Document:

Unassociated Document

 

Exhibit 10.4

ENTERA BIO LTD.

 

SHARE INCENTIVE PLAN

 

A. NAME AND PURPOSE

 

1.    Name: This plan, as amended from time to time, shall be known as the “Entera Bio Ltd. Share Incentive Plan”.

 

2.    Purpose: The purpose and intent of the Plan is to provide incentives to employees, directors, consultants and/or contractors of the Company, by providing them with opportunities to purchase Shares, pursuant to a plan approved by the Board which is designed to enable the Company to issue equity related awards.

 

Incentives under the Plan will only be issued to Grantees (as defined below) subject to the Applicable Laws in their respective country of residence.

 

B. DEFINITIONS

 

“Administrator” means (i) the Board, or (ii) a committee of the Board appointed by the Board for the purpose of the administration of the Plan and, if a committee is appointed, to the extent acting in accordance with specific authorization and guidelines provided by the Board for such purpose and subject to any restriction under Applicable Laws.

 

“Adoption Date” means the Date of Grant, or any other date of commencement of vesting of an Award, for the purposes of the Plan, that is determined by the Administrator for a given grant of an Award.

 

“Affiliate” means any company (i) that holds at least 10% of the issued share capital of Entera Bio Ltd. or of its voting power, or (ii) in which Entera Bio Ltd. holds at least 10% of the issued share capital or voting power, or (iii) in which a company under clause (i) above also holds at least 10% of the issued share capital or voting power.

 

“Applicable Laws” means the requirements relating to the administration of equity compensation plans under Israeli law, U.S. state corporate laws, U.S. federal and state securities laws, U.S. tax law, and any share exchange or quotation system on which the Shares are listed or quoted and the applicable laws of any other country or jurisdiction where Awards are granted under the Plan.

 

“Award” means, individually or collectively, a grant under the Plan of Options, Shares, Restricted Shares, Restricted Share Units.

 

“Board” means the Board of Directors of Entera Bio Ltd.

 

“Cause” means (i) breach of the Grantee’s duty of loyalty towards the Company, or (ii) breach of the Grantee’s duty of care towards the Company, or (iii) the commission of any flagrant criminal

 

  

 

  

offense by the Grantee, or (iv) the commission of any act of fraud, embezzlement or dishonesty towards the Company by the Grantee, or (v) any unauthorized use or disclosure by the Grantee of confidential information or trade secrets of the Company, or (vi) involvement in a transaction in connection with the performance of duties to the Company which transaction is adverse to the interests of the Company and which is engaged in for personal profit, or (vii) any other intentional misconduct by the Grantee (by act or omission) adversely affecting the business or affairs of the Company in a material manner, or (viii) any act or omission by the Grantee which would allow for the termination of the Grantee’s employment without severance pay, according to the Israeli Severance Pay Law, 1963, or any similar provision of applicable law in the jurisdiction in which the Grantee is employed.

 

“Cessation of Service” means Grantee’s cessation of providing services as a Service Provider of the Company.

 

“Companies Law” means the Israeli Companies Law, 1999.

 

“Company” means Entera Bio Ltd., a company organized under the laws of the State of Israel, or any Affiliate thereof.

 

“Consultant” means any person, including an advisor, engaged by the Company to render services to such entity.

 

“Corporate Transaction” means the occurrence, in a single transaction or in a series of related transactions, of any one or more of the following events:

 

(i)    a sale or other disposition of all or substantially all, as determined by the Board in its discretion, of the consolidated assets of the Company and its subsidiaries;

 

(ii)    a sale or other disposition of at least eighty percent (80%) of the outstanding securities of the Company;

 

(iii)    a merger, consolidation or similar transaction following which the Company is not the surviving corporation; or

 

(iv)    a merger, consolidation or reorganization following which the Company is the surviving corporation but the Ordinary Shares of the Company outstanding immediately preceding the merger, consolidation or reorganization are converted or exchanged by virtue of the merger, consolidation or reorganization into other property, whether in the form of securities, cash or otherwise.

 

Whether a transaction is a “Corporate Transaction” as defined above, shall be finally and conclusively determined by the Administrator in its absolute discretion.

 

“Date of Grant” means the effective date of grant of an Award, as detailed in Section 5.1 below.

 

“Date of Cessation” means the effective date of a Cessation of Service.

 

  

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“Director” means a member of the Board or of the board of directors of an Affiliate.

 

“Disability” means the inability to engage in any substantial gainful occupation for which the Grantee is suited by education, training or experience, by reason of any medically determinable physical or mental impairment that is expected to result in such person’s death or to continue for a period of six (6) consecutive months or more.

 

“Employee” means any person, including officers and Directors, employed by the Company or an Affiliate of the Company. Neither service as a Director nor payment of a director’s fee by the Company will be sufficient to constitute “employment” by the Company.

 

“Exercise Conditions” means a Vesting Period and/or Performance Conditions.

 

“Exercise Price” means (i) the purchase price per Share subject to an Award, or (ii) the nominal value per Share to be paid upon the vesting of an Award that does not require exercise by the Grantee, to the extent the Grantee is required to pay such nominal value hereunder, as applicable.

 

“Exercised Share” means a Share issued upon exercise of an Award or vesting of an Award, as applicable, or, if applicable, a freely transferable Share issued to a Grantee not resulting from another type of Award.

 

“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 national market system, its Fair Market Value will be the closing sales price for the Shares (or the closing bid, if no sales were reported) as quoted on such exchange or system on the close of business day prior to the day of determination, as reported in such source as the Administrator deems reliable;

 

(ii)    if the Shares are regularly quoted by a recognized securities dealer but selling prices are not reported, the Fair Market Value of a Share will be the mean between the high bid and low asked prices for the Shares on the close of business day prior to the day of determination (or, if no bids and asks were reported on that date, as applicable, on the last trading date such bids and asks were reported), as reported in such source as the Administrator deems reliable; or

 

(iii)    in the absence of an established market for the Shares, the Fair Market Value will be determined in good faith by the Administrator.

 

“Grantee” means the person to whom an Award shall be granted under the Plan.

 

“IPO” means an initial underwritten public offering of Shares.

 

“Notice of Exercise” means a written notice of exercise of an Award, delivered by a Grantee to the Company.

 

  

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“Notice of Grant” means a written notice of the grant of an Award, accompanied by an applicable agreement between the Company and the Grantee relating to the terms of grant of said Award.

 

“Option” means an option to purchase a Share or Shares.

 

“Performance Based Award” means a performance based Award as defined in Section 10.1 below.

 

“Performance Conditions” mean Performance Conditions as defined in Section 10.1 below.

 

“Plan” means this “Entera Bio Ltd. Share Incentive Plan”, as amended from time to time.

 

“Representative” means any third party designated by the Company for the purpose of the exercise of Awards, as provided in Section 8.2 below.

 

“Restricted Share” means a Share issued under the Plan to a Grantee for such consideration, if any, and subject to such restrictions as established by the Company, as detailed in Section 9A below.

 

“RSU” means Restricted Share Unit, as defined in Section 9 below.

 

“Sale” means the sale of all or substantially all of the issued and outstanding share capital of the Company. For purposes of a Sale, whether “all or substantially all of the issued and outstanding share capital of the Company is to be sold”, shall be finally and conclusively determined by the Board in its absolute discretion.

 

“Service Provider” means an Employee, Director or Consultant.

 

“Share” means an Ordinary Share, nominal value of NIS 0.01each, of the Company.

 

“Stock Market” means a stock exchange or an electronic securities trading system (such as NASDAQ).

 

“Successor Entity Award” means securities of any successor entity, as provided in Section 11.3 below.

 

“Tax” means any and all federal, provincial, state and local taxes of any applicable jurisdiction, and other governmental fees, charges, duties, impositions and liabilities of any kind whatsoever, including social security, national health insurance or similar compulsory payments, together with all interest, linkage for inflation, penalties and additions imposed with respect to such amounts.

 

“Vesting Period” of an Award means, for the purpose of the Plan and its related instruments, the period between the Adoption Date and the date on which (i) the Grantee may exercise the Award into Exercised Shares; or (ii) if said Award does not require the Grantee to exercise it, the date on which the Award vests into an Exercised Share; or (iii) the date on which a Share (not resulting

 

  

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from another type of Award) may be freely transferred by the Grantee (subject to any other restrictions prescribed herein or by law).

 

C. GENERAL TERMS AND CONDITIONS OF THE PLAN

 

3.    Administration:

 

3.1    The Plan will be administered by the Administrator, subject to Applicable Law, including but not limited to the instructions of the Companies Law.

 

3.2    Subject to the general terms and conditions of the Plan, the Administrator shall have the full authority in its discretion, from time to time and at any time to determine (i) the Grantees under the Plan, (ii) the number of Shares subject to each Award, the type of Award, and the Exercise Price per Share, (iii) the time or times at which the same shall be granted, (iv) the schedule and conditions, including Performance Conditions (as defined in Section 10 below), if applicable, on which Awards may vest or be exercised and on which Shares shall be paid for, (v) the method of payment for Shares purchased pursuant to any Award, (vi) the method for satisfaction of any tax withholding obligation arising in connection with an Award, including by the withholding, delivery or sale of Shares, (vii) rules and provisions, as may be necessary or appropriate to permit eligible Grantees resident or employed in any specific jurisdiction to participate in the Plan and/or to receive preferential tax treatment in their country of residence, with respect to Awards granted hereunder, and/or (viii) the Fair Market Value of a Share covered by an Award or the method to be used in order to determine such Fair Market Value, and/or (ix) any other matter which is necessary or desirable for, or incidental to, the administration of the Plan.

 

3.3    The Administrator may, from time to time, adopt such rules and regulations for carrying out the Plan, as it may deem necessary.

 

3.4    The interpretation and construction by the Administrator of any provision of the Plan or of any Award thereunder shall be final and conclusive and binding on all parties who have an interest in the Plan or any Award or Exercised Share, unless otherwise determined by the Board.

 

4.    Eligible Grantees:

 

4.1    The Administrator, at its discretion, may grant Awards to any Service Provider of the Company. Anything in the Plan to the contrary notwithstanding, all grants of Awards shall be authorized and implemented only in accordance with the provisions of Applicable Laws.

 

4.2    The grant of an Award to a Grantee hereunder, shall neither entitle such Grantee to participate, nor disqualify him from participating, in any other grant of Awards pursuant to the Plan or any other incentive plan of the Company.

 

  

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5.    Date of Grant and Shareholder Rights:

 

5.1    Date of Grant. Subject to Sections 7.1 and 7.2 hereof and to any Applicable Laws, the Date of Grant shall be the date the Administrator resolves to grant such Award, or any future date determined as the effective date of a grant of an Award, if so expressly stated by the Administrator in its determination relating to the grant of an Award. The Company shall promptly give the Grantee a Notice of Grant following such resolution.

 

5.2    Voting Rights; Shareholder Rights and Shareholders Agreement. Unless determined otherwise by the Administrator, as a condition precedent to any Award being exercised or vested, as applicable, (A) the Grantee shall execute and deliver a proxy and power of attorney with respect to any Exercised Shares held by the Grantee (or for his benefit) in a form that is appropriate under Applicable Laws and that appoints the Chairman of the Board or such other person as shall be designated by the Administrator, from time to time. The proxy holder shall vote such Exercised Shares only in the same proportion as the result of the shareholders vote, in respect of which such Exercised Shares are being cast. Such proxy shall terminate and be of no further force and effect upon the earlier of: (i) a consummation of an IPO; or (ii) the closing of a Corporate Transaction (as defined herein); and (B) until the consummation of an IPO the Grantee shall execute and deliver to the Company a signed form of company’s shareholders agreement.

 

Such person or persons designated by the Board to act pursuant to such proxy, 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 such proxy unless arising out of such member’s own fraud or bad faith, to the extent permitted by Applicable Laws. Such indemnification shall be in addition to any rights of indemnification the proxy holder may have under the Company’s Articles of Association, any agreement, any vote of shareholders, insurance policy or otherwise.

 

Subject to the aforesaid in this section, the holder of an Award shall have no shareholder rights with respect to the Shares subject to such Award until such person (i) shall have exercised such Award or such Award has vested into a Share, as applicable, and (ii) shall have all restrictions applicable to any Shares issued to him removed, if applicable; and (iii) has paid the applicable Exercise Price, if any; and (iv) has become the record holder of the Exercised Shares.

 

6.    Reserved Shares:

 

6.1    Until termination of the Plan, the Company shall, at all times, reserve sufficient number of unissued Shares for the purpose of granting Awards under the Plan.

 

6.2    All Shares under the Plan, in respect of which the right of a Grantee to purchase or be issued the same shall, for any reason, terminate, expire or otherwise cease to exist, shall again be available for grant through Awards under the Plan, and under any sub-plans of this Plan,

 

  

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as the Administrator may determine at its own discretion, from time to time, provided, however, that until termination of the Plan the Company shall at all times reserve sufficient number of unissued Shares to meet the requirements of the Plan.

 

6.3    Without derogating from the foregoing, the Administrator shall have full authority in its discretion to determine that the Company may issue, for the purposes of this Plan and/or any other plans, previously issued Shares that are held by the Company, from time to time as Dormant Shares (as such term is defined in the Companies Law).

 

7.    Required Approvals; Notice of Grant; Vesting:

 

7.1    The implementation of the Plan and the granting of any Award under the Plan shall be subject to the Company’s procurement of all approvals and permits required by Applicable Laws or regulatory authorities having jurisdiction over the Plan, the Awards granted under it, and the Shares issued pursuant to it.

 

7.2    The Notice of Grant shall state, inter alia, the number of Shares subject to each Award, the type of Award, the vesting schedule, the dates when the Award may be exercised and/or will vest (as applicable), any restrictions upon transfer or sale of Shares (if applicable), the Exercise Price, the tax treatment to which the Award is subject and such other terms and conditions as the Administrator at its discretion may prescribe, provided that they are consistent with the Plan.

 

7.3    Vesting of Awards. Unless determined otherwise by the Administrator, the Vesting Period pursuant to which such Awards shall vest, shall be such that all Awards shall be fully vested on the first business day following the passing of four (4) years from the Adoption Date, such that 25% of the Awards shall vest on the first anniversary of the Adoption Date, and 75% of the Awards shall vest in twelve (12) equal installments upon the lapse of each three-month period following the first anniversary of the Adoption Date.

 

Unless determined otherwise by the Administrator, any period in which the Grantee shall not be employed by the Company, or in which the Grantee shall have taken an unpaid leave of absence (excluding a leave for military reserves duty or the mandatory maternity leave determined by law), or in which the Grantee shall cease to serve as Service Provider of the Company, shall not be included in the Vesting Period.

 

7.4    Acceleration of Vesting. Anything herein to the contrary in the Plan notwithstanding, the Administrator shall have full authority to determine at any time any provisions regarding the acceleration of the Vesting Period of any Award (including, without limitation, accelerating the vesting schedule of any outstanding unvested Award upon a Corporate Transaction), or the cancellation of all or any portion of any outstanding restrictions or Exercise Conditions with respect to any Award or Share upon certain events or occurrences, and to include such provisions in the Notice of Grant on such terms and conditions as the Administrator shall deem appropriate.

 

  

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8.    Options:

 

8.1    Exercise Price; Re-pricing of Options.

 

8.1.1    The Exercise Price per Share subject to each Option shall be determined by the Administrator in its sole and absolute discretion, subject to Applicable Laws and to guidelines adopted by the Board, from time to time. In the event the Exercise Price is not determined by the Administrator, and provided the Company’s shares are listed on any Stock Market, the Exercise Price of an Option shall be equal to the closing price of the Company’s Share on such Stock Market for the last trading day before the Date of Grant of such Option.

 

8.1.2    Subject to Applicable Laws, the Administrator shall have MI authority to, at any time and from time to time, (i) grant in its discretion to the holder of an outstanding Option, in exchange for the surrender and cancellation of such Option, a new Option having an Exercise Price lower than provided in the Option so surrendered and canceled and containing such other terms and conditions as the Administrator may prescribe in accordance with the provisions of the Plan, or (ii) effectuate a decrease in the Exercise Price (see Section 8.1.1 above) of outstanding Options.

 

8.2    Exercise of Options. Options shall be exercisable pursuant to the terms under which they were awarded and subject to the terms and conditions of the Plan. The exercise of an Option shall be made by a written Notice of Exercise delivered by the Grantee to the Company at its principal executive office, and/or to a Representative, in such form and method as may be determined by the Company, specifying the number of Shares to be purchased and accompanied by the payment of the Exercise Price, at the Company’s or the Representative’s principal office, and containing such other terms and conditions as the Administrator shall prescribe from time to time.

 

Each payment for Exercised Shares shall be in respect of a whole number of Shares, and shall be effected in cash or by a bank’s check payable to the order of the Company, or such other method of payment acceptable to the Company.

 

8.3    Net Exercise. Notwithstanding the provisions of Section 8.2 above, the Board may determine that instead of issuing one Exercised Share as a result of the exercise of each one Option (subject to adjustments under Section 11 herein), any Options shall be exercised using the following method (the “Net Exercise”):

 

(a)    The Company shall issue to the Grantee (or for his benefit) a number of Shares having an aggregate Fair Market Value equal to the Benefit Amount (the “Net Exercise Shares”);

 

For the purposes of this section the “Benefit Amount” shall mean the difference between:

 

  

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(i)    the product of (x) the Fair Market Value and (y) the number of Shares subject to the Options for which a Notice of Exercise has been delivered to the Company; and

 

(ii)    the product of (x) the Exercise Price and (y) the number of Shares subject to the Options for which a Notice of Exercise has been delivered to the Company.

 

(b)    The Grantee shall not be required to pay to the Company any sum with respect to the exercise of such Options, other than a sum equal to the aggregate nominal value of the Net Exercise Shares (which shall be paid in a manner provided in Section 8.2 above) (the “Nominal Value Sum”). However, the Company shall have the full authority in its discretion to determine at any time that the Nominal Value Sum shall not be paid and that the Company shall capitalize applicable profits or take any other action to ensure that it meets any requirement of Applicable Laws regarding issuance of Shares for consideration that is lower than the nominal value of such Shares;

 

(c)    In any event, no fractional Shares will be issued to the Grantee and the number of Shares granted to the Grantee under the Plan shall be rounded off (upward or downward, as the Administrator shall determine) to the nearest whole number.

 

8.4    Term of Options. Unless otherwise determined by the Administrator, anything herein to the contrary notwithstanding, but without derogating from the provisions of Section 8.6 hereof, if any Option has not been exercised and the Shares subject thereto not paid for within six (6) years after the Date of Grant (or any shorter or longer period set forth in the Notice of Grant), such Option and the right to acquire such Shares shall terminate, all interests and rights of the Grantee in and to the same shall ipso facto expire, and the Shares subject to such Options shall again be available for grant through Awards under the Plan, and/or any sub-plans of the Plan, as provided for in Section 6 herein.

 

8.5    The exercise of the Options shall be subject to any Applicable Laws, including when applicable, the limitations in connection with the use of nonpublic information.

 

8.6    Cessation of Service.

 

8.6.1.    In the event of a Cessation of Service, all Options theretofore granted to such Grantee, unless determined otherwise by the Administrator, shall terminate as follows:

 

(a)    All such Options that are not vested on the Date of Cessation shall terminate immediately.

 

(b)    If the Grantee’s Cessation of Service is by reason of such Grantee’s death or Disability, such Options (to the extent vested at the Date of Cessation) shall be exercisable by the Grantee or the Grantee’s guardian, legal representative, estate or other person to whom the Grantee’s rights are transferred by will or by laws of descent or distribution, at any time until the lapse of twelve (12) months from the Date of Cessation (but in no event after the expiration date of such Options), and shall thereafter terminate.

 

  

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(c)    If the Grantee’s Cessation of Service is due to any reason other than those stated in Sections 8.6.1(b) and 8.6.1(d) herein, such Options (to the extent vested on the Date of Cessation) shall be exercisable at any time until the lapse of three (3) months from the Date of Cessation (but in no event after the expiration date of such Options), and shall thereafter terminate; provided, however, that if the Grantee dies within such period, such Options (to the extent vested on the Date of Cessation) shall be exercisable by the Grantee’s legal representative, estate or other person to whom the Grantee’s rights are transferred by will or by laws of descent or distribution at any time until the lapse of twelve (12) months from the Date of Cessation (but in no event after the expiration date of such Options), and shall thereafter terminate.

 

(d)    Notwithstanding the aforesaid, if the Grantee’s Cessation of Service is for Cause, all of the Options whether vested or not shall ipso facto expire immediately and be of no legal effect.

 

(e)    Whether the Cessation of Service of a particular Grantee is by reason of “Disability” for the purposes of paragraph 8.6.1(b) hereof, or is a Cessation of Service other than by reason of such Disability, or is for Cause as set forth in paragraph 8.6.1(d) hereof, shall be finally and conclusively determined by the Administrator in its absolute discretion.

 

(f)    Notwithstanding the aforesaid, under no circumstances shall any Option be exercisable after the specified expiration of the term of such Option.

 

8.6.2    Notwithstanding the foregoing provisions of this Section 8.6, the Administrator shall have the discretion, exercisable either at the time an Option is granted or thereafter, to:

 

(a)    Extend the period of time for which the Option is to remain exercisable following the Date of Cessation to such greater period of time, as the Administrator shall deem appropriate, but in no event beyond the specified expiration of the term of the Option; and/or

 

(b)    Permit the Option to be exercised, during the applicable exercise period following the Date of Cessation, not only with respect to the number of Shares for which such Option is exercisable at the Date of Cessation but also with respect to one or more additional installments in which the Grantee would have vested under the Option had the Grantee continued in the employ or service of the Company.

 

8.6.3    Notwithstanding the foregoing provisions of this Section 8.6, unless determined otherwise by the Administrator, and for the avoidance of doubt, the transfer of a Grantee from the employ or service of the Company to the employ or service of an Affiliate, or from the employ or service of an Affiliate to the employ or service of the Company or another Affiliate, shall not be deemed a termination of employment or service for purposes hereof.

 

  

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9.    Restricted Share Units:

 

9.1    Subject to the sole and absolute discretion and determination of the Administrator, the Administrator may decide to grant under the Plan, Restricted Share Unit(s) (“RSU(s)”). A RSU is a right to receive a Share of the Company, under certain terms and conditions, for a consideration of no more than the underlying Share’s nominal value. Upon the lapse of the Exercise Conditions of a RSU, such RSU shall automatically vest into an Exercised Share of the Company (subject to adjustments under Section 11 herein) and the Grantee shall pay to the Company its nominal value. The Board, in its sole discretion, shall determine procedures from time to time for payment of such nominal value by the Grantee or for collection of such amount from the Grantee by the Company. However, the Company shall have the full authority in its discretion to determine at any time that said nominal value shall not be paid and that the Company shall capitalize applicable profits or take any other action to ensure that it meets any requirement of Applicable Laws regarding issuance of Shares for consideration that is lower than the nominal value of such Shares.

 

9.2    Unless determined otherwise by the Administrator, in the event of a Cessation of Service, all RSUs theretofore granted to such Grantee when such Grantee was a Service Provider of the Company that are not vested on the Date of Cessation, shall terminate immediately and have no legal effect.

 

9.3    All other terms and conditions of the Plan applicable to Options, shall apply to RSUs, mutatis mutandis. It is clarified, that without deviating from the foregoing in Sub-Section 9.2, the provisions of Section 8.6 herein, shall, mutatis mutandis, apply to RSUs in the event of Cessation of Service.

 

9A.    Restricted Shares.

 

9A.1    Restricted Share Awards may be granted upon such terms and conditions, as the Administrator shall determine.

 

9A.2    Purchase Price. No monetary payment (other than payments made for applicable Taxes) shall be required as a condition of receiving Shares pursuant to a grant of Restricted Shares. Notwithstanding the foregoing, the Grantee shall furnish consideration in the form of cash having a value not less than the nominal value of the Shares subject to an award of Restricted Shares. The Board, in its sole discretion, shall determine procedures from time to time for payment of such nominal value by the Grantee or for collection of such amount from the Grantee by the Company. However, the Company shall have the full authority in its discretion to determine at any time that said nominal value shall not be paid and that the Company shall capitalize applicable profits or take any other action to ensure that it meets any requirement of Applicable Laws regarding issuance of Shares for consideration that is lower than the nominal value of such Shares.

 

9A.3    Vesting and Restrictions on Transfer. Shares issued pursuant to any Restricted Shares may (but need not) be made subject to Exercise Conditions as described herein, as shall be

 

  

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established by the Administrator and set forth in the applicable Notice of Grant evidencing such Award. During any restriction period in which Shares acquired pursuant to an award of Restricted Shares remain subject to Exercise Conditions, such Shares may not be sold, exchanged, transferred, pledged, assigned or otherwise disposed of unless otherwise provided in the Plan. Upon request by the Company, each Grantee shall execute any agreement evidencing such transfer restrictions prior to the receipt of Shares hereunder and shall promptly present to the Company any and all certificates representing Shares acquired hereunder for the placement on such certificates of appropriate legends evidencing any such transfer restrictions.

 

9A.4    Voting Rights; Dividends and Distributions. Except as provided in this section and in any Notice of Grant, and subject to the provisions of Section 5.2 above, during any restriction period applicable to Shares subject to an award of Restricted Shares, the Grantee shall have all of the rights of a shareholder of the Company holding Shares, including the right to receive all dividends and other distributions paid with respect to such Shares. However, in the event of a dividend or distribution paid in Shares or other property or any other adjustment made upon a change in the capital structure of the Company as described in Section 11.1, any and all new, substituted or additional securities or other property (other than normal cash dividends) to which the Grantee is entitled by reason of the Grantee’s award of Restricted Shares shall be immediately subject to the same Exercise Conditions as the Shares subject to the award of Restricted Shares with respect to which such dividends or distributions were paid or adjustments were made.

 

9A.5    Cessation of Service. Unless otherwise provided by the Administrator, in the event of Cessation of Service of a Grantee, for any reason, whether voluntary or involuntary (including the Grantee’s death or disability), then the Grantee shall forfeit to the Company any Shares acquired by the Grantee pursuant to an award of Restricted Shares which remain subject to Exercise Conditions as of the Date of Cessation.

 

9A.6    All other terms and conditions of the Plan applicable to Options, shall apply to Restricted Shares, mutatis mutandis. It is clarified, that without deviating from the foregoing in Sub-Section 9.2, the provisions of Section 8.6 herein, shall, mutatis mutandis, apply to Restricted Shares in the event of Cessation of Service.

 

10.    Performance Based Awards:

 

10.1    Subject to the sole and absolute discretion and determination of the Administrator, the Administrator may decide to grant Awards under the Plan, the exercise or vesting of which, as applicable, shall be conditional upon the performance of the Company and/or an Affiliate and/or a division or other business unit of the Company or of an Affiliate and/or upon the performance of the Grantee, over such period and measured against such objective criteria as shall be determined by the Administrator and notified to the Grantee (“Performance Based Award(s)”). In granting each Performance Based Award, the Administrator shall establish in writing the applicable performance period (“Performance Period”), performance formula (“Performance Formula”) and one or more performance goals (“Performance Goal(s)”) which, when measured at the end of the Performance Period, shall determine on the basis of said Performance Formula the extent to which the Performance Based Award has vested and/or become exercisable (collectively, the “Performance Conditions”). For the avoidance of doubt, Performance Conditions may be determined for an Award either in addition to, or in substitution for, a Vesting Period.

 

  

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10.2    After a Performance Based Award has been granted, the Administrator may, in appropriate circumstances, amend any Performance Condition, at its sole and absolute discretion.

 

10.3    If, in consequence of the applicable Performance Conditions being met a Performance Based Award becomes vested and/or exercisable in respect of some, but not all of the number of Shares underlying such Award it shall thereupon lapse and cease to be exercisable in respect of the balance of the Shares over which it was held.

 

10.4    Performance Conditions shall not be automatically waived merely due to an event of (i) a Cessation of Service, (ii) a Corporate Transaction, (iii) any other adjustment under Section 11 below, or (iv) a Sale under Section 11.4 below.

 

10.5    Measurement of Performance Goals. Performance Goals shall be established by the Administrator on the basis of targets to be attained with respect to one or more measures of business or financial performance that shall have the same meanings as used in the Company’s financial statements, or, if such terms are not used in the Company’s financial statements, they shall have the meaning applied pursuant to generally accepted accounting principles, or as used generally in the Company’s industry (“Performance Measures”). For purposes of the Plan, the Performance Measures applicable to a Performance Based Award shall be calculated in accordance with generally accepted accounting principles, excluding the effect (whether positive or negative) of any change in accounting standards or any extraordinary, unusual or nonrecurring item, as determined by the Administrator, occurring after the establishment of the Performance Goals applicable to the Performance Based Award. Each such adjustment, if any, shall be made solely for the purpose of providing a consistent basis from period to period for the calculation of Performance Measures in order to prevent the dilution or enlargement of the Grantee’s rights with respect to a Performance Based Award. Performance Measures may be one or more of the following, as determined by the Administrator: revenue; sales; expenses; operating income; gross margin; operating margin; earnings before any one or more of: share-based compensation expense, interest, taxes, depreciation and amortization; pre-tax profit; net operating income; net income; economic value added; free cash flow; operating cash flow; share price; earnings per share; return on shareholder equity; return on capital; return on assets; return on investment; employee satisfaction; employee retention; balance of cash, cash equivalents and marketable securities; market share; customer satisfaction; product development; research and development expenses; completion of an identified special project; and completion of a joint venture or other Corporate Transaction.

 

10.6    All other terms and conditions of the Plan applicable to Awards, shall apply to Performance Based Awards, mutatis mutandis.

 

  

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11.    Adjustments, Liquidation and Corporate Transaction:

 

11.1    Adjustments. Subject to any required action under any Applicable Laws, the number of Shares subject to each outstanding Award, and the number of Shares which have been authorized for issuance under the Plan but as to which no Awards have yet been granted or which have been returned to the Plan upon cancellation or expiration of an Award, as well as the price per share of Shares subject to each outstanding Award, shall be proportionately adjusted, as the Board deems necessary or appropriate, for any increase or decrease in the number of issued Shares resulting from a share split, reverse share split, stock dividend, combination or reclassification of the Shares, or any other increase or decrease in the number of issued Shares effected without receipt of consideration by the Company, such that an adjustment is appropriate in order to prevent dilution or enlargement of the rights of a Grantee under the Plan; provided, however, that conversion of any convertible securities of the Company shall not be deemed to have been “effected without receipt of consideration.” Except as expressly provided in this Section 11, no issuance by the Company of shares of any class, or securities convertible into shares of any class, shall affect, and no adjustment by reason thereof shall be made with respect to, the number or price of Shares subject to an Award.

 

11.2    Liquidation. Unless otherwise provided by the Board, in the event of the proposed dissolution or liquidation of the Company, all outstanding Awards will terminate immediately prior to the consummation of such proposed action. In such case, the Board may declare that any Award shall terminate as of a date fixed by the Board and give each Grantee the right to exercise his Award or have it vested, including Award that would not otherwise vest or be exercisable.

 

11.3    Corporate Transaction.

 

(a)    In the event of a Corporate Transaction, immediately prior to the effective date of such Corporate Transaction, each Award may, among other things, at the sole and absolute discretion of the Board, either:

 

(i)    Be substituted for a Successor Entity Award such that the Grantee may exercise the Successor Entity Award or have it become vested, as the case may be, for such number and class of securities of the successor entity which would have been issuable to the Grantee in consummation of such Corporate Transaction, had the Award vested or been exercised (as applicable), immediately prior to the effective date of such Corporate Transaction, given the exchange ratio or consideration paid in the Corporate Transaction, the Vesting Period and Performance Conditions (if any) of the Awards and such other terms and factors that the Administrator determines to be relevant for purposes of calculating the number of Successor Entity Awards granted to each Grantee; or

 

(ii)    Be assumed by any successor entity such that the Grantee may exercise the Award or have his/her Award vest (as applicable), for such number and class of securities of the successor entity which would have been issuable to the Grantee in consummation of such Corporate Transaction, had the Award vested or been exercised immediately prior to the

 

  

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effective date of such Corporate Transaction, given the exchange ratio or consideration paid in the Corporate Transaction, the Vesting Period and Performance Conditions (if any) of the Awards and such other terms and factors that the Board determines to be relevant for this purpose.

 

(iii)    Determine that the Awards shall be cashed out for a consideration equal to the difference between the price received by the shareholders of the Company in the Corporate Transaction and the Exercise Price, purchase price, or nominal value, as the case may be, of such Award.

 

In the event of a clause (i) or clause (ii) action, appropriate adjustments shall be made to the Exercise Price per Share to reflect such action. In taking any of the actions permitted under this Section 11.3(a), the Administrator shall not be obligated to treat all Awards, all Awards held by a Grantee, or all Awards of the same type, similarly.

 

(b)    Immediately following the consummation of the Corporate Transaction, all outstanding Awards shall terminate and cease to be outstanding, except to the extent assumed by a successor entity.

 

(c)    Notwithstanding the foregoing, and without derogating from the power of the Board or Administrator pursuant to the provisions of the Plan, the Board shall have full authority and sole discretion to determine that any of the provisions of Sections 11.3(a)(i) or 11.3(a)(ii) above shall apply in the event of a Corporate Transaction in which the consideration received by the shareholders of the Company is not solely comprised of securities of a successor entity, or in which such consideration is solely cash or assets other than securities of a successor entity.

 

11.4    Sale. Subject to any provision in the Articles of Association of the Company and to the Board’s sole and absolute discretion, in the event of a Sale, each Grantee shall be obligated to participate in the Sale and sell his or her Shares and/or Awards in the Company, provided, however, that each such Share or Award shall be sold at a price equal to that of any other Ordinary Share sold under the Sale (and, unless determined otherwise by the Board, less the applicable Exercise Price), while accounting for changes in such price due to the respective terms of any such Award, and subject to the absolute discretion of the Board.

 

11.5    The grant of Awards under the Plan shall in no way affect the right of the Company to distribute bonus shares, to offer rights to purchase its securities, to distribute dividends, to adjust, reclassify, reorganize or otherwise change its capital or business structure or to merge, consolidate, dissolve, liquidate or sell or transfer all or any part of its business or assets.

 

12.    Limitations on Transfer:

 

12.1    Unless determined otherwise by the Administrator, no Award shall be assignable or transferable by the Grantee to whom granted otherwise than by will or the laws of descent and distribution, and an Award shall vest or may be exercised (as applicable) during the lifetime of the Grantee only by such Grantee or by such Grantee’s guardian or legal representative. The terms of such Award shall be binding upon the beneficiaries, executors, administrators, heirs and

 

  

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successors of such Grantee. Any Shares acquired upon exercise or vesting of Awards shall be transferable only in accordance with applicable securities and other local laws, and may be subject to substantial statutory or regulatory restrictions on transfer, except to the extent exemptions (whether by registration or otherwise) are available.

 

12.2    Right of First Refusal. The sale or transfer of Exercised Shares to a third party shall be subject to any right of first refusal to purchase such Shares prescribed by the Company’s Articles of Association.

 

12.3    Underwriter’s Lock-up and Limitations on the Use of Nonpublic Information. The Grantee’s rights to sell Exercised Shares may be subject to certain limitations (including a lock-up period), as will be requested by the Company or its underwriters, from time to time, or upon a specific occurrence, and the Grantee unconditionally agrees and accepts any such limitations. Furthermore, the Grantee’s right to sell Exercised Shares is subject to Applicable Laws, including in connection with limitation relating to the use of non-public information, if and when applicable.

 

13.    Term and Amendment of the Plan:

 

13.1    The Plan shall terminate upon the earliest of (i) the expiration of the ten (10) year period measured from the date the Plan was adopted by the Board, or (ii) the termination of all outstanding Awards in connection with a Corporate Transaction. All Awards outstanding at the time of a clause (i) termination event shall continue to have full force and effect in accordance with the provisions of the Plan and the documents evidencing such Awards.

 

13.2    Subject to Applicable Laws and regulations, the Board in its discretion may, at any time and from time to time, amend, alter, extend or terminate the Plan, as it deems advisable, including without limitation, change the vesting and exercise periods. In addition, the Administrator may adopt, as part of the Plan and based on it, sub-plans, in order to comply with all relevant and Applicable Laws and regulations of the country of residence of any Grantees.

 

14.    Withholding and Tax Consequences:

 

14.1    All Tax consequences and obligations arising from the grant, vesting, or exercise of any Award (as applicable), or the subsequent disposition of, Shares subject thereto or from any other event or act (of the Company or of the Grantee) hereunder, shall be borne solely by the Grantee, and the Grantee shall indemnify the Company and hold it harmless against and from any and all liability for any such Tax, including without limitation, monetary liabilities relating to the necessity to withhold, or to have withheld, any such Tax payment from any payment made to the Grantee. Notwithstanding the above, the Company’s obligation to deliver Shares upon the exercise or vesting of any Awards granted under the Plan shall be subject to the satisfaction of all applicable Tax withholding requirements as governed by Applicable Laws or practice.

 

14.2    Withholding in Shares. The Company shall have the right, but not the obligation, to deduct from the Shares issuable to a Grantee upon the exercise or vesting of an Award, or to accept from the Grantee the tender of, a number of whole Shares having a Fair Market Value, as

 

  

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determined by the Company, that will enable the Company to satisfy any Tax withholding obligations of the Company.

 

14.3    The Company shall not be required to release any Shares (or Share certificate) to a Grantee until all required payments have been fully made or secured.

 

14.4    The Grantee shall, if requested at any time by the Company, provide to the Company within 10 calendar days of such request, any information regarding the transfer or other disposition of Shares reasonably required by the Company in order for the Company to comply with applicable local laws and regulations or to obtain any benefits thereunder.

 

15.    Miscellaneous:

 

15.1    Continuance of Employment. Neither the Plan nor the grant of an Award thereunder shall impose any obligation on the Company to continue the employment or service of any Grantee. Nothing in the Plan or in any Award granted thereunder shall confer upon any Grantee any right to continue in the employ or service of the Company for any period of specific duration, or interfere with or otherwise restrict in any way the right of the Company to terminate such employment or service at any time, for any reason, with or without cause.

 

15.2    Notwithstanding anything to the contrary in the Plan, it is hereby clarified, that any income attributed (or deemed to be attributed) to the Grantee as a result of the Plan, the grant, vesting or exercise of Awards thereunder, or the sale of Exercised Shares, shall not be taken into account for the purpose of calculating the Grantee’s eligibility for any rights deriving from the employee-employer or service provider-client relationship between the Grantee and the Company.

 

15.3    Governing Law. The Plan and all instruments issued thereunder or in connection therewith, shall be governed by, and interpreted in accordance with, the laws of the jurisdiction in which the Grantee is generally employed by the Company or provides services to the Company, excluding the choice of law rules thereof.

 

15.4    Application of Funds. Any proceeds received by the Company from the sale of Shares pursuant to the exercise or vesting of Awards granted under the Plan, as applicable, shall be used for general corporate purposes of the Company.

 

15.5    Multiple Agreements. The terms of each Award may differ from other Awards granted under the Plan at the same time, or at any other time. The Administrator may also grant more than one grant of Awards to a given Grantee during the term of the Plan, either in addition to, or in substitution for, one or more Awards previously granted to that Grantee. The grant of multiple Awards may be evidenced by a single Notice of Grant or multiple Notices of Grant, as determined by the Administrator.

 

15.6    Non-Exclusivity of the Plan. The adoption of the Plan by the Board shall not be construed as amending, modifying or rescinding any previously approved incentive arrangement or as creating any limitations on the power of the Board to adopt such other incentive

 

  

17

  

 

arrangements as it may deem desirable, including, without limitation, the granting of share-based Awards otherwise than under the Plan, and such arrangements may be either applicable generally or only in specific cases.

 

16.    The provisions of the Plan shall not be construed as deviating from any Applicable Laws, rules and regulations.

 

*****

  

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APPENDIX “A”

 

ENTERA BIO LTD.

 

ADDENDUM TO THE SHARE INCENTIVE PLAN

FOR ISRAELI GRANTEES

 

1.    General

 

1.1    This addendum (the “Addendum”) shall apply only to Grantees who are residents of the State of Israel or those who are deemed to be residents of the State of Israel for tax purposes (collectively, “Israeli Grantees”). The provisions specified hereunder shall form an integral part of the “Entera Bio Ltd. Share Incentive Plan” (the “Plan”), which applies to the grant of Awards.

 

1.2    This Addendum is to be read as a continuation of the Plan and only modifies the terms of Awards granted to Israeli Grantees so that they comply with the requirements set by the Israeli law in general, and in particular with the provisions of the Israeli Tax Ordinance (as defined below), as may be amended or replaced from time to time. For the avoidance of doubt, this Addendum does not add to or modify the Plan in respect of any other category of Grantees.

 

1.3    The Plan and this Addendum are complimentary to each other and shall be deemed as one. In any case of contradiction with respect to Awards granted to Israeli Grantees, whether explicit or implied, between the provisions of this Addendum and the Plan, the provisions set out in this Addendum shall prevail.

 

1.4    Any capitalized term not specifically defined in this Addendum shall be construed according to the definition or interpretation given to it in the Plan.

 

2.    Definitions

 

“102 Award” means a grant of an Award to an Israeli employee, director or other office holder of the Company, other than to a Controlling Shareholder, pursuant to the provisions of Section 102 of the Tax Ordinance, the 102 Rules, and any other regulations, rulings, procedures or clarifications promulgated thereunder, or under any other section of the Tax Ordinance that will be relevant for such issuance in the future.

 

“102(c) Award” means a 102 Award that will not be subject to a Taxation Route, as detailed in Section 102(c) of the Tax Ordinance.

 

“3(i) Award” means a grant of an Option or RSU to an Israeli consultant, contractor or a Controlling Shareholder of the Company pursuant to the provisions of Section 3(i) of the Tax Ordinance and the rules and regulations promulgated thereunder, or any other section of the Tax Ordinance that will be relevant for such issuance in the future.

 

  

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“Beneficial Grantee” means the Grantee for the benefit of whom the Trustee holds an Award in Trust.

 

“Capital Gains Route” means the capital gains tax route under Section 102(b)(2) of the Tax Ordinance.

 

“Controlling Shareholder” means a “controlling shareholder” of the Company, as such term is defined in Section 32(9)(a) of the Tax Ordinance.

 

“Minimum Trust Period” means the minimum period of time required under a Taxation Route for Awards and/or Exercised Shares to be held in Trust in order for the Beneficial Grantee to enjoy to the fullest extent the tax benefits afforded under such Taxation Route, as prescribed at any time by Section 102 of the Tax Ordinance.

 

“Ordinary Income Route” means the ordinary income route under Section 102(b)(1) of the Tax Ordinance.

 

“Rights” means rights issued in respect of Exercised Shares, including bonus shares.

 

“102 Rules” means the Israeli Income Tax Rules (Tax Relief in Issuance of Shares to Employees), 2003.

 

“Taxation Route” means each of the Ordinary Income Route or the Capital Gains Route.

 

“Tax Ordinance” means the Israeli Income Tax Ordinance [New Version], 1961, as amended.

 

“Trust” means the holding of an Award or Exercised Share by the Trustee in Trust for the benefit of the Beneficial Grantee, pursuant to the instructions of a Taxation Route.

 

“Trustee” means a trustee designated by the Administrator in accordance with the provisions of Section 3 below and, with respect to 102 Awards, approved by the Israeli Tax Authorities.

 

3.    Administration:

 

3.1    Subject to the general teams and conditions of the Plan, the Tax Ordinance, and any other applicable laws and regulations, the Administrator shall have the full authority in its discretion, from time to time and at any time, to determine:

 

(a)    With respect to grants of 102 Awards - whether the Company shall elect the Ordinary Income Route or the Capital Gains Route for grants of 102 Awards, and the identity of the trustee who shall be granted such 102 Awards in accordance with the provisions of the Plan and the then prevailing Taxation Route.

 

In the event the Administrator determines that the Company shall elect one of the Taxation Routes for grants of 102 Awards, all grants of 102 Awards made following such election, shall be subject to the elected Taxation Route and the Company shall be entitled to change such election only following the lapse of one year from the end of the tax year in which

 

  

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102 Awards are first granted under the then prevailing Taxation Route or following the lapse of any shorter or longer period, if provided by law; and

 

(b)    With respect to the grant of 3(i) Awards - whether or not 3(i) Awards shall be granted to a trustee in accordance with the terms and conditions of the Plan, and the identity of the trustee who shall be granted such 3(i) Awards in accordance with the provisions of the Plan.

 

3.2    Notwithstanding the aforesaid, the Administrator may, from time to time and at any time, grant 102(c) Awards.

 

4.    Grant of Awards and Issuance of Shares:

 

Subject to the provisions of the Tax Ordinance and applicable law:

 

(a)    All grants of Awards to Israeli employees, directors and office holders of the Company, other than to a Controlling Shareholder, shall be of 102 Awards; and

 

(b)    All grants of Awards to Israeli consultants, contractors or Controlling Shareholders of the Company shall be of 3(i) Awards.

 

5.    Trust:

 

5.1    General.

 

(a)    In the event Awards are deposited with a Trustee, the Trustee shall hold each such Award and any Exercised Shares in Trust for the benefit of the Beneficial Grantee.

 

(b)    In accordance with Section 102, the tax benefits afforded to 102 Awards (and any Exercised Shares) in accordance with the Ordinary Income Route or Capital Gains Route, as applicable, shall be contingent upon the Trustee holding such 102 Awards for the applicable Minimum Trust Period.

 

(c)    With respect to 102 Awards granted to the Trustee, the following shall apply:

 

(i)    A Grantee granted 102 Awards shall not be entitled to sell the Exercised Shares or to transfer such Exercised Shares (or such 102 Awards) from the Trust prior to the lapse of the Minimum Trust Period; and

 

(ii)    Any and all Rights shall be issued to the Trustee and held thereby until the lapse of the Minimum Trust Period, and such Rights shall be subject to the Taxation Route which is applicable to such Exercised Shares.

 

(d)    Notwithstanding the aforesaid, Exercised Shares or Rights may be sold or transferred, and the Trustee may release such Exercised Shares or Rights from Trust, prior to the lapse of the Minimum Trust Period, provided however, that tax is paid or withheld in

 

  

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accordance with Section 102 of the Tax Ordinance and Section 7 of the 102 Rules, and any other provision in any other section of the Tax Ordinance and any regulation, ruling, procedure and clarification promulgated thereunder, that will be relevant, from time to time.

 

(e)    The Company shall register the Exercised Shares issued to the Trustee pursuant to the Plan, in the name of the Trustee for the benefit of the Israeli Grantees, in accordance with any applicable laws, rules and regulations, until such time that such Shares are released from the Trust as herein provided.

 

If the Company shall issue any certificates representing Exercised Shares deposited with the Trustee under the Plan, then such certificates shall be deposited with the Trustee, and shall be held by the Trustee until such time that such Exercised Shares are released from the Trust as herein provided.

 

(f)    Subject to the teens hereof, at any time after the Awards are exercised or vested, with respect to any Exercised Shares the following shall apply:

 

(i)    Upon the written request of any Beneficial Grantee, the Trustee shall release from the Trust the Exercised Shares issued, on behalf of such Beneficial Grantee, by executing and delivering to the Company such instrument(s) as the Company may require, giving due notice of such release to such Beneficial Grantee, provided, however, that the Trustee shall not so release any such Exercised Shares to such Beneficial Grantee unless the latter, prior to, or concurrently with, such release, provides the Trustee with evidence, satisfactory in form and substance to the Trustee, that payment of all taxes, if any, required to be paid upon such release has been secured.

 

(ii)    Alternatively, subject to the terms hereof, provided the Shares are listed on a Stock Market, upon the written instructions of the Beneficial Grantee to sell any Exercise Shares, the Company and/or the Trustee shall use their reasonable efforts to effect such sale and shall transfer such Shares to the purchaser thereof concurrently with the receipt of, or after having made suitable arrangements to secure, the payment of the proceeds of the purchase price in such transaction. The Company and/or the Trustee, as applicable, shall withhold from such proceeds any and all taxes required to be paid in respect of such sale, shall remit the amount so withheld to the appropriate tax authorities and shall pay the balance thereof directly to the Beneficial Grantee, reporting to such Beneficial Grantee the amount so withheld and paid to said tax authorities.

 

5.2    Voting Rights. Unless determined otherwise by the Administrator, as long as the Trustee holds the Exercised Shares, the voting rights at the Company’s general meeting attached to such Exercised Shares will remain with the Trustee. However, the Trustee shall not be obligated to exercise such voting rights at general meetings nor notify the Grantee of any Shares held in the Trust, of any meeting of the Company’s shareholders.

 

  

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Without derogating from the above, with respect to 102 Awards, such shares shall be voted in accordance with the provisions of Section 102 and any rules, regulations or orders promulgated thereunder.

 

5.3    Dividends. Subject to any applicable law, tax ruling or guidelines of the Israeli Tax Authority, as applicable, for so long as Shares deposited with the Trustee on behalf of a Beneficial Grantee are held in Trust, the cash dividends paid or distributed with respect thereto shall be distributed directly to such Beneficial Grantee, subject further to any applicable taxation on distribution of dividends, and when applicable subject to the provisions of Section 102 of the Tax Ordinance, the 102 Rules and the regulations or orders promulgated thereunder.

 

5.4    Notice of Exercise. With respect to a 102 Award held in the Trust, a copy of any Notice of Exercise shall be provided to the Trustee, in such form and method as may be determined by the Trustee in accordance with the requirements of Section 102 of the Tax Ordinance.

 

6.    Notice of grant:

 

6.1    The Notice of Grant shall state, inter alia, whether the Awards granted to Israeli Grantees are 102 Awards (and in particular whether the 102 Awards are granted under the Ordinary Income Route, the Capital Gains Route or as 102(c) Awards), or 3(i) Awards. Each Notice of Grant evidencing a 102 Award shall be subject to the provisions of the Tax Ordinance applicable to such awards.

 

6.2    Furthermore, each Grantee of a 102 Award under a Taxation Route shall be required: (i) to execute a declaration stating that he or she is familiar with the provisions of Section 102 of the Tax Ordinance and the applicable Taxation Route; and (ii) to undertake not to sell or transfer the Awards and/or the Exercised Shares prior to the lapse of the applicable Minimum Trust Period, unless he or she pays all taxes that may arise in connection with such sale and/or transfer.

 

7.    Sale:

 

In the event of a Sale described in Section 11.4 of the Plan, with respect to Shares held in Trust the following procedure will be applied: The Trustee will transfer the Shares held in Trust and sign any document in order to effectuate the transfer of Shares, including share transfer deeds, provided, however, that the Trustee receives a notice from the Board, specifying that: (i) all or substantially all of the issued outstanding share capital of the Company is to be sold, and therefore the Trustee is obligated to transfer the Shares held in Trust under the provisions of Section 11.4 of the Plan; and (ii) the Company is obligated to withhold at the source all taxes required to be paid upon release of the Shares from the Trust and to provide the Trustee with evidence, satisfactory to the Trustee, that such taxes indeed have been paid; and (iii) the Company is obligated to transfer the consideration for the Shares (less applicable tax and compulsory payments) directly to the Grantees.

 

  

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8.    Limitations of Transfer:

 

In addition to the provisions of Section 12 of the Plan, as long as Awards and/or Shares are held by the Trustee on behalf of the Grantee, all rights of the Grantee over the Shares are personal, can not be transferred, assigned, pledged or mortgaged, other than by will or pursuant to the laws of descent and distribution.

 

9.    Taxation:

 

9.1    Without derogating from the provisions of Section 14 of the Plan, the provisions of Section 14.1 of the Plan shall apply also to actions taken by the Trustee. Accordingly, without derogating from the provisions of Section 14.1 of the Plan, the Grantee shall indemnify the Trustee and hold it harmless against and from any and all liability for any such Tax, including without limitation, monetary liabilities relating to the necessity to withhold, or to have withheld, any such Tax from any payment made to the Grantee.

 

9.2    The Trustee shall not be required to release any Share (or Share certificate) to a Grantee until all required Tax payments have been fully made or secured.

 

9.3    With regards to 102 Awards, any provision of Section 102 of the Tax Ordinance, the 102 Rules and the regulations or orders promulgated thereunder, which is necessary in order to receive and/or to preserve any Tax treatment pursuant to Section 102 of the Tax Ordinance, which is not expressly specified in the Plan or in this Addendum, shall be considered binding upon the Company and the Israeli Grantee.

 

9.4    Guarantee. In the event a 102(c) Award is granted to a Grantee, if the Grantee’s employment or service is terminated, for any reason, such Grantee shall provide the Company, to its full satisfaction, with a guarantee or collateral securing the future payment of all Taxes required to be paid upon the sale of the Exercised Shares received upon exercise of such 102(c) Award, all in accordance with the provisions of Section 102 of the Tax Ordinance, the 102 Rules and the regulations or orders promulgated thereunder.

 

10.    Cessation of Service: It is hereby clarified that the Cessation of Service of an Israeli Grantee who is an Employee shall be the cessation of the employee-employer relationship between the Israeli Grantee and the Company.

 

  

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Enters Bio Ltd.

 

Private Company No. 514330604

 

(the “Company”)

 

UNANIMOUS WRITTEN CONSENT

 

OF THE BOARD OF DIRECTORS

 

The undersigned. being all the members of the Board of Directors of the Company (the “Board”). hereby unanimously adopt the following resolutions in writing and without a meeting, as of March 17, 2013.

 

Phillip Schwartz has disclosed his personal interest in certain of the below transactions and therefore, the Board shall submit the relevant resolutions to the shareholders of the Company for their approval.

 

A.    SIGNATURE RIGHTS

 

RESOLVED, that any previous resolution of the Board pertaining to signature rights of any representative of the Company shall hereby be cancelled and nullified and that. as of the date hereof, solely the signature rights set forth herein shall be effective.

 

RESOLVED, that the collective signature of two out of the following persons accompanied by the stamp or printed name of the Company shall be binding upon the Company for any matter in any amount without limitation:

 

1.    Zeev Bronfeld (ID. 50843101)

2.    Yonatan Males (ID. 022620934)

3.    Phillip Schwartz (US passport 444958743).

 

RESOLVED, that, without derogating from the above, the collective signature of two out of the following persons accompanied by the stamp or printed name of the Company shall be binding upon the Company for effecting payments in any amount without limitation:

 

1.    Zeev Bronfeld

2.    Yonatan Malta

3.    Philip Schwartz

4.    Israel Messer (ID. 037542685).

 

B.    BANK ACCOUNT WITH BANK LEUMI

 

RESOLVED, that a bank account with Bank Leumi (the “Bank”) (branch number 717) (the “Bank Account”), shall be opened in the name of the Company and operated pursuant to the general conditions governing the operations of the Bank Account and the terms and conditions of all documents signed and/or hereafter signed by the Company from time to time vis-a-vis the Bank, and the Bank standard terms and conditions in force from time to time.

 

  

  

  

 

 

RESOLVED, that Messrs. Phillip Schwartz, Israel Messer and Shimon Erlichman (ID. 050354117) shall be authorized to check the Bank Account through the internet banking system of the Bank and be issued by the Bank the codes required therefor.

 

RESOLVED, that solely payment of salaries, but no other payments, may be effected through the internet banking system.

 

RESOLVED, that Messrs. Phillip Schwartz and Israel Messer, each individually, shall be authorized to effect transfers between different bank accounts of the Company (e.g. transfers between checking and savings account) or order documents and certifications from the Bank.

 

RESOLVED, that Mr. Phillip Schwartz shall receive and be authorized to use a credit card issued by the Bank in favor of the Company in accordance with the Company’s policies and the Bank’s general terms and conditions.

 

RESOLVED, that Mr. Phillip Schwartz and Mr. Israel Messer, each individually, shall be authorized to perform all acts and execute all documents required in order to open and maintain the Bank Account.

 

C.    ISSUANCE OF BANK GUARANTEE

 

RESOLVED. that the issuance of a bank guarantee in the amount of NIS 20,250 in favor of HBL Hadasit Bio-Holdings Ltd. to secure the rent payment for the office lease of the Company shall be approved.

 

D.    BANK ACCOUNT WITH U-BANK

 

RESOLVED, that NIS 35.000 shall be held as a security deposit for the use of the credit card issued by U Bank.

 

RESOLVED, that Mr. Phillip Schwartz and Mr. Israel Messer. each individually, shall be authorized to perform all acts and execute all documents required by U Bank to close the existing bank account of the Company.

 

E.    FINANCIAL STATEMENTS

 

RESOLVED, that the financial statements of the Company for financial year 2011 have been distributed to the Board, reviewed and discussed and shall be approved.

 

F.    REPORT TO THE COMPANIES REGISTRAR

 

RESOLVED, that the report of the Company to the Companies Registrar, in the form attached hereto as Exhibit A, shall be approved and that Mr. Phillip Schwartz shall be authorized to sign and execute such report on behalf of the Company.

 

G.    ESOP

 

RESOLVED,

 

	 	
a. 

	
That the Employee Share Incentive Plan (the “Plan”) in the form attached hereto as Exhibit B be, and hereby is, approved.

 

  

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b. 

	
To elect the Capital Gains Route for taxation of awards granted under the Plan, in accordance with Section 102 (b)(2) of the Ordinance; and to file such election with the Israeli tax authorities in accordance with applicable law; and

 

	 	
c. 

	
To appoint S.G.S. Trusts Ltd (the “Trustee”) to serve as trustee under the Plan, for the purpose of grants made pursuant to the provisions of Section 102 of the Ordinance, in accordance with the aforementioned Section 102 and the rules promulgated thereunder.

 

	 	
d. 

	
Subject to the lapse of 30 days from the submission of the Plan to the Israeli Tax Authority, in accordance with the rules promulgated under Section 102 of the Ordinance, to approve the grant of an option to purchase up to 3,296 Ordinary Shares of the Company NIS 0.01 par value (“Options”), reflecting 9.9% of the Company’s share capital, to Mr. Phillip Schwartz. The Options are granted under the terms and conditions of the Plan.

 

H.    EMPLOYMENT AGREEMENT PHILLIP SCHWARTZ

 

RESOLVED, that the salary of Phillip Schwartz under his employment agreement shall be amended to reflect NIS 70,000 employer’s expense (“[Hebrew characters]”), including company car and cellular phone starting February 2013. Phillip Schwartz shall be entitled to choose to receive his remuneration either as salary or via invoice.

 

The Board acknowledges that Section 9.1 of the employment agreement of Phillip Schwartz erroneously provides for the minimum pension arrangement required by law. The Company however has contributed, and will continue to contribute, pension payments for the benefit of Phillip Schwartz in accordance with customary Manager’s Insurance.

 

I.    GENERAL MEETING OF SHAREHOLDERS

 

The Board will summon general meeting of shareholders of the Company which, among other things, shall approve the 2011 financials and the Company’s auditors, amendment of the salary of Phillip Schwartz and the issuance of the abovementioned options.

 

J.    GENERAL TRAVEL POLICY

 

RESOLVED, that the Company shall adopt a general travel policy. Among others such policy shall set forth hotel and travel allowances which currently are set at up to US$180 in the USA (US$ 250 in high season) and up to € 120 in Europe (€ 180 in high season); per diem allowance for pocket expenses shall be US$65. Air travel shall be made in economy class, unless no seats are available in which case business class travel may be authorized by two members of the Board.

 

K.    GENERAL; OMNIBUS

 

RESOLVED, that all actions previously taken by any officer or director of the Company in connection with the foregoing resolutions be, and they hereby are. adopted, ratified, confirmed and approved in all respects;

 

RESOLVED FURTHER, that any Officer is hereby authorized and directed to execute, make, verify, acknowledge, deliver, file and record any and all applications, certificates, instruments, agreements and documents and to take any and all other actions as may be necessary or desirable

 

  

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in its judgment in order to carry out the intent and purposes of the foregoing resolutions, the execution by any Officer of any such document to be conclusive evidence of such Officer’s authority to act in accordance with these resolutions.

 

[SIGNATURE PAGE FOLLOWS]

  

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IN WITNESS HEREOF, the undersigned directors of the Company have executed the above resolutions.

 

	

/s/ Zeev Bronfeld

	  	

/s/ Yonatan Malca

	
Mr. Zeev Bronfeld

	  	
Mr. Yonatan Malca

	

/s/ Phillip Schwartz

	  	

/s/ Kenneth Abramowitz

	
Mr. Phillip Schwartz

	  	
Mr. Kenneth Abramowitz

	  	  	  
	
Mr. Nadav Kidron

	  	  

  

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IN WITNESS HEREOF, the undersigned directors of the Company have executed the above resolutions.

 

	

/s/ Zeev Bronfeld

	  	  
	
Mr. Zeev Bronfeld

	  	
Mr. Yonatan Malca

	

/s/ Phillip Schwartz

	  	  
	
Mr. Phillip Schwartz

	  	
Mr. Kenneth Abramowitz

	

/s/ Nadav Kidron

	  	  
	
Mr. Nadav Kidron

	  	  

  

6

  

Exhibit A

 

Report to the Rasham

 

 

 

  

7

  

Exhibit B

 

 

Employee Share Incentive Plan

 

 

8Exhibit 10.5

EXECUTION VERSION

 

SERIES A PREFERRED SHARE PURCHASE AGREEMENT

 

THIS SERIES A PREFERRED SHARE PURCHASE AGREEMENT (the “Agreement”) is made as of the 29th day of January 2014 (the “Effective Date”), by and between Entera Bio Ltd., an Israeli company (the “Company”) and Centillion Fund (the “Investor”).

 

WHEREAS, the Board of Directors of the Company (the “Board”) has determined that it is in the best interest of the Company to raise capital from the Investor (the “Financing”) by means of issuance of such number of Series A Preferred Shares of the Company, with par value of NIS 0.01 per share (the “Preferred Shares”), at a price per shares of US$479.37617 (the “Price Per Share”), for an aggregate purchase price of up to $5,000,000 (the “Purchase Price”), constituting, immediately following the investment in the Company of the Initial Investment Amount and the entire Milestone Investment Amount (as such terms are defined below), 18.18% of the Company’s issued and outstanding shares on a Fully Diluted Basis (as defined below) (but excluding the Warrants to be issued pursuant to this Agreement) and reflecting a pre-money valuation of the Company of twenty-two million and five hundred thousand United States dollars (US$22,500,000) on a Fully Diluted Basis;

 

WHEREAS, the Board has determined that in order to induce the Investor to enter into this Agreement, it is in the best interest of the Company to issue to the Investor Warrants, each in substantially the form attached hereto as Exhibit A (the “Warrants”), representing the right to acquire Preferred Shares of the Company (as exercised, collectively, the “Warrant Shares”); and

 

WHEREAS, the Investor desires to invest in the Company pursuant to the terms and conditions more fully set forth in this Agreement.

 

NOW, THEREFORE, in consideration of the mutual promises and covenants set forth herein, the parties hereby agree as follows.

 

	
1.

	
Purchase and Sale of Shares

 

1.1.           Issue and Purchase of the Shares at the Initial Closing. Subject to the terms and conditions hereof, including without limitations Sections 5 and 6 below, the Company shall issue and sell to the Investor, and the Investor shall purchase from the Company, at the Initial Closing (as defined below) for an aggregate purchase price of two million United States dollars (US$2,000,000) (the “Initial Investment Amount”), an aggregate amount of 4,172 Preferred Shares, at a purchase price per each share of the Price Per Share (the “Initial Closing Shares”).

 

1.2.           Issue and Purchase of the Milestone Shares at the Milestone Closings

 

(a)  Subject to the successful achievement of a Milestone Event (as defined below) no later than the applicable due time and subject to the terms and conditions set forth hereof, including without limitations this Section 1.2 and Sections 7 and 8, at each Milestone Closing (as defined below), which shall occur after the Initial Closing, the Company shall issue and sell to the Investor and the Investor shall purchase from the Company, for an aggregate purchase price of

 

 

  

  

  

up to three million United States dollars (US$3,000,000) (the “Milestone Investment Amount”) (such investment amount to reflect the entire sum to be invested in all of the Milestone Closings together), an aggregate amount of up to 6,258 additional Preferred Shares (the “Milestone Shares”) (such number of shares to reflect the aggregate number of shares to be issued in all of the Milestone Closings together), at a purchase price per each share of the Price Per Share, provided that at each Milestone Closing the Investor shall invest the amount in consideration for such Milestone Shares as indicated in Schedule 1.2(a), and provided further that the Investor shall have a right to invest, in its sole and absolute discretion, any portion of the Milestone Investment Amount prior to the occurrence of the respective Milestone Event against issuance of the respective portion of the Milestone Shares to the Investor by delivering a written notice to the Company (the “Acceleration Notice”). For the purposes hereof the term “Milestone Event” shall mean each of the events specified in Schedule 1.2(a) attached hereto.

 

(b)  Upon the completion of each Milestone Event, the Company shall deliver to the Investor a written notice of the completion of such Milestone Event (each, a “Completion Notice”).

 

(c)  In the event that a Milestone Event is completed in accordance with the terms and subject to the conditions of Section 1.2(b), a milestone closing shall occur upon the earlier of: (i) in connection with the achievement of a Milestone Event – two (2) business days following the receipt by the Investor of the Completion Notice; or (ii) in the event that that the Investor delivered an Acceleration Notice (if the Milestone Event(s) have not occurred by then) – seven (7) business days after the date of the Acceleration Notice (each, a “Milestone Closing”, and collectively, the “Milestone Closings”). Each of the Initial Closing and each of the Milestone Closings shall be hereinafter referred to as a “Closing”.

 

1.3.           The Preferred Shares to be issued to the Investor pursuant to this Agreement (including the Initial Closing Shares and any Milestone Shares) shall be referred to in this Agreement as the “Shares”. For the purpose of this Agreement, “Fully Diluted Basis” shall mean all issued and outstanding shares of the Company, with all securities convertible into shares of the Company deemed so converted; all outstanding loans, options, warrants and other rights to acquire shares or that are exchangeable for shares deemed converted or exercised; all options reserved for employees, directors and consultants deemed granted and exercised, including the Pool (as defined below); and after giving effect to all anti-dilution rights and adjustments that may be activated as a result of the transactions contemplated or referred to herein, all as set forth in the capitalization table of the Company reflecting the issued and outstanding share capital of the Company on a Fully Diluted Basis and as converted basis, both immediately prior and immediately following the Initial Closing and Milestone Closings, should they occur, and attached hereto as Schedule 1.3 (the “Capitalization Table”).

 

1.4.           Warrants. Subject to the terms and conditions hereof, on each Closing Date, the Company shall issue to the Investor a Warrant to acquire up to that number of Warrant Shares equal to the quotient determined by dividing (x) twenty five percent (25%) of the actual investment made by the Investor pursuant to this Agreement at such Closing by (y) the Price Per Share. The Company shall have secured all permits, consents and authorizations that shall be necessary or required lawfully to consummate each such Warrant and the issuance of the Warrant Shares.

 

 

  

2

  

	
2.

	
Closing of Issuance and Purchase

 

2.1.           Initial Closing. The issuance and sale of the Initial Closing Shares, the purchase thereof by the Investor, and the registration of the Initial Closing Shares in the name of the Investor in the shareholder registry of the Company (the “Initial Closing”) shall take place at the offices of Herzog Fox & Neeman, 4 Weizmann Street, Tel Aviv, concurrently with the signing of this Agreement (the “Initial Closing Date”) or at such date, time and place as the Company and the Investor shall mutually agree.

 

2.2.           Milestone Closings. The issuance and sale of the applicable portion of Milestone Shares, the purchase thereof by the Investor, and the registration thereof in the name of the Investor in the shareholder registry of the Company, shall take place at each of the Milestone Closings as set forth in Section 1.2(c) above at the offices of Herzog Fox & Neeman, 4 Weizmann Street, Tel Aviv, at such date or at any other place as the Company and the Investor shall mutually agree.

 

2.3.           Transactions at the Initial Closing. At the Initial Closing, the following transactions shall occur, which transactions shall be deemed to take place simultaneously and no transaction shall be deemed to have been completed or any document delivered until all such transactions have been completed and all required documents delivered:

 

2.3.1.                The Company shall issue the Initial Closing Shares to the Investor, as provided in Section 1.1 hereof.

 

2.3.2.                The Company shall deliver to the Investor the following documents or cause the following actions to be completed:

 

2.3.2.1.                 True and correct copies of resolutions of the Company’s shareholders, in the form attached hereto as Schedule 2.3.2.1(A), by which, among other things, (i) the share capital of the Company shall have been reclassified and modified to create the new series of Preferred Shares and the Articles of Association of the Company have been replaced with the Amended and Restated Articles of Association attached hereto as Schedule 2.3.2.1(B) (the “Amended Articles”), (ii) the shareholders of the Company shall have waived any preemptive, anti-dilution rights or similar rights in connection with the issuance of the Shares, Warrant and Warrant Shares, (iii) this Agreement, the Investors’ Rights Agreement (as defined below) and all other Transaction Documents (as defined below), and the issuance of the Shares, the Warrants and Warrant Shares to the Investor shall have been approved, (iv) immediately prior to the Initial Closing an amount of 7,754 of the Company’s Ordinary Shares, each having a nominal value of NIS 0.01 (“Ordinary Shares”) shall have been reserved for issuance upon the exercise of options to purchase Ordinary Shares granted or to be granted to employees, directors and consultants of the Company under the Company’s employee stock ownership plan (“ESOP”) or other similar arrangements (the “Pool”) of which (a) 5,355 Ordinary Shares have been promised or otherwise allocated; and (b) 2,399 Ordinary Shares, which shall constitute, assuming the investment in the Company of the Initial Investment Amount and the entire Milestone Investment Amount, four percent (4%) of the Company’s outstanding share capital on a Fully Diluted Basis, shall be free for future issuance of Ordinary Shares to employees, directors and consultants of the Company (the “Un-Allocated Pool”), (v) the Indemnification Agreements (as

 

 

  

3

  

 

 

defined below) to be entered with each member of the Board of Directors shall have been approved, and (vi) the shareholders of the Company shall have agreed to a market stand-off period of not less than one hundred eighty (180) days following the Company’s initial public offering pursuant to a registration statement filed with the Securities and Exchange Commission under the Securities Act of 1933, as amended, and the rules and regulations promulgated thereunder (an “IPO”);

 

2.3.2.2.                 True and correct copies of resolutions of the Board, in the form attached hereto as Schedule 2.3.2.2, by which the Company’s Board (i) approves the issuance and the sale of the Shares, Warrant and Warrant Shares to the Investor and reserving a sufficient number of Ordinary Shares to be issued upon conversion of the Shares and Warrant Shares, (ii) recommends to the Company’s shareholders to adopt the Amended Articles, (iii) approves this Agreement, the Investors’ Rights Agreement and all other Transaction Documents, (iv) approves the reservation of the Pool, and (v) approves the entry into the Indemnification Agreements to be entered into by the Company with each member of the Board of Directors;

 

2.3.2.3.                 A validly executed share certificate representing the Initial Closing Shares, issued in the name of the Investor, in the form attached hereto as Schedules 2.3.2.3;

 

2.3.2.4.                 An opinion of counsel to the Company dated as of the Initial Closing Date, in the form attached hereto as Schedule 2.3.2.4;

 

2.3.2.5.                 Director indemnification agreements with all of the Company’s directors (including the Preferred A Director as such term is defined in the Amended Articles) duly executed and approved by the Company, in the form attached hereto as Schedule 2.3.2.5, and dated as of the Initial Closing (the “Indemnification Agreement”);

 

2.3.2.6.                 A certificate duly executed by the chief executive officer of the Company, dated as of the Initial Closing Date, in the form attached hereto as Schedule 2.3.2.6;

 

2.3.2.7.                 The Company shall register the allotment of the Initial Closing Shares to the Investor in the Shareholders Register of the Company, which shall be in the form attached hereto as Schedule 2.3.2.7; and

 

2.3.2.8.                 The Company shall register the appointment of the Preferred A Director in the Directors Register of the Company, which shall be in the form attached hereto as Schedule 2.3.2.8.

 

2.3.2.9.                 The Company shall deliver to the Investor a Warrant to acquire up to that number of Warrant Shares equals to the quotient determined by dividing (x) twenty five percent (25%) of the Initial Investment Amount by (y) the Price Per Share.

 

2.3.3.                The Investor shall cause the transfer to the Company of the Initial Investment Amount in consideration of the Initial Closing Shares, by wire transfer to the Company’s account as set forth in Schedule 2.3.3 hereof.

 

 

  

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2.3.4.                The Company and the Investor shall execute and deliver the Investors’ Rights Agreement in the form attached hereto as Schedule 2.3.4 (the “Investors’ Rights Agreement”).

 

2.3.5.                Within seven (7) days following the Initial Closing, the Company shall deliver to the Israeli Registrar of Companies the applicable reports with respect to the issuance and sale of the Initial Closing Shares, the reclassification of the Company’s share capital and creation of a new class of Preferred Shares and the appointment of the new members to the Board and the adoption of the Amended Articles.

 

2.4.           Transactions at the Milestone Closings. At each Milestone Closing, the following transactions shall occur, which transactions shall be deemed to take place simultaneously, and no transaction shall be deemed to have been completed or any document delivered until all such transactions have been completed and all required documents delivered:

 

2.4.1.                The Company shall issue such portion of the Milestone Shares to the Investor applicable to such Milestone Event as provided for in Section 1.2 hereof;

 

2.4.2.                The Company shall deliver a validly executed share certificate issued in the name of the Investor representing such portion of the issued Milestone Shares;

 

2.4.3.                The Company shall register the allotment of such portion of the Milestone Shares to the Investor in the Shareholders Register of the Company;

 

2.4.4.                The Company shall deliver to the Investor a Warrant to acquire up to that number of Warrant Shares equals to the quotient determined by dividing (x) twenty five percent (25%) of the portion of the applicable Milestone Investment Amount by (y) the Price Per Share.

 

2.4.5.                A certificate duly executed by the chief executive officer of the Company, dated as of the applicable Milestone Closing Date, in the form attached hereto as Schedule 2.4.5;

 

2.4.6.                The Investor shall cause the transfer to the Company of such portion of the Milestone Investment Amount as set forth opposite to the applicable Milestone Event in Schedule 1.2(a), by wire transfer to the Company’s account as set forth in Schedule 2.3.3 hereof; and

 

2.4.7.                Promptly following each Milestone Closing, the Company shall deliver to the Israeli Registrar of Companies the applicable reports with respect to the issuance and sale of the applicable Milestone Shares.

 

	
3.

	
Representations and Warranties of the Company

 

The Company hereby represents and warrants to the Investor, that the following is true and correct as of the date hereof, except as set forth in the Schedule of Exceptions (the “Schedule of Exceptions”) attached hereto as Schedule 3 and furnished to the Investor and counsel to the Investor, specifically identifying the relevant subparagraph hereof, which exceptions shall be deemed to be representations and warranties as if made hereunder (it is being understood that the disclosures in any section or subsections of the Schedule of Exceptions shall be deemed to be

 

 

  

5

  

disclosed with respect to any other section of the Schedule of Exceptions to the extent that it is readily apparent on the face of such disclosures that such disclosure is applicable or relevant to such other sections or subsections), and acknowledges that the Investor is entering into this Agreement in reliance thereon, as follows.

 

3.1.           Organization. The Company is duly organized and validly existing under the laws of the State of Israel, and has full corporate power and authority to own, lease and operate its properties and assets and to conduct its business as now being conducted and as presently proposed to be conducted. The Company has all requisite power and authority to execute and deliver the Transaction Documents and to consummate the transactions contemplated hereby and thereby. Neither the nature of the Company’s business as now conducted and currently proposed to be conducted nor its current ownership or leasing of property require that the Company be qualified to do business in any jurisdiction other than the State of Israel, except where the failure to so qualify or be in good standing would not be reasonable expected to have a Material Adverse Effect (as defined below). The Articles of Association of the Company as in effect immediately prior to the Initial Closing (until the adoption of the Amended Articles) are attached hereto as Schedule 3.1. The Company has not taken any action or, to the Company’s knowledge, failed to take any action, which action or failure would preclude or prevent the Company from conducting its business, in all material respect, after the Closing in the manner heretofore conducted.

 

3.2.           Share Capital. The authorized share capital of the Company as of immediately prior to the Initial Closing consists of NIS 10,250 divided into:

 

3.2.1.                (A) 1,000,000 Ordinary Shares, of which (i) 34,396 Ordinary Shares are issued and outstanding immediately prior to the Initial Closing; (ii) 7,754 Ordinary Shares are reserved as part of the Pool, of which options to purchase 5,355 shares have been promised and 2,399 Ordinary Shares remain available for issuance of options to the Company’s employees, directors and consultants; (iii) 4,786 Ordinary Shares are reserved for issuance upon conversion of convertible loans under convertible loan agreements to which the Company is a party; (iv) 10,430 Ordinary Shares are reserved for issuance upon conversion of the Shares; and (v) 2,608 Ordinary Shares are reserved for issuance upon conversion of the Warrant Shares; and (B) 25,000 Preferred Shares, none of which are issued and outstanding immediately prior to the Initial Closing.

 

3.2.2.                Except for the transactions contemplated by this Agreement, and except as set forth in Section 3.2.2 of the Schedule of Exceptions hereto, there are no other shares, preemptive rights, convertible securities, convertible loans, outstanding warrants, options or other rights to subscribe for, purchase or acquire from the Company and/or, to the Company’s knowledge, from any shareholder of the Company any share capital of the Company and there are no contracts or commitments, written or oral, providing for the issuance of, or the granting of, any rights to acquire, any share capital of the Company or under which the Company and/or, to the Company’s knowledge, any shareholder of the Company is, or may become, obligated to issue any debt or equity securities and there are no commitments, promises, understandings or undertakings with respect to grants of any options under the Pool or otherwise.

 

 

  

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3.2.3.                All issued and outstanding share capital of the Company has been duly authorized, and is validly issued and outstanding and fully paid and non-assessable. The Shares and Warrant Shares, when issued, sold and delivered in accordance with this Agreement, will be duly authorized, validly issued, fully paid, non-assessable, free of any preemptive rights, will have the rights, preferences, privileges, and restrictions set forth in the Amended Articles and Transaction Documents, and except as set forth on Section 3.2.3 of the Schedule of Exceptions hereto will be free and clear of any liens, claims, encumbrances or third party rights of any kind (other than as set forth in the Amended Articles and Transaction Documents) and duly registered in the name of the Investor in the Company’s register of shareholders, and (assuming the representations and warranties of the Investor set forth in Section 4 of this Agreement are true and correct) will be offered, sold and issued in compliance with all applicable securities laws. The Ordinary Shares issuable upon the exercise of the Warrant have been duly authorized and reserved for issuance by all necessary corporate action and, upon issuance in accordance with the terms of the Amended Articles and Transaction Documents, shall be duly and validly issued, fully paid, non-assessable, free of any preemptive rights, will have the rights, preferences, privileges and restrictions set forth in the Amended Articles, will be free and clear of any liens, claims, encumbrances or third party rights of any kind (other than as set forth in the Amended Articles and Transaction Documents) and (assuming the representations and warranties of the Investor set forth in Section 4 of this Agreement are true and correct) will be issued in compliance with all applicable securities laws. Except as set forth in this Agreement and the Investor’s Rights Agreement and Section 3.2.3 of the Schedule of Exceptions hereto, the Company is not under any obligation to register for trading on any securities exchange any of its currently outstanding securities or any of its securities which may hereafter be issued. Since its incorporation, there has been no declaration or payment by the Company of dividends, or any distribution by the Company of any assets of any kind to any of its shareholders in redemption of or as the purchase price for any of the Company’s securities. The Company has obtained valid waivers of any rights by other parties to purchase any of the Shares, Warrant and Warrant Shares covered by this Agreement.

 

3.2.4.                The Company option plan that is intended to qualify as a capital gains route plan under Section 102 of the Israeli Income Tax Ordinance [New Version] 5721-1961, and the rules and regulations promulgated thereunder (a “102 Plan” and the “Ordinance”, respectively) has received a favorable determination or approval letter from, or is otherwise approved by, or deemed approved by passage of time without objection by, the Israel Tax Authority (“ITA”). All options to purchase the Company’s share capital which are subject to tax under Section 102 of the Ordinance and which were issued under any 102 Plan have been granted and issued, as applicable, in compliance with the applicable requirements of Section 102 of Ordinance (including the relevant sub-section of Section 102) and the written requirements and guidance of the ITA, including, without limitation, the filing of the necessary documents with the ITA, the appointment of an authorized trustee to hold the Company Options, and the due deposit of such Company Options with such trustee pursuant to the terms of Section 102 of the Ordinance and the guidance published by the ITA on July 24, 2012 and clarification dated November 6, 2012.

 

3.3.           Ownership of Shares. Section 3.3 of the Schedule of Exceptions sets forth the capitalization of the Company immediately prior to and following the Initial Closing including the number of shares of the following: (i) issued and outstanding Ordinary Shares; (ii) granted

 

 

  

7

  

share options, including vesting schedule, acceleration provisions and exercise price; (iii) Ordinary Shares reserved for future award grants under the ESOP; (iv) each series of the Company’s Preferred Shares; and (v) warrants or rights to purchase from the Company shares of the Company, if any. Except as set forth in Schedule 3.3 of the Schedule of Exceptions, the individuals identified on Section 3.3 of the Schedule of Exceptions as the shareholders, optionholders or warrantholders of the Company are the lawful owners, and to the Company’s knowledge, beneficially and of record, of all of the issued and outstanding shares of the Company and of all rights thereto, and except as set forth in the Amended Articles, the Transaction Documents and Section 3.3 of the Schedule of Exceptions, the Company is not aware of the existence of any liens, claims, charges, encumbrances, restrictions, rights, options to purchase, proxies, voting trust and other voting agreements, calls or commitments of every kind, and none of the said individuals owns any other shares, options or other rights to subscribe for, purchase or acquire any share capital of the Company from the Company or to the Company’s knowledge, from each other. All outstanding shares of the Company and all Ordinary Shares of the Company underlying outstanding options are subject to (or shall be immediately following the Initial Closing) (i) a right of first refusal in favor of either the Company or other shareholders of the Company upon any proposed transfer (other than transfers for estate planning purposes) and (ii) a lock-up or market standoff agreement of not less than one hundred eighty (180) days following the Company’s initial public offering pursuant to a registration statement filed with the Securities and Exchange Commission under the Securities Act of 1933, as amended, and the rules and regulations promulgated thereunder (an “IPO”).

 

3.4.           Subsidiaries. The Company does not own, directly or indirectly, any share capital of any corporation, association or business entity and is not a participant in any partnership, joint venture or other business association.

 

3.5.           Directors and Officers. The directors and officers of the Company are set forth in Section 3.5 of the Schedule of Exceptions. Except for the transactions contemplated in the Transaction Documents, the Amended Articles and as set forth in Section 3.5 of the Schedule of Exceptions hereto, the Company does not have any agreement, obligation or commitment with respect to the election of any individual or individuals to its Board, or to appoint anyone as an officer and there is no voting agreement or other arrangement among the Company’s shareholders. All agreements, commitments and understandings, whether written or oral, with respect to any compensation to be provided to any directors or officers in addition to that set forth in their respective employment agreement or consulting agreement, as applicable, have been fully disclosed in writing to the Investor.

 

3.6.           Financial Statements. The Company has furnished the Investor with its audited, New Israeli Shekel (“NIS”)-denominated financial statements as of and for the year ending December 31, 2012, and unaudited, reviewed NIS -denominated financial statements as of and for the period ended September 30, 2013 (the “Financial Statements”). The Financial Statements are true and correct in all material respects, were prepared from and are in accordance with the books and records of the Company and have been prepared in accordance with International Financial Reporting Standards (“IFRS”) consistently applied, and fairly and accurately present in all material respects the financial position of the Company as of such dates and the results of its operations for the periods then ended. Other than as set forth in Section 3.6 of the Schedule of Exceptions, the Company has no material liabilities, debts or obligations of any nature, direct or

 

 

  

8

  

indirect, whether accrued, absolute or contingent other than liabilities reflected or reserved against in the Financial Statements. Except as set forth in Section 3.6 of the Schedule of Exceptions, since September 30, 2013, there has not been:

 

3.6.1.                any material adverse change in the assets (including intangible assets), liabilities, financial condition, operating results, or business of the Company from that reflected in the Financial Statements;

 

3.6.2.                any damage, destruction or loss, whether or not covered by insurance, to any material asset or which would have a Material Adverse Effect;

 

3.6.3.                any waiver by the Company of a valuable right or of a material debt owed to it;

 

3.6.4.                any satisfaction or discharge of any material lien, material claim or material encumbrance or payment of any material obligation by the Company, except in the ordinary course of business and that is not individually or in the aggregate adverse to the assets, properties, financial condition, operating results or business of the Company;

 

3.6.5.                any material change in any compensation arrangement or agreement with any employee of the Company;

 

3.6.6.                any loans or advances made by the Company to its employees, officers, or directors or obligations to make such loans or advances, other than advances made in the ordinary course of business in an amount not exceeding $5,000 in the individual and $10,000 in the aggregate;

 

3.6.7.                any sale, transfer or lease of, except in the ordinary course of business, or mortgage or pledge of imposition of lien on, any of the Company’s assets;

 

3.6.8.                any change in the accounting methods or accounting principles or practices employed by the Company;

 

3.6.9.                any material change to a material contract or agreement by which the Company is subject or by which any of their respective assets are bound;

 

3.6.10.                any sale, assignment, lease, license or transfer of any Company’s Intellectual Property, other than transactions in the Company’s ordinary course of business and none of which involves the grant of an exclusive license to the Company’s Intellectual Property in any jurisdiction or market;

 

3.6.11.                any cash utilization by the Company other than in the ordinary and usual conduct of its business;

 

3.6.12.                any arrangement or commitment by the Company to do any of the things described in clauses 3.6.3 through 3.6.11 above; or

 

 

  

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3.6.13.                any other event, condition or occurrence of any character, which could reasonably be expected to result in a Material Adverse Effect.

 

3.7.           Authorization; Approvals. All corporate action on the part of the Company necessary for the authorization, execution, delivery, and performance of all of the Company’s obligations under this Agreement, the Investor’s Rights Agreement, the Warrant and any and all other agreements executed or documents delivered in connection herewith or therewith (collectively, the “Transaction Documents”), and for the authorization, issuance, and sale of the Shares being sold under this Agreement and of the Warrant Shares issuable upon the exercise of the Warrant has been (or will be) taken prior to the Initial Closing. The Transaction Documents, when executed and delivered by or on behalf of the Company shall constitute the valid and legally binding obligations of the Company and legally enforceable against the Company in accordance with their respective terms. No consent, approval, order, license, permit, action by, or authorization of or designation, declaration, or filing with any governmental authority or any third party on the part of the Company is required that has not been, or will not have been, obtained by the Company prior to the Initial Closing in connection with the valid execution, delivery and performance of the Transaction Documents or the offer, sale, or issuance of the Shares and Warrant Shares other than filings with the OCS (as such term is defined below, and filings with the Israeli Registrar of Companies to be effected following the Initial Closing.

 

3.8.           Compliance with Other Instruments. The Company is not in default under (i) its Articles or (ii) under any note, indenture, mortgage, lease, agreement, contract, purchase order or other instrument, document or agreement to which the Company is a party or by which it or any of its property is bound or affected or (iii) any applicable federal, state, local or foreign law (including common law), statute, code, ordinance, rule, regulation or other legal requirement law (a “Law”) or order, writ, injunction, decree, or judgment of any court or any governmental department, commission, board, bureau, agency or instrumentality, domestic or foreign (an “Order”), which default under sub-sections (ii) and (iii) would reasonably be expected to result in a material adverse effect on the assets (tangible or intangible), condition (financial or otherwise), liabilities, properties, results of operations or business of the Company as currently conducted or currently proposed to be conducted, (a “Material Adverse Effect”). The Company is not aware of any default of any third party under any material agreement, contract, document or other instrument to which the Company is a party or by which it or any of its property is affected. The Company is not a party to or, to its knowledge, bound by any order, judgment, decree or award of any governmental authority, agency, court, tribunal or arbitrator.

 

3.9.           No Breach. Neither the execution and delivery of any of the Transaction Documents nor compliance by the Company with the terms and provisions thereof, will conflict with, or result in a breach or violation of, any of the terms, conditions and provisions of: (i) the Company’s Articles of Association or other governing instruments of the Company, (ii) any judgment, order, injunction, decree, or ruling of any court or governmental authority, domestic or foreign, (iii) any agreement, contract, lease, license or commitment to which the Company is a party or to which it is subject, or (iv) applicable law. Such execution, delivery and compliance will not (a) give to others any rights, including rights of termination, cancellation or acceleration, in or with respect to any agreement, contract, lease, license or commitment referred to in this Section 3.9, or to any of the properties of the Company or (b) otherwise require the consent or

 

 

  

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approval of any person, which consent or approval has not heretofore been obtained or shall be obtained by the Initial Closing.

 

3.10.           Records. The minute books of the Company, which have been provided to the Investor, contain accurate and complete copies of the minutes of every meeting of the Company’s shareholders and Board (and any committee thereof). No resolutions have been passed, enacted, consented to or adopted by the directors (or any committee thereof) or shareholders of the Company, except for those contained in such minute books. The corporate records of the Company have been maintained in accordance with all applicable statutory requirements, in all material respects, and are complete and accurate in all respects.

 

3.11.           Ownership of Assets; No Indebtedness. Except as set forth in Section 3.11 of the Schedule of Exceptions hereto, the Company does not lease or license any property. All property owned by the Company is so owned free and clear of all mortgages, pledges, liens, licenses, leases security interests, encumbrances or charges in amounts equal to or greater than $1,000 other than those identified on Section 3.11 of the Schedule of Exceptions. Except as set forth in Section 3.11 of the Schedule of Exceptions hereto, the Company has no outstanding debt for borrowed money and have not assumed, guaranteed, endorsed or otherwise become directly or contingently liable on any indebtedness of any other person (including, without limitation, liability by way of agreement, contingent or otherwise, to purchase, to provide funds for payment, to supply funds to or otherwise invest in the debtor, or otherwise to assure the creditor against loss).

 

3.12.           Intellectual Property Rights

 

3.12.1.                Except as set forth in Section 3.12.1 of the Schedule of Exceptions hereto, to the best of the Company’s knowledge the Company owns or possesses or otherwise has the legally enforceable right to use all Intellectual Property Rights necessary or required for the conduct of its business as currently conducted. Each patent, patent application, copyright registration or application therefor, mask work registration or application therefor, and trademark, service mark and domain name registration or application therefor of the Company are listed in Section 3.12.1 of the Schedule of Exceptions hereto. The Company has complied, in all material respects with the requirements of, and has filed all material documentation required in dealing with, all Patent and Trademark Offices and any other patent registry agency in which its patent applications were filed, and, to the best knowledge of the Company, all patents (if any) and patent applications are in effect, and to the best knowledge of the Company, there is no prior art or any other claim which renders the inventions of the Company referred to in the patents, patent applications and related documentation (if any) invalid in any manner. Section 3.12.1 of the Schedule of Exceptions identifies each license or other agreement pursuant to which the Company has licensed, distributed or otherwise granted any rights to any third party with respect to, any Intellectual Property Rights of the Company. As used in this Agreement, “Intellectual Property Rights” means all rights and interests of any kind in and to Intellectual Property; “Intellectual Property” means any of the following: (i) patents, patent applications, patent disclosures and all related continuation, continuation-in-part, divisional, reissue, re-examination, utility, model, certificate of invention and design patents, patent applications, registrations and applications for registrations, (ii) trademarks, service marks, trade dress, logos, tradenames, service names and corporate names and registrations and applications for registration thereof, (iii)

 

 

  

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copyrights and registrations and applications for registration thereof, (iv) mask works and registrations and applications for registration thereof, (v) trade secrets and confidential business information, whether patentable or nonpatentable and whether or not reduced to practice, knowhow, technology manufacturing and product processes and techniques, research and development information, copyrightable works, (vi) other proprietary rights relating to any of the foregoing, and (vii) copies and tangible embodiments thereof.

 

3.12.2.                Except as set forth in Section 3.12.2 of the Schedule of Exceptions hereto, the Intellectual Property owned by the Company, together with any Intellectual Property used by Company, has been developed solely by the Company, its employees or consultants or, in the case of a third party licensing entity, to the Company’s knowledge the Intellectual Property has been developed solely by the employees or consultants of the licensing entity providing the Company with the applicable license.

 

3.12.3.                Except as set forth in Section 3.12.3 of the Schedule of Exceptions hereto, the Intellectual Property owned by the Company, together with the Intellectual Property licensed to Company under any license, includes all the Intellectual Property and Intellectual Property Rights required, used in, or held for use in, or reasonably deemed necessary for the conduct of the company’s business as presently conducted, including Intellectual Property necessary for the development, distribution, marketing, manufacture, use, import, license and sale of any company products or technology.

 

3.12.4.                Except as set forth in Section 3.12.4 of the Schedule of Exceptions hereto, there are no outstanding options, licenses, or agreements of any kind relating to the Intellectual Property of any other person or entity, except, in either case, for standard commercially available off-the-shelf licenses, nor is the Company bound by or to any party to any options, licenses or agreements of any kind with respect to such Intellectual Property.

 

3.12.5.                Any and all Intellectual Property Rights, necessary for the Company’s business as currently conducted or currently proposed to be conducted, which has been developed or is currently being developed by any person which the Company currently employs or retains or intends to employ or retain as an employee, service provider or a consultant of the Company in his/her/its capacity as such, is and shall be the property solely of the Company. The Company has taken security measures to protect the secrecy, confidentiality and value of all the Intellectual Property Rights, which measures are reasonable and customary in the industry in which the Company operates. Except as set forth in Section 3.12.5 of the Schedule of Exceptions hereto, the Company’s current and former employees, consultants, independent contractors, directors and any other third party engaged by the Company (excluding any such third party otherwise bound by a duty of confidentiality by law or applicable standards of professional conduct) who, either alone or in concert with others, developed, invented, discovered, derived, programmed or designed the Intellectual Property, or who have knowledge of or access to information about the Intellectual Property, have entered into written agreements with the Company, assigning to and acknowledging sole ownership of the Company with respect to all rights in Intellectual Property developed in the course of their employment or engagement by the Company and, except as set forth in Section 3.12.5 of the Schedule of Exceptions hereto all the Company’s current and former employees, consultants, independent contractors, directors and any other third party engaged by the Company (excluding any such third party otherwise bound

 

 

  

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by a duty of confidentiality by law or applicable standards of professional conduct) have entered into appropriate confidentiality and non-compete written agreement with the Company. True and correct copies of all such proprietary information and non-competition agreements have been provided to the Investor or their counsels. All such persons have explicitly waived any and all moral rights, as applicable, with respect to Intellectual Property purportedly owned by the Company. All amounts payable by the Company to all such persons have been paid in full, and all current and former employees of the Company have irrevocably waived the right to receive compensation in connection with “Service Inventions” under Section 134 of the Israeli Patent Law 1967 or any other similar provision under any law of any applicable jurisdiction. The Company has taken and will continue through the Closing to take commercially reasonable steps necessary, appropriate or desirable to safeguard and maintain the secrecy and confidentiality of, and its proprietary rights in, all of its confidential information and trade secrets. The Company has not, and to the Company’s knowledge, each of its current and former officers, employees, consultants and independent contractors have not, disclosed to any third party who is not under a duty of confidentiality or who is not entitled to receive such information or materials any confidential information or trade secret of Company or any confidential information or trade secret of any third party that has been disclosed to Company pursuant to a nondisclosure obligation.

 

3.12.6.                To the best knowledge of the Company (provided that the knowledge qualifier shall not apply with respect to subsection (ii)), the Company and the operation of the business of the Company, including the development, manufacture, use, license, and distribution of Company products does not (and did not at any time): (i) infringe or misappropriate the Intellectual Property Rights of any person or entity; (ii) violate any term or provision of any license or other agreement concerning the Intellectual Property Rights of the licensor under such license or agreement; (iii) violate any right of any person or entity (including any right to privacy or publicity); or (iv) constitute unfair trade practice under any law.

 

3.12.7.                The Company has not received from any person or entity any (i) notice claiming that such operation or any Company product infringes or misappropriates the Intellectual Property Rights of any third party or constitutes unfair competition or trade practices under any law or (ii) notice of third-party patent rights or other Intellectual Property Rights from a putative or potential licensor of such rights.

 

3.12.8.                To the Company’s knowledge, no person has infringed, misappropriated or otherwise violated any of the patents, trademarks, service marks, trade names, copyrights or trade secrets or other proprietary rights or Intellectual Property Rights of the Company. The Company is not aware that any person who the Company currently hires as an employee or retains as a consultant is obligated under any contract (including licenses, covenants or commitments of any nature) or other agreement, or subject to any judgment, decree or order of any court or administrative agency, that would interfere with the use of such person’s best efforts to promote the interests of the Company or that would conflict with the Company’s business as conducted and as currently proposed to be conducted. To the Company’s knowledge none of the execution or delivery of the Agreement or any of the Transaction Documents, the carrying on of the Company’s business or the conduct of the Company’s business as currently proposed to be conducted, will conflict with or result in a breach of the terms, conditions or provisions of, or

 

 

  

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constitute a default under, any contract, covenant or instrument under which any of the Company’s employees, Service providers or consultants are now obligated.

 

3.12.9.                To the best knowledge of the Company, it is not or will not become, necessary to utilize any Intellectual Property Rights and inventions of any of its employees or consultants made prior to their engagement by the Company other than those that have been rightfully assigned to the Company pursuant to an Intellectual Property assignment agreement signed by the Company and such employees and consultants, and no third party has any rights in such Intellectual Property Rights or Invention that were assigned to the Company. To the Company’s knowledge, except as set forth in Section 3.12.9 of the Schedule of Exceptions hereto no current or former employee, consultant or independent contractor of the Company (including any employees and consultants thereof), who was involved in, or who contributed to the creation or development of any Intellectual Property Rights of the Company (i) has performed services for or otherwise was under restrictions resulting from his relations with any government, university, college or other educational institution or research center during the time such employee, consultant or independent contractor was so involved in, or contributed to the creation or development of any Intellectual Property Rights of the Company; or (ii) (A) in case of any current or former employee, was subject to any employment agreement or invention assignment, or other similar engagement obligation with any third party, during a period of time during which such employee created any Intellectual Property Rights of the Company or during such time that such employee was also performing services for or for the benefit of the Company, and (B) in case of any consultant or independent contractor of the Company (including any employees and consultants thereof) was subject to any employment agreement or invention assignment, or other similar engagement obligation with any third party, during a period of time during which such consultant created any Intellectual Property Rights of the Company or during such time that such consultant or independent contractor was also performing services for or for the benefit of the Company, in a manner which might derogate from the Company’s ownership of the Intellectual Property Rights of the Company.

 

3.12.10.                Except as set forth in Section 3.12.10 of the Schedule of Exceptions hereto, the Company is not obligated or under any liability whatsoever to make any payments by way of royalties, fees or otherwise to any owner or licensee of, or other claimant to, any patent, trademark, service mark, trade name, copyright or other intangible asset, with respect to the use thereof or in connection with the conduct of its business as now conducted.

 

3.12.11.                Except as set forth in Section 3.12.11 of the Schedule of Exceptions, no funding from any Governmental Entity (as defined below), nor any facilities or resources of a university, college, other educational institution or research center or funding from third parties was used in the development of the Company’s Intellectual Property, and the Company has not received written notice or otherwise has knowledge that a Governmental Entity, university, college, other educational institution or research center, or other third party has any claim or right in or to the Company’s Intellectual Property.

 

3.13.           Taxes. The Company has paid, or has made adequate provisions for the payment of all taxes, interest, penalties, assessments or deficiencies owing by it to any taxing authority. The Company has duly filed all required declarations, returns, reports and filings with respect to all taxes, including, but not limited to, all withholding taxes, corporate, business, profit, excise, sales,

 

 

  

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use, value added, real, personal taxes and social charges, unemployment and retirement contributions, duties, imposts and other governmental charges. All such tax returns and reports are correct and accurate in all material respects and are not the subject of any dispute with the tax authorities. The Company is not in default with respect to such returns and reports or is delinquent in the payment of any such taxes. Without derogating from the above to date, the tax authorities have not carried out an audit of the Company’s tax returns. The Company has not made any elections under applicable laws or regulations (other than elections that related solely to methods of accounting, depreciation or amortization) that would have a material adverse effect on the Company’s financial condition, business, properties or assets.

 

3.14.           Contracts. Section 3.14 of the Schedule of Exceptions hereto contains a true and complete list of all material licenses, commitments or undertakings, written or oral, that will be in effect after the Closing to which the Company is a party or by which its property is bound (each, a “Material Contract”), including:

 

3.14.1.                all indentures, leases, subleases, licenses or other instruments under which the Company leases property, real or personal under which the Company is obligated to pay an annual rent of $17,500 or more;

 

3.14.2.                any oral or written contract, obligation, instrument, corporate restriction or commitment which involves a potential obligation or liability in excess of $17,500 or which is otherwise material and not entered into in the ordinary course of business;

 

3.14.3.                any agreement which prohibits or substantially restricts the Company from freely engaging in any business in any part of the world;

 

3.14.4.                any agreement that obligates the Company to share, license or develop any product or technology;

 

3.14.5.                any collective bargaining agreement, employment agreement, consulting agreement, non-competition agreement, nondisclosure agreement, inventions assignment agreement, excluding all such agreements entered into in the ordinary course of business (but, in regards to all non-competition and invention assignment agreements, not excluding all such agreements that impose non-competition and/or invention assignment obligations on the Company), executive compensation plan, profit sharing plan, bonus plan, restricted stock award agreement, deferred compensation agreement, employee pension retirement plan, employee benefit stock option, stock awards or stock purchase plan, buy-sell agreement and any other employee or stockholder agreement or employee benefit plan, entered into or adopted by the Company;

 

3.14.6.                all bank accounts (or accounts with other financial institutions) maintained by the Company, together with the persons authorized to make withdrawals from such accounts;

 

3.14.7.                each partnership, joint venture, collaboration or other similar agreement or arrangement with another entity;

 

3.14.8.                any promissory note, indenture, mortgage, loan agreement, guaranty, security agreement, pledge or similar agreement with any lender; and

 

 

  

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3.14.9.                each confidentiality (other than standard nondisclosure agreements entered into in the Company’s ordinary course of business), product development, research, manufacturing, marketing, distribution or supply agreement, purchase agreement (excluding purchase orders and price quotes entered into by the Company prior to January 1, 2013, and following such date in amounts of less than $2,000 each) , product, software, patent or other intellectual property licensing or royalty agreement and any other Material Contract (whether oral or written) entered into by the Company or by which the Company is bound.

 

True and correct copies of all such contracts have been delivered or made available to the Investor. The Company has in all respects substantially performed all obligations required to be performed by it to date and is not in default in any respect under any of such contracts, agreements, leases, documents, commitments or other arrangements to which it is a party or by which it is otherwise bound which default could reasonably be expected to result in a Material Adverse Effect. All agreements referred to in Section 3.14 of the Schedule of Exceptions hereto are in effect and enforceable against the Company according to their respective terms, and to the knowledge of the Company there is not under any of such agreements any existing material default or event of default or event which, with notice or lapse of time or both, would constitute an event of default thereunder. To the knowledge of the Company all parties having material contractual arrangements with the Company are in substantial compliance therewith and none are in material default in any respect thereunder.

 

3.15.           Litigation/Regulation.

 

3.15.1.                There is no civil, criminal or arbitration proceeding, action including administrative action, demand, claim, complaint, hearing, suit, proceeding or governmental inquiry or investigation pending, or to the Company’s knowledge threatened against or involving the Company or any of its officers, directors, or employees (in their capacity as such), or against any of the Company’s properties, including claims as to which the Company may be vicariously liable or in respect whereof the Company is liable to indemnify any party concerned, before any court, arbitration board or tribunal or administrative or other governmental agency, and, to the Company’s knowledge, there are no facts likely to give rise to any such claim or proceedings. Neither the Company nor to the best of its knowledge any of its officers, directors, or employees (in their capacity as such) is a party to the provisions of any order, writ, injunction, judgment or decree of any court or governmental agency or instrumentality. There is no action, suit, proceeding or investigation by the Company currently pending or that the Company intends to initiate. There is no action, suit, proceeding or investigation pending or, to the Company’s knowledge, threatened involving the prior employment of any of the Company’s employees or their obligations under any agreements with prior employers. The Company has not received any opinion or memorandum or legal advice from legal counsel to the effect that it is exposed, from a legal standpoint, to any liability or disadvantage which the Company reasonably believes may be material to its present or contemplated business, prospects, financial condition, operations, property or affairs. There have been no legal memoranda, letters and other legal documents provided to the Company since its inception the subject matter of which is the Company’s compliance with any and all applicable laws, rules and regulations relating to its business.

 

3.15.2.                There are no inspections, investigations or proceedings pending or, to the Company’s knowledge, threatened against the Company by or before any governmental or

 

 

  

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regulatory authority relating to any of the products being developed, manufactured, promoted, marketed, distributed, imported, exported, or sold by or on behalf of the Company or otherwise in connection with the conduct of their respective businesses.

 

3.15.3.                The Company has heretofore disclosed to the Investor all adverse effects that have occurred in clinical trials conducted by the Company with respect to the development and administration of its products and any claims or actions involving or relating to use of any of the products in any clinical trial or otherwise being developed, manufactured, promoted, marketed, distributed, imported, exported, or sold by or on behalf of the Company.

 

3.15.4.                The Company has not received any communication from a governmental or regulatory authority that alleges that the business of the Company is not, or has not been, conducted in compliance with applicable laws, rules and regulations and to the knowledge of the Company there are no facts or circumstances that would reasonably be expected to give rise to any such notice or communication.

 

3.15.5.                The Company possesses all licenses, registrations, clearances, approvals, authorizations, exemptions, permits, orders, or franchises from governmental and regulatory authorities that are necessary to conduct the business as it is currently being conducted, including as may be necessary to develop, manufacture, promote, market, distribute, export, import and sell products of the business and to conduct clinical trials (collectively, the “Permits”). The Company has not received any notice or communication from any federal, national, supranational, state, provincial, local, or similar government, governmental, regulatory or administrative authority, agency or commission or any court, tribunal, or judicial or arbitral body (each a “Governmental Authority”) (i) asserting or alleging that it has failed to comply with applicable laws, rules or regulations or the requirements of any Permit, or (ii) threatening or asserting any actual or possible revocation, withdrawal, cancellation, suspension, termination or modification of any Permit, and there are no facts or circumstances that would reasonably be expected to give rise to any such notice or communication.

 

3.16.           Offering Valid. Assuming the representations and warranties of the Investor set forth in Section 4 of this Agreement are true and correct the offer and issuance of the Shares and Warrant, and the issuance of the Warrant Shares upon the exercise of the Warrant, will be exempt from the registration requirements of the Securities Act of 1933, as amended (the “Securities Act”) and the publication of prospectus pursuant to the Israeli Securities Law, 1968, and will have been registered or qualified (or are exempt from registration and qualification) under the registration, permit or qualification requirements of all applicable state securities laws.

 

3.17.           No Public Offer. Neither the Company nor anyone acting on its behalf has offered securities of the Company or any part thereof or any similar securities for issuance or sale to, or solicited any offer to acquire any of the same from, anyone so as to make issuance and sale of the Shares, Warrant or Warrant Shares hereunder not exempt from the registration requirements of the Securities Act, the Israeli Securities Law, 1968, or any similar foreign law. None of the shares of the Company’s share capital issued and outstanding has been offered or sold in such a manner as to make the issuance and sale of such shares not exempt from such registration requirements, and all such share capital have been offered and sold in compliance with all applicable, Israeli and US federal and state securities laws.

 

 

  

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3.18.           Interested Party Transactions. Except as set forth in Section 3.18 of the Schedule of Exceptions, to the Company’s knowledge no officer, director or shareholder of the Company, or any affiliate of any such person or entity or the Company, has or has had, either directly or indirectly, (a) an interest in any person or entity which (i) furnishes or sells services or products which are furnished or sold or are proposed to be furnished or sold by the Company, or (ii) purchases from or sells or furnishes to the Company any goods or services, or (b) a beneficial interest in any contract or agreement to which the Company is a party or by which it is bound. Except as set forth in Section 3.18 of the Schedule of Exceptions, there are no existing arrangements or proposed transactions between the Company and any officer, director, or shareholder of the Company, or, to the Company’s knowledge, any affiliate or associate of any such person. No employee, shareholder, officer, or director of the Company is indebted to the Company, nor is the Company indebted (or committed to make loans or extend or guarantee credit) to any of them other than as set forth in Section 3.18 of the Schedule of Exceptions.

 

3.19.           Employees.

 

3.19.1.                The Company has no employment, consulting, service provider or other contract with any officer, employee, agent, contractors or any other consultant or person that is not terminable by it at will without liability, upon less than thirty (30) days prior notice, except as set forth on Section 3.19 of the Schedule of Exceptions hereto. Section 3.19.1 of the Schedule of Exceptions hereto lists all current employment, consulting, service provider or other agreements between the Company and all of the Company’s employees, consultants and service providers. Except as set forth on Section 3.19.1 of the Schedule of Exceptions hereto, the Company has no oral or written employment, consulting or service provider contracts, financing agreements, licenses, distributor or sales representative agreements, agreements with officers, directors, employees, consultants, service providers or shareholders of the Company or to the Company’s knowledge, persons or organizations related to or affiliated with any such persons, leases, agreements relating to product development, or pension, profit sharing, retirement or stock option plans that are currently in effect.

 

3.19.2.                The Company has complied in all material respects with all applicable employment laws, agreements relating to employment and to the proper withholding and remission to the proper tax and other authorities of all sums required to be withheld from employees or persons deemed to be employees under applicable laws respecting such withholding. The Company is not bound by or, to the knowledge of the Company, subject to (and none of its assets or properties is bound by or subject to) any written or oral, express or implied, contract, commitment or arrangement with any labor union except for those provisions of general agreements between the Histadrut and any Employers’ Union or Organization which are applicable to all the employees in Israel by Extension Order. No labor union has requested or has sought to represent any of the employees, representatives or agents of the Company.

 

3.19.3.                All of the Company’s payment obligations regarding severance, pensions, and other payments to employees required by law have been fully paid by the Company or properly reserved as reflected in the Company’s Financial Statements. Since September 30, 2013, no Key Employee, employee, consultant or service provider of the Company has indicated an intention to terminate or has terminated his or her engagement with the Company and the Company is not aware of such intention. Except as set forth on Section 3.19.3 of the Schedule of

 

 

  

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Exceptions hereto, the Company does not intend to terminate the engagement of any of its employees, consultants or service providers. To the Company’s knowledge, no employee, consultant or service provider is in violation of any term of any contract, patent disclosure agreement, non-competition agreement, or any other contract or agreement or any restrictive covenant or any other obligation to a former employer or third party relating to the right of any such employee, consultant or service provider to be employed or engaged, as applicable, by the Company.

 

3.19.4.                Except as set forth in Section 3.19.4 of the Schedule of Exceptions, each current and former employees , consultant, contractor and officer of the Company has executed an agreement with the Company regarding confidentiality and proprietary information substantially in the form or forms delivered to the counsel for the Investor (the “Confidential Information Agreements”). No current or former Key Employee has excluded works or inventions from his or her assignment of inventions pursuant to such Key Employee’s Confidential Information Agreement. Each current and former Key Employee has executed a non-competition and non-solicitation agreement substantially in the form or forms delivered to counsel for the Investor. The Company is not aware that any of its Key Employees is in violation of any agreement covered by this Section 3.19.4. For the purposes herein, “Key Employee” shall mean each of the Company’s Chief Executive Officer, Director of Pharmaceutical Development (together with the Chief Executive Officer, the “Active Key Employees”), Chief Operating Officer and Chief Science Officer.

 

3.19.5.                To the Company’s knowledge, none of the Company’s employees, consultants, agents, or contractors is obligated under any contract (including licenses, covenants or commitments of any nature) or other agreement, or subject to any judgment, decree or order of any court or administrative agency, that would interfere with such employee’s, consultant’s, agent’s or contractor’s ability to promote the interest of the Company or that would conflict with the Company’s business. Neither the execution or delivery of this Agreement or the Transaction Documents, nor the carrying on of the Company’s business by the employees, consultants, agents, or contractors of the Company, nor the conduct of the Company’s business as now conducted and as presently proposed to be conducted, is expected, to the Company’s knowledge, to conflict with or result in a breach of the terms, conditions, or provisions of, or constitute a default under, any contract, covenant or instrument under which any such constitute a default under, any contract, covenant or instrument under which any such employee, consultant, agent, or contractor is now, obligated.

 

3.19.6.                Except as set forth in Section 3.19.6 of the Schedule of Exceptions hereto or as required by law, upon termination of the employment or engagement, as applicable, of any employees, consultant, agent, or contractor no severance or other payments will become due. The Company has no policy, practice, plan or program of paying severance pay or any form of severance compensation in connection with the termination of employment or engagement, as applicable, other than as required by applicable law.

 

3.19.7.                Except as set forth in Section 3.19.7 of the Schedule of Exceptions hereto the Company has not made any representations regarding equity incentives to any officer, employee, director, agent, contractor or consultant that are inconsistent with the share amounts and terms set forth in the minutes of meetings of the Board.

 

 

  

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3.19.8.                Except as set forth in Section 3.19.8 of the Schedule of Exceptions, to the Company’s knowledge, each officer of the Company is currently devoting all of his or her business time to the conduct of the business of the Company and the Company is not aware of any officer, employee, consultant or service provider of the Company planning to dedicate less than all of his or her business time to the conduct of the business of the Company in the future.

 

3.20.           Brokers. No agent, broker, investment banker, person or firm acting in a similar capacity on behalf of or under the authority of the Company is or will be entitled to any broker’s or finder’s fee or any other commission or similar fee, directly or indirectly, on account of any action taken by the Company in connection with any of the transactions contemplated under the Agreement. The Company agrees to indemnify and hold the Investor harmless from and against any claim or liability resulting from any party claiming any such commission or fee, if such claims shall be contrary to the foregoing statement.

 

3.21.           Grants.

 

3.21.1.                Section 3.21.1.1 of the Schedule of Exceptions identifies each Governmental Grant that has been or is provided or available to the Company as of the date of this Agreement. The Company has made available to the Investor accurate and complete copies of (i) all applications, reports, undertakings and related material documents and material correspondence submitted by the Company to any Governmental Entity related to Governmental Grants, and (ii) all certificates of approval and letters of approval (and supplements thereto) granted to the Company by such Governmental Entity related to Governmental Grants, notifications, and any material correspondence with the Company. In each such application submitted on behalf of the Company, the Company has accurately and completely disclosed all information required by such application. Except as set forth in Section 3.21.1.2 of the Schedule of Exceptions, the Company is in compliance, in all material respects, with the terms, conditions, requirements and criteria of all Governmental Grants and has duly fulfilled, in all material respects, all conditions, undertakings and other obligations relating thereto. Except as set forth in Section 3.21.1.2 of the Schedule of Exceptions, to the knowledge of the Company no event has occurred and no circumstance or condition exists, that would reasonably be expected to give rise to or serve as the basis for (i) the annulment, revocation, withdrawal, suspension, cancellation, recapture or modification of any Governmental Grant, (ii) the imposition of any material limitation on any Governmental Grant or any benefit available in connection with any Governmental Grant, or (iii) a requirement that the Company return or refund any benefits provided under any Governmental Grant. Except as set forth in Section 3.21.1.2 of the Schedule of Exceptions, the Company is in compliance with all terms and requirements pertaining to each of the Grants received from the OCS, and the Company is in compliance with Law for the Encouragement of Industrial Research and Development – 1984 and the regulations, guidelines and rules promulgated thereunder. The Company has not transferred, shared or granted any rights in any know-how (as such term is defined in the Israeli Law for the Encouragement of Industrial Research and Development – 1984 and generally understood under Israeli Law) connected with any funds received by the Company from the OCS (“Funded Know-how”), either to Israeli or non-Israeli parties. The Company does not perform any manufacturing outside of Israel by itself, and currently has no plans to perform such manufacturing. The Company has not deposited any Funded Know-how in escrow nor has it pledged any such know-how. The Company has paid in full all royalty obligations with respect to grants received by the Company

 

 

  

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from the OCS, and it has no future royalty obligations with respect to such grants. No Governmental Entity (y) has awarded any participation or provided any support to the Company, or (z) is or may become entitled to receive any royalties or other payments from the Company. No Investment Center program is applicable to the Company. For the purposes herein, (i) “Governmental Entity” means any: (A) nation, principality, state, commonwealth, province, territory, county, municipality, district or other jurisdiction of any nature; (B) federal, state, local, municipal, foreign or other government; (C) governmental or quasi-governmental authority of any nature (including any governmental division, subdivision, department, agency, bureau, branch, office, commission, council, board, instrumentality, officer, official, representative, organization, unit, body or Entity and any court or other tribunal); (D) multi-national organization or body; or (E) individual, Entity or body exercising, or entitled to exercise, any executive, legislative, judicial, administrative, regulatory, police, military or taxing authority or power of any nature, (ii) “Governmental Grant” means any grant, funding, incentive, tax incentive, subsidy, award, participation, exemption, status, cost-sharing arrangement, reimbursement arrangement, credit, offset or other benefit, relief or privilege provided or made available by or on behalf of or under the authority of the OCS, the Investment Center, the State of Israel, the Fund for Encouragement of Marketing Activities of the Israeli Government or any other Governmental Entity, (iii) “Investment Center” means the Investment Center of the Ministry of Industry, Trade and Labor established under the Israel Law for the Encouragement of Capital Investments, 1959, and (iv) “OCS” means the Office of the Chief Scientist at the Israeli Ministry of Economy.

 

3.21.2.                Section 3.21.2 of the Schedule of Exceptions sets forth, with respect to each Governmental Grant referred to in Section 3.21.1 of the Schedule of Exceptions: (i) the total amount of the benefits received by the Company under such Governmental Grant and the total amount of the benefits available for future use by the Company under such Governmental Grant, (ii) the time period in which the Company received benefits under such Governmental Grant, (iii) a general description of any research and development program for which such Governmental Grant was approved, (iv) a description of all current and future payment obligations of the Company under such Governmental Grant (assuming the execution of this Agreement and the Financing would not have occurred), (v) any royalty or other repayment schedule applicable to such Governmental Grant and the total payment or repayment due, (vi) the type of revenues from which royalty or other payments are required to be made under such Governmental Grant, (vii) the total amount of any payments made by the Company prior to the date of this Agreement with respect to such Governmental Grant; and (viii) details of any pending application for a Governmental Grant.

 

3.22.           Insurance. A list of the Company’s insurance policies is set forth in Section 3.22 of the Schedule of Exceptions. The Company has not undertaken any action, or omitted to take any action, which to the knowledge of the Company could render any such insurance policy void or voidable or which could result in a material increase in the premium for any such insurance policy. Since the date marked herein, the Company has maintained (or been covered by) adequate coverage with a financially sound and reputable insurer, covering its properties and business against hazards, risks and liabilities to third entities and property and third party insurance (December 20, 2012), and D&O insurance (August 19, 2010). No claim has been made or is currently intended to be made by the Company under the said insurance policies; said insurance policies are valid and in effect, and the Company has not received any notice regarding

 

 

  

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any intention of cancellation, non-renewal or renewal on materially different terms of said insurance policies, nor do they know of, or have reasonable grounds to know of, any fact which may result in such cancellation, non-renewal or renewal on materially different terms.

 

3.23.           No Insolvency. No insolvency proceeding of any character, including, without limitation, bankruptcy, receivership, reorganization, composition or arrangement with creditors, voluntary or involuntary, affecting the Company or any of its assets or properties, is pending or, to the knowledge of the Company, threatened. The Company has not taken any action in contemplation of, any such insolvency proceedings.

 

3.24.           Business Plan. The Company’s business plan (the “Business Plan”) attached hereto as Schedule 3.24(A) and budget (the “Budget”) attached hereto as Schedule 3.24(B) have been prepared in good faith and with reasonable professional care and consideration by the Company.

 

3.25.           Data Privacy. In connection with its collection, storage, transfer (including, without limitation, any transfer across national borders) and/or use of any personally identifiable information from any individuals, including, without limitation, any customers, prospective customers, employees and/or other third parties (collectively “Personal Information”), to the Company’s knowledge, the Company is and has been in compliance with all applicable laws in all relevant jurisdictions, the Company’s privacy policies and the requirements of any contract or codes of conduct to which the Company is a party. The Company has commercially reasonable physical, technical, organizational and administrative security measures and policies in place to protect all Personal Information collected by it or on its behalf from and against unauthorized access, use and/or disclosure. The Company is and has been in compliance in all material respects with all applicable laws relating to data loss, theft and breach of security notification obligations.

 

3.26.           Full Disclosure. Neither this Agreement (including the schedules attached hereto) nor any certificate made or delivered in connection herewith contains any untrue statement of a material fact or omits to state a material fact necessary to make the statements herein or therein not misleading, in view of the circumstances in which they were made. There is no fact or information relating to the business, condition (financial or otherwise), affairs, operations, or assets of the Company of which the Company is aware and the existence of which has caused or is likely to cause a Material Adverse Effect, that has not been disclosed to the Investor by the Company.

 

3.27.           Effectiveness; Survival; Indemnification.

 

3.27.1.                Each representation and warranty herein is deemed to be made on the date of this Agreement and at the Closing, and shall survive and remain in full force and effect (i) following the Initial Closing until three (3) years from the date of the last Milestone Closing, or (ii) with respect to Sections 3.2 (Share Capital), 3.3 (Ownership of Shares), 3.7 (Authorization; Approvals), 3.12 (Intellectual Property Rights), 3.13 (Taxes), and 3.15 (Litigation/Regulation), until fifteen (15) days after the expiration of the applicable statute of limitation (respectively, the “Expiration Date”). Notwithstanding the aforesaid, any breach by the Company of any of the representations or warranties contained in this Agreement involving fraud or willful misrepresentation shall survive indefinitely.

 

 

  

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3.27.2.                In the event of any breach or misrepresentation of any warranty or representation made by the Company or breach of any covenant made by the Company, subject to the terms of this Section 3.27.2, the Company shall defend and indemnify the Investor and its respective affiliates, officers, directors, stockholders, representatives and agents (collectively, the “Indemnitees”) and hold them harmless from any and all loss, damage (including, without limitation, any decrease in the value of the Shares, Warrant and Warrant Shares), liability and expense (including reasonable legal fees and costs) (collectively, the “Damages”) sustained or incurred by the Indemnitees as a result of or in connection with the said breach or misrepresentation, provided that the parties agree that the Indemnitees shall have no claim or right of action against the Company for any damage or loss incurred as a result of a breach of warranty, misrepresentation or other breach hereof by the Company until the aggregate amount of all such damages and losses is US$50,000, at which time the Indemnitees shall be indemnified for their entire amount of damages, and that, except with respect to fraud or willful misconduct in no event shall an Indemnitee be entitled hereunder to any amount of damages or reimbursement in connection with a breach of warranty or misrepresentation that exceeds in the aggregate the amount invested in the Company hereunder by the Investor plus out of pocket expense and reasonable legal fees expended by the Indemnitees in connection with any claim hereunder. Except with respect to fraud or willful misconduct, in no other case shall the Company be liable to indemnify the Indemnitees for any consequential, special or punitive damages. For purposes of calculating Damages with respect to any breach or breaches by the Company of any of its representations and warranties contained in or made by or pursuant to this Agreement that are qualified by materiality or Material Adverse Effect, all such qualifications shall be disregarded. For purposes of calculating Damages with respect to any breach or breaches by the Company of any of its representations and warranties contained in or made by or pursuant to this Agreement that are qualified by materiality or Material Adverse Effect (including for the purpose of determining whether the basket as per this Section 3.27.2 has been satisfied but not for purposes of determining whether such a breach has occurred), all such qualifications shall be disregarded.

 

3.27.3.                Other than in respect of fraud or willful misconduct by the Company, the remedies set forth in this Section 3.27 shall constitute the exclusive rights and remedies available to the Indemnitees against the Company under this Agreement, and no claim may be made against the Company for a breach of any representation or warranty following its expiration as specified in Section 3.27.1 above, provided that, if any claims for indemnification have been made by the lndemnitees with respect to any breach on or prior to the applicable Expiration Date, such claims shall survive and continue in effect until final resolution of such claims.

 

3.27.4.                An Indemnitee’s right to indemnification under this Section 3.27 based on the breach of any representation or warranty or the failure of any representation or warranty to be true and correct as of the date hereof and the Closing Date or the failure to perform any covenant shall not be diminished or otherwise affected in any way as a result of the existence of such Indemnitee’s knowledge of such breach, untruth or nonperformance as of the date hereof or the Closing Date, regardless of whether such knowledge exists as a result of the Indemnitee’s investigation or as a result of disclosure by the Company (or any other Person). For the purpose of this Agreement, “Person” shall mean any natural person, any unincorporated organization or association, and any partnership, limited liability company, corporation, estate, trust, nominee, custodian or other individual or entity.

 

 

  

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3.27.5.                Promptly after receipt by any Indemnitee of notice of the commencement of any action, proceeding, or investigation by a third party in respect of which indemnity may be sought (a “Claim”), the Indemnitee shall notify the Company. The Company shall promptly assume the defense of the Claim with counsel reasonably satisfactory to such Indemnitee and the fees and expenses of such counsel shall be borne by the Company, provided that the Company will not be entitled to assume the defense of any Claim and the Investor shall be entitled to conduct the defense of any Claim at the sole reasonable cost and expense of the Company if counsel for the Indemnitee reasonably determines that there is a conflict between the positions of the Company and the Investor in conducting the defense of such Claim or that there are legal defenses available to the Investor different from or in addition to those available to the Company. The Indemnitee shall reasonably cooperate with the Company in the defense of any Claim for which the Company assumes the defense, at Company’s cost and expense. At its option and expense, each of the lndemnitees may retain or use separate counsel to represent it, provided that the Company shall maintain control of the defense. The Company shall not be liable for a settlement made by an Indemnitee in any Claim effected without the Company’s consent. The Company shall not enter into any settlement of any Claim unless such settlement includes a general release of an Indemnitee with no payment by the Indemnitee of any consideration, with no affirmative or negative restrictions of any kind on the Indemnitee and with no admission of any liability or wrongdoing of any kind on the part of the Indemnitee.

 

	
4.

	
Representations and Warranties of the Investor

 

The Investor hereby represents and warrants to the Company, that the following is true and correct as of the date hereof and acknowledges that without derogating from the Company’s representation, warranties and covenants pursuant to this Agreement or otherwise, the Company is entering into this Agreement in reliance thereon, as follows:

 

4.1.           Enforceability. The Investor is duly organized and validly existing under the laws of the jurisdiction of its organization or incorporation. This Agreement and the Transaction Documents, when executed and delivered by the Investor, will constitute the valid, binding and enforceable obligations of the Investor.

 

4.2.           Authorization. The execution, delivery and performance of the obligations of the Investor hereunder and under the Transaction Documents have been duly authorized by all necessary corporate action.

 

4.3.           Experience. The Investor confirms that it is an experienced and knowledgeable investor in the securities of companies in the early development stage and is capable of evaluating the risks of its investment in the Company. The Investor represents and warrants that it (i) must be prepared to continue to bear the economic risk of its investment for an indefinite period of time, (ii) has such knowledge and experience in financial or business matters that it is capable of evaluating the merits and risks of the investment in the Preferred Shares, and (iii) has the capacity to protect its own interests. Moreover, the Investor acknowledges that due to the inherent risk involved in such investment, the Investor’s investment may be substantially or totally lost.

 

 

  

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4.4.           Investor Status. The Investor confirms that is an “accredited investor” within the meaning of Rule 501 of Regulation D promulgated under the Securities Act and a non-”U.S. person” within the meaning of Rule 902(k) promulgated under the Securities Act (and the Investor is not purchasing for the account or benefit of a U.S. Person), and at the time of the offer and sale of the Shares and the Warrants the Investor was not located in the United States. The Investor is not required to be registered as a broker-dealer under Section 15 of the Securities Exchange Act of 1934, as amended. The Investor understands and agrees that, until registered under the Securities Act of 1933 or transferred pursuant to the provisions of Rule 144 as promulgated by the Securities and Exchange Commission, all certificates evidencing any of the Shares (or Warrant Shares issuable upon the Exercise of the Warrant), whether upon initial issuance or upon any transfer thereof, shall bear a legend, prominently stamped or printed thereon, reading substantially as follows:

 

“THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933 AS AMENDED, AND MAY NOT BE SOLD OR TRANSFERRED IN THE ABSENCE OF SUCH REGISTRATION OR WITHOUT AN EXEMPTION THEREFROM, IF APPLICABLE. THE SALE OR TRANSFER OF THE SECURITIES REPRESENTED BY THIS CERTIFICATE IS SUBJECT TO THE TERMS AND CONDITIONS OF THE ARTICLES OF ASSOCIATION OF THE COMPANY. COPIES OF THE ARTICLES OF ASSOCIATION MAY BE OBTAINED UPON WRITTEN REQUEST TO THE SECRETARY OF THE COMPANY.”

 

4.5.           Purchase Entirely for Own Account. This Agreement, including the Transaction Documents, is made with the Investor in reliance upon the Investor’s representation to the Company, which by Investor’s execution of this Agreement and the Transaction Documents Investor hereby confirms, that the Shares and Warrant Shares will be acquired for investment for the Investor’s own account, not as a nominee or agent and that the Investor has no present intention of selling, granting any participation in, or otherwise distributing the same.

 

4.6.           No Public Market. The Investor understands that the Shares and Warrant Shares have not been registered under the Securities Act and no public market now exists for any of the securities issued by the Company, and that the Company can make no assurance that a public market will ever exist for the Company’s securities.

 

4.7.           Required Consents. No approval or consent from any person, entity or authority, is required by the Investor for the execution, delivery and performance by it of this Agreement, and any and all agreements and instruments ancillary hereto or thereto.

 

4.8.           No Conflict. The execution and delivery of this Agreement and the Transaction Documents by the Investor will not conflict with, or result in any material breach or violation of any (a) terms, conditions or provisions of applicable law; (b) any judgment, order, injunction, decree or ruling of any court or governmental authority to which the Investor is subject; (c) any agreement, contract, license or commitment to which the Investor is a party or to which the

 

 

  

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Investor is subject and which would materially impair the ability of the Investor to execute, deliver or perform any of the Investor’s obligations pursuant to this Agreement; or (d) Investor’s governing organizational documents.

 

4.9.           Disclosure of Information. The Investor was provided with the opportunity to conduct a due-diligence review and to review all representations and warranties concerning the Company contained in this Agreement and the opportunity to ask questions and receive answers to its satisfaction from Company’s directors and officers regarding Company’s affairs and the terms of the transaction hereunder and all other subjects that it has raised. The aforesaid shall not limit, modify or derogate from the Company’s representations and warranties set forth in Section 3 above or the right of the Investor to rely thereon and shall not derogate from the provisions under Section 3.27.4.

 

4.10.           Brokers. No agent, broker, investment banker, person or firm acting in a similar capacity on behalf of or under the authority of the Investor is or will be entitled to any broker’s or finder’s fee or any other commission or similar fee, directly or indirectly, on account of any action taken by the Investor in connection with any of the transactions contemplated under the Agreement. The Investor agrees to indemnify and hold the Company harmless from and against any claim or liability resulting from any party claiming any such commission or fee, if such claims shall be contrary to the foregoing statement.

 

	
5.

	
Conditions of Initial Closing of the Investor

 

The obligations of the Investor to transfer the Initial Investment Amount at the Initial Closing are subject to the fulfillment at or before the Initial Closing of the following conditions precedent, any one or more of which may be waived in whole or in part by the Investor, which waiver shall be at the sole discretion of the Investor:

 

5.1.           Representations and Warranties. The representations and warranties made by the Company in this Agreement shall have been true and correct when made, and shall be true and correct as of the Initial Closing as if made on the date of the Initial Closing.

 

5.2.           Covenants. All covenants, agreements, and conditions contained in this Agreement to be performed or complied with by the Company prior to the Initial Closing shall have been performed or complied with by the Company prior to or at the Initial Closing.

 

5.3.           Consents, etc. The Company shall have secured all permits, consents and authorizations that shall be necessary or required lawfully to consummate this Agreement and to issue the Initial Closing Shares to the Investor at the Initial Closing.

 

5.4.           Delivery of Documents. All of the documents to be delivered by the Company pursuant to Section 2.3 shall be in the respective form attached to this Agreement, or if no such forms are attached in a form and substance satisfactory to the Investor and its counsel, and shall have been delivered to the Investor.

 

5.5.           Proceedings and Documents. All corporate and other proceedings in connection with the transactions contemplated by this Agreement and all documents and instruments incident to such transactions shall be satisfactory, in form and in substance, to the Investor and its counsel,

 

 

  

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and the Investor and its counsel shall have received all such counterpart originals or certified or other copies of such documents as the Investor or their counsel may reasonably request.

 

	
6.

	
Conditions of Initial Closing of the Company

 

The Company’s obligations at the Initial Closing shall be subject to:

 

6.1.           The Investor causing the transfer to the Company of the Initial Investment Amount for the Initial Closing Shares being issued to it.

 

6.2.           The representations and warranties made by the Investor herein shall have been true and correct in all respects when made and shall be true and correct on the date of the Initial Closing.

 

6.3.           All covenants, agreements and conditions contained in this Agreement to be performed, or complied with, by the Investor prior to the Initial Closing, shall have been performed or complied with by the Investor.

 

6.4.           The Investor shall have executed an undertaking required by the OCS as to the Initial Closing Shares.

 

	
7.

	
Conditions of Milestone Closing of the Investor

 

The obligations of the Investor to transfer the applicable portion of the Milestone Investment Amount at the applicable Milestone Closing are subject to the fulfillment at or before the applicable Milestone Closing of the following conditions precedent, any one or more of which may be waived in whole or in part by the Investor, which waiver shall be at the sole discretion of the Investor:

 

7.1.           No Termination of Clinical Trial. There shall not have occurred the early termination of a clinical trial being conducted by the Company due to concerns in respect of the safety or finding that could reasonably be expected to affect adversely the safety of one of the Company’s products, drug or comparator material (including placebos used in the clinical trial) that is the subject of the clinical trial.

 

7.2.           Covenants. All covenants, agreements, and conditions contained in this Agreement to be performed or complied with by the Company prior to the applicable Milestone Closing, including, without limitation, the Company’s undertaking pursuant to Section 9.9 below (which such undertaking shall only be deemed a covenant of the Company for either of the Milestone Closings and not for the Initial Closing), shall have been performed or complied with by the Company prior to or at the applicable Milestone Closing.

 

7.3.           Consents, etc. The Company shall have secured all permits, consents and authorizations that shall be necessary or required lawfully to consummate this Agreement and to issue the applicable portion of the Milestone Shares to the Investor at the applicable Milestone Closing.

 

 

  

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7.4.           Delivery of Documents. All of the documents to be delivered by the Company pursuant to Section 2.4 shall be in the respective form attached to this Agreement, or if no such forms are attached in a form and substance satisfactory to the Investor and its counsel, and shall have been delivered to the Investor.

 

7.5.           Proceedings and Documents. All corporate and other proceedings in connection with the transactions contemplated by this Agreement and all documents and instruments incident to such transactions shall be satisfactory, in form and in substance, to the Investor and its counsel, and the Investor and its counsel shall have received all such counterpart originals or certified or other copies of such documents as the Investor or their counsel may reasonably request.

 

7.6.           Milestone Events. The applicable Milestone Event set forth in Schedule 1.2(a) shall have occurred no later than the date set forth in Schedule 1.2(a) attached hereto.

 

	
8.

	
Conditions of Milestone Closings of the Company

 

The Company’s obligations at each of the Milestone Closings shall be subject to:

 

8.1.           The Investor causing the transfer to the Company of the applicable portion of the Milestone Investment Amount for the applicable portion of the Milestone Shares being issued to it.

 

8.2.           All covenants, agreements and conditions contained in this Agreement to be performed, or complied with, by the Investor prior to the applicable Milestone Closing, shall have been performed or complied with by the Investor.

 

8.3.           The Investor shall have executed an undertaking required by the OCS as to the Milestone Shares being sold and issued to the Investor at such Milestone Closing.

 

	
9.

	
Affirmative Covenants of the Company

 

9.1.           Use of Proceeds. The Company shall use the Purchase Price to continue the development of the Company’s technology, know-how, sales and marketing programs and to provide general working capital, in accordance with the Budget approved by the Board including one (1) Preferred A Director (provided that such Preferred A Director’s approval shall not unreasonably be withheld), as may be amended by the Board from time to time, subject to provisions set forth in the Amended Articles.

 

9.2.           Observer Rights. On and after the Effective Date and subject to applicable law, until an IPO the Company shall permit one (1) representative designated by the Investor (the “Investor Observer”) to attend, in a non-voting observer capacity, each meeting of the Board of Directors of the Company and each meeting of any committee thereof and to participate in all discussions during each such meeting. The Company shall send to the Investor Observer notice of the time and place of any such meeting, in the same manner and at the same time as notice is sent to its directors. The Company shall also provide to the Investor Observer copies of all notices, reports, minutes, contracts and other documents, at the time and in the same manner as such documents are provided to the Board of Directors of the Company. Any materials furnished to the Investor Observer and the discussions and presentations in connection with or at any 

 

 

  

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meeting shall be considered confidential information and the Investor Observer will keep such materials and discussions confidential and will not disclose or divulge such materials and discussions to any third party. Notwithstanding the foregoing, the Company reserves the right to exclude the Investor Observer from access to any materials or meetings or portions thereof if the Board of Directors shall reasonably determine, upon advice of counsel, that such exclusion is necessary (A) to preserve the attorney-client privilege, or (B) to prevent a conflict of interest.

 

9.3.           Fees. Subject to the execution of this Agreement, the Company will pay the reasonable legal and other fees and expenses of the Investor in the amount of up to thirty-five thousand United States dollars ($35,000), plus value added tax if applicable, to Herzog Fox & Neeman representing the Investor in connection with the transactions contemplated under this Agreement, or any Amendment to this Agreement (the “Investor Expenses”), which such amounts shall be paid directly by Investor to Herzog Fox & Neeman by way of set-off of such amounts from the Initial Investment Amount.

 

9.4.           D&O Insurance. Prior to the second Milestone Closing, the Company shall obtain from financially sound and reputable insurers directors’ and officers’ liability insurance in the amount of at least five million United States dollars (US$5,000,000) (the “D&O Insurance”).

 

9.5.           Run-off Insurance. In the event the Company merges with another entity and is not the surviving corporation, or transfers all of its assets, the Company shall ensure that directors are covered by a run-off insurance policy for a period of seven (7) years following such merger or transfer subject to the applicable insurance company consenting to provide the Company such run-off insurance policy provided that the Company shall use its best efforts to have the applicable insurance company provide the Company such run-off insurance policy on generally standard terms and conditions.

 

9.6.           Proprietary Information and Non-Competition Agreement. The Company will not employ, or continue to employ, or engage, or continue to engage, any person who has access to confidential information with respect to the Company and its operations unless such person has executed an appropriate confidentiality, intellectual property assignment and non-compete agreement.

 

9.7.           Employment Agreements. Following the Initial Closing the Active Key Employees shall devote one hundred percent (100%) of his or her business time to the conduct of the business of the Company and to the best of the Company’s knowledge each of the individuals currently serving as an Active Key Employee intends to continue to devote one hundred percent (100%) of his or her business time to the conduct of the business of the Company for the foreseeable future following the Initial Closing.

 

9.8.           No Public Disclosure. Other than with respect to publishing a prospectus by the Company in connection with a future initial public offering of its securities (in which case, any disclosure would require the prior written approval of the Investor), no party hereto shall publicly announce or disclose the existence of this Agreement or its terms and conditions, or advertise or release any publicity regarding this Agreement or the transactions contemplated hereunder (the “Transaction Terms”), without the prior written consent of the other parties hereto, except that (i) the parties hereto may disclose to third parties any information regarding 

 

 

  

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the Transaction Terms which is known or becomes known to the public in general (other than as a result of a breach of this Section 9.8 by the disclosing party), and (ii) the parties hereto may disclose Transaction Terms to the extent legally required in order to comply with any court order, applicable law or order from regulatory authorities.

 

9.9.           Consulting Agreement. The Company will ensure that the persons (and any entity through which such persons provide services to the Company) indicated in Schedule 9.9-A shall execute an Intellectual Property assignment and confidentiality agreement with the Company (to apply as of the date in which such services were provided to the Company by each such persons, but solely as to such services) substantially in the form attached hereto as Schedule 9.9-B or as reasonably amended by the parties hereto to reflect standard terms and conditions, and the person indicated on Schedule 9.9-B will execute an amendment to his employment agreement, each within thirty (30) days as of the Initial Closing.

 

9.10.           Registration of Shares. The Company shall use its reasonable efforts to (i) file with the SEC a form Fl for the purpose of effecting an initial public offering of its Ordinary Shares (the “QIPO”) following the consummation of which the Company’s shares shall be listed on the NASDAQ or NYSE MKT LLC (AMEX) within five (5) months as of the Initial Closing, (ii) to appoint underwriters for the purpose of effecting the QIPO, and (iii) to consummate the QIPO within eleven (11) months as of the Initial Closing.

 

	
10.

	
Miscellaneous

 

10.1.           Further Assurances. From and after the date of this Agreement, upon the request of the Investor or the Company, the Company and the Investor shall execute and deliver such instruments, documents and other writings as may be reasonably necessary or desirable to confirm and carry out and to effectuate fully the intent and purposes of this Agreement.

 

10.2.           Governing Law; Jurisdiction. This Agreement shall be governed by and construed in accordance with the laws of the State of Israel, excluding that body of law pertaining to conflict of law. The competent courts in Tel Aviv-Jaffa district shall have exclusive jurisdiction over any dispute or claim arising in connection with or as a result of this Agreement.

 

10.3.           Successors and Assigns; Assignment. Except as otherwise expressly provided herein, the provisions hereof shall inure to the benefit of, and be binding upon, the successors, assigns, heirs, executors, and administrators of the parties hereto. None of the rights, privileges, or obligations set forth in, arising under, or created by this Agreement may be assigned or transferred without the prior consent in writing of each party to this Agreement, with the exception of assignments by the Investor to Permitted Transferees (as such term is defined in the Amended Articles) of the Investor; provided, however, that that no such assignment or transfer shall become effective unless each such transferee has provided the Company with a confirmation in writing that it is bound by all terms and conditions of this Agreement as if it were an original party to it.

 

10.4.           Entire Agreement; Amendment and Waiver. This Agreement and the Schedules attached hereto constitute the full and entire understanding and agreement between the parties with regard to the subject matters hereof and thereof. Any term of this Agreement may be 

 

 

  

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amended and the observance of any term hereof may be waived (either prospectively or retroactively and either generally or in a particular instance) only with the written consent of the Company and the Investor.

 

10.5.           Notices, etc. All notices and other communications required or permitted hereunder to be given to a party to this Agreement shall be in writing and shall be faxed, or mailed, postage prepaid, or otherwise delivered by electronic mail, hand or by guaranteed courier, addressed to such party’s address as set forth below or at such other address as the party shall have furnished to each other party in writing in accordance with this provision:

 

if to the Investor:                 Centillion Fund

62 Wilson Street

London, EC2A 2BU

Telephone:+44 (0) 20 7782 0007

Fax: +44 (0) 20 7782 0939

Attn.: Lot Hammink

E-mail: info@Centillion-Fund.com

with a copy (which shall not constitute notice) to:

Herzog Fox & Neeman,

4 Weizmann Street,

Tel-Aviv 6423904, Israel

Attn: Yair Geva, Adv., Yuval Meidar, Adv.

Fax no. +972-3-6966464

Email: gevay@hfn.co.il, meidary@hfn.co.il

	
  

	
if to the Company:

	
Entera Bio Ltd.

Jerusalem Bio Park

PO Box 12117

Jerusalem 91220

Tel: +972-54-535-2683

Attn: Dr. Phillip Schwartz

E-mail: phillip@enterabio.com

with a copy (which shall not constitute notice) to:

Adam M. Klein, Adv.

Goldfarb Seligman & Co.

Electra Tower

98 Yigal Alon Street

Tel Aviv 6789141, Israel

Fax: +972-3-608-9855

or such other address with respect to a party as such party shall notify each other party in writing as above provided. Any notice sent in accordance with this Section 10.5 shall be effective (i) if mailed, seven (7) business days after mailing, (ii) if sent by guaranteed courier, the second day following pick-up by the guaranteed courier, and (iii) if faxed, upon transmission and electronic confirmation of receipt or (if transmitted and received on a non-business day) on the first 

 

 

  

31

  

 

 

business day following transmission and electronic confirmation of receipt. Notices sent by electronic mail shall be deemed received upon confirmation of receipt of such electronic mail message.

 

10.6.           Delays or Omissions. No delay or omission to exercise any right, power, or remedy accruing to any party upon any breach or default under this Agreement shall be deemed a waiver of any other breach or default theretofore or thereafter occurring. Any waiver, permit, consent, or approval of any kind or character on the part of any party of any breach or default under this Agreement, or any waiver on the part of any party of any provisions or conditions of this Agreement, must be in writing and shall be effective only to the extent specifically set forth in such writing. All remedies, either under this Agreement or by law or otherwise afforded to any of the parties, shall be cumulative and not alternative.

 

10.7.           Severability. If any provision of this Agreement is held by a court of competent jurisdiction to be unenforceable under applicable law, then such provision shall be excluded from this Agreement and the remainder of this Agreement shall be interpreted as if such provision were so excluded and shall be enforceable in accordance with its terms; provided, however, that in such event this Agreement shall be interpreted so as to give effect, to the greatest extent consistent with and permitted by applicable law, to the meaning and intention of the excluded provision as determined by such court of competent jurisdiction.

 

10.8.           Counterparts. This Agreement may be executed in any number of counterparts, each of which shall be deemed an original and enforceable against the parties actually executing such counterpart, and all of which together shall constitute one and the same instrument.

 

10.9.           Headings. Article, Section and subsection headings in this Agreement are included herein for convenience of reference only and shall not constitute a part of this Agreement for any other purpose.

 

10.10.           Administration of the Investor. For purposes of determining the availability of any right or the applicability of any limitation under this Agreement, all shares in the Company held by any of the Investor and any Affiliate (as defined in the Amended Articles) of the Investor shall be aggregated.

 

[Remainder of page intentionally left blank.]

 

 

  

32

  

 

 

IN WITNESS WHEREOF the parties have signed this Series A Preferred Share Purchase Agreement as of the date first hereinabove set forth.

 

	
The Company:

 

ENTERA BIO LTD.

	 
	 
	
By:

	
/s/  Phillip Schwartz

	
Name:

	
Dr. Phillip Schwartz

	
Title:

	
CEO

 

 

	
The Investor:

 

CENTILLION FUND

	 
	 
	
By:

	  
	
Name:

	  
	
Title:

	  

 

 

[Signature Page to Entera Bio Ltd. SPA]

 

 

  

33

  

 

 

IN WITNESS WHEREOF the parties have signed this Series A Preferred Share Purchase Agreement as of the date first hereinabove set forth.

 

 

	
The Company:

 

ENTERA BIO LTD.

	 
	 
	
By:

	  
	
Name:

	  
	
Title:

	  

 

 

	
The Investor:

 

CENTILLION FUND

	 
	 
	
By:

	
/s/  Sean Ellis

	
Name:

	
Sean Ellis

	
Title:

	
CIO

 

 

[Signature Page to Entera Bio Ltd. SPA]

 

 

  

34

  

 

 

Schedule 1.2(a)

 

Milestone

 

	
Milestone Event

	
Milestone Last

Date

	
Milestone Investment Amount

	
Milestone Shares

	
The company shall have filed with the SEC a form Fl for the purpose of effecting a QIPO for the purpose that following the consummation of which the Company’s shares shall be listed on the NASDAQ or NYSE MKT LLC (AMEX) and by the initial filing of the form Fl the Company has appointed underwriters for such purpose, the identity of which to be approved by the Investor at its reasonable discretion

	
Five (5) months following the Initial Closing

	
US$2,000,000

	
4,172 Preferred Shares

	
Consummation of the QIPO following which the Company’s shares shall be listed on the NASDAQ or NYSE MKT LLC (AMEX)

	
Eleven (11) months following the Initial Closing

	
US$1,000,000

	
2,086 Preferred Shares

 

  

35

  

 

 

Schedule 1.3

 

Capitalization Table

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

  

 

  

 

 

Exhibit A

 

Form of a Warrant

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

  

 

  

 

 

FORM OF WARRANT

 

THIS WARRANT AND THE APPLICABLE SHARES ISSUABLE UPON EXERCISE THEREOF HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “ACT”), AND MAY NOT BE OFFERED, SOLD OR OTHERWISE TRANSFERRED, PLEDGED OR HYPOTHECATED UNLESS AND UNTIL REGISTERED UNDER THE ACT OR, IN THE OPINION OF COUNSEL SATISFACTORY TO THE ISSUER OF THESE SHARES, SUCH OFFER, SALE OR TRANSFER, PLEDGE OR HYPOTHECATION OTHERWISE COMPLIES WITH THE ACT.

 

ENTERA BIO LTD.

 

WARRANT TO PURCHASE SHARES OF ENTERA BIO

 

For value received and subject to the provisions set forth in this warrant (this “Warrant”), Centillion Fund (“Centillion”) and its assignees are entitled to purchase from Entera Bio Ltd., an Israeli Company (the “Company”):

 

	
Type of Shares:

	
Applicable Shares.

	
Exercise Price:

	
$[  ], subject to adjustment as set forth below.

	
Number of Shares

	
[  ], subject to adjustment as set forth below.

	
Term of Warrant:

	
The earlier to occur of: (i) two (2) years from an IPO (as defined below), or (ii) seven (7) years from the Warrant Date.

	
Warrant Date:

	
[  ], 2014.

 

The number of Shares for which this Warrant is exercisable and the Exercise Price may be adjusted as specified in Section 5.

 

1.           Definitions. As used herein, capitalized terms not otherwise defined herein shall have the meanings set forth in the introductory paragraph of this Warrant or the following meanings:

 

a.     “Applicable Shares” means (i) prior to the Company’s initial public offering pursuant to a registration statement filed with the Securities and Exchange Commission under the Act pursuant to which the Company’s Ordinary Shares shall be listed for trading on the NASDAQ or AMEX (an “IPO”), the Company’s Series A Preferred Shares, (ii) after the conversion of all of the outstanding shares of such series of preferred shares into Ordinary Shares, either automatically or by vote of the requisite holders thereof, the Company’s Ordinary Shares, and (iii) upon any conversion, exchange, reclassification or change, any security into which the shares described in clauses (i) or (ii) of this definition may be converted, exchanged, reclassified or otherwise changed.

 

b.     “Change of Control” shall mean any (i) acquisition of the Company by another entity by means of any transaction or series of related transactions (including, without limitation, any 

 

 

  

 

  

 

 

share acquisition, reorganization, merger or consolidation) other than a transaction or series of transactions in which the holders of the voting shares of the Company outstanding immediately prior to such transaction continue to retain (either by such voting shares remaining outstanding or by such voting shares being converted into voting shares of the surviving entity), as a result of shares in the Company held by such holders prior to such transactions, in substantially the same proportions, at least fifty percent (50%) of the total voting power represented by the voting shares of the Company or such surviving entity outstanding immediately after such transaction or series of transactions, or (ii) sale, lease or other conveyance of all substantially all of the assets of the Company.

 

c.     “Ordinary Shares” means the Ordinary Shares of the Company, each having a nominal value of NIS 0.01.

 

d.     “Exercise Price” means the exercise price per share of Applicable Shares specified in the introductory paragraph of this Warrant.

 

e.     “Holder” means the initial holder of this Warrant set forth in the first paragraph of this Warrant and any other person or entity which becomes a holder of this Warrant pursuant to the terms of this Warrant.

 

f.     “Shares” means the Applicable Shares of Company issuable upon exercise of this Warrant.

 

g.     “Warrant Date” means the date of this Warrant specified in the introductory paragraph of this Warrant.

 

2.           Term. The right to purchase Applicable Shares upon exercise hereof is exercisable at any time and from time to time from the Warrant Date until the end of the Term of Warrant specified in the introductory paragraph of this Warrant.

 

3.           Payment and Exercise. The purchase right represented by this Warrant may be exercised by the Holder, in whole or in part and from time to time, at the election of the Holder, by the surrender of this Warrant (with the notice of exercise substantially in the form attached hereto as Exhibit A duly completed and executed) at the principal office of the Company and by the payment to the Company, by check, or by wire transfer to an account designated by the Company of an amount equal to the then applicable Exercise Price multiplied by the number of Shares then being purchased.

 

The person or persons in whose name(s) any certificate(s) representing Applicable Shares shall be issuable upon exercise of this Warrant shall be deemed to have become the holder(s) of record of, and shall be treated for all purposes as the record holder(s) of, the Shares represented thereby (and such Shares shall be deemed to have been issued) immediately prior to the close of business on the date or dates upon which this Warrant is exercised. In the event of any exercise of the rights represented by this Warrant, certificates for the Shares so purchased shall be delivered to the Holder as soon as possible and in any event within thirty (30) days after such exercise and, unless this Warrant has been fully exercised or expired, a new Warrant representing the portion of the Shares, if any, with respect to which this Warrant shall not then have been exercised shall also be issued to the Holder as soon as possible and in any event within such 

 

 

  

 

  

 

 

thirty-day period; provided, however, that at such time as the Company is subject to the reporting requirements of the Securities Exchange Act of 1934, as amended, if requested in writing by the Holder, the Company shall cause its transfer agent to deliver the certificate representing Shares issued upon exercise of this Warrant to a broker or other person (as directed by the Holder exercising this Warrant) within the time period required to settle any trade made by the Holder after exercise of this Warrant.

 

4.           Shares Fully Paid; Reservation of Shares. All Shares that may be issued upon the exercise of the rights represented by this Warrant will, upon issuance pursuant to the terms and conditions herein, be fully paid and nonassessable, and free from all preemptive rights and taxes, liens and charges with respect to the issuance thereof. During the period within which the rights represented by this Warrant may be exercised, the Company will at all times have authorized, and reserved for the purpose of the issue upon exercise of the purchase rights evidenced by this Warrant, a sufficient number of Applicable Shares to provide for the exercise of the rights represented by this Warrant and, while the Applicable Shares is convertible preferred shares, a sufficient number of Ordinary Shares to provide for the conversion of the Applicable Shares into Ordinary Shares.

 

5.           Adjustment of Exercise Price and Number of Shares. The number and kind of shares purchasable upon the exercise of this Warrant and the Exercise Price shall be subject to adjustment from time to time upon the occurrence of certain events, as follows:

 

a.           Change of Control. In case of any Change of Control, the Company, or such successor or purchasing corporation, as the case may be, shall make appropriate provision, so that the Holder shall receive upon exercise of this Warrant at a total purchase price not to exceed that payable upon the exercise of the unexercised portion of this Warrant, and in lieu of the Applicable Shares theretofore issuable upon exercise of this Warrant, the kind and amount of shares, other securities, money and property receivable upon such Change of Control by a holder of the number of Applicable Shares then purchasable under this Warrant.

 

b.           Reclassifications or Reorganizations. In case of any reclassification, capitalization reorganization or change of securities of the class issuable upon exercise of this Warrant (other than a change in par value, or from par value to no par value, or from no par value to par value, or as a result of a subdivision or combination), the Company shall duly execute and deliver to the Holder a new Warrant (in a form substantially similar to this Warrant), or the Company shall make appropriate provision without the issuance of a new Warrant, so that the Holder shall have the right to receive upon exercise of this Warrant, at a total purchase price not to exceed that payable upon the exercise of the unexercised portion of this Warrant, and in lieu of the Applicable Shares theretofore issuable upon exercise of this Warrant, the kind and amount of shares, other securities, and property receivable upon such reclassification, reorganization or change by a holder of the number of Applicable Shares then purchasable under this Warrant. The provisions of this Section Sb shall similarly apply to successive reclassifications, reorganizations and changes.

 

c.           Subdivision, Shares Dividend or Combination of Shares. If the Company at any time while this Warrant remains outstanding and unexpired shall subdivide, distribute a dividend payable in Applicable Shares or combine its outstanding Applicable Shares, the Exercise Price 

 

 

  

 

  

 

 

shall be proportionately decreased and the number of Shares issuable hereunder shall be proportionately increased in the case of a subdivision or a share dividend and the Exercise Price shall be proportionately increased and the number of Shares issuable hereunder shall be proportionately decreased in the case of a combination.

 

d.           Adjustment of Number of Shares. Upon each adjustment in the Exercise Price, the number of Applicable Shares purchasable hereunder shall be adjusted, to the nearest whole share, to the product obtained by multiplying the number of Shares purchasable immediately prior to such adjustment in the Exercise Price by a fraction, the numerator of which shall be the Exercise Price immediately prior to such adjustment and the denominator of which shall be the Exercise Price immediately thereafter.

 

e.           Antidilution Rights. The other antidilution rights applicable to the Applicable Shares purchasable hereunder, if any, are set forth in the Company’s Amended and Restated Articles of Incorporation, as amended through the Warrant Date, a true and complete copy of which is attached hereto as Exhibit B (the “Charter”). The Company shall promptly provide the Holder with any restatement, amendment, modification or waiver of the Charter promptly after the same has been made.

 

6.           Notice of Adjustments. Whenever the Exercise Price or the number of Shares purchasable hereunder shall be adjusted pursuant to Section 5 hereof, the Company shall make a certificate signed by its chief financial officer setting forth, in reasonable detail, the event requiring the adjustment, the amount of the adjustment, the method by which such adjustment was calculated, and the Exercise Price and the number of Shares purchasable hereunder after giving effect to such adjustment, and shall cause copies of such certificate to be delivered to the Holder. In addition, whenever the conversion price or conversion ratio of the Applicable Shares shall be adjusted, the Company shall make a certificate signed by its chief financial officer setting forth, in reasonable detail, the event requiring the adjustment, the amount of the adjustment, the method by which such adjustment was calculated, and the conversion price or ratio of the Applicable Shares after giving effect to such adjustment, and shall cause copies of such certificate to be delivered to the Holder.

 

7.           Fractional Shares. No fractional Applicable Shares will be issued in connection with any exercise hereunder, but in lieu of such fractional shares the Company shall round up or down to the nearest whole number of shares (in the event any such fraction is equal to one-half (1/2), the Company shall round up to the nearest whole number) and issue such whole number of Shares.

 

8.           Rights as Shareholders; Information. Without derogating Section 5 above, no Holder, as a holder of this Warrant, shall be entitled to vote or receive dividends or be deemed the holder of Applicable Shares or any other securities of the Company which may at any time be issuable upon the exercise hereof for any purpose, nor shall anything contained herein be construed to confer upon the Holder, as such, any of the rights of a shareholder of the Company or any right to vote for the election of directors or upon any matter submitted to shareholders at any meeting thereof, or to receive dividends or subscription rights or otherwise until this Warrant shall have been exercised and the Shares purchasable upon the exercise hereof shall have become deliverable, as provided herein. Notwithstanding the foregoing, the Company will transmit to the 

 

 

  

 

  

 

 

Holder such information, documents and reports as are generally distributed to the holders of any class or series of the securities of the Company concurrently with the distribution thereof to the holders of the Applicable Shares except if such information, documents and reports are otherwise publicly filed or made publicly available by the Company.

 

9.           Notice Rights.

 

a.           Change of Control Transactions. The Company shall provide the Holder with at least fourteen (14) days’ written notice prior to the consummation of a Change of Control.

 

b.           Dividends and Repurchases. The Company shall provide the Holder with at least fourteen (14) days written notice prior to the record date of any cash dividend with respect to or offer to repurchase the Applicable Shares.

 

c.           Liquidation. The Company shall provide the Holder with at least fourteen (14) days written notice prior to any voluntary or involuntary dissolutions, liquidation or winding-up of the Company.

 

10.           Representations and Warranties. The Company represents and warrants to the Holder as follows:

 

a.           This Warrant has been duly authorized and executed by the Company and is a valid and binding obligation of the Company enforceable in accordance with its terms.

 

b.           The Shares have been duly authorized and reserved for issuance by the Company and, when issued in accordance with the terms hereof, will be validly issued, fully paid and nonassessable and free from preemptive rights.

 

c.           The rights, preferences, privileges and restrictions granted to or imposed upon the Applicable Shares and the holders thereof are as set forth in the Charter, and on the Warrant Date, each share of the Applicable Shares represented by this Warrant is convertible into one share of Ordinary Shares.

 

d.           The Ordinary Shares issuable upon conversion of the Shares have been duly authorized and reserved for issuance by the Company and, when issued in accordance with the terms of the Charter will be validly issued, fully paid and nonassessable.

 

e.           The execution and delivery of this Warrant are not, and the issuance of the Shares upon exercise of this Warrant in accordance with the terms hereof will not be, inconsistent with the Company’s Charter, do not and will not contravene any law, governmental rule or regulation, judgment or order applicable to the Company, and do not and will not conflict with or contravene any provision of, or constitute a default under, any indenture, mortgage, contract or other instrument of which the Company is a party or by which it is bound or require the consent or approval of, the giving of notice to, the registration or filing with or the taking of any action in respect of or by, any government authority or agency or other person, except for the filing of notices pursuant to applicable securities laws, which filings will be effected by the time required thereby.

 

 

  

 

  

 

 

11.           Restrictions on Transfer. By acceptance of this Warrant, the Holder hereby agrees that (i) until the consummation of an IPO the Holder will not sell, offer for sale, pledge, hypothecate or otherwise transfer (“Transfer”) this Warrant except to a Permitted Transferee (as such term is defined in Article 19 of the Company’s Third Amended and Restated Articles of Association) and (ii) upon and following the consummation of an IPO, absent an effective registration statement filed with the Securities and Exchange Commission under the Act covering the disposition or sale of this Warrant or the Shares issued or issuable upon exercise hereof, as the case may be, and registration or qualification under applicable state securities laws, the Holder will not Transfer any or all this Warrant or the Shares, as the case may be, unless such transfer is exempt from the registration requirements of the Act and any applicable state securities laws, and in such event the Company may require an opinion of counsel, in form and substance reasonably satisfactory to the Company, to the effect that such registration is not required in connection with such transfer. In the event of any Transfer in compliance with the terms and conditions of this Section 11, the Holder may Transfer this Warrant, in whole or in part, upon surrender of this Warrant properly endorsed and delivery of a Form of Assignment in substantially the form attached hereto as Exhibit C duly executed by the Holder and upon payment of any necessary transfer tax or other governmental charge imposed upon such transfer, if any.

 

12.           Compliance with Securities Laws. By acceptance of this Warrant, the Holder hereby represents, warrants and covenants that any securities purchased upon exercise of this Warrant or acquired upon conversion thereof shall be acquired for investment only and not with a view to, or for sale in connection with, any distribution thereof; that the Holder has had such opportunity as the Holder has deemed adequate to obtain from representatives of the Company such information as is necessary to permit the Holder to evaluate the merits and risks of its investment in the Company; that the Holder is able to bear the economic risk of holding the Shares for an indefinite period; that the Holder understands that the Shares will not be registered under the Act (unless otherwise required pursuant to exercise by the Holder of the registration rights, if any, granted to the Holder) and will be “restricted securities” within the meaning of Rule 144 promulgated under the Act; and that all stock certificates representing Shares may have affixed thereto a legend substantially in the following form:

 

THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “ACT”) OR ANY STATE SECURITIES LAWS, AND MAY NOT BE SOLD, OFFERED FOR SALE, PLEDGED, HYPOTHECATED OR OTHERWISE TRANSFERRED WITHOUT AN EFFECTIVE REGISTRATION STATEMENT UNDER THE ACT OR UNLESS SUCH TRANSFER IS EXEMPT FROM THE REGISTRATION REQUIREMENTS OF THE ACT AND ANY APPLICABLE STATE SECURITIES LAWS. THE COMPANY MAY REQUIRE AN OPINION OF COUNSEL, IN FORM AND SUBSTANCE REASONABLY SATISFACTORY TO THE COMPANY, TO THE EFFECT THAT REGISTRATION IS NOT REQUIRED IN CONNECTION WITH SUCH TRANSFER.

 

 

  

 

  

 

 

13.           Modification and Waiver. This Warrant and any provision hereof may be changed, waived, discharged or terminated only by an instrument in writing signed by the party against which enforcement of the same is sought.

 

14.           Notices. Any notice, request, communication or other document required or permitted to be given or delivered to the Holder or the Company shall be delivered, or shall be sent by certified or registered mail, postage prepaid, overnight courier or facsimile (with return receipt requested) or delivered personally to the Holder at its address as shown on the books of the Company or to the Company at the address indicated therefor on the signature page of this Warrant.

 

15.           Binding Effect on Successors. This Warrant shall be binding upon any corporation succeeding the Company by merger, consolidation or acquisition of all or substantially all of the Company’s assets, and all of the obligations of the Company relating to the Applicable Shares issuable upon the exercise or conversion of this Warrant shall survive the exercise, conversion and termination of this Warrant and all of the covenants and agreements of the Company shall inure to the benefit of the successors and assigns of the Holder.

 

16.           Lost Warrants or Stock Certificates. The Company covenants to the Holder that, upon receipt of evidence reasonably satisfactory to the Company of the loss, theft, destruction or mutilation of this Warrant or any share certificate and, in the case of any such loss, theft or destruction, upon receipt of an indemnity reasonably satisfactory to the Company, or in the case of any such mutilation upon surrender and cancellation of such Warrant or share certificate, the Company will make and deliver a new Warrant or share certificate, of like tenor, in lieu of the lost, stolen, destroyed or mutilated Warrant or shares certificate.

 

17.           Descriptive Headings. The descriptive headings of the various Sections of this Warrant are inserted for convenience only and do not constitute a part of this Warrant. The language in this Warrant shall be construed as to its fair meaning without regard to which party drafted this Warrant.

 

18.           Governing Law. This Warrant shall be construed and enforced in accordance with, and the rights of the parties shall be governed by, the laws of the State of Israel.

 

19.           Survival of Representations. Warranties and Agreements. All representations and warranties of the Company and the Holder contained herein shall survive the Warrant Date, the exercise or conversion of this Warrant (or any part hereof) or the termination or expiration of rights hereunder. All agreements of the Company and the Holder contained herein shall survive indefinitely until, by their respective terms, they are no longer operative.

 

20.           Remedies. In case any one or more of the covenants and agreements contained in this Warrant shall have been breached, the Holder (in the case of a breach by the Company), or the Company (in the case of a breach by the Holder), may proceed to protect and enforce their or its rights either by suit in equity and/or by action at law, including, but not limited to, an action for damages as a result of any such breach and/or an action for specific performance of any such covenant or agreement contained in this Warrant.

 

 

  

 

  

 

 

21.           No Impairment of Rights. The Company will not, by amendment of its Charter or through any other means, avoid or seek to avoid the observance or performance of any of the terms of this Warrant, but will at all times in good faith assist in the carrying out of all such terms and in the taking of all such action as may be necessary or appropriate in order to protect the rights of the Holder against impairment.

 

22.           Severability. The invalidity or unenforceability of any provision of this Warrant in any jurisdiction shall not affect the validity or enforceability of such provision in any other jurisdiction, or affect any other provision of this Warrant, which shall remain in full force and effect.

 

23.           Entire Agreement; Modification. This Warrant constitutes the entire agreement between the parties pertaining to the subject matter contained in it and supersedes all prior and contemporaneous agreements, representations, and undertakings of the parties, whether oral or written, with respect to such subject matter.

 

[Signature Page Follows]

 

 

  

 

  

 

 

The Company has caused this Warrant to be duly executed and delivered as of the Warrant Date specified above.

 

 

	
ENTERA BIO LTD.

	  
	 
	 
	
Name:

	
Title:

	  
	
Address for Notices:

	  
	
Entera Bio Ltd.

Jerusalem Bio Park

PO Box 12117

Jerusalem 91220

Tel: +972-54-535-2683

Attn: Dr. Phillip Schwartz

	  
	
with a copy (which shall not constitute notice) to:

	  
	
Adam M. Klein, Adv.

Goldfarb Seligman & Co.

Electra Tower

98 Yigal Alon Street

Tel Aviv 6789141, Israel

Fax: +972-3-608-9855

 

  

 

  

 

EXHIBIT A

 

NOTICE OF EXERCISE

 

To: Entera Bio Ltd. (the “Company”)

 

1. The undersigned hereby elects to purchase ________ shares of [Applicable Shares] [Ordinary Shares] of the Company pursuant to the terms of the attached Warrant, and tenders herewith payment of the purchase price of such shares in full.

 

2. Please issue a certificate or certificates representing ________ shares in the name of the undersigned:

 

	  	  	  
	  	
(Name)

	  
	  	  	  
	 	 	 
	  	  	  
	  	
(Address)

	  

 

3. The undersigned confirms that the representations and warranties of the undersigned set forth in Sections 4.4 and 4.5 of the Series A Preferred Share Purchase Agreement by and between the Company and the Holder are true and correct as of the date hereof.

 

	 	 
	(Signature)	 

 

 

 

_________________

(Date)

 

  

 

  

 

 

EXHIBIT B

 

CHARTER

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

  

 

  

 

 

EXHIBIT C

 

FORM OF ASSIGNMENT

 

(To be executed only upon assignment of Warrant)

 

To: Entera Bio Ltd.                                                                            Warrant No. ____

 

FOR VALUE RECEIVED, the undersigned hereby sells, assigns and transfers unto _____________________ the attached Warrant, together with all right, title and interest therein, and does hereby irrevocably constitute and appoint ___________________ attorney, to transfer said Warrant on the books of the within-named Company with respect to the number of Shares set forth below, with full power of substitution in the premises:

 

	
Name(s) of Assignee(s)

	
Address

	
Number of Shares

	  	  	  
	  	  	  
	  	  	  
	  	  	  

 

If the number of shares specified to be transferred in this Form of Assignment shall not be all of the Shares purchasable under the Warrant, please issue a new Warrant in the name of the undersigned for the balance remaining of the Shares purchasable thereunder.

 

	
CENTILLION FUND

	 
	 
	
By:

	  
	  
	  
	
Printed Name

	  
	  
	
Title

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