if any) in the possession of Astellas or its Subcontractor at the end of each such calendar quarter, including the status, disposition, and expected use thereof, in the detail and form reasonably satisfactory to FG and as outlined on Exhibit B.

 

[*] = Certain confidential information contained in this document, marked by brackets, has been omitted and filed separately with the Securities and Exchange Commission pursuant to Rule 24b-2 of the Securities Act of 1934, as amended.

Exhibit 10.9(i)

	
26)
	
Section 20.6 (Notices) is hereby amended to reflect the Parties’ current notice information, as follows:

		
	
Astellas:
	
Astellas Pharma Inc.

	
 
	
Attn: Vice President, Legal

	
 
	
[*]

	
 
	
 

	
 
	
 

	
with copy to:
	
Astellas Pharma Inc.

	
 
	
Attn: Vice President, Business Development

	
 
	
[*]

	
 
	
 

	
 
	
 

	
FG:
	
FibroGen, Inc.

	
 
	
Attn: Chief Executive Officer

	
 
	
409 Illinois Street

	
 
	
San Francisco, California 94158

	
 
	
United States of America

	
with a copy to:
	
FibroGen, Inc.

	
 
	
Attn: Chief Legal Counsel

	
 
	
409 Illinois Street

	
 
	
San Francisco, California 94158

	
 
	
United States of America

	
27)
	
The Agreement, as amended hereby, contains the entire understanding of the Parties with respect to the subject matter hereof. The Parties acknowledge that the amendments to the Agreement contained in this First Amendment are and shall be of no force or effect with respect to the EU Agreement.

	
28)
	
Except as otherwise provided herein, the Agreement has not been modified or amended and remains in full force and effect. All express or implied agreements and understandings, either oral or written, heretofore made that conflict with respect to the subject matter herein are expressly superseded in this First Amendment.

	
29)
	
This First Amendment may be executed in counterparts, each of which shall be deemed an original, and all of which together shall constitute one and the same instrument. Counterparts may be signed and delivered by facsimile and/or via portable document format (.pdf), each of which shall be binding when sent.

 

[*] = Certain confidential information contained in this document, marked by brackets, has been omitted and filed separately with the Securities and Exchange Commission pursuant to Rule 24b-2 of the Securities Act of 1934, as amended.

Exhibit 10.9(i)

IN WITNESS WHEREOF, the Parties have executed this First Amendment to the Agreement as of the First Amendment Effective Date.

					
	
FibroGen, Inc.
	
 
	
Astellas Pharma Inc.

	
By:
	
 
	
 
	
By:
	
 

	
Name:
	
 
	
 
	
Name:
	
Mitsunori Matsuda

	
Title:
	
 
	
 
	
Title:
	
Senior Vice President and President,

	
 
	
 
	
 
	
 
	
Pharmaceutical Technology

 

 

[*] = Certain confidential information contained in this document, marked by brackets, has been omitted and filed separately with the Securities and Exchange Commission pursuant to Rule 24b-2 of the Securities Act of 1934, as amended.

Exhibit 10.9(i)

 

Exhibit A: 

Prohibited Activities

	
 
	
1.
	
[*]

Permitted activities:

	
 
	
1.
	
[*]

 

[*] = Certain confidential information contained in this document, marked by brackets, has been omitted and filed separately with the Securities and Exchange Commission pursuant to Rule 24b-2 of the Securities Act of 1934, as amended.

Exhibit 10.9(i)

 

EXHIBIT B:

For the Quarterly Manufacturing Reports, the following information should be included:

	
 
	
•
	
[*]Exhibit 4.26

 

KAMADA LTD.

 

COMPENSATION POLICY FOR EXECUTIVE OFFICERS AND DIRECTORS

 

	1.	
OBJECTIVES OF THE POLICY

 

This document is designed to determine, describe and detail the policy of Kamada Ltd. (the “Company”) with respect to the compensation of the Company's office holders, the amount of the compensation, its components and the method for determining compensation.

 

The Company’s compensation policy and its publication are designed to enhance the level of transparency of the Company’s activities relating to the compensation of office holders and to improve the ability of the shareholders to express their opinion and influence the Company's compensation policy for officer and directors.

 

This document shall apply to the Company's office holders:  the chief executive officer, members of the Company's executive management, each person fulfilling such positions even if his title is different, and directors.

 

This document does not grant any rights whatsoever to an office holder.  Each of the Company's office holders shall be entitled to compensation only in accordance with his respective employment contract approved by the compensation committee, the board of directors (and the shareholders, to the extent required).

 

This document determines (among other things) the maximum values for the various components of compensation.  Awarding compensation to an office holder in an amount that is less than the amounts specified in this document shall not be deemed to be a deviation from the provisions of this compensation policy and shall not require the approval of the shareholders that is required by law in the event of deviation from the terms of the compensation policy.

 

Except with respect to the terms of service and employment of office holders that were approved prior to the date of approval of this compensation policy, any deviation or exception from this compensation policy (excluding, as described above, awarding compensation which is less than the compensation stated in this policy) shall be subject to the approval of the Company’s compensation committee, board of directors and the shareholders, to the extent required by law.

 

 

Amended and Restated Compensation Policy – Approved on December 20, 2018

 

This compensation policy shall apply to the terms of service and employment of office holders that are approved following the date of approval of this compensation policy.  This compensation policy does not derogate from existing contractual obligations, as of the date of approval of this compensation policy, between the Company and its office holders.

 

The policy is drafted in the masculine solely for convenience and applies to both men and women, without distinction.

 

In this policy, the Company's “competent organizations” are the compensation committee and the board of directors, and with respect to the compensation of the Company's chief executive officer, directors and controlling shareholders, also the shareholders, to the extent required by law.

 

	2.	
GENERAL BACKGROUND

 

		2.1.	
PURPOSE OF THE COMPENSATION POLICY FOR OFFICE HOLDERS

 

This compensation policy for office holders is designed to assist in achieving the Company's objectives and work plans with a long-term view, taking into account, among other things, the Company’s risks management policy and to ensure that:

 

		2.1.1.	
The interests of the Company’s office holders shall be as close as possible to and aligned with those of the Company and the shareholders;

 

		2.1.2.	
The Company may recruit and retain senior officers capable of leading the Company to further business success and able to handle future challenges;

 

		2.1.3.	
Office holders shall have motivation to attain a high level of business achievements without taking unreasonable risks;

 

		2.1.4.	
Office holders shall be compensated for achieving the Company's strategic targets; and

 

		2.1.5.	
An appropriate balance shall be established between the various compensation components – fixed vs. variable compensation, quantitative and measurable components vs. discretionary components, short-term vs. long-term components, compensation in cash vs. equity-based compensation and benefits and perquisites.

 

2

 

		2.2.	
PRIMARY BODIES INVOLVED IN DETERMINING THE COMPENSATION POLICY FOR OFFICE HOLDERS

 

The parties involved in determining the Company's compensation policy are:

 

		·	
Compensation committee of the board of directors – makes recommendations to the board of directors regarding the approval of the compensation policy for office holders and any extensions and updates to the policy to the extent required; approves the terms of service and employment of office holders; and may determine to exempt a transaction from shareholder approval (in the event that the compensation committee believes that bringing the transaction to the approval of the shareholders could jeopardize an arrangement with a candidate for chief executive officer).

 

		·	
Board of directors – approves the compensation policy for office holders; periodically reviews the compensation policy and is responsible for updating it as and when necessary.

 

		·	
Shareholders – approves the compensation policy, to the extent approval is required by law.

 

		2.3.	
BUSINESS ENVIRONMENT AND ITS IMPACT ON COMPENSATION OF OFFICE HOLDERS

 

As a Company engaged in the development of biological based drugs (biopharmaceuticals), the Company competes with other companies in the same and related fields to recruit and retain managers and leading professionals.  As at the date of writing this document (July 2013), no shortage of highly talented management personnel with expertise in the Company's specific field of business has been experienced; however, since it is a growing area with several companies joining each year, the Company's management personnel could be a target for recruitment by rival companies alongside a shortage which could develop over the following years.

 

3

 

The Company's compensation policy was designed, among other things, to ensure the Company's ability to recruit and retain the highly talented management personnel it requires to continue to develop its business and business success, all in accordance with and subject to the objectives of the compensation policy set forth in Section 2.1, including the promotion of the Company's goals in the long-term.

 

	3.	
OFFICER’S COMPENSATION IN VIEW OF COMPANY VALUES AND BUSINESS STRATEGY

 

		3.1.	
COMPENSATION ACCORDING TO THE OFFICER’S CHARACTERISTICS AND EXPERIENCE

 

Officer compensation shall take into account the officer’s education, skills, expertise, professional experience and achievements, as well as the characteristics of the position which he is intended to fulfill and the responsibilities of the position.  It is clarified, however, that the foregoing shall not constitute threshold conditions for purposes of fulfilling a specific position in the Company (because at times prior experience in a position and the relevant field are equivalent to or prevail over formal education in the field), and all of the foregoing characteristics shall be taken into account in the examination of the suitability of a candidate for a particular position. Without derogating from the foregoing, an office’s compensation shall be determined, for each of the various compensation components, according to the foregoing parameters, the nature of the position and the areas of responsibility, while preserving an appropriate balance between the various compensation components set out in this document.

 

		3.2.	
RATIO BETWEEN OFFICER COMPENSATION AND COMPENSATION OF OTHER COMPANY EMPLOYEES

 

The Company aims to compensate its office holders for their contribution to its business success over time, taking into account the extensive responsibility and authority imposed upon them.

 

Nevertheless, since the Company employs a relatively small number of employees most of whom have unique professional expertise, the Company attaches importance to the creation of appropriate compensation for all of its employees and in preserving reasonable gaps between the overall compensation of officers and the compensation of the other Company employees.

 

4

 

The compensation committee and the board of directors have examined the ratio between the terms of service and employment of officers and the average and median salary of the other Company employees and contractors, and the ratio between the terms of service and employment of officers and the average and median cost of employment of the other Company employees and contractors.

 

The compensation committee and the board of directors believe that the ratio is appropriate and reasonable taking into account the nature of the Company, its size, value, scale of activity in the various fields, the mixture of manpower and its field of activity and that it does not adversely impact labor relations within the Company.

 

		3.3.	
RELATIONSHIP BETWEEN THE COMPANY'S BUSINESS RESULTS AND OFFICER COMPENSATION

 

The Company's policy is that the overall compensation for officers should be considerably influenced by its business results as well as the individual contribution, responsibility and professional expertise of each officer to the achievement of these results.  The higher the management position, the influence of the business results and the individual contribution to the achievement of these results on the executive’s compensation shall increase.  For this purpose, the higher the management position, the weight of the variable compensation that is performance based in relation to the overall compensation shall increase, all as specified in Section 4.2 below.

 

	4.	
PRIMARY CONCEPTS OF THE COMPENSATION POLICY

 

		4.1.	
OVERALL COMPENSATION CONCEPT

 

The Company's compensation committee and board of directors believe that the overall compensation of each employee and in particular of officers should be comprised of a number of different components, such that each element rewards the employee for a different element of his contribution to the Company, thus achieving the objectives of the Company's compensation policy:

 

		·	
Base salary – designed to partially reward the employee for the time he devotes to the performance of his role and the daily performance of his tasks.  The base salary takes into account, on the one part, the employee's skills (such as experience, know-how, expertise accumulated in the field of business, education, professional qualifications etc.) and, on the other part, the requirements of the role and the responsibility and authority it carries.

 

5

 

		·	
Benefits and perquisites – some of which are mandatory according to law (such as pension, severance pay, vacation days, sick leave, recuperation pay, etc.), some of which are common market practice (such as health insurance, insurance for loss of earning capacity, further education funds, which have certain tax benefits for the employee and the Company) and others are designed to compensate the employee for expenses incurred in fulfilling the position (such as a company car, travel expenses, phone, etc.).

 

		·	
Variable performance based awards (e.g. annual bonus) – designed to reward the officer for his achievements and contribution to attaining the Company's goals during the course of the period for which the variable compensation is paid and to supplement the base salary.  The weight of variable performance based compensation in relation to the overall compensation shall increase the higher the officer’s management position.

 

		·	
Equity-based compensation – designed to link long-term shareholder returns and the compensation of officers and employees of the Company.  Equity-based compensation creates a correlation between the interests of employees and officers and the interests of the Company’s shareholders and assists in creating motivation and in retaining the key personnel in the Company.

 

6

 

		4.2.	
RATIO BETWEEN COMPENSATION COMPONENTS

 

The ratio required between the components of an officer’s compensation package is set forth in the following table:

 

	
RANK

	
BASE SALARY TO VARIABLE COMPENSATION (BOTH PERFORMANCE AND EQUITY BASED)

	
Chief Executive Officer and Deputy Chief Executive Officer

	
up to 1:2

	
Vice President

	
up to 1:1

 

	5.	
COMPENSATION COMPONENTS

 

		5.1.	
BASE SALARY

 

		5.1.1.	
Determination of the base salary for officers

 

The base salary for an officer shall be determined during the course of the negotiations for his employment in the Company, which shall be conducted by the person who shall directly supervise the officer (for the chief executive officer – the chairman of the board of directors or whoever is appointed on his behalf for such purpose, for a vice president – the Company's chief executive officer or whoever is appointed on his behalf for such purpose).  The officer’s intended supervisor may determine the base salary based on a range to be determined and approved in advance for such purpose in accordance with the provisions prescribed in this policy.

 

The salary to be determined, within the foregoing range, shall express the skills of the candidate (including, among other things, his education, professional experience and expertise) and his suitability to the intended position as well as also the acceptable salary conditions in the relevant market and the Company's financial capability at the time of recruitment.

 

7

 

The Company believes that the emphasis of its compensation policy should be on  performance based compensation and therefore, the Company's policy is to determine a base salary which is close to the median salary in the relevant market for similar positions, alongside variable performance based compensation and long-term compensation components that will bring the officer’s overall compensation to a level which will allow the Company to recruit and retain the highly talented management personnel it requires for continuation of its success.

 

Because officers hold a management position within the meaning of the Hours of Work and Rest Law, such law shall not apply to officers and they shall not be entitled to compensation for overtime work or work on the day of rest.

 

		5.1.1.1.	
Market comparison (benchmark)

 

To determine the salary for the recruitment of a new officer, a comparison shall be made of the acceptable salary in the market for similar positions in companies similar to the Company.  For purposes of the foregoing comparative studies, companies meeting the maximum number as possible of the following characteristics shall be selected:

 

		·	
Companies in the field of bio-tech, pharmaceuticals, medical devices and other related fields;

 

		·	
Public companies whose shares are traded either on the Tel Aviv Stock Exchange or the NASDAQ Stock Market;

 

		·	
Companies of a similar size in the following financial dimensions:  shareholder equity, balance sheet, sales turnover, operating profit and net profit;

 

		·	
Companies having substantial international activity.

 

8

 

The comparative study shall address all the components of the compensation package and shall include (to the extent the information is available):

 

		·	
the acceptable range of base salaries for similar positions (including the split within the range);

 

		·	
the acceptable range for annual bonuses;

 

		·	
the acceptable range for equity-based compensation; and

 

		·	
the benefits and perquisites that are acceptable in the market.

 

		5.1.1.2.	
Internal comparison – in determining the salary for the recruitment of a new officer, the following considerations shall be taken into account, as well as their potential impact on the Company’s labor relations as a whole and within the management team:

 

		·	
The gap between the proposed salary of the officer and the salary of the other officers in the Company.

 

		·	
The ratio between the proposed salary of the officer and the salary of the other employees of the Company.

 

		·	
If there are officers with similar positions in the Company – the gap between the proposed salary of the officer and the salary of the officers with similar positions.

 

		5.1.1.3.	
To the extent necessary, the Company may employ an officer outside of Israel.  In such instance, the salary shall be determined in a process adjusted to the country where such officer is employed.  In the event that the salary of officers who are candidates for employment abroad deviate from this policy, the salary shall be brought before the Company's competent organs for approval, prior to the execution of a binding employment contract.

 

		5.1.1.4.	
Director compensation

 

The compensation of directors of the Company (including external directors and others) who are not employed in another position in the Company shall be determined pursuant to the Companies Regulations (Rule Regarding the Compensation and Expenses of an External Director), 5760 – 2000 (the “Compensation Regulations”) and shall not exceed the maximum compensation permitted under the Compensation Regulations, among other things taking into account their definition as financial experts.

 

9

 

Compensation to directors who are employed in another position in the Company shall be determined in accordance with the Company’s customary compensation for similar positions, subject to the provisions of this compensation policy.

 

The Company may award directors equity-based compensation pursuant to the provisions of Section 5.2.2 below, subject to the provisions of the Compensation Regulations.

 

Directors shall be entitled only to such compensation that has been expressly provided for in this document.

 

		5.1.2.	
Periodical review and update of salary

 

In order to retain officers, the officers' base salary shall be reviewed annually during the course of the first quarter of each year, taking into consideration the challenges of the given year and the following year, the complexity of the officers’ roles, their scope and importance to the Company's performance, all based upon the Company's resources and in comparison to the acceptable salary for similar roles in the relevant market.  To the extent necessary, a proposal regarding an increase to all or any of the officers' salaries shall be prepared and brought before the Company's relevant organs for approval.

 

		5.1.2.1.	
Linkage

 

The officers' salary shall not be linked to any index apart from the statutory cost of living increase.

 

10

 

		5.2.	
VARIABLE COMPENSATION

 

Variable compensation components are intended to achieve several objectives:

 

		·	
To link part of the officers’ compensation to the achievement of business goals and targets which, in the long-term, bring maximum value to the Company and create a joint interest between the officers, the Company and its shareholders.

 

		·	
Increase the officers' motivation to attain the Company's long-term goals.

 

		·	
Correlating some of the Company's payroll costs with its performance and enhancing its financial and operational flexibility.

 

		5.2.1.	
Annual bonus

 

The Company's officers shall be entitled to an annual bonus, based upon the annual bonuses plan which shall be brought before the compensation committee and the board of directors for approval.

 

		5.2.1.1.	
Principles

 

Annual bonuses for officers shall be calculated according to the annual bonus plan, to the extent it is approved by the Company's competent organs.  The annual bonus plan shall be comprised of the following provisions:

 

		·	
Payment thresholds based on one or more quantitative financial measure(s) of Company performance during the year for which the bonus is paid (such as revenue, gross profit, EBITDA, operating profit or net profit).  The compensation committee shall determine the measure from the list and according to the Company's objectives for the bonus year.  In addition, the compensation committee shall determine a substitute measure which may be used as a payment threshold according to the board of directors resolution during the course of the bonus year where, due to circumstances which could not have been anticipated and which are not in the control of the Company's board of directors, the Company would not succeed in meeting the primary threshold(s).

 

11

 

		·	
Determining the target bonus for each officer – a target bonus is the bonus paid when 100% of the targets have been met – in terms of a salary multiplier.  A target bonus shall be identical for each officer of a particular rank and shall not exceed, in percentages, the rate set forth in Section 4.2;

 

		·	
Determining the maximum bonus (in terms of a salary multiplier) which shall be paid to an officer upon attaining considerably higher results than the targets that were determined;

 

		·	
The measures according to which the bonus shall be calculated for each officer and their relative weights, in accordance with Section 5.2.1.2 below;

 

		·	
The targets for each measure, for the bonus year.

 

		5.2.1.2.	
Determining the bonus plan measures and targets

 

Personal targets and measures shall be determined for each officer, according to which the officer's performance shall be measured.  A weight shall be assigned to each measure for determining the annual bonus for each officer, and the bonus paid to the officer shall be determined in accordance with the weighted percentage of meeting the targets, as described below.  There shall be three main categories of performance measures for each officer:

 

		·	
Company measures – economic or strategic measures, which may be measured quantitatively, in relation to the Company's performance (sales turnover, operating profit, percentage of operating profit, EBITDA, net profit, obtaining approval from the authorities in the target markets, etc.).  These measures shall be the same for all Company officers and the extent of meeting their targets shall determine 80% of the total bonus for the Company's chief executive officer and 40% of the total bonus for vice presidents.

 

12

 

Personal measures – quantifiable and measurable key performance indicators (KPIs) shall be determined for each officer separately, in accordance with his position. The extent of meeting these measures shall determine a further 40% of the total bonus of a vice president.  No personal measures shall be determined for the chief executive officer.

 

		·	
Managerial appraisal (the Company's chief executive officer or the chairman of the board of directors, as the case may be) – an evaluation of each officer’s performance in terms that are not measurable but which have a contribution to the Company's long-term performance.  The managerial appraisal shall determine up to 20% of the officer's total bonus.  At the beginning of each year, qualitative measures shall be determined on the basis of which the appraisal of each officer shall be made.

 

The targets in the personal and managerial measures of each officer shall be determined in accordance with the work plan targets for the bonus year.

 

		5.2.1.3.	
Determination of the bonus budget

 

The total annual budget for the bonuses of Company's officers shall be determined according to the sum of the maximum bonuses of all officers.  After the Company has achieved a net profit for two consecutive years, a maximum total annual bonus budget shall be determined, in terms of a percentage of the Company's operating profit (or the net profit/ gross profit / EBITDA / other measure or any combination thereof, according to the resolution of the Company's compensation committee and board of directors), unless otherwise determined in the Company’s annual budget  approved by the board of directors (e.g., if the Company has operating losses as a result of an increase in research and development costs, partnerships or M&A). In years where the Company does not meet the minimum percentage of the target determined by the Company, as determined by the compensation committee from time to time, no bonuses shall be paid to officers.

 

13

 

		5.2.1.4.	
Bonus calculation mechanism

 

The bonus for each officer shall be determined according to the extent that the officer has met the targets determined for him for the bonus year.  The weighted percentage of meeting the targets of each officer shall be translated into a bonus percentage according to the "payment line" formula determined in the bonus plan for officers, which shall be multiplied by the target bonus (the personal bonus) of the officer for the purpose of calculating the actual bonus.  The maximum target bonus for vice presidents shall be eight times the base monthly salary, for the deputy chief executive officer, nine times the base monthly salary and for the chief executive officer, ten times the base monthly salary.

 

The “payment line” shall determine:

 

		·	
The minimum percentage of meeting targets (the lower performance threshold) up to which the officer shall not be paid any bonus whatsoever; the minimum percentage is 70%.

 

		·	
The percentage of the target bonus which shall be paid in achieving the lower performance threshold;

 

		·	
A maximum percentage of the target bonus (the bonus ceiling) which shall be paid upon achieving a considerably higher level of performance than the targets; the maximum percentage is 150% of the target bonus.

 

		·	
The level of performance where the personal bonus ceiling shall be paid.

 

Calculation of the target bonus percentage for each level of performance between the above-mentioned points shall be made by a linear method.

 

14

 

		5.2.1.5.	
The approval process for the actual bonus

 

At the end of each year, the extent of meeting targets by each of the officers shall be calculated.  The percentage of meeting targets of the officer shall be translated into a percentage of the target bonus according to the payment line formula.  The actual bonus to be paid shall be calculated by multiplying the target bonus percentage by the target bonus.

 

The compensation committee and the board of directors shall be entitled to reduce an officer's annual bonus at their discretion taking into account the following factors:

 

		·	
The amount of the officer's contribution to the Company's business development beyond the specific responsibility;

 

		·	
The quality and speed of the officer's response to crises and unanticipated events;

 

		·	
The officer's contribution to the promotion of the Company within his field of expertise or outside such field.

 

		·	
The officer’s overall management, motivating employees and leadership.

 

The annual bonuses approved by the compensation committee and the board of directors shall be paid to the officers together with the first monthly salary that is paid after the approval of the annual bonuses by the board of directors.

 

If annual bonuses have been paid to officers on the basis of financial measures which at a later stage transpire to be erroneous and are restated in the financial statements, the officer shall refund the surplus bonuses sums, within one year from the date of the Company's notice with respect thereto, linked to the consumer price index, and if the officer has received less, the Company shall pay the missing bonus amounts together with the next monthly salary.  The Company, by written notice to the officer 60 days in advance, may set-off all or part of the surplus bonuses sums from the bonuses owing to the officer in respect of the following years.

 

15

 

		5.2.2.	
Special bonus

 

The Company's compensation committee and the board of directors shall be authorized to award any of the Company's officers a one-time special bonus of up to a gross amount of NIS 500,000 (in addition to the annual bonus) in recognition of a significant achievement or for completion of an assignment, such as completion of a major transaction or achieving a major milestone with material effect over the Company's business. Such bonus is individual for any of the Chief Executive Officer, Deputy Chief Executive Officer or Vice Presidents and should be approved by the Company’s compensation committee and board of directors.

 

		5.2.3.	
Equity-Based Compensation

 

The Company's compensation committee and board of directors believe, in accordance with common practices of public companies in the market, that as part of the officers' total compensation package it is appropriate to offer a component of equity-based compensation, the purpose of which is to establish a joint interest between the officers and the Company's shareholders.  By virtue of the long-term nature of equity-based compensation plans, they support the Company's ability to retain senior managers in their position for the long term and are in the interest of the Company and its shareholders.

 

16

 

In view of the advantages of equity-based compensation plans, the Company shall offer its officers participation in an equity-based compensation plan according to the provision set forth below:

 

		5.2.3.1.	
Equity-based compensation plan

 

Subject to the approval of the Company's competent organs in accordance with law, the Company shall offer officers and directors, participation in an equity-based company plan, which may include options to purchase shares or restricted share awards or a combination of both (herein described collectively as "Awards"). The equity-based compensation plan shall be defined and implemented so that it conforms to the requirements of Section 102 of the Income Tax Ordinance in the capital gains track, to the extent possible.

 

The equity-based compensation plan to be approved shall include the following:

 

		·	
The maximum number of securities to be granted and the dilution percentage arising from the grants;

 

		·	
The method of allocating the grant among the various offerees and also a reserve for grants to office holders who may join the Company during the course of the term of the plan;

 

		·	
The Awards shall vest over a minimum period of four years and not more than 25% of the Awards shall vest in each of such years. The minimum vesting period for the first portion of the grant shall not be less than one year from the date of grant;

 

		·	
With respect to options, the exercise price of each option shall be equal to the higher of (i) the average closing price of the Company’s ordinary shares on the Tel Aviv Stock Exchange during the 30 trading days prior to the date of the option grant plus 5%; and (ii) the closing price of the Company’s ordinary shares on the Tel Aviv Stock Exchange on the date of the option grant;

 

		·	
The expiration date of the options - up to 10 years from the date of grant; and

 

17

 

		·	
Terms upon termination of employment or service (due to dismissal, resignation, death or disability) and change of control.  The terms in the event of a change of control shall include, among others:  a definition of a change in control resulting in full acceleration of Awards that have not yet vested as of the date of the change of control.  Upon leaving the Company, the compensation committee shall be entitled, at its discretion, to approve the acceleration of Awards.

 

		5.2.3.2.	
Grants

 

In accordance with the approval of the compensation committee and the board of directors, Awards shall be granted to officers of the Company in accordance with the terms of the approved equity-based compensation plan.  To the extent that an approved plan includes several grants, the future grants shall be made in accordance with the provisions of the plan and on such dates as prescribed in the plan.

 

When a new officer joins the Company during the course of a plan, the joining officer shall be granted an Award out of the reserve determined in the plan.

 

The Awards granted shall be deposited with a trustee in accordance with the provisions of Section 102 of the Income Tax Ordinance.  The trustee shall report to the offerees about the number of Awards it holds on their behalf, their exercise dates in the case of options and any other details they require in connection with the grant.

 

The considerations for the allocation of the Awards among the various offerees shall include:

 

		·	
The officer's contribution to the Company's success;

 

		·	
The officer's ability to influence the Company's future and performance;

 

18

 

		·	
The amount of the other compensation components to which the officer is entitled;

 

		·	
The scope of the officer's responsibility and tasks.

 

		5.2.3.3.	
Exercise of Options

 

Upon vesting of each portion of an officer's options, the vested options held by the trustee may be exercised into Company shares.  The trustee shall act pursuant to the officers' instructions and shall perform for them all the acts required for the exercise of the options into shares and/or cash.

 

		5.2.3.4.	
Maximum Value of Equity-Based Compensation.

 

The maximum value of equity-based compensation for all officers shall be fifteen monthly base salaries.

 

		5.3.	
ADDITIONAL BENEFITS AND PERQUISITES

 

		5.3.1.	
Pension

 

The Company shall allocate payments to a pension fund (or several pension funds) or a pension agent, all in accordance with the officer's selection in writing and pursuant to the applicable statutory provisions.  The allocations shall be made out of the officer's base salary only and shall not be comprised of any other compensation components whatsoever.  The Company's allocations to pension funds shall be conditional upon the appropriate contribution from the officer's salary to the pension.

 

The Company shall insure officers for loss of earning capacity as part of their participation in a pension fund or as an additional policy for office holders that have manager insurance.  The Company's allocations to insurance for loss of earning capacity shall not exceed 2.5% of the officer's base salary.

 

Officers who are recruited by the Company after the publication of this policy shall sign the general consent form of the Israeli Minister of Labor pursuant to Section 14 of the Severance Pay Law and the Company shall allocate the officers' severance pay into the pension fund / manager’s insurance in accordance with officer’s election.

 

19

 

		5.3.2.	
Further Education Fund

 

Each month the Company shall allocate 7.5% of the officer's base salary and shall deduct a further 2.5% of his base salary to a further education fund at the officer's selection.  The allocation and deduction from the officer's salary to a further education fund shall be made up to maximum amount permitted under the Income Tax Regulations.

 

		5.3.3.	
Vehicle

 

The Company shall provide officers with a vehicle for their personal use, in accordance with the Company's practice, and the Company shall pay the cost of maintaining the vehicle.  The officer shall pay any tax applicable under any law on the value of the use of the vehicle placed at his disposal by the Company.  The Company shall calculate such tax and shall deduct it from the officer's salary.

 

		5.3.4.	
Mobile Phone

 

The Company shall provide an officer with a mobile phone for his use, the type of which shall be at the Company's discretion, and the payment for the cost of use of the phone and the device shall be paid by the Company.  The officer shall pay any tax which is likely to be levied on him due to the use of the mobile telephone at the Company's expense.

 

		5.3.5.	
Meals

 

The officer shall be entitled to participate in a payment arrangement for meals during working hours as determined in the Company's policy with respect to all of the Company's employees.

 

		5.3.6.	
Annual Vacation

 

An officer shall be entitled to annual vacation in the number of days determined in the annual vacation tables and in accordance with the Company's policy (or pursuant to the Annual Vacation Law if no such tables have been defined in the Company's policy).

 

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		5.3.7.	
Sick Leave

 

An officer shall be entitled to be absent from work on account of illness pursuant to the provisions of the Sick Pay Law and in accordance with the Company's policy.

 

		5.3.8.	
Recuperation Pay

 

An officer shall be entitled to recuperation pay pursuant to the Recuperation Pay Law.

 

	6.	
TERMINATION OF OFFICE CONDITIONS

 

		6.1.	
ADVANCE NOTICE

 

An officer shall be entitled to an advance notice period, as determined by the compensation committee or in accordance with the existing agreements and no more than four months.  During the course of the advance notice period, the officer shall be required to continue to fulfill his position, unless the chief executive officer decides to release him from this obligation, and he shall be entitled to the continuation of all the terms of office and employment without change with respect to such period.

 

		6.2.	
RETIREMENT AND TERMINATION AWARDS

 

As a general rule, no retirement and termination awards shall be determined in the officers' personal employment agreements.  The board of directors, at the chief executive officer’s recommendation, may approve the offer to an officer who has been employed by the Company for at least three years, a retirement award in an amount not exceeding twice the officer's base monthly salary.  When an officer has been employed by the Company for five years or more, the board of directors may approve a retirement or termination award which may not exceed four times the officer's base monthly salary.

 

		6.3.	
NON-COMPETITION

 

Officers shall undertake in writing, at the time they enter into an employment agreement with the Company, to refrain from competing with the Company for a period which is not less than the advance notice period plus the retirement or termination award period to which they shall be entitled after their retirement from the Company.

 

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Officers who are employed in the Company at the date of publication of the policy and who have not signed a non-competition agreement shall sign an agreement as above-mentioned as a condition for payment of any retirement or termination award.

 

	7.	
EXCULPATION, INDEMNITY AND OFFICERS' INSURANCE

 

Office holders shall be covered by directors' and officers' liability insurance which the Company shall acquire, from time to time (the "Policy"), subject to the Israeli Companies Law, 1999 (the “Companies Law”), the Israeli Companies Law Regulations (Reliefs Regarding Transaction with Interested Parties), 2000 (the “Companies Regulations”) and any other applicable law or regulation.  Subject to the provisions of the Companies Law, the Companies Regulations and any other applicable law or regulation, the acquisition, extension, renewal or replacement of the Policy may be approved solely by the Company’s compensation committee provided that (i) the liability coverage does not exceed $30,000,000 (for each claim and in the aggregate) and the aggregate annual premium does not exceed $400,000, and the side "A" directors and officers liability coverage does not exceed $10,000,000 (for each claim and in the aggregate) and its aggregate annual premium does not exceed $30,000; and (ii) the Policy is on market terms and shall not have a material impact on the profitability of the Company, its assets or liabilities.

 

The Company awards, and shall continue to award, indemnification undertakings to directors and officers, subject to the approvals required in accordance with the provisions of the Companies Law.

 

Subject to the provisions of the Companies Law, the Company shall be entitled to exculpate in advance an office holder of the Company from liability, in whole or in part, for damages resulting from a breach of a duty of care towards the Company, subject to the approvals required in accordance with the Companies Law; provided, however, that the Company may not exempt an office holder for an action or transaction in which a controlling shareholder (as such term is defined in the Companies Law) or any other office holder (including an office holder who is not the office holder the Company has undertaken to exempt) has a personal interest (as such term is defined in the Companies Law).

 

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	8.	
MAINTENANCE OF THE COMPENSATION POLICY

 

		8.1.	
The Company’s Vice President, Human Resources shall be responsible for maintaining the compensation policy updated.

 

		8.2.	
Updates to the compensation policy shall be approved by the compensation committee, the board of directors and the shareholders pursuant to the requirements of the Companies Law.

 

 

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