Document:

Exhibit 10.54

 

[***] INDICATES MATERIAL THAT HAS BEEN OMITTED AND FOR WHICH CONFIDENTIAL TREATMENT HAS BEEN REQUESTED.  ALL SUCH OMITTED MATERIAL HAS BEEN FILED WITH THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO RULE 24b-2 PROMULGATED UNDER THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED.

 

AMENDMENT NO. 1

 

This Amendment No. 1 (“Amendment”), effective as of October 3, 2013 (the “Effective Date”), entered into by and between (i) AMAG Pharmaceuticals, Inc. (“AMAG” or the “Company”) and (ii) Sigma-Aldrich, Inc. (“SAFC”), amends that certain Commercial Supply Agreement between AMAG and SAFC dated August 29, 2012 (the “Agreement”). Capitalized terms used but not defined in this Amendment will have the meanings given them in the Agreement.

 

BACKGROUND

 

A.            SAFC currently manufactures Active Pharmaceutical Ingredient and Drug Product Intermediate at its T-East plant in St. Louis, Missouri (“T-East Plant”), for commercial supply to AMAG under the terms of the Agreement.  SAFC will continue to manufacture Active Pharmaceutical Ingredient and Drug Product Intermediate at T-East Plant in accordance with Section 2.8(a) of this Agreement.

 

B.            SAFC and AMAG now desire to add additional manufacture of Active Pharmaceutical Ingredient and Drug Product Intermediate at SAFC’s N-1 plant in St. Louis, Missouri (“N-1 Plant”).  SAFC anticipates that N-1 Plant will be approved and online no later than [***] from the Effective Date of this Amendment (the “N-1 Start Date”).

 

C.            The Parties are willing to add additional manufacturing capacity of Active Pharmaceutical Ingredient and Drug Product Intermediate at N-1 Plant provided that the terms of the Agreement are amended as set forth in this Amendment.

 

Now, therefore, in consideration of the premises and the mutual covenants and agreements contained herein, the Parties hereby agree as follows:

 

AMENDMENTS

 

1.              The second sentence of Section 2.4 (Inspections) of the Agreement is hereby amended by adding the following parenthetical statement immediately after the term “Company representatives”:

 

“(which representatives may include up to two (2) employees or other designees of Company and up to three (3) employees or other designees of [***] or its affiliate (“[***]” or “Customer”), provided, however, that SAFC may condition access to its records and facilities by [***] or any other third party to [***] or such third party executing a confidentiality agreement with SAFC in form and substance reasonably acceptable to SAFC; provided, further however, that if that certain three-way confidentiality agreement dated April 10, 2013 (the “3-Way CDA”) by and among SAFC, [***] and AMAG, is in force on the date of a proposed inspection, then such 3-Way CDA satisfies such requirement as it pertains to [***] employees or its designees).”

 

 

[***] INDICATES MATERIAL THAT HAS BEEN OMITTED AND FOR WHICH CONFIDENTIAL TREATMENT HAS BEEN REQUESTED.  ALL SUCH OMITTED MATERIAL HAS BEEN FILED WITH THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO RULE 24b-2 PROMULGATED UNDER THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED.

 

2.              Section 2.8 of the Agreement is hereby amended and restated in its entirety to read as follows:

 

“2.8                         Minimum [***] Purchase Commitment.

 

(a) Subject to the terms and conditions of this Agreement and as long as SAFC can demonstrate to Company’s reasonable satisfaction that SAFC is satisfying the Purchase Commitment Requirements set forth in Section 2.8(e) of this Agreement, Company agrees to purchase from SAFC not less than the percentage of its and its Affiliates’ worldwide demand for the Product as set forth in the following table (the “Minimum Purchase Commitment”):

 

	
[***]
    	
 
    	
Percent of
   Worldwide Demand
   if Purchase
   Commitment
   Requirements in
   Section 2.8(e) are
   Satisfied
    	
 
    	
Percent of Worldwide
   Demand if Purchase
   Commitment
   Requirements in
   Section 2.8(e) Are Not
   Satisfied
    
	
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[***]
    	
 
    	
[***]
    

 

In addition, provided that AMAG is in compliance with its obligations under this Agreement in all material respects, SAFC agrees during the Term SAFC shall maintain the following:

 

(i)                                     before the N-1 Plant is approved and online for manufacture of the Product, the amount of the capacity in the T-East Plant sufficient to meet AMAG’s forecasted demand (and AMAG’s contractual rights to exceed such forecasted demand in accordance with the Agreement); provided, however, that SAFC may use the capacity of the T-East Plant for other projects and/or customers so long as SAFC reserves sufficient capacity to meet (A) AMAG’s forecasted demand for the Product and (B) AMAG’s contractual rights to exceed such forecasted demand in accordance with the Agreement;

 

(ii)                                  after the N-1 Plant is approved and online for manufacture of the Product, up to [***] of the capacity in N-1 Plant, which is designated by SAFC for the manufacture of Product, to meet AMAG’s forecasted demand, provided, however, that SAFC may use the capacity of the N-1 Plant build out for other projects and/or customers so long as SAFC reserves sufficient capacity to meet (A) AMAG’s forecasted demand for the Product and (B) AMAG’s contractual rights to exceed such forecasted demand in accordance with the Agreement; and

 

2

 

[***] INDICATES MATERIAL THAT HAS BEEN OMITTED AND FOR WHICH CONFIDENTIAL TREATMENT HAS BEEN REQUESTED.  ALL SUCH OMITTED MATERIAL HAS BEEN FILED WITH THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO RULE 24b-2 PROMULGATED UNDER THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED.

 

(iii)          after the N-1 Plant is approved and online for manufacture of the Product, sufficient capacity in T-East Plant for the manufacture of at least the greater of [***] or [***] for the Product through [***] (“T-East Plant Phaseout Date”); provided, such T-East Plant Phase Out Date shall be extended for additional [***] terms upon the written request of AMAG if (i) N-1 Plant is not approved or is not available for manufacture of Active Pharmaceutical and Drug Product Intermediate or (ii) N-1 Plant does not have sufficient capacity to satisfy AMAG’s purchases of Product.  AMAG may at its discretion request notification from SAFC from time to time during the Term of this Agreement regarding additional available capacity in N-1 Plant and T-East Plant for the manufacture of Product.

 

(b)                                 The Parties agree that, for purposes of calculating the foregoing Minimum Purchase Commitment, AMAG’s total purchases of Product under this Agreement during [***] will be compared against the total Product purchased by AMAG from all sources for use or sale worldwide during the [***] preceding each [***] during the Term. AMAG further agrees to provide to SAFC no later than [***] days after the end of each [***] during the Term, a written certification with respect to AMAG’s compliance with the foregoing Minimum Purchase Commitment for the applicable [***], which certification will contain sufficient back-up calculations to determine AMAG’s compliance with the foregoing Minimum Purchase Commitment. Within [***] days following AMAG’s delivery of the foregoing certification (the “Required Notice Period”), SAFC shall indicate whether or not it agrees that AMAG has complied with its Minimum Purchase Commitment for the applicable [***]. If SAFC does not agree that AMAG has complied with its Minimum Purchase Commitment for the applicable [***], SAFC shall provide AMAG a written notice that contains a detailed description of the reasonable basis for such disagreement, the Parties will engage in good faith discussions for a period of an additional [***] from the receipt of such notice in effort to resolve the disagreement. If the Parties do not reach a mutually acceptable agreement within the foregoing [***] day discussion period, then either Party may refer the matter to be resolved by arbitration in accordance with Section 11.3 hereof.  If SAFC does not provide AMAG with the written notice within the Required Notice Period, such ability to contest compliance shall be deemed waived.

 

(c)                                  As set forth in Section 5.2 of the Agreement, the sales prices for Product Manufactured under this Agreement shall be the sales prices in Appendix 3 to the Agreement (subject to price adjustment based on PPI in accordance with Section 5.5 of the Agreement); provided, however, beginning on the earlier of (i) [***] or (ii) date of FDA approval of Product manufacture at the N-1 Plant, SAFC will use commercially reasonable efforts to provide AMAG with the following Product Pricing:

 

	
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[***]
    	
 
    	
[***]
    	
 
    

 

3

 

[***] INDICATES MATERIAL THAT HAS BEEN OMITTED AND FOR WHICH CONFIDENTIAL TREATMENT HAS BEEN REQUESTED.  ALL SUCH OMITTED MATERIAL HAS BEEN FILED WITH THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO RULE 24b-2 PROMULGATED UNDER THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED.

 

	
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The pricing set forth in the above table will be based on the cumulative amount of Product invoiced to AMAG [***] during the Term and will not be based on cumulative purchases by AMAG during the Term.  For example, [***].

 

(d)                                 AMAG’s Minimum Purchase Commitment, as set forth in column 2 of the table under Section 2.8(a) will:

 

(i)            suspend during any period during which SAFC is unable to meet AMAG’s actual demand requirements for the Product (other than due to the acts, omission or default of AMAG);

 

(ii)           if after [***],

 

(a)                             SAFC is unable to match a bona fide offer from a third party to manufacture and supply Product to AMAG in quantities and subject to pricing, payment, packaging, delivery and other material terms which in the aggregate provide AMAG with a lower total cost of purchase of the Product than the pricing and terms provided by SAFC pursuant to this Agreement then the Minimum Purchase Commitment as set forth in column 2 of the table under 2.8(a) will be terminated [***] following the date AMAG notifies SAFC of such third party offer, and the Minimum Purchase Commitment as set forth in Column 3 of the table under 2.8(a) will apply; and

 

(b)                                 SAFC is unable to offer the pricing set forth under Section 2.8(c) above, then, AMAG shall have the right, but not the obligation, to terminate either or both (A) the Minimum Purchase Commitment as set forth in column 2 of the table under Section 2.8(a) and/or (B) the Minimum Purchase Commitment as set forth in column 3 of the table under Section 2.8(a).

 

In the event Section 2.8(d)(ii)(a) applies, AMAG agrees to provide SAFC in writing with the terms of the third party offer and SAFC will have [***] business days to match the terms of such third party offer.  If SAFC is able to match such third party offer, then the Minimum Purchase Commitment as set forth in column 2 under the table in Section 2.8(a) will continue to apply for the remainder of the Term. AMAG may only invoke clause Section 2.8(d)(ii)(a) above once during the Term of this Agreement.”

 

(e)                                  For purposes of this Agreement, the term “Purchase Commitment

 

4

 

[***] INDICATES MATERIAL THAT HAS BEEN OMITTED AND FOR WHICH CONFIDENTIAL TREATMENT HAS BEEN REQUESTED.  ALL SUCH OMITTED MATERIAL HAS BEEN FILED WITH THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO RULE 24b-2 PROMULGATED UNDER THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED.

 

Requirements” shall mean that (i) SAFC has provided and continues to provide conforming and timely delivered Product in commercial Batches resulting from a production yield of not less than the minimum yield achieved in the prior [***] validation runs, or in the event a Batch is produced with a Yield that is less than the minimum criteria stated in the previous sentence, the Parties will negotiate in good faith to provide a price adjustment on such Batch to cover the percentage of [***] supplied by AMAG which is lost due to unexpected yield, (ii) SAFC can meet the Commercial Assurance (as defined below in Section 3.1 of this Agreement) production levels and (iii) SAFC has not and does not breach any material term of this Agreement which remains uncured for longer than [***] days following receipt of written notice from AMAG describing the nature of the breach.

 

(f)           SAFC shall use commercially reasonable efforts to have N-1 Plant approved and available for use and manufacture of Active Pharmaceutical Product and Drug Product Intermediate by no later than the N-1 Start Date.”

 

3.              Section 9.1 of the Agreement is hereby amended and restated in its entirety to read as follows:

 

“9.1                         Term.  The initial period of this Agreement shall commence as of the Commencement Date and shall continue in full force and effect until [***], unless earlier terminated as provided in Section 9.2 or 10 below. Thereafter, the Agreement shall be renewed automatically for additional [***] year periods, unless terminated or cancelled by (i) by SAFC upon at least [***] months prior written notice to AMAG and (ii) by AMAG upon [***] months prior written notice to SAFC.  Such initial period and any renewal period shall be referred to herein as the ‘Term’.  Notwithstanding the foregoing, AMAG shall have the right to terminate this Agreement and any pending Purchase Orders upon (A) [***] days prior written notice if:  (i) AMAG, its Affiliates and any marketing partners (if any) all discontinue the sale or commercialization of the Finished Product in [***], or (ii) the FDA and other relevant regulators take regulatory action that prohibits the sale or commercialization of the Finished Product in [***] or (B) on or after [***], upon [***] months prior written notice to SAFC for convenience.”

 

4.              Paragraph (a) of Section 12.6 (Assignment; Successors; Subcontractors; Third-Party Beneficiaries) of the Agreement is hereby amended and restated in its entirety to read as follows:

 

(d)                                 “Neither Party may assign or otherwise transfer any of its rights or obligations under this Agreement without the prior written consent of the other Party, which will not be unreasonably withheld, except that (i) Company may assign, in whole or in part, without such consent any of its rights or obligations under this Agreement to any Affiliate of Company, provided that any such assignment to an Affiliate shall not relieve Company as the primary obligor hereunder, (ii) either Party may assign this Agreement in connection with the merger, consolidation or sale of the stock or substantially all of the assets of such Party relating to the performance of this Agreement, (iii) Company may assign this Agreement at any time to [***] upon written notice to SAFC, (iv) SAFC acknowledges and agrees that

 

5

 

[***] INDICATES MATERIAL THAT HAS BEEN OMITTED AND FOR WHICH CONFIDENTIAL TREATMENT HAS BEEN REQUESTED.  ALL SUCH OMITTED MATERIAL HAS BEEN FILED WITH THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO RULE 24b-2 PROMULGATED UNDER THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED.

 

[***] is an intended third party beneficiary of: (A) the right to participate in certain inspections that may be conducted by Regulatory Authorities as and to the extent set forth in Section 2.4 of this Agreement and (B) the right to obtain direct supply of Active Pharmaceutical Ingredient and Drug Product Intermediate from SAFC as and to the extent set forth in Section 12.22 of this Agreement, and (v) Company agrees that SAFC shall have the right from time to time, during the Term of this Agreement and without further notice or liability, to accept Purchase Orders for Product directly from [***] against Company’s Commercial Forecast. Any assignment in violation of this Section 12.6(a) shall be null and void.”

 

5.              The Agreement is hereby amended by adding the following new Section 12.21 at the end of the Agreement:

 

“12.21           Manufacturing Product at N-1 Plant.

 

a)            SAFC will be responsible for the costs of constructing and preparing the N-1 Plant for Manufacture of Product, including making any capital improvements to N-1 Plant, utilities, ancillary equipment and controls, which may be necessary to transfer the current process and scale-up the Manufacture of Product in N-1 Plant in commercial quantities (“Technology Transfer and Scale-Up Project”).

 

b)            SAFC shall invoice AMAG for a technology transfer fee and scale-up fee up to a total of $[***] for a portion of the costs of the Technology Transfer and Scale-Up Project: (i) $[***] to be billed and invoiced on or after [***] and (ii) $[***] to be billed and invoiced by SAFC on or after [***].  If the N-1 Plant is not approved by AMAG, such approval not to be unreasonably withheld, and online [***] from the Effective Date of this Amendment, then SAFC shall promptly provide a credit to AMAG of $[***].

 

c)             If AMAG requests changes to the Product Specification, or process of Manufacture, AMAG and SAFC will negotiate the responsibility for the costs of validating and implementing such changes, which may include additional capital equipment. Provided that N-1 Plant modifications meet AMAG quality standards and global regulatory approval (i.e., US, EU, Canada and Switzerland) is obtained, AMAG agrees to allow SAFC to Manufacture Product in N-1 Plant in fulfillment of AMAG Purchase Orders within [***] of facility completion and validation.”

 

6.              The Agreement is hereby amended by adding the text set forth below as a new Section 12.22 to the Agreement:

 

6

 

[***] INDICATES MATERIAL THAT HAS BEEN OMITTED AND FOR WHICH CONFIDENTIAL TREATMENT HAS BEEN REQUESTED.  ALL SUCH OMITTED MATERIAL HAS BEEN FILED WITH THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO RULE 24b-2 PROMULGATED UNDER THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED.

 

“12.22           The Parties hereby acknowledge that AMAG desires for [***] to have the right to order certain quantities of Active Pharmaceutical Ingredient and Drug Product Intermediate from SAFC in the event that during the term of this Agreement either (i) [***] or (ii) [***].  SAFC hereby agrees to accept such orders from [***] subject to the following terms and conditions: (i) AMAG shall provide written notice to SAFC of (A) the occurrence of such an [***] or [***] and (B) AMAG’s assignment of its rights and obligations under this Agreement to [***], (ii) [***] shall agree in writing with SAFC to assume AMAG’s rights and obligations under the Agreement and submit written purchase orders to SAFC that satisfy all of the requirements, terms and conditions of this Agreement, including without limitation, as to quantities, delivery dates and payment, as the same would apply to purchase orders submitted by AMAG under this Agreement and (iii) [***] shall commit in writing to make direct payment to SAFC of the amounts due for the Active Pharmaceutical Ingredient and Drug Product Intermediate so ordered and delivered in accordance with the terms and conditions of this Agreement, as the same would apply to quantities of Active Pharmaceutical Ingredient and Drug Product Intermediate purchased by AMAG hereunder.”

 

7.                                      Accept as provided herein, all other terms and conditions of the Agreement shall remain in full force and effect unamended.

 

[Remainder of this page is intentionally left blank]

 

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[***] INDICATES MATERIAL THAT HAS BEEN OMITTED AND FOR WHICH CONFIDENTIAL TREATMENT HAS BEEN REQUESTED.  ALL SUCH OMITTED MATERIAL HAS BEEN FILED WITH THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO RULE 24b-2 PROMULGATED UNDER THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED.

 

SIGNAURE PAGE TO AMENDMENT NO. 1

 

In Witness Whereof, the Parties by their authorized representatives have executed this Amendment as of the Effective Date.

 

	
 
    	
 
    	
 
    
	
AMAG   PHARMACEUTICALS, INC.
    	
Sigma-Aldrich, Inc.
    	
 
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    	
 
    	
 
    
	
By:
    	
/s/ Frank E. Thomas
    	
 
    	
By:
    	
/s/ Gilles Cottier
    
	
 
    	
 
    	
 
    	
 
    
	
Name: 
    	
Frank E. Thomas
    	
Name:
    	
Gilles Cottier
    
	
Title:    
    	
Chief Operating Officer
    	
Title: 
    	
Vice President
    
						

 

8Exhibit 10.1

 

ISRAELI SHARE OPTION PLAN

	
 
    

 

MediWound Ltd.

 

THE 2003 ISRAELI SHARE OPTION PLAN

 

(*In compliance with Amendment No. 132 of the Israeli Tax Ordinance, 2002)

 

1

 

TABLE OF CONTENTS

 

	
1.
    	
PURPOSE OF THE ISOP
    	
3
    
	
2.
    	
DEFINITIONS
    	
3
    
	
3.
    	
ADMINISTRATION OF THE ISOP
    	
6
    
	
4.
    	
DESIGNATION OF   PARTICIPANTS
    	
7
    
	
5.
    	
DESIGNATION OF OPTIONS   PURSUANT TO SECTION 102
    	
8
    
	
6.
    	
TRUSTEE
    	
9
    
	
7.
    	
SHARES RESERVED FOR THE   ISOP
    	
9
    
	
8.
    	
PURCHASE PRICE
    	
10
    
	
9.
    	
ADJUSTMENTS
    	
11
    
	
10.
    	
TERM AND EXERCISE OF   OPTIONS
    	
13
    
	
11.
    	
VESTING OF OPTIONS
    	
14
    
	
12.
    	
PURCHASE FOR INVESTMENT
    	
14
    
	
13.
    	
SHARES SUBJECT TO RIGHT OF   FIRST REFUSAL
    	
15
    
	
14.
    	
DIVIDENDS
    	
16
    
	
15.
    	
RESTRICTIONS ON   ASSIGNABILITY AND SALE OF OPTIONS
    	
16
    
	
16.
    	
EFFECTIVE DATE AND   DURATION OF THE ISOP
    	
16
    
	
17.
    	
AMENDMENTS OR TERMINATION
    	
17
    
	
18.
    	
GOVERNMENT REGULATIONS
    	
17
    
	
19.
    	
CONTINUANCE OF EMPLOYMENT   OR HIRED SERVICES
    	
17
    
	
20.
    	
GOVERNING LAW &   JURISDICTION
    	
17
    
	
21.
    	
TAX CONSEQUENCES
    	
18
    
	
22.
    	
NON-EXCLUSIVITY OF THE   ISOP
    	
18
    
	
23.
    	
MULTIPLE AGREEMENTS
    	
18
    

 

2

 

This plan, as amended from time to time, shall be known as MediWound Ltd. 2003 Israeli Share Option Plan (the “ISOP”).

 

1.                                      PURPOSE OF THE ISOP

 

The ISOP is intended to provide an incentive to retain, in the employ of the Company and its Affiliates (as defined below), persons of training, experience, and ability, to attract new employees, officers, directors, consultants, service providers and any other entity which the Board shall decide their services are considered valuable to the Company, to encourage the sense of proprietorship of such persons, and to stimulate the active interest of such persons in the development and financial success of the Company by providing them with opportunities to purchase shares in the Company, pursuant to the ISOP.

 

2.                                      DEFINITIONS

 

For purposes of the ISOP and related documents, including the Option Agreement, the following definitions shall apply:

 

2.1                               “Affiliate” means any “employing company” within the meaning of Section 102(a) of the Ordinance.

 

2.2                               “Approved 102 Option” means an Option granted pursuant to Section 102(b) of the Ordinance and held in trust by a Trustee for the benefit of the Optionee.

 

2.3                               “Board” means the Board of Directors of the Company.

 

2.4                               “Capital Gain Option (CGO)” as defined in Section 5.4 below.

 

2.5                               “Cause” means, (i) conviction of any felony involving moral turpitude or affecting the Company; (ii) any refusal to carry out a reasonable directive of the chief executive officer, the Board or the Optionee’s direct supervisor, which involves the business of the Company or its Affiliates and was capable of being lawfully performed; (iii) embezzlement of funds of the Company or its Affiliates; (iv) any breach of the Optionee’s fiduciary duties or duties of care of the Company; including without limitation disclosure of confidential information of the Company; and (v) any conduct (other than conduct in good faith) reasonably determined by the Board to be materially detrimental to the Company.

 

2.6                               “Chairman” means the chairman of the Committee.

 

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2.7                               “Committee” means a share option compensation committee appointed by the Board, which shall consist of no fewer than two members of the Board.

 

2.8                               “Company” means MediWound Ltd., an Israeli company.

 

2.9                               “Companies Law” means the Israeli Companies Law 5759-1999.

 

2.10                        “Controlling Shareholder” shall have the meaning ascribed to it in Section 32(9) of the Ordinance.

 

2.11                        “Date of Grant” means, the date of grant of an Option, as determined by the Board and set forth in the Optionee’s Option Agreement.

 

2.12                        “Employee” means a person who is employed by the Company or its Affiliates, including an individual who is serving as a director or an office holder, but excluding Controlling Shareholder.

 

2.13                        “Expiration date” means the date upon which an Option shall terminate, as set forth in Section 10.2 of the ISOP.

 

2.14                        “Fair Market Value” means as of any date, the value of a Share determined as follows:

 

(i)                                     If the Shares are listed on any established stock exchange or a national market system, including without limitation the NASDAQ National Market system, or the NASDAQ Small Cap Market of the NASDAQ Stock Market, the Fair Market Value shall be the closing sales price for such Shares (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 Board deems reliable.

 

Without derogating from the above, solely for the purpose of determining the tax liability pursuant to Section 102(b)(3) of the Ordinance, if at the Date of Grant the Company’s shares are listed on any established stock exchange or a national market system or if the Company’s shares will be registered for trading within ninety (90) days following the Date of Grant, the Fair Market Value of a Share at the Date of Grant shall be determined in accordance with the average value of the Company’s shares on the thirty (30) trading days preceding the Date of Grant or on the thirty (30) trading days following the date of registration for trading, as the case may be;

 

(ii)                                  If the Shares 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 Shares on the last market trading day prior to the day of determination, or;

 

(iii)                               In the absence of an established market for the Shares, the Fair Market Value thereof shall be determined in good faith by the Board.

 

2.15                        “Flip Tax” means restructure the form of incorporation under which the current shareholders would hold shares in a U.S. resident company which owns 100% of the shares of the Company.

 

4

 

2.15                        “IPO” means the initial public offering of the Company’s shares and the listing of such shares for trading on any recognized stock exchange or over-the-counter or computerized securities trading system.

 

2.16                        “ISOP” means this 2003 Israeli Share Option Plan.

 

2.17                        “ITA” means the Israeli Tax Authorities.

 

2.18                        “Non-Employee” means any person who is not an Employee, including without limitation, consultant, adviser, service provider, Controlling Shareholder.

 

2.19                        “Ordinary Income Option (OIO)” as defined in Section 5.5 below.

 

2.20                        “Option” means an option to purchase one or more Shares of the Company pursuant to the ISOP.

 

2.21                        “102 Option” means any Option granted to Employees pursuant to Section 102 of the Ordinance.

 

2.22                        “3(i) Option” means an Option granted pursuant to Section 3(i) of the Ordinance to any person who is Non-Employee.

 

2.23                        “Optionee” means a person who receives or holds an Option under the ISOP.

 

2.24                        “Option Agreement” means the share option agreement between the Company and an Optionee that sets out the terms and conditions of an Option.

 

2.25                        “Ordinance” means the Israeli Income Tax Ordinance [New Version], 1961 as now in effect or as hereafter amended.

 

2.26                        “Purchase Price” means the price for each Share subject to an Option.

 

2.27                        “Section 102” means section 102 of the Ordinance as now in effect or as hereafter amended.

 

2.28                        “Share” means the ordinary shares, NIS 0.01 par value each, of the Company.

 

2.29                        “Successor Company” means any entity the Company is merged to or is acquired by, in which the Company is not the surviving entity.

 

2.30                        “Transaction” means (i) merger, acquisition or reorganization of the Company with one or more other entities in which the Company is not the surviving entity, (ii) a sale of all or substantially all of the assets of the Company.

 

2.31                        “Trustee” means any individual appointed by the Company to serve as a trustee and approved by the ITA, all in accordance with the provisions of Section 102(a) of the Ordinance.

 

2.32                        “Unapproved 102 Option” means an Option granted pursuant to Section 102(c) of the Ordinance and not held in trust by a Trustee.

 

5

 

2.33                        “Vested Option” means any Option, which has already been vested according to the Vesting Dates.

 

2.34                        “Vesting Dates” means, as determined by the Board or by the Committee, the date as of which the Optionee shall be entitled to exercise the Options or part of the Options, as set forth in section 11 of the ISOP.

 

3.                                      ADMINISTRATION OF THE ISOP

 

3.1                               The Board shall have the sole and absolute power to administer the ISOP either directly or upon the recommendation of the Committee, all as provided by applicable law and in the Company’s Articles of Association.  Notwithstanding the above, the Board shall automatically have residual authority if no Committee shall be constituted or if such Committee shall cease to operate for any reason.

 

3.2                               The Committee shall select one of its members as its Chairman and shall hold its meetings at such times and places as the Chairman shall determine.  The Committee shall keep records of its meetings and shall make such rules and regulations for the conduct of its business as it shall deem advisable.  Any member of such Committee shall be eligible to receive Options under the ISOP while serving on the Committee, unless otherwise specified herein.

 

3.3                               The Committee shall have the power to recommend to the Board and the Board shall have the full power and authority to:  (i) designate participants; (ii) determine the terms and provisions of the respective Option Agreements, including, but not limited to, the number of Options to be granted to each Optionee, the number of Shares to be covered by each Option, provisions concerning the time and the extent to which the Options may be exercised and the nature and duration of restrictions as to the transferability or restrictions constituting substantial risk of forfeiture and to cancel or suspend awards, as necessary; (iii) determine the Fair Market Value of the Shares covered by each Option; (iv) make an election as to the type of Approved 102 Option; and (v) designate the type of Options.  The Committee shall have full power and authority to: (i) alter any restrictions and conditions of any Options or Shares subject to any Options (ii) interpret the provisions and supervise the administration of the ISOP; (iii) accelerate the right of an Optionee to exercise in whole or in part, any previously granted Option; (iv) determine the Purchase Price of the Option; (v) prescribe, amend and rescind rules and regulations relating to the ISOP; and (vi) make all other determinations deemed necessary or advisable for the administration of the ISOP.

 

3.4                               Notwithstanding the above, the Committee shall not be entitled to grant Options to the Optionees, however, it will be authorized to issue Shares underlying Options which have been granted by the Board and duly exercised pursuant to the provisions herein in accordance with section 112(a)(5) of the Companies Law.

 

3.5                               The Board shall have the authority to grant, at its discretion, to the holder of an outstanding Option, in exchange for the surrender and cancellation of such Option, a new

 

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Option having a purchase price equal to, lower than or higher than the Purchase Price of the original Option so surrendered and canceled and containing such other terms and conditions as the Committee may prescribe in accordance with the provisions of the ISOP.

 

3.6                               All decisions and selections made by the Board or the Committee pursuant to the provisions of the ISOP shall be made in accordance with the Companies Law and the Company’s Articles of Association.

 

3.7                               The interpretation and construction by the Committee of any provision of the ISOP or of any Option Agreement thereunder shall be final and conclusive unless otherwise determined by the Board.

 

3.8                               Subject to the Company’s Articles of Association and the Company’s decision, and to all approvals legally required, including, but not limited to the provisions of the Companies Law, each member of the Board or the Committee shall be indemnified and held harmless by the Company against any cost or expense (including counsel fees) reasonably incurred by him, or any liability (including any sum paid in settlement of a claim with the approval of the Company) arising out of any act or omission to act in connection with the ISOP unless arising out of such member’s own fraud or bad faith, to the extent permitted by applicable law.  Such indemnification shall be in addition to any rights of indemnification the member may have as a director or otherwise under the Company’s Articles of Association, any agreement, any vote of shareholders or disinterested directors, insurance policy or otherwise.

 

4.                                      DESIGNATION OF PARTICIPANTS

 

4.1                               The persons eligible for participation in the ISOP as Optionees shall include any Employees and/or Non-Employees of the Company or of any Affiliate; provided, however, that (i) Employees may only be granted 102 Options; (ii) Non-Employees may only be granted 3(i) Options; and (iii) Controlling Shareholders may only be granted 3(i) Options.

 

4.2                               The grant of an Option hereunder shall neither entitle the Optionee to participate nor disqualify the Optionee from participating in, any other grant of Options pursuant to the ISOP or any other option or share plan of the Company or any of its Affiliates.

 

4.3                               Anything in the ISOP to the contrary notwithstanding, all grants of Options to directors and office holders shall be authorized and implemented in accordance with the provisions of the Companies Law or any successor act or regulation, as in effect from time to time.

 

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5.                                      DESIGNATION OF OPTIONS PURSUANT TO SECTION 102

 

5.1                               The Company may designate Options granted to Employees pursuant to Section 102 as Unapproved 102 Options or Approved 102 Options.

 

5.2                               The grant of Approved 102 Options shall be made under this ISOP adopted by the Board as described in Section 15 below, and shall be conditioned upon the approval of this ISOP by the ITA.

 

5.3                               Approved 102 Option may either be classified as Capital Gain Option (“CGO”) or Ordinary Income Option (“OIO”).

 

5.4                               Approved 102 Option elected and designated by the Company to qualify under the capital gain tax treatment in accordance with the provisions of Section 102(b)(2) shall be referred to herein as CGO.

 

5.5                               Approved 102 Option elected and designated by the Company to qualify under the ordinary income tax treatment in accordance with the provisions of Section 102(b)(1) shall be referred to herein as OIO.

 

5.6                               The Company’s election of the type of Approved 102 Options as CGO or OIO granted to Employees (the “Election”), shall be appropriately filed with the ITA before the Date of Grant of an Approved 102 Option.  Such Election shall become effective beginning the first Date of Grant of an Approved 102 Option under this ISOP and shall remain in effect until the end of the year following the year during which the Company first granted Approved 102 Options.  The Election shall obligate the Company to grant only the type of Approved 102 Option it has elected, and shall apply to all Optionees who were granted Approved 102 Options during the period indicated herein, all in accordance with the provisions of Section 102(g) of the Ordinance.  For the avoidance of doubt, such Election shall not prevent the Company from granting Unapproved 102 Options simultaneously.

 

5.7                               All Approved 102 Options must be held in trust by a Trustee, as described in Section 6 below.

 

5.8                               For the avoidance of doubt, the designation of Unapproved 102 Options and Approved 102 Options shall be subject to the terms and conditions set forth in Section 102 of the Ordinance and the regulations promulgated thereunder.

 

5.9                               With regards to Approved 102 Options, the provisions of the ISOP and/or the Option Agreement shall be subject to the provisions of Section 102 and the Tax Assessing Officer’s permit, and the said provisions and permit shall be deemed an integral part of the ISOP and of the Option Agreement.  Any provision of Section 102 and/or the said permit which is necessary in order to receive and/or to keep any tax benefit pursuant to Section 102, which is not expressly specified in the ISOP or the Option Agreement, shall be considered binding upon the Company and the Optionees.

 

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6.                                      TRUSTEE

 

6.1                               Approved 102 Options which shall be granted under the ISOP and/or any Shares allocated or issued upon exercise of such Approved 102 Options and/or other shares received subsequently following any realization of rights, including without limitation bonus shares, shall be allocated or issued to the Trustee and held for the benefit of the Optionees for such period of time as required by Section 102 or any regulations, rules or orders or procedures promulgated thereunder (the “Holding Period”). In the case the requirements for Approved 102 Options are not met, then the Approved 102 Options may be treated as Unapproved 102 Options, all in accordance with the provisions of Section 102 and regulations promulgated thereunder.

 

6.2                               Notwithstanding anything to the contrary, the Trustee shall not release any Shares allocated or issued upon exercise of Approved 102 Options prior to the full payment of the Optionee’s tax liabilities arising from Approved 102 Options which were granted to him and/or any Shares allocated or issued upon exercise of such Options.

 

6.3                               With respect to any Approved 102 Option, subject to the provisions of Section 102 and any rules or regulation or orders or procedures promulgated thereunder, an Optionee shall not sell or release from trust any Share received upon the exercise of an Approved 102 Option and/or any share received subsequently following any realization of rights, including without limitation, bonus shares, until the lapse of the Holding Period required under Section 102 of the Ordinance.  Notwithstanding the above, if any such sale or release occurs during the Holding Period, the sanctions under Section 102 of the Ordinance and under any rules or regulation or orders or procedures promulgated thereunder shall apply to and shall be borne solely by such Optionee.

 

6.4                               Upon receipt of Approved 102 Option, the Optionee will sign an undertaking to release the Trustee from any liability in respect of any action or decision duly taken and bona fide executed in relation with the ISOP, or any Approved 102 Option or Share granted to him thereunder.

 

7.                                      SHARES RESERVED FOR THE ISOP; RESTRICTION THEREON

 

7.1                               The Company has reserved four hundred and fifty thousand (450,000) authorized but unissued Shares, for the purposes of the ISOP and for the purposes of any other share option plans which were adopted by the Company in the past or which may be adopted by the Company in the future, subject to adjustment as set forth in Section 9 below.  Any Shares which remain unissued and which are not subject to the outstanding Options at the termination of the ISOP shall cease to be reserved for the purpose of the ISOP, but until termination of the ISOP the Company shall at all times reserve sufficient number of Shares to meet the requirements of the ISOP.  Should any Option for any reason expire or be canceled prior to its exercise or

 

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relinquishment in full, the Shares subject to such Option may again be subjected to an Option under the ISOP or under the Company’s other share option plans.

 

7.2                               Each Option granted pursuant to the ISOP, shall be evidenced by a written Option Agreement between the Company and the Optionee, in such form as the Board or the Committee shall from time to time approve.  Each Option Agreement shall state, among other matters, the number of Shares to which the Option relates, the type of Option granted thereunder (whether a CGO, OIO, Unapproved 102 Option or a 3(i) Option), the Vesting Dates, the Purchase Price per share, the Expiration Date and such other terms and conditions as the Committee or the Board in its discretion may prescribe, provided that they are consistent with this ISOP.

 

7.3                               Until the consummation of an IPO, such Shares shall be voted by an irrevocable proxy (the “Proxy”) pursuant to the directions of the Board, such Proxy to be assigned to the person or persons designated by the Board. Such person or persons designated by the Board shall be indemnified and held harmless by the Company against any cost or expense (including counsel fees) reasonably incurred by him/her, or any liability (including any sum paid in settlement of a claim with the approval of the Company) arising out of any act or omission to act in connection with the voting of such Proxy unless arising out of such member’s own fraud or bad faith, to the extent permitted by applicable law. Such indemnification shall be in addition to any rights of indemnification the person(s) may have as a director or otherwise under the Company’s Articles of Association, any agreement, any vote of shareholders or disinterested directors, insurance policy or otherwise.  Without derogating from the above, with respect to Approved 102 Options, such shares shall be voted in accordance with the provisions of Section 102 and any rules, regulations or orders promulgated thereunder.

 

8.                                      PURCHASE PRICE

 

8.1                               The Purchase Price of each Share subject to an Option shall be determined by the Committee in its sole and absolute discretion in accordance with applicable law, subject to any guidelines as may be determined by the Board from time to time.  Each Option Agreement will contain the Purchase Price determined for each Optionee.

 

8.2                               The Purchase Price shall be payable upon the exercise of the Option in a form satisfactory to the Committee, including without limitation, by cash or check.  The Committee shall have the authority to postpone the date of payment on such terms as it may determine.

 

8.3                               The Purchase Price shall be denominated in the currency of the primary economic environment of, either the Company or the Optionee (that is the functional currency of the Company or the currency in which the Optionee is paid) as determined by the Company.

 

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9.                                      ADJUSTMENTS

 

Upon the occurrence of any of the following described events, Optionee’s rights to purchase Shares under the ISOP shall be adjusted as hereafter provided:

 

9.1                               In the event of Transaction, the unexercised Options then outstanding under the ISOP shall be assumed or substituted for an appropriate number of shares of each class of shares or other securities of the Successor Company (or a patent or subsidiary of the Successor Company) as were distributed to the shareholders of the Company in connection and with respect to the Transaction. In the case of such assumption and/or substitution of Options, appropriate adjustments shall be made to the Purchase Price so as to reflect such action and all other terms and conditions of the Option Agreements shall remain unchanged, including but not limited to the vesting schedule, all subject to the determination of the Committee or the Board, which determination shall be in their sole discretion, final and binding.

 

9.2                               Notwithstanding the above and subject to any applicable law, the Board or the Committee shall have full power and authority to determine that in certain Option Agreements and at its sole discretion there shall be a clause instructing that, if in any such Transaction as described in section 9.1 above, the Successor Company (or parent or subsidiary of the Successor Company) does not agree to assume or substitute for the Options, the Vesting Dates shall be accelerated so that any unvested Option or any portion thereof shall be immediately vested as of the date which is ten (10) days prior to the effective date of the Transaction.  For avoidance of doubt if in any such Transaction as described in section 9.1 above, the Successor Company (or parent or subsidiary of the Successor Company) does not agree to assume or substitute for the Options or if a decision of acceleration is not made by the Board or the Committee then all non exercised or non vested options shall expire upon the effective date of such Transaction.

 

9.3                               For the purposes of section 9.1 above, an Option shall be considered assumed or substituted if, following the Transaction, the Option confers the right to purchase or receive, for each Share underlying an Option immediately prior to the Transaction, the consideration (whether shares, options, cash, or other securities or property) received in the Transaction by holders of shares held on the effective date of the Transaction (and if such holders were offered a choice of consideration, the type of consideration chosen by the holders of a majority of the outstanding shares); provided, however, that if such consideration received in the Transaction is not solely ordinary shares (or their equivalent) of the Successor Company or its parent or subsidiary, the Committee may, with the consent of the Successor Company, provide for the consideration to be received upon the exercise of the Option to be solely ordinary shares (or their equivalent) of the Successor Company or its parent or subsidiary equal in Fair Market Value to the per Share consideration received by holders of a majority of the outstanding shares in the Transaction; and provided further that the Committee may determine, in its discretion, that in lieu of such assumption or substitution of Options for options of the Successor Company or its parent or subsidiary, such Options will be substituted for any other type of asset or property including cash which is fair under the circumstances.

 

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9.4                               If the Company is voluntarily liquidated or dissolved while unexercised Options remain outstanding under the ISOP, the Company shall immediately notify all unexercised Option holders of such liquidation, and the Option holders shall then have ten (10) days to exercise any unexercised Vested Option held by them at that time, in accordance with the exercise procedure set forth herein.  Upon the expiration of such ten (10) days period, all remaining outstanding Options will terminate immediately.

 

9.5                               If the outstanding shares of the Company shall at any time be changed or exchanged by declaration of a share dividend (bonus shares), share split, combination or exchange of shares, recapitalization, or any other like event by or of the Company, and as often as the same shall occur, then the Board may (in its sole discretion) adjust the number, class and kind of the Shares subject to the ISOP or subject to any Options therefore granted, and the Purchase Prices, shall be appropriately and equitably adjusted so as to maintain the proportionate number of Shares without changing the aggregate Purchase Price, provided, however, that no adjustment shall be made by reason of the distribution of subscription rights (rights offering) on outstanding shares.  Upon happening of any of the foregoing, the class and aggregate number of Shares issuable pursuant to the ISOP (as set forth in Section 7 hereof), in respect of which Options have not yet been exercised, shall be appropriately adjusted, all as will be determined by the Board whose determination shall be final and binding.

 

9.6                               In the event of a “Flip Tax” the Purchase Price and the number of Shares to which Optionee is entitled pursuant to this ISOP shall be proportionately substituted so that the ratio of the Purchase Price per share to the Fair Market Value of each Share shall not be changed and appropriate adjustment shall maintain the aggregate Intrinsic Value (as defined below) of the Options granted unchanged.

 

Notwithstanding anything to the contrary, any grant of 102 Options following an event described in this sub-section 9.6 shall take place subject to the approval obtained by Israeli Tax authority for such grant.

 

“Intrinsic Value” means the excess of the Fair Market Value of the Shares over the Purchase price on the Date of Grant.

 

9.7                               Anything herein to the contrary notwithstanding, if prior to the completion of the IPO all or substantially all of the shares of the Company are to be sold, or in case of a Transaction, all or substantially all of the shares of the Company are to be exchanged for securities of another Company, then each Optionee shall be obliged to sell or exchange, as the case may be, any Shares such Optionee purchased under the ISOP, in accordance with the instructions issued by the Board in connection with the Transaction, whose determination shall be final and binding.

 

9.8                               The Optionee acknowledges that in the event that the Company’s shares shall be registered for trading in any public market, Optionee’s rights to sell the Shares may be subject to certain limitations (including a lock-up period), as will be requested by the Company or its underwriters, and the Optionee unconditionally agrees and accepts to be bound by any such limitations.

 

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10.                               TERM AND EXERCISE OF OPTIONS

 

10.1                        Options shall be exercised by the Optionee by giving written notice to the Company and/or to any third party designated by the Company (the “Representative”), in such form and method as may be determined by the Company and when applicable, by the Trustee in accordance with the requirements of Section 102, which exercise shall be effective upon receipt of such notice by the Company and/or the Representative and the payment of the Purchase Price at the Company’s or the Representative’s principal office.  The notice shall specify the number of Shares with respect to which the Option is being exercised.

 

10.2                        Options, to the extent not previously exercised, shall terminate forthwith upon the earlier of:  (i) the date set forth in the Option Agreement; and (ii) the expiration of any extended period in any of the events set forth in section 10.5 below.

 

10.3                        The Options may be exercised by the Optionee in whole at any time or in part from time to time, to the extent that the Options become vested and exercisable, prior to the Expiration Date, and provided that, subject to the provisions of section 10.5 below, the Optionee is employed by or providing services to the Company or any of its Affiliates, at all times during the period beginning with the granting of the Option and ending upon the date of exercise.

 

10.4                        Subject to the provisions of section 10.5 below, in the event of termination of Optionee’s employment or services, with the Company or any of its Affiliates, all Options granted to such Optionee will immediately expire.  A notice of termination of employment or service shall be deemed to constitute termination of employment or service.  For the avoidance of doubt, in case of such termination of employment or service, the unvested portion of the Optionee’s Option shall not vest and shall not become exercisable.

 

10.5                        Notwithstanding anything to the contrary hereinabove and unless otherwise determined in the Optionee’s Option Agreement, an Option may be exercised after the date of termination of Optionee’s employment or service with the Company or any Affiliates during an additional period of time beyond the date of such termination, but only with respect to the number of Vested Options at the time of such termination according to the Vesting Dates, if:

 

(i)                                     termination is without Cause, in which event any Vested Option still in force and unexpired may be exercised within a period of ninety (90) days after the date of such termination; or -

 

(ii)                                  termination is the result of death or disability of the Optionee, in which event any Vested Option still in force and unexpired may be exercised within a period of six (6) months after the date of such termination; or -

 

(iii)                               prior to the date of such termination, the Committee shall authorize an extension of the terms of all or part of the Vested Options beyond the date of such termination for a period not to exceed the period during which the Options by their terms would otherwise have been exercisable.

 

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For avoidance of any doubt, if termination of employment or service is for Cause, any outstanding unexercised Option (whether vested or non-vested), will immediately expire and terminate, and the Optionee shall not have any right in connection to such outstanding Options.

 

10.6                        To avoid doubt, the Optionees shall not have any of the rights or privileges of shareholders of the Company in respect of any Shares purchasable upon the exercise of any Option, nor shall they be deemed to be a class of shareholders or creditors of the Company for purpose of the operation of sections 350 and 351 of the Companies Law or any successor to such section, until registration of the Optionee as holder of such Shares in the Company’s register of shareholders upon exercise of the Option in accordance with the provisions of the ISOP, but in case of Options and Shares held by the Trustee, subject to the provisions of Section 6 of the ISOP.

 

10.7                        Any form of Option Agreement authorized by the ISOP may contain such other provisions as the Committee may, from time to time, deem advisable.

 

10.8                        With respect to Unapproved 102 Option, if the Optionee ceases to be employed by the Company or any Affiliate, the Optionee shall extend to the Company and/or its Affiliate a security or guarantee for the payment of tax due at the time of sale of Shares, all in accordance with the provisions of Section 102 and the rules, regulation or orders promulgated thereunder.

 

11.                               VESTING OF OPTIONS

 

11.1                        Subject to the provisions of the ISOP, each Option shall vest following the Vesting Dates and for the number of Shares as shall be provided in the Option Agreement.  However, no Option shall be exercisable after the Expiration Date.

 

11.2                        An Option may be subject to such other terms and conditions on the time or times when it may be exercised, as the Committee may deem appropriate.  The vesting provisions of individual Options may vary.

 

12.                               PURCHASE FOR INVESTMENT

 

The Company’s obligation to issue or allocate Shares upon exercise of an Option granted under the ISOP is expressly conditioned upon:  (a) the Company’s completion of any registration or other qualifications of such Shares under all applicable laws, rules and regulations or (b) representations and undertakings by the Optionee (or his legal representative, heir or legatee, in the event of the Optionee’s death) to assure that the sale of the Shares complies with any registration exemption requirements which the Company in its sole discretion shall deem necessary or advisable.

 

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Such required representations and undertakings may include representations and agreements that such Optionee (or his legal representative, heir, or legatee):  (a) is purchasing such Shares for investment and not with any present intention of selling or otherwise disposing thereof; and (b) agrees to have placed upon the face and reverse of any certificates evidencing such Shares a legend setting forth (i) any representations and undertakings which such Optionee has given to the Company or a reference thereto and (ii) that, prior to effecting any sale or other disposition of any such Shares, the Optionee must furnish to the Company an opinion of counsel, satisfactory to the Company, that such sale or disposition will not violate the applicable laws, rules, and regulations, whether of the State of Israel or of the United States or any other State having jurisdiction over the Company and the Optionee.

 

13.                               SHARES SUBJECT TO RIGHT OF FIRST REFUSAL

 

13.1                        Notwithstanding anything to the contrary in the Articles of Association of the Company, none of the Optionees shall have a right of first refusal in relation with any sale of shares in the Company.

 

13.2                        Unless otherwise determined by the Committee, until such time as the Company shall complete an IPO, an Optionee shall not have the right to sell Shares issued upon the exercise of an Option within six (6) months and one day of the date of exercise of such Option or issuance of such Shares.  Unless otherwise determined by the Committee, until such time as the Company shall complete an IPO, the sale of Shares issuable upon the exercise of an Option shall be subject to a right of first refusal on the part of the Repurchaser(s).

 

Repurchaser(s) means (i) any shareholder who is entitled to the right of first refusal according to the Company’s Articles of Association at the time of such sale of Shares and in accordance with the manner determined in the Company’s Articles of Association; (ii) if the right described in (i) above is not exercised, the Company, if permitted by applicable law, or (iii) if the Company is not permitted by applicable law, then any affiliate of the Company designated by the Committee.  The Optionee shall give a notice of sale (hereinafter the “Notice”) to the Company in order to offer the Shares to the Repurchaser(s).

 

13.3                        The Notice shall specify the name of each proposed purchaser or other transferee (hereinafter the “Proposed Transferee”), the number of Shares offered for sale, the price per Share and the payment terms.  The Repurchaser(s) will be entitled for thirty (30) days from the day of receipt of the Notice (hereinafter the “Notice Period”), to purchase all or part of the offered Shares on a pro rata basis based upon their respective holdings in the Company.

 

13.4                        If by the end of the Notice Period not all of the offered Shares have been purchased by the Repurchaser(s), the Optionee shall be entitled to sell such Shares at any time during the ninety (90) days following the end of the Notice Period on terms not more favorable than those set out in the Notice, provided that the Proposed Transferee agrees in writing that the provisions of this section shall continue to apply to the Shares in the hands of such Proposed Transferee.  Any sale of Shares issued under the ISOP by the Optionee

 

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that is not made in accordance with the ISOP or the Option Agreement shall be null and void.

 

14.                               DIVIDENDS

 

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

 

15.                               RESTRICTIONS ON ASSIGNABILITY AND SALE OF OPTIONS

 

15.1                        No Option or any right with respect thereto, purchasable hereunder, whether fully paid or not, shall be assignable, transferable or given as collateral or any right with respect to it given to any third party whatsoever, except as specifically allowed under the ISOP, and during the lifetime of the Optionee each and all of such Optionee’s rights to purchase Shares hereunder shall be exercisable only by the Optionee.

 

Any such action made directly or indirectly, for an immediate validation or for a future one, shall be void.

 

15.2                        As long as Options and/or Shares are held by the Trustee on behalf of the Optionee, all rights of the Optionee over the Shares are personal, cannot be transferred, assigned, pledged or mortgaged, other than by will or pursuant to the laws of descent and distribution.

 

16.                              EFFECTIVE DATE AND DURATION OF THE ISOP

 

The ISOP shall be effective as of the day it was adopted by the Board and shall terminate at the end of ten (10) years from such day of adoption.

 

The Company shall obtain the approval of the Company’s shareholders for the adoption of this ISOP or for any amendment to this ISOP, if shareholders’ approval is necessary or desirable to comply with any applicable law including without limitation the US securities law or the securities laws of other jurisdiction applicable to Options granted to Optionees under this ISOP, or if shareholders’ approval is required by any authority or by any governmental agencies or

 

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national securities exchanges including without limitation the US Securities and Exchange Commission.

 

17.                               AMENDMENTS OR TERMINATION

 

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

 

18.                               GOVERNMENT REGULATIONS

 

The ISOP, and the granting and exercise of Options hereunder, and the obligation of the Company to sell and deliver Shares under such Options, shall be subject to all applicable laws, rules, and regulations of the State of Israel.

 

19.                               CONTINUANCE OF EMPLOYMENT OR HIRED SERVICES

 

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

 

20.                               GOVERNING LAW & JURISDICTION

 

The ISOP shall be governed by and construed and enforced in accordance with the laws of the State of Israel applicable to contracts made and to be performed therein, without giving effect to the principles of conflict of laws.  The competent courts of Tel-Aviv, Israel shall have sole jurisdiction in any matters pertaining to the ISOP.

 

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21.                               TAX CONSEQUENCES

 

21.1                        Any tax consequences arising from the grant or exercise of any Option, from the payment for Shares covered thereby or from any other event or act (of the Company and/or its Affiliates, the Trustee or the Optionee), hereunder, shall be borne solely by the Optionee. The Company and/or its Affiliates and/or the Trustee shall withhold taxes according to the requirements under the applicable laws, rules, and regulations, including withholding taxes at source.  Furthermore, the Optionee shall agree to indemnify the Company and/or its Affiliates and/or the Trustee and hold them harmless against and from any and all liability for any such tax or interest or penalty thereon, including without limitation, liabilities relating to the necessity to withhold, or to have withheld, any such tax from any payment made to the Optionee.

 

21.2                        The Company and/or, when applicable, the Trustee shall not be required to release any Share certificate to an Optionee until all required payments have been fully made.

 

22.                               NON-EXCLUSIVITY OF THE ISOP

 

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

 

For the avoidance of doubt, prior grant of options to Optionees of the Company 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.

 

23.                               MULTIPLE AGREEMENTS

 

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

 

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