Document:

alec-ex1011_792.htm

 

Exhibit 10.11

 

ALECTOR, INC.

OUTSIDE DIRECTOR COMPENSATION POLICY

Approved March 2020

Alector, Inc. (the “Company”) believes that providing cash and equity compensation to members of its Board of Directors (the “Board,” and members of the Board, the “Directors”) represents an effective tool to attract, retain and reward Directors who are not employees of the Company (the “Outside Directors”).  This Outside Director Compensation Policy (the “Policy”) formalizes the Company’s policy regarding cash compensation and grants of equity awards to its Outside Directors.  Unless otherwise defined herein, capitalized terms used in this Policy will have the meaning given such term in the Company’s 2019 Equity Incentive Plan, as amended from time to time (the “Plan”), or if the Plan is no longer in use at the time of an equity award, the meaning given such term or any similar term in the equity plan then in place under which such equity award is granted.  Each Outside Director will be solely responsible for any tax obligations incurred by such Outside Director as a result of the equity and cash payments such Outside Director receives under this Policy.

Subject to Section 9, this Policy will be effective as of the effective date of the registration statement in connection with the initial public offering of the Company’s securities (the “Registration Statement”) (such date, the “Effective Date”). 

	
 
	
1.
	
Cash Compensation

Annual Cash Retainer

Each Outside Director will be paid an annual cash retainer of $40,000.  There are no per‐meeting attendance fees for attending Board meetings.  

Committee Annual Cash Retainer

As of the Effective Date, each Outside Director who serves as the chairman of the Board, the lead Outside Director, or the chair or a member of a committee of the Board will be eligible to earn additional annual fees (paid quarterly in arrears on a prorated basis) as follows: 

Non-Executive Chairman of the Board:$20,000

Lead Outside Director:$20,000

Chairman of Audit Committee:$15,000

Member of Audit Committee:$7,500

Chairman of Compensation Committee:$10,000

 

 

 

Member of Compensation Committee:$5,000

Chairman of Nominating and Governance Committee:$8,000

Member of Nominating and Governance Committee:$4,000

For clarity, each Outside Director who serves as the chair of a committee will receive only the annual fee as the chair of the committee and will not also receive the additional annual fee as a member of the committee. 

Payment

Each annual cash retainer under this Policy will be paid quarterly in arrears on a prorated basis to each Outside Director who has served in the relevant capacity at any point during the immediately preceding fiscal quarter, and such payment shall be made no later than 30 days following the end of such immediately preceding fiscal quarter.  For purposes of clarification, an Outside Director who has served as an Outside Director, as a member of an applicable committee (or chair thereof) during only a portion of the relevant Company fiscal quarter will receive a pro-rated payment of the quarterly payment of the applicable annual cash retainer(s), calculated based on the number of days during such fiscal quarter such Outside Director has served in the relevant capacities.  For purposes of clarification, an Outside Director who has served as an Outside Director, as a member of an applicable committee (or chair thereof), as applicable, from the Effective Date through the end of the fiscal quarter containing the Effective Date (the “Initial Period”) will receive a prorated payment of the quarterly payment of the applicable annual cash retainer(s), calculated based on the number of days during the Initial Period that such Outside Director has served in the relevant capacities. 

	
 
	
2.
	
Equity Compensation

Outside Directors will be eligible to receive all types of Awards (except Incentive Stock Options) under the Plan (or the applicable equity plan in place at the time of grant), including discretionary Awards not covered under this Policy.  All grants of Awards to Outside Directors pursuant to Section 2 of this Policy will be automatic and nondiscretionary, except as otherwise provided herein, and will be made in accordance with the following provisions:

(a)No Discretion.  No person will have any discretion to select which Outside Directors will be granted any Awards under this Policy or to determine the number of Shares to be covered by such Awards.

(b)Initial Options.  Subject to Section 11 of the Plan, each individual who first becomes an Outside Director following the Effective Date will be granted a nonstatutory stock option (an “Initial Option”) having a grant date fair value of approximately $550,000. The number of options will be determined by dividing the dollar value of the grant by the Black Scholes value of a share (with the shares covered by the award rounded down to the nearest whole share. The Initial Option will be made on the first trading date on or after the date on which such individual first becomes an Outside Director, whether through election by the stockholders of the Company or appointment by the Board to fill a vacancy. If an individual was a member of the Board and also an employee, becoming an Outside Director due to termination of employment will not entitle 

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the Outside Director to an Initial Option.  Each Initial Option will vest as to 1/4th of the Shares subject to the Initial Option on the one-year anniversary of the date the applicable Outside Director’s service as an Outside Director commenced and as to 1/48th of the Shares subject to the Initial Option each month thereafter, in each case subject to the Outside Director continuing to be a Service Provider through the applicable vesting date. Each Initial Option will become fully vested and exercisable immediately prior to a Change in Control, subject to the Outside Director continuing to be a Service Provider at the time of the Change in Control.

(c)Annual Option. Subject to Section 11 of the Plan, on the date of each annual meeting of the Company’s stockholders following the Effective Date (each, an “Annual Meeting”), each Outside Director who, as of such annual meeting date, has served on the board as a director for at least the preceding six months, will be automatically granted a nonstatutory stock option (an “Annual Option”) having a grant date fair value of approximately $350,000. The number of options will be determined by dividing the dollar value of the grant by the Black Scholes value of a share (with the shares covered by the award rounded down to the nearest whole share). Each Annual Option will vest on as to 1/12th of the Shares subject to the Annual Option each month after the date the Annual Option is granted, provided that the Annual Option will vest in full on the earlier of (i) the 12-month anniversary of the date of grant, or (ii) the date of the next regularly scheduled Annual Meeting, in each case subject to the Outside Director continuing to be a Service Provider through the applicable vesting date. Each Annual Option will become fully vested and exercisable immediately prior to a Change in Control, subject to the Outside Director continuing to be a Service Provider.

(d)Additional Terms of Initial Options and Annual Options.  The terms and conditions of each Initial Option and Annual Option will be as follows:

(i)The term of each Initial Option and Annual Option will be ten years, subject to earlier termination as provided in the Plan.

(ii)Each Initial Option and Annual Option will have an exercise price per Share equal to 100% of the Fair Market Value per Share on the grant date.

(e)Value.  For purposes of this Policy, “Value” means the grant date fair value (determined in accordance with U.S. generally accepted accounting principles), or such other methodology the Board may determine prior to the grant of the Initial Option or Annual Option becoming effective, as applicable.

	
 
	
3.
	
Change in Control

In the event of a Change in Control, each Outside Director will fully vest in his or her outstanding Company equity awards, including any Initial Option or Annual Option, provided that the Outside Director continues to be an Outside Director through such date.

	
 
	
4.
	
Annual Compensation Limit

No Outside Director may be paid, issued or granted, in any fiscal year, cash compensation and Awards with an aggregate value greater than $750,000, increased to $1,000,000 in the fiscal year of his or her initial service as an Outside Director (with the value of each Award based on its 

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Grant Value for purposes of the limitation under this Section 4).  Any cash compensation paid or Awards granted to an individual for his or her services as an Employee, or for his or her services as a Consultant (other than as an Outside Director), will not count for purposes of the limitation under this Section 4.

	
 
	
5.
	
Travel Expenses

Each Outside Director’s reasonable, customary and documented travel expenses to Board meetings will be reimbursed by the Company.

	
 
	
6.
	
Additional Provisions

All provisions of the Plan not inconsistent with this Policy will apply to Awards granted to Outside Directors.

	
 
	
7.
	
Adjustments

In the event that any dividend or other distribution (whether in the form of cash, Shares, other securities or other property), recapitalization, stock split, reverse stock split, reorganization, merger, consolidation, split-up, spin-off, combination, repurchase, or exchange of Shares or other securities of the Company, or other change in the corporate structure of the Company affecting the Shares occurs, the Administrator, in order to prevent diminution or enlargement of the benefits or potential benefits intended to be made available under this Policy, will adjust the number of Shares issuable pursuant to Awards granted under this Policy.

	
 
	
8.
	
Section 409A

In no event will cash compensation or expense reimbursement payments under this Policy be paid after the later of (i) the 15th day of the 3rd month following the end of the Company’s fiscal year in which the compensation is earned or expenses are incurred, as applicable, or (ii) the 15th day of the 3rd month following the end of the calendar year in which the compensation is earned or expenses are incurred, as applicable, in compliance with the “short-term deferral” exception under Section 409A of the Internal Revenue Code of 1986, as amended, and the final regulations and guidance thereunder, as may be amended from time to time (together, “Section 409A”).  It is the intent of this Policy that this Policy and all payments hereunder be exempt from or otherwise comply with the requirements of Section 409A so that none of the compensation to be provided hereunder will be subject to the additional tax imposed under Section 409A, and any ambiguities or ambiguous terms herein will be interpreted to be so exempt or comply.  In no event will the Company reimburse an Outside Director for any taxes imposed or other costs incurred as a result of Section 409A.

	
 
	
9.
	
Revisions

The Board may amend, alter, suspend or terminate this Policy at any time and for any reason.  No amendment, alteration, suspension or termination of this Policy will materially impair the rights of an Outside Director with respect to compensation that already has been paid or awarded, unless otherwise mutually agreed between the Outside Director and the Company.  Termination of this Policy will not affect the Board’s or the Compensation Committee’s ability to 

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exercise the powers granted to it under the Plan with respect to Awards granted under the Plan pursuant to this Policy prior to the date of such termination.  

5Exhibit
4.1

 

DESCRIPTION
OF SECURITIES

 

Under
the Amended and Restated Articles of Association (the “Articles”) of On Track Innovations Ltd. (the “Company”),
the Company is authorized to issue up to fifty million (50,000,000) ordinary shares, nominal value NIS 0.10 per share (the “Ordinary
Shares”). As of December 31, 2019, the Company had 46,784,377 outstanding Ordinary Shares, 1,178,699 Ordinary Shares that
were repurchased by the Company and are held as dormant shares, and 809,000 options to purchase additional Ordinary Shares at
a weighted average exercise price of $0.93 per share. The Ordinary Shares are quoted on the OTCQX® market (“OTCQX”)
under the symbol “OTIVF.”

 

The
following is a summary of some of the terms of the Company’s Ordinary Shares, which is the Company’s only class of
securities registered under Section 12 of the Securities Exchange Act of 1934, as amended. This summary is not complete, and is
subject to and qualified by the provisions of the Articles. The terms of the Ordinary Shares are also subject to and qualified
by the applicable provisions of the Companies Law, 5759-1999, of the State of Israel (the “Companies Law”). The ownership
or voting of Ordinary Shares by non-residents of Israel is not restricted in any way by the Articles or the laws of the State
of Israel, except that nationals of countries which are in a state of war with Israel might not be recognized as owners of Ordinary
Shares.

 

Registered
Share Capital

 

Increasing
the authorized share capital of the Company, including Ordinary Shares, must be approved by the Company’s shareholders.
Because the approval of an increase in the Company’s authorized share constitutes an amendment to the Memorandum of Association
of the Company, the affirmative vote of 75% of the Company's Ordinary Shares voting on the matter is required to approve such
resolution.

 

     

    	 

    

 

Dividend
and Liquidation Rights

 

The
Company is permitted to declare a dividend to be paid to the holders of Ordinary Shares, but the Company has never declared a
dividend and it does not anticipate any dividend declaration in the foreseeable future. Dividends may only be paid out of the
Company’s profits ("the profit test"), provided that there is no reasonable concern that payment of a dividend
will prevent the Company from satisfying its existing and foreseeable obligations as they become due ("the solvency test").
Profits, as defined in section 302(b) to the Companies Law, mean surplus balance or surplus accumulated during the last two years,
whichever is higher. Alternatively, an Israeli court is entitled, at the Company’s request, to approve a dividend distribution,
which does not meet the profit test, provided it is convinced that the solvency test is met. In the event of the Company’s
liquidation, after satisfaction of liabilities to creditors, the Company’s assets will be distributed to the holders of
Ordinary Shares in proportion to the nominal value of their holdings. This right may be affected by the grant of preferential
dividend or distribution rights to the holders of a class of shares with preferential rights that may be authorized in the future
by the Company’s shareholders. Under the Companies Law, the declaration of a dividend does not require the approval of the
shareholders of a company unless the company’s articles of association require otherwise. The Articles provide that the
Company’s board of directors may declare and pay dividends without the approval of its shareholders.

 

Preemptive
Rights

 

Under
the Companies Law, shareholders in public companies do not have preemptive rights unless those rights are provided pursuant to
a contract. This means that the Company’s shareholders do not have the legal right to purchase shares in a new issuance
before they are offered to third parties. As a result, the Company’s shareholders could experience dilution of their ownership
interest if the Company decides to raise additional funds by issuing more shares and these shares are purchased by third parties.
Pursuant to the share purchase agreement (the “Share Purchase Agreement”) dated December 23, 2019 by and among the
Company, Jerry L. Ivy, Jr. Descendants’ Trust (“Ivy”) and certain other investors, Ivy has a right to purchase
any future equity securities offered by the Company, except with respect to certain exempt issuances as set forth in the Share
Purchase Agreement.

 

Voting,
Shareholders’ Meetings and Resolutions

 

Holders
of Ordinary Shares have, for each Ordinary Share held, one vote on all matters submitted to a vote of the Company’s shareholders.
These voting rights may be affected by the grant of any special voting rights to the holders of a class of shares with preferential
rights that may be authorized in the future by the Company’s shareholders. The quorum required for a general meeting of
shareholders consists of at least two shareholders present, in person or by proxy, who hold or represent together at least one
third of the Company’s issued and outstanding Ordinary Shares or, as long as the Company is quoted on OTCQX, such higher
percentage as OTCQX may impose on quoted companies from time to time so long as such higher percentage is in effect. A meeting
adjourned for lack of a quorum is generally adjourned to the same day in the following week at the same time and place. If a quorum
is not present within half an hour following the time appointed for the reconvened meeting, any two shareholders then present,
in person or by proxy, shall constitute a quorum.

 

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Under
the Companies Law, unless otherwise provided in the Articles or by applicable law, shareholders’ resolutions require the
approval of holders of a simple majority of our ordinary shares voting, in person or by proxy on the matter.  A shareholders’
resolution to amend the Articles requires the approval of a simple majority of the Company’s shareholders present in person
or by proxy.

 

Under
the Companies Law, a shareholder has certain duties of good faith and fairness towards the Company.

 

Election
of Directors

 

The
Ordinary Shares do not have cumulative voting rights for the election of directors.  Rather, under the Articles the
Company’s directors (other than external directors) are elected at a shareholders meeting by a simple majority of Ordinary
Shares for a term of service ending upon the next general meeting following three years from their election.  External
directors are elected by a simple majority of Ordinary Shares, which majority includes at least a majority of the shares held
by non-controlling shareholders who do not have a personal interest in the matter (excluding a personal interest unrelated to
the relationship with a controlling shareholder) voted at the meeting, or the total number of shares held by such non-controlling
shareholders who do not have a personal interest voted against the election of the external director does not exceed two percent
of the aggregate voting rights in the Company. As a result, the holders of Ordinary Shares that represent more than 50% of the
voting power represented at a shareholder meeting have the power to elect any or all of the Company’s directors whose positions
are being filled at that meeting, subject to the additional approval requirements for external directors.

 

Modification
of Class Rights

 

The
rights attached to any class, such as voting, liquidation and dividend rights, may be amended, following a decision by the Company’s
board of directors, by adoption of a resolution by a simple majority of the shares of that class represented at a separate class
meeting.

 

Transfer
of Shares and Notices

 

Fully
paid Ordinary Shares are issued in registered form and may be freely transferred under the Articles unless the transfer is restricted
or prohibited by Israeli law, U.S. securities laws or the rules of a stock exchange on which the shares are traded.  Under
the Companies Law and applicable regulations, unless otherwise provided in the Articles or by applicable law, shareholders of
record are entitled to receive at least 35 or 21 days' prior notice of meetings of shareholders, based on the matters that are
on the agenda.

 

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Anti-Takeover
Provisions under Israeli Law

 

Tender
Offer.  A person wishing to acquire shares of a publicly traded Israeli company and who would, as a result, hold
over 90% of the company’s issued and outstanding share capital or voting rights is required by the Companies Law to make
a tender offer to all of the company’s shareholders for the purchase of all of the issued and outstanding shares of the
company.  A person wishing to acquire shares of a public Israeli company and who could, as a result, hold over 90% of
the issued and outstanding share capital or voting rights of a certain class of shares is required by the Companies Law to make
a tender offer to all of the shareholders who hold shares of the relevant class for the purchase of all of the issued and outstanding
shares of that class. If the shareholders who refuse to sell their shares hold less than 5% of the issued share capital and voting
rights of the company or of the applicable class, all of the shares held by such shareholders that the acquirer offered to purchase
will be transferred to the acquirer by operation of law (provided that a majority of the offerees that do not have a personal
interest in such tender offer shall have approved it, which condition shall not apply if, following consummation of the tender
offer, the acquirer would hold at least 98% of all of the company's outstanding shares and voting rights (or shares and voting
rights of the relevant class)).  However, the shareholders may, at any time within six months following the completion
of the tender offer, petition the court to alter the consideration for the acquisition.  Even shareholders who indicated
their acceptance of the tender offer may so petition the court, unless the acquirer stipulated that a shareholder that accepts
the offer may not seek appraisal rights. If the dissenting shareholders hold more than 5% of the issued and outstanding share
capital or voting rights of the company or the applicable class, the acquirer may not acquire additional shares or voting rights
of the applicable class from shareholders who accepted the tender offer, if following such acquisition the acquirer would then
own over 90% of the issued and outstanding share capital or voting rights of the company or the applicable class.

 

The
Companies Law provides that an acquisition of shares of a public company must be made by means of a special tender offer if, as
a result of the acquisition, the purchaser would become a holder of 25% or greater of the voting rights in the company.  This
rule does not apply if there is already another holder of 25% or greater of the voting rights in the company.  As of
the date hereof, the Company is not aware of any single shareholder which holds 25% or more of the voting rights in the Company.  However,
pursuant to the terms of the Share Purchase Agreement, if the Subsequent Closing (as defined under the Share Purchase Agreement)
is consummated, subject to, among other things, the approval of the Company’s shareholders, Ivy will hold more than 25%
of the voting rights in the Company. Similarly, the Companies Law provides that an acquisition of shares in a public company must
be made by means of a special tender offer if as a result of the acquisition the purchaser would become a holder of more than
45% of the voting rights in the company, if there is no other holder of more than 45% of the voting rights in the company. The
special tender offer must be extended to all shareholders, but the offeror is not required to purchase shares representing more
than 5% of the voting power attached to the company’s outstanding shares, regardless of how many shares are tendered by
shareholders.  The special tender offer may be consummated only if (i) at least 5% of the voting power attached to the
company’s outstanding shares will be acquired by the offeror and (ii) the number of shares tendered in the offer exceeds
the number of shares whose holders objected to the offer.

 

Merger.
The Companies Law permits merger transactions if approved by each party’s board of directors and the majority of each party’s
shares voted on the proposed merger at a shareholders’ meeting called on at least 21 days' prior notice. The Articles provide
that merger transactions may be approved by a simple majority of the shares present, in person or by proxy, at a general meeting
of the Company’s shareholders. Under the Companies Law, in determining whether the required majority has approved the merger,
shares held by the other party to the merger, any person holding at least 25% of the outstanding voting shares or holding at least
25% of the means of appointing directors of the other party to the merger, or anyone acting on their behalf, including their relatives
or companies controlled by them, are excluded from the vote. If a majority of shareholders of one of the parties do not approve
the transaction because the votes of certain shareholders are excluded from the vote, a court may still approve the merger upon
the request of holders of at least 25% of the voting rights of a company, if the court holds that the merger is fair and reasonable,
taking into account the value of the parties to the merger and the consideration offered to the shareholders. Upon the request
of a creditor of either party to the proposed merger, the court may delay or prevent the merger if it concludes that there exists
a reasonable concern that, as a result of the merger, the surviving company will be unable to satisfy the obligations of any of
the parties to the merger. In addition, a merger may not be executed unless at least 30 days have passed from the approval of
the companies’ shareholders and at least 50 days have passed from the time that the proposals for approval of the merger
have been filed with the Israeli Registrar of Companies.

 

 

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