Document:

exv4w3

 

Exhibit 4.3

TopSpin Medical, Inc.

(“The Company”)

*

CERTIFICATE No. 1

For 25,000,000 warrants (Series 2), registered in the name of the Registration Company of Bank
Hapoalim Ltd.

	 	1.	 	This Certificate witnesseth that pursuant to the provisions of the Trust Deed of
November 21, 2006, drafted and signed between the Company on the one hand and Hermetic
Trust (1975) Ltd. as trustee, on the other hand (hereinafter: “trust deed”), whereby the
Company shall issue bonds (Series A) (“the bonds”, or “the bonds (Series A)”), where this
warrant constitutes an appendix to and an integral part of them, the Company hereby grants
to the holder of bonds issued pursuant to the trust deed, a quantity of up to 25,000,000
registered warrants (series 2), unlisted, for the purchase of up to 25,000,000 ordinary
            shares of US$ 0.001 par value each of the Company (“warrants (Series 2)”) so that every
allocation of 2 bonds shall entitle the above holder to obtain from the Company, free of
any charge, 1 (one) warrant (Series 2), wherein each warrant (Series 2) entitles the said
holder to acquire one (1) ordinary share of US$ 0.001 par value each of the Company. It is
stipulated for the sake of clarity that the entitledness to obtaining warrants (Series 2)
as aforesaid is confined to the bonds (Series A) allocated for the private placement, to
the exclusion of any bonds (Series A) issued in future, if at all.
	 
	 	2.	 	Every warrant (Series 2) shall entitle its holder to acquire in return for the exercise
price indicated in the supplement to this warrant, (hereinafter: “the warrant (Series 2)
overleaf conditions”) from the Company free of charge

 

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     one ordinary share of the Company of US$ 0.001 par value each (hereinafter: “ the
exercise share”), on any business day except the 12th through 16th
days of every month, during a period starting on the day of the listing for trading at
the stock exchange of the warrants (Series 2) and ending on May 31, 2009 at a cash
exercise price of NIS 0.84, linked to the index.

     3. The exercise rate between the warrant (Series 2) for the exercise share (1:1) and the
exercise price shall be subject to adjustments as stipulated in the warrant (Series 2)
overleaf conditions.

     4. The warrants (Series 2) shall only be listed for reading on the stock exchange
subject to the provisions of the warrant (Series 2) overleaf conditions.

     5. It is stipulated that no exercise of warrants (Series 2) can take place pending the
listing of the warrants (Series 2) for trading on the stock exchange.

     6. This warrant (Series 2) is issued pursuant to and in accordance with the warrant
overleaf conditions.

Signed on November 21, 2006

	 	 	 
	 	 	 
	 

	 	Top Spin Medical, Inc.

TRANSFER OF THIS SECURITY DIRECTLY OR INDIRECTLY, WITHIN THE UNITED STATES OR TO OR FOR THE
ACCOUNT OR

BENEFIT OF U.S. PERSONS IS PROHIBITED EXCEPT IN ACCORDANCE WITH THE PROVISIONS OF REGULATION S
PROMULGATED UNDER THE SECURITIES ACT OF 1933 (THE “SECURITIES ACT”) RULE 901 THROUGH RULE 905,
AND PRELIMINARY NOTES), PURSUANT TO REGISTRATION UNDER THE SECURITIES ACT, OR PURSUANT TO AN
AVAILABLE EXEMPTION FROM REGISTRATION. HEDGING TRANSACTIONS INVOLVING THESE SECURITIES MAY NOT
BE CONDUCTED UNLESS IN COMPLIANCE WITH THE SECURITIES ACT.

 

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TopSpin Medical, Inc. (“the Company”)

Overleaf Conditions

	1.	 	Definitions
	 
	 	 	The following definitions shall apply to terms used in this Warrant (Series 2):
	 
	 	 	“Bonds” or “Bonds (Series A)”
	 
	 	 	As defined in the trust deed.
	 
	 	 	“Special Resolution”
	 
	 	 	A resolution passed (a) at a general meeting of the holders of warrants (Series 2) at a
majority of at least 75% of the votes participating in the vote.
	 
	 	 	Private Placement Date
	 
	 	 	November 23, 2006
	 
	 	 	Business Day
	 
	 	 	Any day on which the majority of banks in Israel are open for transactions.
	 
	 	 	Commerce Day
	 
	 	 	A day on which transactions are conducted on the stock exchange.
	 
	 	 	Exercise date or Exercise day
	 
	 	 	As defined in art 3.1 hereinbelow.
	 
	 	 	“The Bond Holders”
	 
	 	 	The bond holders (Series A)

 

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	 	 	“The Warrant Holders”
	 
	 	 	The persons whose names appear at the relevant time in the register of warrant (Series 2)
holders, and in the event of a number of joint holders, the joint holder whose name appears
first in the register.
	 
	 	 	Register 
	 
	 	 	The register of warrant (Series 2) holders as indicated in art. 10 below.
	 
	 	 	Trust Deed
	 
	 	 	The trust deed of November 21, 2006, whereby the Company is to issue bonds (Series A) to
the investors.
	 
	 	 	The Stock Exchange
	 
	 	 	The Tel-Aviv Stock Exchange Ltd.
	 
	 	 	The Company Law
	 
	 	 	The Israeli Company Law, 1999

	2.	 	General

	 	2.1	 	Pursuant to the provisions of the trust deed of November 21, 2006,
whereby the Company shall issue the bonds to which this warrant (Series 2) is a
supplement and an integral part thereof, the Company hereby issues to the holders of
bonds issued pursuant to the trust deed a quantity of up to 25,000,000 warrants
(Series 2), registered but unlisted for trading, for the purchase of up to 25,000,000
ordinary shares of $ 0.001 par value each in the Company (“the Series 2 Warrants”), so
that every bond holder holding NIS 2 par value of bonds (Series A) shall be entitled
to obtain from the Company free of charge one (1) warrant (Series 2), wherein each
warrant (Series 2) entitles to the purchase of one (1) ordinary share of $ 0.001 par
value

 

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	 	 	 	of the Company against payment of the exercise price defined hereinbelow.
	 
	 	2.2	 	Every warrant (Series 2) shall entitle its holder to acquire, in return for
the exercise price specified hereinbelow, to acquire one ordinary share of the Company
of $ 0.001 par value (“the exercise price”) on any commerce day except the
12th through 16th day of each month, in the period starting on
the day of listing of the warrants (Series 2) for trading on the stock exchange till
May 31, 2009 (“the exercise period”), at an exercise price in cash of NIS 0.84 linked
to the index (“the exercise price”). In the event of the deadline for exercise of the
warrants falling on a non-commerce day, the said deadline shall be deferred to the
next commerce day.
	 
	 	2.3	 	The exercise ratio between the warrant (Series 2) and the exercise share
(1:1) and the exercise price shall be subject to adjustments as stipulated in art. 4
hereinbelow.
	 
	 	2.4	 	The Company may at any time allocate additional warrants (Series 2) without
restriction, at its sole discretion, without having to seek approval by the warrant
(Seriues 2) holders. The status of the additional warrants (Series 2) from the moment
of their issue shall be the same as that of the offered warrants (Series 2). The
offered warrants (Series 2) and the additional warrants (Series 2) (from the time of
issue) shall constitute a single series to all intents and purposes.

 

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	 	2.5	 	Moreover, the Company may allocate warrants of a different class or other
securities, with or without inherent rights to the purchase of shares of the Company,
on such terms regarding redemption, interest, linkage differential, repayment rank in
case of liquidation and other conditions as the Company may deem fit, regardless of
whether superior, equal or inferior to the terms of the warrants (Series 2), the
Company being under no obligation to seek any approval from the warrant holders
(Series 2).
	 
	 	2.6	 	Listing for Trade on the Stock Exchange
	 
	 	 	 	The warrants (Series 2) are not listed for trading on the stock exchange. The
Company hereby serves notice that it shall make its best efforts and that it
intends to apply all the necessary measures and pass all the necessary resolutions
under law in order to publish a prospectus of the Company not later than six months
from the private placement date, on the basis of which the warrants (Series 2) and
the bonds (Series A) shall be listed for trading on the stock exchange.
	 
	 	 	 	If the prospectus is not published as stated in this art. 2.6, the bonds (Series A)
shall be subjected to anticipated repayment pursuant to art. 2,8 of the trust deed.
The warrants shall expire and become null and void automatically at the time of
such anticipated repayment, whereupon they shall confer no rights whatsoever to
their holders.
	 
	 	 	 	A condition precedent to the obligation of the Company to act for publication of a
prospectus envisaging the listing of the warrants (Series 2) for trading on the
stock exchange as aforesaid is that every

 

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	 	 	 	warrant holder shall provide the Company with such information as shall be
reasonably required by the Company for listing the warrants (Series 2), with regard
to the said holder individually and the warrants (Series 2) held, everything as
required under law, including the US SEC.
	 
	 	 	 	The private placement is taking place in Israel only, not in the USA or to a US
person as defined in Regulation S, issued under the United States Securities Act of
1933 (“Securities Act”). Every buyer of the securities offered under the private
placement has declared that he is not a US person, is not buying the securities
offered under the private placement for any US person and/or person located in the
United States; that he was not staying in the United States when filing an
application for buying the securities offered under the private placement, and that
he is not buying the securities offered under the private placement with an intent
to engage in “distribution” in the United States (according to the definition of
this term as given in the US security laws).
	 
	 	 	 	No person is empowered to act for the sale of the securities offered under the
private placement in the United States.
	 
	 	 	 	The warrants (Series 2) are not registered pursuant to the
	 
	 	 	 	US Securities Act, and the purchasers of warrants (Series 2) are banned from
offering and/or selling them in the USA or to US persons unless registered under
the Securities Act or unless
	 
	 	 	 	there is an exemption from the registration requirements under the Securities Act.
The Company does not undertake to list the warrants (Series 2) for trading under
the Securities Act.

 

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	 	2.7	 	Subject to any other provision of this warrant and any law, the Company
and/or a subsidiary of the Company and/or another corporation controlled by the
Company (“the acquiring corporation”) shall be entitled at any time to buy warrants
(Series 2) from this issue at their sole discretion at such price as they deem fit.
	 
	 	2.8	 	The warrants (Series 2) to be held as aforesaid by the
acquiring corporation shall constitute an asset of the acquiring corporation (and
subject to the foregoing in this article, the acquiring corporation may perform any
operation in connection with the warrants (Series 2), including sale thereof, from
time to time, and if the warrants (Series 2) are listed for trading on the stock
exchange they shall not be stricken off the trading on the stock exchange.
everything subject to the provisions of any law.
	 
	 	2.9	 	Immediately after the date of the private placement, the Company shall act
for registering the warrants (Series 2) in the name of a registration company of one
of the banks in Israel and shall enter then as a non-registered paper at the stock
exchange clearing house that shall provide clearing services for the warrants (Series
2), subject to the proper permits from the Securities Authority and/or the stock
exchange and/or the stock exchange clearing house and/or any other authority for the
purpose of making the registration at the stock exchange clearing house. It is
stipulated that as long as the warrants (Series 2) remain registered as a
non-registered paper there shall be

 

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	 	 	 	no transfers of warrants except with approval by the Company and strictly after the
transferee shall have provided the Company with the details required for listing
the warrants (Series 2) for trading as provided in art. 2.6 above, as well as Form
IRS W-8BEN, everything subject to the foregoing art. 2.6 .

	2.10	 	Linkage Conditions of the Exercise Price
	 
	 	 	Definitions
	 
	 	 	“Consumer Price Index” or “Index”
	 
	 	 	The price index known as the “consumer price index” including fruits and
vegetables, as published by the Central Bureau of Statistics in Israel, including
the said index if published by any other official body or institution superseding
the Central Bureau of Statistics, also including any official index superseding
them, regardless of whether based on the existing index or not. In the event of it
being superseded by any other index published by such body or institution and the
said body or institution not having established the ratio between it and the
superseded index, the said ratio shall be determined by the Central Bureau of
Statistics, and if no such ratio is established the board of the Company shall, in
consultation with economic experts appointed by it, shall determine the ratio
between the other index and the superseded one.
	 
	 	 	“The Known Index” – the last known index.
	 
	 	 	“The Basic Index”  — the index due to October 2006 as published on November 15,
2006.

 

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	 	 	“The exercise index”  —  the index known at the time of exercise of the warrant.
	 
	 	 	The exercise price shall be linked to the consumer price index as follows. If it
shall have become evident at the time of exercise that the exercise index has risen
in relation to the basic index, the exercise price shall be increased in proportion
to the change of the exercise index in relation to the basic index; and in the
event that at the time of exercise the exercise index shall have decreased in
relation to the basic index, the exercise index shall equal the basic index.

	3.	 	Exercise of the Warrants (Series 2)

	 	3.1	 	Subject to completion of the listing of the warrants (Series 2) for trading, every
warrant (Series 2) holder desiring to exercise his right to buy exercise shares by
virtue of the warrants (Series 2) held by him shall do so during the exercise period
by way of submitting an exercise notice to the Company on a form to be established by
the Company to this effect, at the registered office of the Company, and in the event
of an applicant not entered in the register of option holders (non-registered
applicant) – to a stock exchange member through which he holds the warrants, payment
of the exercise price in cash, and return of the allocation letter, as proof of his
eligibility for the exercise. Once sent the exercise notice may not be cancelled or
modified. The person applying for exercise shall, whenever required by the Company to
do so, sign any documents necessary under the provisions of any law for granting the
exercise shares.

 

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	 	 	 	The exercise day or exercise time shall be the day on which an exercise notice is
delivered to the Company in the event of a registered applicant, and in case of
submission of an exercise notice through a stock exchange member by a
non-registered applicant – the day of receipt at the stock exchange clearing house
of the exercise notice for the warrant (Series 2) that meets all of the above
requirements. To this effect, an exercise notice received after 12:00 hrs shall be
deemed to have been received before 12:00 hrs on the following commerce day.
	 
	 	 	 	The applicant shall, whenever required to do so by the Company or the registration
company, sign any additional document as shall be necessary under the provisions of
any law or the incorporation documents of the Company for validating the allocation
of the exercise shares.
	 
	 	 	 	In the event of the applicant having failed to comply with all the conditions for
exercise of the warrant (Series 2), the exercise notice shall be deemed to be null
and void, and the warrants (Series 2) allocation letters and the money attach ed to
the exercise notice shall be returned to the applicant within two(2) business days
from the Company’s ruling that the said notice is null and void.
	 
	 	 	 	An exercise notice may not be cancelled or amended. No right shall be granted to
exercise any fractional warrant (Series 2); however, an allocation letter for an
warrant (Series 2) may be split or transferred as provided in articles 6 and 7 of
this warrant.
	 
	 	 	 	In the event of the deadline for exercise of warrants (Series 2) falling on a
non-commerce day, it shall be extended to the next commerce day.

 

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	 	3.2	 	Stock Exchange Clearing House Regulations on the Timetable for Exercise of
Warrants
	 
	 	 	 	The warrants shall be registered as non-registered paper and after their
listing on the stock exchange, their exercise shall be subject to the following
stock exchange clearing house regulations, subject to the foregoing provisions. The
stock exchange clearing house regulations stipulate as follows.

	 	a.	 	Exercise notices received by 12:00 hrs at the office of a
stock exchange member shall be handed over by the said member to the stock
exchange clearing house not later than 12:00 hrs on the following commerce
day.
	 
	 	b.	 	On receipt of an exercise note from a stock exchange member
by 12:00 hrs, the stock exchange clearing house shall debit the said stock
exchange member with its money equivalent and shall accordingly credit the
registration company not later than 12:00 hrs on the following commerce day
after receiving the said notice.
	 
	 	c.	 	On receiving a credit note pursuant to the foregoing
sub-article (b) by 12:00 hrs, the registration company shall transfer the
exercise notice to the registered office of the Company not later than 12:00
hrs on the following commerce day.
	 
	 	d.	 	Any of the aforementioned notices received after 12:00 hrs on
a commerce day shall be deemed to have been received before 12:00 hrs on the
following commerce day.

Notwithstanding the foregoing, on the exercise deadline – and if the latter is not
a commerce day, then on the following commerce
day –

 

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the stock exchange clearing house members shall submit to the stock exchange
clearing house the final exercise applications by 09:00 hrs. The exercise shall
take place on the same day. A clearing house member who has failed to submit an
application by the said time shall be deemed by the clearing house to have failed
to exercise his right, whereupon the warrant shall expire and become null and void.

	4.	 	Adjustments and Participation in the Issue of Rights, Bonus Shares, and Distribution of
Dividend.

	 	4.1	 	The following provisions shall apply to the warrants (Series 2) from the day of
the private placement to the end of the exercise period in any case of issue of bonus
 shares.

	 	4.1.1	 	In the event of the Company distributing bonus shares the
date of record for the distribution of which is prior to the exercise day, the
exercise shares to which the warrant (Series 2) holder is entitled on exercise
of the warrants (Series 2) and the payment of the exercise price shall be
joined by ordinary shares of the Company for every warrant (Series 2) in the
number to which he would have been entitled as bonus shares if he had
exercised the warrant (Series 2) prior to the day of record for the right to
obtain bonus shares.
	 
	 	 	 	The exercise price of all warrants (Series 2) shall remain unchanged as a
result of the addition of shares as aforesaid, on the condition that the
exercise price shall not be less than the nominal value of the exercise shares and the shares to be so added. The provisions with regard to the
exercise shares shall

 

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	 	 	 	apply also to the shares to be added to the exercise shares, subject to any
necessary changes. In the event of adjustments pursuant to this
sub-article, the applicant shall not be entitled to obtain any fractional
share, and the provisions of article 5 hereinbelow shall apply. This
adjustment method is not subject to change.
	 
	 	4.1.2	 	In the event of the shareholders of the Company being
offered – by way of rights – rights to the purchase of any securities
whatsoever, the number of shares arising from the exercise of the warrants
shall be adjusted to the bonus component of the rights as evident in the ratio
between the share price on the stock exchange on the day of record and the “X
Rights” basic rate. In case of adjustment pursuant to this sub-article, the
applicant shall not be entitled to obtain any fractional share and the
provisions of article 5 hereinbelow shall apply. This adjustment method is not
subject to any change.
	 
	 	 	 	The number of exercise shares due to an warrant (Series 2) holder shall
only be adjusted in case of distribution of bonus shares and rights but not
in the event of any other issues, including an issue to interested parties.
	 
	 	4.1.3	 	If the Company pays dividend to its shareholders,
immediately after the date of record for the right to obtain cash dividend the
exercise price of the outstanding warrants (Series 2) shall be adjusted by
multiplication by the ratio between the basic “ex Dividend” rate and the
closing rate established at the stock exchange for the Company shares on the
day of record for eligibility for dividend. The Company shall announce by an

 

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	 	 	 	immediate report and an announcement to the stock exchange clearing house
the adjusted exercise price not later than the day on which trading with
the “ex dividend” shares begins.

	5.	 	Allocation of Exercise Shares

	 	5.1.1	 	The Company shall proceed as follows with regard to the allocation of
exercise shares. On the first business day after the exercise day the Company
shall, by means of share certificates for applicants directly holding warrants
(Series 2) and for the registration company for holders of warrants (Series 2)
through the registration company, allocate the exercise shares due to them and
after approval of the listing of the exercise shares on the stock exchange, the
Company shall immediately approach the stock exchange with an application for
causing the listing of the exercise shares as speedily as possible thereafter.
	 
	 	5.1.2	 	Whenever required to do so, the applicant shall such additional
document as may be required under the provisions of any law and the Company
guidelines for validating the allocation of the exercise shares. On submission of
the application for exercise of the warrants (Series 2), every applicant shall
declare in writing that he is not exercising the warrants (Series 2) for any US
person and/or person in the US.
	 
	 	5.1.3	 	The applicant shall not be entitled to obtain fractional exercise shares. Any remaining surpluses of exercise shares shall be sold by the trustee to
be appointed by the Company for this purpose at the stock exchange within a period
of one month from the

 

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	 	 	 	allocation date, and the net proceeds, after deduction of the sale expenses and
the relative exercise price, and after deduction of other commissions and
compulsory payments, if any, shall be paid to the entitled person within
fourteen (14) days from the sale date. The Company shall not send checks to the
entitled persons for amounts of less than NIS 50; these can be collected at the
Company office.
	 
	 	5.1.4	 	Immediately after the exercise date, the exercise shares shall be
equal in every way to the ordinary shares of the equity of the Company and shall
entitle their owners to the full amount of dividend in cash or bonus shares, as
well as to every other distribution for which the date of record is from the
exercise date onward.

	6.	 	Transfers
	 
	 	 	The allocation letters for warrants (Series 2) are transferable subject to
submission of appropriate transfer deeds to the Company. The transfer deeds shall be of
the same format as share transfer deeds. The Company shall keep in its registered
office a register containing a list of the holders of warrants (Series 2) registered in
the Company.
	 
	 	 	The articles of association of the Company with regard to the transfer of wholly paid
up shares shall apply, mutatis mutandis, to the transfer of warrant (Series 2)
allocation letters. It is stipulated that as long as the warrants (Series 2) remain as
entered in the non-registered category, any transfer thereof is subject to approval by
the Company, on the condition that the transferee shall have submitted to the Company
the necessary details as required for the listing of the option warrants (Series 2)
for

 

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	 	 	trading, as provided in art. 2.6 hereinabove and in Form W-8BEN, everything subject to
the foregoing art. 2.9.
	 
	7.	 	Splitting of Allocation Letters
	 
	 	 	Any allocation letter on warrant (Series 2) may be split into a number of
allocation letters where the sum total of warrants (Series 2) covered by them equals
the number of warrants (Series 2) included in the allocation letter whose split is
requested. The splitting shall take place on the basis of a splitting application
signed by the registered holder of the respective allocation letter, or his legal
representatives, and it shall be submitted to the Company at its registered office
together with the allocation letter whose splitting is requested. All expenses involved
in the splitting, including stamp tax and other mandatory payments, if any, shall be
paid by the applicant.
	 
	8.	 	Notices
	 
	 	 	Unless expressly provided otherwise in the warrants (Series 2) and except in the
cases where this warrant (Series 2) stipulates otherwise, notices by the Company to the
holders of warrants (Series 2) shall be made in one of the following ways at the
discretion of the Company:
	 
	  8.1	 	By sending a notice by registered mail to the latest address of the holder of
the warrant (Series 2) as entered in the register; and any notice so mailed shall be
deemed to have been delivered to the warrant (Series 2) holder within three business
days from being so mailed. This alternative is only applicable to warrant (Series 2)
holders entered personally in the register, i.e. not by means of the nominee company;
or

 

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	   8.2	 	By an advertisement inserted in two large-distribution Hebrew daily
newspapers. A notice so published shall be deemed to have been delivered on the day of
its publication.

	9.	 	Waivers, Settlements, Changes of the Warrant (Series 2)
	 
	 	 	The Company may, by way of a special resolution by a separate general meeting of the
holders of warrants (Series 2) and in accordance with a resolution by the shareholders of
the Company (passed with an ordinary majority), enter into settlements with the warrant
(Series 2) holders with regard to any right or claim on their part and/or introduce any
amendment, modification or settlement regarding their rights or any other provision
contained in the warrant (Series 2).
	 
	 	 	Notwithstanding the foregoing, the stock exchange regulations rule out any change of the
terms of the warrants (Series 2) with regard to the exercise price, the exercise period,
the linkage conditions and the means established in art. 4 of this warrant, except a change
of the exercise period and/or the exercise price of the warrants in the course of a
settlement or composition pursuant to art. 350 of the Company Law. All the provisions of
the articles of incorporation of the Company with regard to general meetings of the company
shall be regarded as referring to to separate general meetings of warrant (Series 2)
holders as if the warrants (Series 2) constitute a class of shares in the share capital of
the Company; however, the quorum at a meeting of the holders of warrants (Series 2) shall
be at least two (2) warrant (Series 2) holders attending in person or by proxy, holding one
third or more of the existing warrants (Series 2). In the absence of quorum at a deferred
meeting held after notifying the warrant (Series 2) holders of the holding of the deferred
meeting, where it is stated that at least two (2) of the warrant

 

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	 	 	(Series 2) holders who are attending in person or are represented by proxy shall constitute
quorum, two (2) warrant (Series 2) holders attending in person or by proxy shall constitute
quorum at the deferred meeting as aforesaid. Voting at general meetings of the warrants (2)
shall be by ballot only, every warrant entitling to one vote. In this context there shall
be no distinction between persons who are interested parties in the Company and those who
are not. It is stipulated that the quorum for the purpose of holding the general meetings
of the warrant (Series 2) holders for passing a special resolution and in the count of
votes for such special resolution shall not include the votes of warrant (Series 2) holders
who are holders of controlling interest in the Company, companies controlled by holders of
controlling interest in the Company or companies related to the Company according to the
definitions of these terms in the Securities Law, except those of the foregoing who are
investors belonging to the investors named in the First Supplement to the Securities Law
(concerning art. 15(a)(b)(1) of the Securities Law), who is not an investor for himself,
his vote will be counted.
	 
	 	 	The following procedure shall apply to all cases of convening a general meeting of warrant
(Series 2) holders with regard to unregistered holders:
	 
	 	 	Voting at meetings of warrant (Series 2) holders of the Company, pending the issuance of
detailed instructions and/or arrangements in regulations of the stock exchange clearing
house with regard to voting at meetings of companies incorporated outside Israel and issued
at the Tel-Aviv Stock Exchange Ltd.:

 

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	 	 	Warrant holders holding an warrant (Series 2) with a stock exchange member on the date of
record, the said warrant being included among the warrants (Series 2) registered in the
name of the Registration Company of Bank Hapoalim Ltd. (“registration company”) who desire
to vote at a general meeting shall approach the stock exchange member with whom their right
to warrant (Series 2) is registered and request that the stock exchange member act through
the stock exchange clearing house for obtaining a power of attorney from the registration
company in his name or in the name of an authorized person on his behalf.
	 
	 	 	An warrant (Series 2) holder with an warrant (Series 2) in his name held by a stock
exchange member on the date of record may only participate in and vote at the meeting by
presenting such a power of attorney, and he may not prove his ownership or take part in the
vote by presenting a proof of ownership (as defined in the Company Law) from a stock
exchange member on his holdings of warrant (Series 2) on the date of record.
	 
	 	 	The registration company shall approach the stock exchange clearing house with a request to
certify that the approvals of the applications for power of attorney handed over to it as
aforesaid, according to a list of the requested quantity with every clearing house member,
were held on the date of record for the meeting by the clearing house member as indicated
on the list. After receipt of the said certification by the clearing house, the
registration company shall provide the warrant (Series 2) holders with a power of attorney
according to the respective applications, whereby the registration company empowers every
one of the unregistered warrant (Series 2) holders to vote at a general meeting at his sole
discretion with regard to the totality of warrants (Series 2) held by such holder, and also
to note that every one of them is entitled to deliver to the Company, not later than the
time of the

 

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	 	 	meeting, a proxy on its behalf, empowering another person to vote on his behalf.
	 
	 	 	In the event of issue of detailed guidelines and/or instructions as part of the stock
exchange clearing house regulations with regard to voting at meetings of companies
incorporated outside Israel and issuing on the Tel-Aviv stock exchange Ltd., the said
guidelines and/or instructions shall apply subject to adjustment to the laws of the State
of Israel.
	 
	 	 	Voting by proxy and/or appointment letter does not contradict the provisions of US law with
regard to voting at meetings.
	 
	10.	 	Register of Warrant (Series 2) Holders

	 	10.1	 	The Company shall manage in its registered office or shall cause others to do so,
a separate register of warrant (Series 2) holders, where the Company shall indicate
the names and addresses of the warrant (Series 2) holders and the number of warrants
(Series 2) held by them. All ownership transfers with regard to the warrants (Series
2) shall also be entered in the register. The warrant (Series 2) holders shall be
entitled to inspect the register at any reasonable time subject to prior appointment
with the Company.
	 
	 	10.2	 	The Company is under no obligation to enter in the register any notice of
express, implied or assumed trusteeship, or any mortgage or lien, or any equitable
right, claim, offsetting or any other right in connection with the warrants (Series
2). The Company shall only recognize the ownership of the person whose name appears on
the warrants (Series 2) on the condition that his legal inheritors, the

 

22

	 	 	 	administrators of the estate or the executors of the will of the entered person and
any person entitled to the warrants (Series 2) following bankruptcy (and in case of
a corporation – liquidation or winding up) of any registered owner shall be
entitled to be registered as their owner after submitting proof that in the opinion
of the Company managers is sufficient to demonstrate his right to be registered as
the owner of the said warrants (Series 2).
	 
	 	10.3	 	The Company may close the register from time to time for a period or periods
not exceeding an aggregate of thirty days annually.

	11.	 	General Provisions

	 	11.1	 	The warrant (Series 2) holders hereby acknowledge on receiving this warrant
(Series 2) that pursuant to the Securities Law, 1968, and art. 5 of the Securities
Regulations (Details Concerning Articles 15a through 15c of the Law), 2000, there
exist restrictions on the resale of warrants (Series 2) of the exercise shares until
the date of their listing at the stock exchange, and on receiving the warrants (Series
2) they undertake to comply with all of these restrictions as stipulated by law.
	 
	 	11.2	 	Meetings of the warrant (Series 2) holders shall be held as stated in the
Third Supplement enclosed with the trust deed, mutatis mutandis.
	 
	 	11.3	 	The competent courts of Tel-Aviv Jaffa shall have sole jurisdiction with
regard to the warrant (Series 2).exv10w1

 

Exhibit 10.1

Topspin Medical Inc.

(the “Corporation”)

2001 Stock Option Plan-Israel

	1.	 	Name. This plan, as amended from time to time, shall be known as the “Topspin
Medical Inc. 2001 Israeli Stock Option Plan ” (the “Plan”).
	 
	2.	 	Definitions. As used in this Plan, the following words and phrases shall have the
meanings indicated:

	 	2.1.	 	“Board” shall mean the Board of Directors of the Corporation.
	 
	 	2.2	 	“Cause” shall mean any of the following resulting from an act or omission of
Grantee: (a) fraud, embezzlement or felony or similar act; (b) failure to
substantially perform duties as an employee or to abide by the general policies of
the Corporation applicable to all employees (including, without limitation,
policies relating to confidentiality and reasonable workplace conduct); (c) an act
of moral turpitude, or any similar act, to the extent that such act causes injury
to the reputation of the Corporation; (d) any act or omission which in the
reasonable opinion of the Corporation could be financially injurious to the
Corporation or injurious to the business reputation of the Corporation; or (e) any
other act constituting cause under any employment agreement between the Grantee
and the Company.
	 
	 	2.3.	 	“Committee” shall mean a committee, pursuant to Section 4 hereinafter,
established or authorized by the Board to administer the Plan.
	 
	 	2.4	 	“Date of Grant” shall mean as determined by the Committee, (i) the date as of
which the Committee approves a grant or (ii) such other date as may be specified
by the Committee in the Option Agreement.
	 
	 	2.5.	 	“Disability” shall mean a Grantee’s inability to perform his duties with the
Corporation or any of its affiliates by reason of any medically determinable
physical or mental impairment, as determined by a physician selected by the
Grantee and acceptable to the Corporation.
	 
	 	2.6.	 	“Exchange Act” shall mean the US Securities Exchange Act of 1934, as now in
effect or as hereafter amended.
	 
	 	2.7.	 	“Exercise Price” shall mean the exercise price for each shares of Common Stock
covered by an Option.
	 
	 	2.8	 	“Expiration Date” shall mean the date upon which an Option shall expire as set
forth in section 7.6 of the Plan.
	 
	 	2.9	 	“Fair Market Value“ shall mean as of any date, the value of a Stock determined as
follows: (i) If the Stocks are listed on any established stock exchange or a
national market system, including without limitation the NASDAQ National Market
system, or the NASDAQ SmallCap Market of the NASDAQ Stock Market, the Fair Market
Value shall be the closing sales price for such Stocks (or the closing bid, if no
sales were reported), as quoted on such exchange or system for the last market
trading day prior to time of determination, as reported in the Wall Street
Journal, or such other source as the Committee deems reliable; (ii) If the Stocks
are regularly quoted by a recognized securities dealer but selling prices are not
reported, the Fair Market Value shall be the mean between the high bid and low
asked prices for the Stocks on the last market trading day prior to the day of
determination; or (iii) In the absence of an established market for the Stocks,
the Fair Market Value thereof shall be determined in good faith by the Committee.

3

 

	 	2.10.	 	“Grantee” shall mean a person who receives a grant of Options under the Plan.
	 
	 	2.11.	 	“Initial Public Offering” or “IPO” shall mean the underwritten initial public
offering of the Corporation’s Common Stock.
	 
	 	2.12	 	. “Option” shall mean an option to purchase one or more of the Corporation’s
Stock, pursuant to the Plan.
	 
	 	2.13.	 	“102 Options” shall mean Options containing such terms as will qualify them
for the special tax treatment under Section 102.
	 
	 	2.14.	 	“3(9) Options” shall mean Options that do not contain such terms as will
qualify them for the special tax treatment under Section 102.
	 
	 	2.15.	 	“Option Agreement” shall mean the stock option agreement between the Company
and a Grantee that evidences and sets out the terms and conditions of an Option.
	 
	 	2.16.	 	“Ordinance” means the 1961 Israeli Tax Ordinance [New Version] as now in effect
or as hereafter amended.
	 
	 	2.17.	 	“Person” shall mean an individual, corporation, partnership, joint venture,
trust or unincorporated organization.
	 
	 	2.18.	 	“Retirement” shall mean a Grantee’s retirement pursuant to applicable law or in
accordance with the terms of any tax-qualified retirement plan maintained by the
Corporation or any of its affiliates in which the Grantee participates.
	 
	 	2.19	 	“Section 102” means section 102 of the Ordinance as now in effect or as hereafter
amended.
	 
	 	2.20.	 	“Stock” shall mean the Common Stock of the Corporation, each bearing a nominal
value of US$ 0.001.
	 
	 	2.21.	 	“Subsidiary” shall mean any corporation (other than the Corporation) in an
unbroken chain of companies beginning with the Corporation if, at the time of
granting an Option, each of the companies other than the last Corporation in the
unbroken chain owns Stock possessing fifty percent (50%) or more of the total
combined voting power of all classes of stock in one of the other companies in
such chain.
	 
	 	2.22	 	“Trustee” shall mean a trustee nominated by the Committee and approved by the Tax
authorities under Section 102.

	3.	 	Purpose, Types of Options; Construction.

	 	3.1.	 	The purpose and intent of the Plan is to provide incentives to employees,
directors, consultants and other service providers of the Corporation or any
Subsidiary which now exists or hereafter is organized or acquired by the
Corporation, by providing them with opportunities to purchase Stock of the
Corporation, pursuant to the Plan approved by the Board.
	 
	 	3.2.	 	The Plan is intended to enable the Corporation to issue options pursuant and
subject to the provisions of Section 102 and any regulations, rules, orders or
procedures promulgated thereunder; and Section 3(9).
	 
	 	3.3.	 	To the extent any provision herein conflicts with the conditions of any relevant
tax law or regulation which are relied upon for tax relief in respect of a
particular Option granted to a Grantee, the provisions of said law or regulation
shall prevail over those of the Plan and the Committee is empowered hereunder to
interpret and enforce the said prevailing provisions.

	4.	 	Administration

2

 

	 	4.1.	 	The Plan will be administered by the Board or by a Committee, which, if
appointed, will consist of such number of Directors of the Corporation as may be
fixed, from time to time, by the Board. If a Committee is not appointed, the term
Committee, whenever used herein, shall mean the Board. The Board shall appoint the
members of the Committee and may, from time to time, remove members from, or add
members to, the Committee and shall fill vacancies in the Committee however
caused.
	 
	 	4.2.	 	The Committee shall have the authority in its discretion to administer the Plan
and to exercise all the powers and authorities either specifically granted to it
under the Plan or necessary or advisable in the administration of the Plan,
including, without limitation:

	 	4.2.1.	 	the authority to grant Options;
	 
	 	4.2.2.	 	to determine which Options shall constitute 102 Options or 3(9)
Options;
	 
	 	4.2.3.	 	to determine the Exercise Price of each Option;
	 
	 	4.2.4.	 	to determine the Persons to whom, and the time or times at which
Options shall be granted;
	 
	 	4.2.5.	 	to determine the number of shares of Common Stock to be covered by
each Option;
	 
	 	4.2.6.	 	to determine the Fair Market Value of the Stocks;
	 
	 	4.2.7	 	to accelerate the right of a Grantee to exercise, in whole or in part,
any previously granted Option;
	 
	 	4.2.8.	 	to prescribe, amend and rescind rules and regulations relating to the
Plan;
	 
	 	4.2.9.	 	to determine the terms and provisions of the Option Agreements (which
need not be identical), and to cancel or suspend Options, as necessary;
and
	 
	 	4.2.10.	 	to make all other determinations deemed necessary or advisable for
the administration of the Plan, including to adjust the terms of the
Plan or any Option Agreement so as to reflect: (i) changes in applicable
laws; and (ii) the laws of other jurisdictions within which the
Corporation wishes to grant Options.

	 	4.3.	 	The Committee shall select one of its members as its Chairman and shall hold its
meetings at such times and places as it shall determine. Actions taken by a
majority of the members of the Committee, at a meeting at which a majority of its
members is present, or acts reduced to or approved in writing by all members of
the Committee, shall be the valid acts of the Committee.
	 
	 	4.4	 	Any member of such Committee shall be eligible to receive Options under the Plan
while serving on the Committee, unless otherwise specified herein. No person shall
be eligible to be a member of the Committee if that person’s membership would
prevent the Plan from complying with exemptions from Section 16 set forth in Rule
16b-3 promulgated under the Exchange Act, if applicable to the Corporation. At
such time as any class of equity securities of the Corporation is registered
pursuant to Section 12 of the Exchange Act, the Committee shall consist of at
least two (2) individuals, each of whom is a Non-Employee Director as that term is
defined in Rule 16b-3.
	 
	 	4.4.	 	No member of the Board or of the Committee shall be liable for any act or
determination made in good faith with respect to the Plan or any Option granted
thereunder.

3

 

	 	4.5.	 	The interpretation and construction by the Committee of any provision of the Plan
or of any Option Agreement thereunder shall be final and conclusive unless
otherwise determined by the Board.
	 
	 	4.6	 	Without limiting the foregoing, the Committee may, with the consent of the
Grantee and subject to Board’s approval, from time to time cancel all or any
portion of any Option then subject to exercise, and the Corporation’s obligation
in respect of such Option may be discharged by (i) payment to the Grantee of an
amount in cash equal to the excess, if any, of the Fair Market Value of the
canceled Stocks at the date of such cancellation over the aggregate Exercise Price
of such Stocks, (ii) the issuance or transfer to the Grantee of Stocks of the
Corporation with a Fair Market Value at the date of such transfer equal to any
such excess, or (iii) a combination of cash and shares with a combined value equal
to any such excess, all as determined by the Committee in its sole discretion.

	5.	 	Reserved Shares. The maximum number of Stock reserved for the grant of Options
under the Plan shall be 300,000, subject to adjustments as provided in section 13 below.
Such Stock may, in whole or in part, be authorized but unissued Stock. Until termination
of the Plan, the Corporation shall at all times reserve a sufficient number of shares of
Stock to meet the requirements of the Plan. If any Options, for any reason, expire, be
canceled or be forfeited without having been exercised in full, the Stock allocable to the
unexercised, canceled or terminated portion of such Options shall (unless the Plan shall
have been terminated) become available for subsequent grants of Options under the Plan.
Any of such Stock which may remain unissued and which are not subject to outstanding
options at the termination of the Plan shall cease to be reserved for the purpose of the
Plan.
	 
	6.	 	Eligible Grantees.

	 	6.1.	 	3(9) Stock Options may be granted to employees, directors, service providers and
consultants of the Corporation and of any Subsidiary.
	 
	 	6.2.	 	102 Stock Options may be granted only to employees of the Corporation or a
Subsidiary.
	 
	 	6.3.	 	Anything in this Plan to the contrary notwithstanding, all grants of Options to
directors and officers shall be authorized and implemented in accordance with the
provisions of the applicable law, as in effect from time to time.
	 
	 	6.4.	 	The grant of an Option to a Grantee hereunder, shall neither entitle such Grantee
to participate, nor disqualify him from participating, in any other grant of
Options pursuant to this Plan or any other stock option plan of the Corporation.

	7.	 	Terms and Conditions of Options. Each Option granted pursuant to the Plan shall
be evidenced by an Option Agreement between the Corporation and the Grantee, in such form
and containing such terms and conditions as the Committee shall from time to time approve,
which Option Agreement shall comply with and be subject to the following terms and
conditions, unless otherwise specifically provided in such Option Agreement.

	 	7.1.	 	Number of Shares. Each Option Agreement shall state the number of shares
of Stock to which the Option relates, subject to section 13.
	 
	 	7.2.	 	Type of Option. Each Option Agreement shall specifically state the type
of Option granted thereunder and whether it constitutes a 102 Option or a 3(9)
Option.
	 
	 	7.3.	 	Exercise Price. Each Option Agreement shall state the Exercise Price. The
Exercise Price shall be determined by the Committee in its sole and absolute
discretion; provided, however, that such Exercise Price shall not be less than the
par value of the Stock into which such Option is exercisable. The Exercise Price
shall be subject to adjustment as provided in section 13 hereof.
	 
	 	7.4.	 	Manner of Exercise. An Option may be exercised, as to any or all whole shares of Stock as to which the Option has become exercisable, by written notice
delivered to the

4

 

	 	 	 	Corporation, specifying the number of shares of Stock with respect to which the Option
is being exercised, along with payment of the Exercise Price for such Stock in the
manner specified in the following sentence. The Exercise Price shall be paid in full
with respect to each share of Stock, at the time of exercise in respect of a whole
number of shares of Stock, and shall be effected in cash or by a cashier’s check
payable to the order of the Corporation, or such other method of payment acceptable to
the Corporation.
	 	7.5.	 	Vesting of Options. Subject to section 14, each Option Agreement shall
provide the vesting schedule for the Option as determined by the Committee,
provided, that, the Committee shall have the authority to accelerate the vesting
of any outstanding option at such time and under such circumstances as it, in its
sole discretion, deems appropriate. Unless otherwise stated in the Option
Agreement, Options shall vest and become exercisable under the following schedule:
twenty-five percent (25%) of the Stock covered by the Option on the first
anniversary of the Date of Grant of such Option and six and one-quarter percent
(6.25%) of the Stock covered by the Option at the end of each subsequent quarter
over the course of the following three years; provided, however, that the
Committee, in its absolute discretion, may, on such terms and conditions as it may
determine to be appropriate, accelerate or otherwise change the time at which such
Option or any portion thereof may be exercised. The Option may contain performance
goals and measurements, and the provisions with respect to any Option need not be
the same as the provisions with respect to any other Option.
	 
	 	7.6.	 	Expiration Date. The Options to the extent not previously exercised,
shall terminate forthwith upon the earlier of: (i) ten (10) years from the Date of
Grant of the Options; and (ii) the expiration of any extended period in any of the
events set forth in section 7.7 and 7.8 below.
	 
	 	7.7.	 	Termination.

	 	7.7.1.	 	Except as provided in this section 7.7 and in section 7.8 hereunder,
an Option may not be exercised unless the Grantee is then in the employ
of or maintaining a director, consultant or service provider
relationship with the Corporation or a Subsidiary thereof, and unless
the Grantee has remained continuously so employed or in the director or
consultant relationship since the date of grant of the Option. In the
event that the employment or director or consultant relationship of a
Grantee shall terminate (other than by reason of death, Disability or
Retirement), all Options of such Grantee that are vested and exercisable
at the time of such termination may, unless earlier terminated in
accordance with their terms, be exercised, in the case of an employee
within ninety (90) days after the date of such termination, and in the
case of a director, consultant or service provider within twenty four
(24) months after the date of such termination (or such different period
as the Committee shall prescribe); provided, however, that if the
Corporation shall terminate the Grantee’s employment for Cause (as
determined by the Committee), all Options theretofore granted to such
Grantee shall, to the extent not theretofore exercised, terminate on the
date of such termination unless otherwise determined by the Committee.
	 
	 	7.7.2.	 	In addition, in the case of a Grantee whose principal employer is a
Subsidiary, the Grantee’s employment shall be deemed to be terminated
for purposes of this Section 7.7 as of the date on which such principal
employer ceases to be a Subsidiary. Notwithstanding

5

 

	 	 	 	anything to the contrary, in such an event that such principal
employer ceases to be a Subsidiary, all Options of such a Grantee
that are vested and exercisable at the time of such termination
may, unless earlier terminated in accordance with their terms, be
exercised, in the case of an employee within twelve (12) months
after the date such principal employer ceases to be a Subsidiary.
	 
	 	7.7.3.	 	A notice of termination of employment shall be deemed to constitute
termination of employment.

	 	7.8.	 	Death or Disability of Grantee. If a Grantee shall die while employed by,
or maintaining a director, consultant or service provider relationship with, the
Corporation or a Subsidiary, or if the Grantee’s employment or director or
consultant relationship shall terminate by reason of Disability, all Options
theretofore granted to such Grantee (to the extent vested and exercisable at the
date of termination) may, unless earlier terminated in accordance with their
terms, be exercised by the Grantee or by the Grantee’s estate or by a Person who
acquired the right to exercise such Options by bequest or inheritance or otherwise
by result of death or Disability of the Grantee, at any time within one (1) year
after the death or Disability of the Grantee (or such different period as the
Committee shall prescribe). In the event that an Option granted hereunder shall be
exercised by the legal representatives of a deceased or former Grantee, written
notice of such exercise shall be accompanied by a certified copy of letters
testamentary or equivalent proof of the right of such legal representative to
exercise such Option.
	 
	 	7.9.	 	Retirement of Grantee. In the event that the employment or director or
consultant relationship of a Grantee shall terminate on account of such Grantee’s
Retirement, all Options of such Grantee that are exercisable at the time of such
Retirement may, unless earlier terminated in accordance with their terms, be
exercised at any time within one (1) year after the date of such Retirement (or
such different period as the Committee shall prescribe).
	 
	 	7.10.	 	Extensions. Notwithstanding the foregoing provisions of sections 7.7,
7.8 and 7.9 the Committee may provide, either at the time an Option is granted or
thereafter, that such Option may be exercised after the periods provided for in
Sections 7.7, 7.8 and 7.9 but in no event beyond the Expiration Date.
	 
	 	7.11.	 	Other Provisions. The Option Agreements shall contain such other terms
and conditions not inconsistent with the Plan as the Committee may determine.

	8.	 	102 Options.

	 	8.1.	 	Options granted pursuant to this Section 8 are intended to constitute 102 Options
and subject to Section 102 of the Ordinance and the rules and regulations
promulgated thereunder, as amended; the general terms and conditions specified in
Section 7 hereof; and other provisions of the Plan, except for said provisions of
the Plan applying to Options under a different tax law or regulation, shall apply.
	 
	 	8.2.	 	To the extent required by the Ordinance or the Income Tax Commissioner of the
State of Israel, the 102 Options which shall be granted pursuant to the Plan shall
be issued to the Trustee and the Options and Stock issued upon the exercise of
said Option shall be held for the benefit of the Grantee for a period of not less
than twenty-four (24) months from the Date of Grant (or such other period of time
as may be required by the Ordinance).

	9.	 	3(9) Options.

	 	9.1.	 	Options granted pursuant to this Section 9 are intended to constitute 3(9)
Options and shall

6

 

	 	 	 	be subject to the general terms and conditions specified in Section 7 hereof and other
provisions of the Plan, except for said provisions of the Plan applying to Options
under a different tax law or regulation.
	 
	 	9.2.	 	To the extent that may be required by the Income Tax Commissioner of the State of
Israel, the 3(9) Options which shall be granted pursuant to the Plan shall be
issued to the Trustee , pursuant to the provisions set by the Commissioner.

10. Issuance of Stock in Trust.

	 	10.1.	 	All Options granted under the Plan which are granted by the Corporation to the
Trustee pursuant to Sections 8 and 9 above, and all Stock issued upon exercise of
such Options, shall be held by the Trustee in trust for the benefit of the Grantee
in respect of whom such Option was granted.
	 
	 	10.2.	 	In the event that a Grantee exercises Options pursuant to the provisions hereof,
the Stock issued upon exercise thereof shall also be held in trust.
	 
	 	10.3.	 	All certificates representing Stock issued to the Trustee hereunder shall be
deposited with the Trustee, and shall be held by the Trustee until such time that
such Shares are released from the trust as herein provided.
	 
	 	10.4.	 	Subject to the terms of sections 8, 9 and 10.1-10.3 above the following shall
apply:

	 	10.4.1.	 	Upon the written request of any Grantee, the Trustee shall release
from the trust the Options or the Stock issued, on behalf of such
Grantee, by executing and delivering to the Corporation such
instrument(s) as the Corporation may require, giving due notice of such
release to such Grantee.
	 
	 	10.4.2.	 	Alternatively, upon the written instructions of the Grantee to sell
any Stock issued upon exercise of Options, the Trustee shall use its
best efforts to effect such sale and shall transfer such Stock to the
purchaser thereof concurrently with the receipt, or after having made
suitable arrangements to secure the payment of the proceeds, of the
purchase price in such transaction. The Trustee shall withhold from such
proceeds any and all taxes required to be paid in respect of such sale,
shall remit the amount so withheld to the appropriate tax authorities
and shall pay the balance thereof directly to the Grantee, reporting to
such Grantee and to the Corporation the amount so withheld and paid to
said tax authorities.

	11.	 	Exercise of Options.

	 	11.1.	 	Options shall be exercisable pursuant to the terms under which they were awarded
and subject to the terms and conditions of the Plan.
	 
	 	11.2.	 	The exercise of an Option shall be made by a written notice of exercise
delivered by the Grantee (or, with respect to Option held in the trust, by the
Trustee upon receipt of written instructions from the Grantee) to the Corporation
at its principal executive office, specifying the number of Shares to be purchased
and accompanied by the payment of the Exercise Price, and containing such other
terms and conditions as the Committee shall prescribe from time to time.

	12.	 	Voting and Dividend Rights

	 	12.1.	 	All Stock issued upon the exercise of Options granted hereunder shall entitle
the Grantee

7

 

	 	 	 	thereof to receive dividends with respect thereto, subject to the Corporation’s By
Laws, Certificates of Incorporation and subject to any applicable taxation on
distribution of dividends. For so long as Stock issued to the Trustee on behalf of a
Grantee are held in the trust, the dividends paid or distributed with respect thereto
shall be remitted directly to the Grantee.
	 
	 	12.2.	 	The Grantee and the Trustee shall grant an irrevocable power of attorneys to Mr.
Erez Golan to participate and vote – regarding the Stock issued upon the exercise
of Options — at the general assemblies of the Corporation, including assemblies
for the appointment of directors. If the Corporation requires them do to so, the
Grantee and the Trustee will sign the said power of attorney in the wording
presented to them by the Corporation. Such power of attorneys shall be in effect
until such time as the Corporation shall effect an IPO.

	13.	 	Adjustment Upon Changes in Capitalization. Subject to any required action by the
shareholders of the Corporation, the number of Stock covered by each outstanding Option,
and the number of Stock which have been authorized for issuance under the Plan but as to
which no Options have yet been granted or which have been returned to the Plan upon
cancellation or expiration of an Option, as well as the Exercise Price, shall be
proportionately adjusted for any increase or decrease in the number of shares of issued
Stock resulting from a stock split, reverse stock split, combination or reclassification
of the Stock or the payment of a stock dividend (bonus shares) with respect to the Stock
or any other increase or decrease in the number of issued shares of Stock effected without
receipt of consideration by the Corporation; provided, however, that
conversion of any convertible securities of the Corporation shall not be deemed to have
been “effected without receipt of consideration”. Such adjustment shall be made by the
Committee, whose determination in that respect shall be final, binding and conclusive.
Except as expressly provided herein, no issuance by the Corporation of stock of any class,
or securities convertible into stock of any class, shall affect, and no adjustment by
reason thereof shall be made with respect to, the number or shares of Stock subject to an
Option or the Exercise Price.
	 
	14.	 	Liquidation or M&A. In the event of the proposed dissolution or liquidation of
the Corporation or the proposed consolidation or the acquisition of the Corporation by
means of merger (with or into another entity), or in the event of any other
reclassification of the Corporation’s securities or any other form of corporate
reorganization in which the outstanding shares of the Company are exchanged for securities
or other consideration issued, or caused to be issued, by the acquiring company or its
subsidiary, or in the event of the sale of all or substantially all of the assets of the
Corporation, the Committee shall notify each Grantee at least fifteen (15) days prior to
such proposed action. To the extent it has not been previously exercised, each Option
shall terminate immediately prior to the consummation of such proposed action (for
avoidance of doubt, all options which have not yet been vested at that time shall also
terminate at that time). However, in the event of the proposed consolidation or the merger
of the Corporation with or into another corporation, the Committee may, at its absolute
discretion and without obligation to, agree that instead of such termination: (i) each
unexercised Option, if possible, shall be assumed or an equivalent option shall be
substituted by such successor corporation or a parent or subsidiary of such successor
corporation; or (ii) the Corporation shall pay to the Grantee such an amount equivalent to
the valuation of such Grantee’s unexercised Options (on an as converted basis) at that
time.
	 
	15.	 	Non-Transferability and Other Limitations

	 	15.1.	 	No Option shall be assignable or transferable by the Grantee to whom granted
otherwise than by will or the laws of descent and distribution, and an Option may
be exercised during the lifetime of the Grantee only by such Grantee or by such
Grantee’s guardian or legal representative. The terms of such Option shall be
binding upon the beneficiaries, executors, administrators, heirs and successors of
such Grantee.
	 
	 	15.2.	 	No Stock purchasable hereunder that was not fully paid for shall be assignable
or

8

 

	 	 	 	transferable by the Grantee. In addition, and without derogating from the rights and
powers of the Committee to provide to hereunder, until the consummation of an IPO, a
Grantee, or the Trustee on his behalf, shall sell, assign, transfer, pledge,
hypothecate, mortgage or dispose of, by gift or otherwise, or in any way encumber, all
or any part of the Stock owned by him (“Transfer”) subject to the provisions of
sub-section 15.3 and subject to the following right of first refusal:

	 	15.2.1.	 	The Corporation is granted a right of first refusal to purchase all
or any portion of Stock proposed to be Transferred to a third party
(“Prospective Transferee”) at the same price and on the same terms
offered to the Prospective Transferee.
	 
	 	15.2.2.	 	A Grantee or the Trustee on his behalf, proposing such a Transfer to
a Prospective Transferee shall give a written notice setting forth the
terms and conditions of such a proposed Transfer to the Corporation and
to each Stockholder as set forth in the incorporation’s documents of the
Corporation (“Entitled Stockholder”) not later than twenty five (25)
days prior to the consummation of such proposed Transfer. Such notice
shall contain all material terms and conditions of the proposed
Transfer. The Corporation may elect to exercise all or any portion of
its rights under this section 15.2 by giving written notice to such
Grantee or Trustee on his behalf within twenty (20) days of said notice.
If the consideration to be paid for the Stock is not cash, the value of
the consideration shall be determined in good faith by the Corporation’s
Board of Directors, and if the Corporation cannot for any reason pay for
the Stock in the form of non-cash consideration, the Company may pay the
cash equivalent thereof, as determined by the Board of Directors. All
payments shall be delivered by the Corporation to such Grantee not later
than the date specified in the said notice, but in no event earlier than
twenty (20) days after receipt of such notice.
	 
	 	15.2.3.	 	If the Corporation will not fully exercise its right of first refusal
with respect to any proposed Transfer, it must deliver a secondary
notice to each Entitled Stockholder at least five (5) days prior to the
expiration of the Corporation’s right of refusal with respect to any
proposed Transfer, and then each Entitled Stockholder shall have the
right, but not the obligation, for a period of fifteen (15) days after
receipt of such secondary notice, to purchase its pro rata portion
(based upon the total number of shares of capital stock then held by
such Entitled Stockholder, on an as converted basis, as the case may be,
but excluding for this purpose the shares held by the Grantee) of all
such unpurchased Transfer Stock at the same price and on the same terms
as set forth in the notice mentioned in sub-section 15.2.3;
provided however, that if any Prospective Transferee has
offered to pay for any Stock with property, services or any other
non-cash consideration, then the Stockholders, shall nevertheless have
the right to pay for such Stock with cash in an amount equal to the fair
value of the non-cash consideration offered by the Prospective
Transferee in question, where the fair value of such non-cash
consideration shall be conclusively determined in good faith by the
Board of Directors.
	 
	 	15.2.4.	 	Any proposed Transfer not made in conformance with this Section 15.2
shall be null and void, shall not be recorded on the books of the

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	 	 	 	Company and shall not be recognized by the Company.
	 
	 	15.2.5.	 	The right of first refusal shall not apply to: transfers to family
members of the Grantee or descendants; provided that such family members
of the Grantee or descendants shall have assumed the obligations of the
Grantee under this section 15.2 with respect to subsequent transfers. In
addition, such rights shall not apply to stock sold in an IPO.

	 	15.3.	 	If, prior to the closing of an IPO: (i) all or substantially all of the Stock of
the Corporation is to be sold; or (ii) upon a merger or reorganization or the
like, the Stock of the Corporation, or any class thereof, are to be exchanged for
securities of another corporation then the Grantee or any Person that the Stock
was transferred to or the Trustee shall be obliged to sell or exchange, as the
case may be, the Stock held by them, in accordance with the instructions then
issued by the Board, the determination of which shall be final.
	 
	 	15.4.	 	The Grantee acknowledges that in the event Corporation’s shares shall be
registered for trading in any public market, the Grantee’s right to sell the Stock
may be subject to certain limitations (including a lock-up period), as will be
requested by the Corporation or its underwriters; and the Grantee unconditionally
agrees and accepts any such limitations.

	16.	 	Amendment of the Plan. Subject to applicable laws, the Board may, at any time and
from time to time, terminate or amend the Plan in any respect. In no event may any action
of the Corporation alter or impair the rights of a Grantee, without his consent, under any
Option previously granted to him.
	 
	17.	 	Terms of the Plan. The Plan shall take effect upon its adoption by the Board and
shall terminate on the tenth (10th) anniversary of such date. Notwithstanding
the foregoing, in the event that approval of the Plan by the stockholders of the
Corporation is required under applicable law, in connection with the application of
certain tax treatment or pursuant to applicable stock exchange rules or regulations, such
approval shall be obtained within the time required under the applicable law.
	 
	18.	 	Tax Consequences.

	 	18.1	 	All tax consequences arising from the grant or exercise of any Option, from the
payment for, or the subsequent disposition of, Stock covered thereby or from any
other event or act (of the Corporation or the Grantee) hereunder, shall be borne
solely by the Grantee, and the Grantee shall indemnify the Corporation and the
Trustee and hold them harmless against and from any and all liability for any such
tax or interest or penalty thereon, including without limitation, liabilities
relating to the necessity to withhold, or to have withheld, any such tax from any
payment made to the Grantee.
	 
	 	18.2	 	The Committee and/or the Trustee shall not be required to release any Stock
certificate to a Grantee until all required payments have been fully made.
	 
	 	18.3	 	To the extent provided by the terms of an Option Agreement, the Grantee may
satisfy any tax withholding obligation relating to the exercise or acquisition of
Stocks under an Option by any of the following means (in addition to the
Corporation’s right to withhold from any compensation paid to the Grantee by the
Corporation) or by a combination of such means: (i) tendering a cash payment; (ii)
subject to the Committee’s approval on the payment date, authorizing the
Corporation to withhold Stocks from the Stocks otherwise issuable to the Grantee
as a result of the exercise or acquisition of Stocks under the Option in an amount
not to exceed the minimum amount of tax required to be withheld by law; or (iii)
subject to Committee approval on the payment date, delivering to the Corporation
owned and unencumbered Stocks; provided that Stocks acquired on exercise of
Options have been held for at least 6 months from the date of exercise.

10

 

	19.	 	Multiple Agreements.
	 
	 	 	The Corporation has allocated and/or is entitled to allocate Options and Stock to
other employees and other Persons, and the Grantee shall have no claim regarding such
allocations, their quantity, the relationship among them and between them and the
other Stock in the Corporation, exercising of the options or any matter related to or
stemming from them.
	 
	20.	 	Continuance of Employment or Hired Services
	 
	 	 	Neither the Plan nor the grant of Option or Stock thereunder shall impose any
obligation on the Corporation to continue the engagement of the Grantee, and nothing
in the Plan or in any Option or Stock granted pursuant thereto shall confer upon any
Grantee any right to continue being engaged by the Corporation, or restrict the right
of the Corporation to terminate such engagement at any time.
	 
	21.	 	Governing Law and Jurisdiction. The Plan and all instruments issued thereunder or
in connection therewith, shall be governed by, and interpreted in accordance with, the
laws of the State of Israel. The competent courts in Tel Aviv shall have sole an exclusive
jurisdiction over any dispute with regard to any controversy or claim arising under, out
of, or in connection with this Plan, its validity, its interpretation, its execution or
any breach or claimed breach thereof.
	 
	22.	 	Application of Funds. The proceeds received by the Corporation from the issuance
of Stock pursuant to Options granted under the Plan will be used for general corporate
purposes of the Corporation.
	 
	23.	 	Government Regulations. The Plan, and the granting and exercise of Options
hereunder, and the obligation of the Corporation to sell and deliver Stocks under such
Options, shall be subject to all applicable laws, rules, and regulations, whether of the
State of Israel or of the United States or any other State having jurisdiction over the
Corporation and the Grantee, including the registration of the Stocks under the United
States Securities Act of 1933, and the Ordinance and to such approvals by any governmental
agencies or national securities exchanges as may be required. Nothing herein shall be
deemed to require the Corporation to register the Stocks under the securities laws of any
jurisdiction.
	 
	24.	 	Non-Exclusivity of the Plan. The adoption of the Plan by the Board shall not be
construed as amending, modifying or rescinding any previously approved incentive
arrangement or as creating any limitations on the power of the Board to adopt such other
incentive arrangements as it may deem desirable, including, without limitation, the
granting of stock options otherwise than under the Plan, and such arrangements may be
either applicable generally or only in specific cases.
	 
	 	 	For the avoidance of doubt, prior grant of options to Grantees of the Corporation under their
employment agreements, and not in the framework of any previous option plan, shall not be
deemed an approved incentive arrangement for the purpose of this section.

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