Document:

Exhibit 10.4

 

CERTAIN IDENTIFIED INFORMATION HAS BEEN EXCLUDED FROM THIS EXHIBIT
BECAUSE IT IS BOTH (i) NOT MATERIAL AND (ii) WOULD LIKELY CAUSE COMPETITIVE HARM TO WEARABLE DEVICES LTD. IF PUBLICLY DISCLOSED. OMISSIONS
ARE DENOTED IN BRACKETS THROUGHOUT THIS EXHIBIT.

 

Wearable Devices Ltd.

Number with Registrar of Companies: 515056117

(hereinafter: the “Company”)

 

Date: July 16, 2020

 

	To	Company: 9397

 

Israel Innovation Authority

 

		Re:	Letter of Undertaking and Notice
on the Implementation of an Approved Program

 

		1.	We are executing this letter of
undertaking and notice on the implementation of an approved program (hereinafter: the “Letter of Undertaking”) with
respect to the approval of the committee that is responsible for operating the track (hereinafter: the “Research Committee”)
that is attached1 to the Letter of Undertaking as Exhibit A granted on 1 May 2020, with respect to an approved
program the details of which are as set forth in this section below (hereinafter: the “Approved Program”):

 

The subject of the Approved Program: A snc-based human-machine
interface for communication with wearable devices

 

The Israel Innovation Authority’s benefit track where
the file was approved: Benefit track no. 1 – R&D Fund (hereinafter: the “Track”), attached hereto as Exhibit
B.

 

File number in the Israel Innovation Authority’s system:
71327

 

		2.	We hereby inform you that we have
commenced the implementation of the Approved Program pursuant to the approval the Research Committee granted us.

 

		3.	We declare and undertake to fulfill
all of provisions of the Track, the Research, Development and Technological Innovation in Industry Encouragement Law, 5744-1984 (hereinafter:
the “Innovation Law”), the rules and procedures set forth thereunder, and the approval of the Research Committee,
including:

 

		a.	The obligation not to transfer
to anyone the information, rights thereon and production rights to derive form the research and development, without the Research Committee’s
approval.

 

		b.	To pay royalties and to submit
all reports pursuant to the provisions of law and of the Track, and pursuant to the procedures and rules set forth thereunder.

 

	 	1.	A.D.

 

	 	2.	_____________

 

	3.      _____________	_____________

 

	Signature with initials	Company stamp

 

     

     

    

 

	 	c.	We agree to attribute this file with the number:71327to program 51481

 

on the subject: sEMG-based human-machine interface for
communication with wearable devices.

 

	 	4.	We declare that we have read all the procedures for financial reporting for R&D purposes, and that we shall act pursuant thereto, including with respect to the subject of a computerized system for reporting hours when allocating tasks.

 

	 	5.	Additional undertakings:

 

Royalties are to be paid for the Company’s entire
revenue.

 

	 	6.	We hereby declare that we are conducting separate and special account/s as part of the financial accounting for purpose of implementing the Approved Program. The records therein are directly chronological, original, methodical and only pursuant to documentation.

 

	 	7.	We hereby declare that we are aware of the fact that the grant under discussion is to be paid subject to the terms of the approval, the provisions of the Track, the Innovation Law and the rules and procedures set forth thereunder.

 

	 	8.	The attached budget2 (Exhibit C) including all of its details, terms and schedules constitutes a binding framework. Costs that deviate from this detailed framework shall not be recognized, except with the prior and written approval of the Israel Innovation Authority.

 

	 	9.	We undertake to fulfill the following provisions:

 

	 	a.	The company shall be entitled to an advance pursuant to the Israel Innovation Authority’s procedures and the terms set forth in the Research Committee’s approval, provided the program’s implementation really commenced. The advance shall be set off from payments due under the financial statements, except for payment for current tax advances.

 

	 	b.	Any additional payment shall be made pursuant to a detailed financial report that complies with the Israel Innovation Authority’s procedures. The payment shall be made after an examination of such report. The receiver of the grant must submit a financial report once every 3 months, and a technical report at least once every 6 months, on forms of the Israel Innovation Authority or in their format.

 

	 	c.	The accuracy of the financial report shall be confirmed by a competent representative of the Company, and attached to it there shall be documents that attest to actual payment to the subcontractors, if such costs were reported.

 

    2

     

    

 

	 	d.	Any payment for the approved grant shall only be calculated retroactively, until the approval of the final report. Until the final report no more than 90% (including the current advance payment) shall be paid from the budgeted grant or for the cost in the financial report, the lower thereof. The balance shall only be paid after receiving a final financial report and a final technical report including CPA confirmation on behalf of the Company.

 

The payment shall be made after an examination of the reports
by the Israel Innovation Authority, or anyone on its behalf.

 

	 	e.	The Company’s books, including the Company’s balance sheets, shall be open for examination on behalf of the Israel Innovation Authority for 7 years from the implementation of the Approved Program, or 6 years from the submission of the final financial report, according to the later date.

 

	 	f.	The Israel Innovation Authority shall have a right to set off any amount it is due from the Company, from the grant that is hereby approved.

 

	 	g.	The company shall not be entitled to terminate the implementation of the Approved Program, except with the written approval of the Israel Innovation Authority. Should the program be terminated without approval, the Israel Innovation Authority shall be entitled to demand the grant to be returned, plus interest and linkage in accordance with law.

 

	 	h.	The Company shall be required to submit a final financial report that is confirmed by an accountant on its behalf, in form acceptable to the Israel Innovation Authority, and a final technical report for the Approved Program, no later than 3 months from the date the Approved Plan is completed.

 

	 	i.	The Israel Innovation Authority is entitled to at all times demand additional technical reports.

 

	 	j.	No cost shall be recognized unless the consideration therefore was paid, except for overhead in the salary section.

 

	 	k.	The final financial report shall recognize costs that accumulated during the R&D period that was approved and which were paid no later than 60 days from its end.

 

	 	l.	The Israel Innovation Authority is entitled to demand interest and linkage differentials in accordance with law for any amount due to it from the receiver of the grant.

 

	 	10.	We are aware of the fact that the various terms in this Letter of Undertaking do not detract from any provisions of the Innovation Law and of the Track and from any law applicable to the provision of the grant for the Approved Program.

 

    3

     

    

 

	11.	We hereby undertake to observe the intellectual property laws as they shall be introduced from time to time in the State of Israel. We are aware of, and we agree to the fact that should we be convicted of an offense under the intellectual property laws, the Israel Innovation Authority shall be entitled to retroactively revoke any benefit that we received from you, including any grant, loan, benefit or other financial gain, or part of such benefit, and to demand from us to return such in addition to interest and linkage differentials in accordance with law.

 

Signature Confirmation for a Corporation:

 

I, the undersigned, Einat Ashkenazy, Adv./CPA,
hereby confirm that Wearable Devices Ltd. is duly registered in Israel; that Messrs. Asher Dahan who signed this Agreement in its name,
signed it in my presence, and they are authorized to do so on its behalf; and that their signature on this Agreement binds the corporation.

 

	 	July 16, 2020	 	/s/ Asher Dahan	 
	 	Date	 	Signature and Stamp	 

 

    4

     

    

 

Exhibit A

 

Approval of Research Committee

 

[**]

 

    A-1

     

    

 

National Authority for Technological Innovation

 

	
     

     

    To

    Wearable Devices Ltd.

    202 HaTa’asiya

    Yokne’am Illit 0
	 	
    Jerusalem, 20 July 2020

    Approval Letter: 71327

    (Budget Regulation: 38300224)

    Group: 17

    Merkava Request: 1001332688

    Supplier no: 41054659

 

Approval Letter

 

	1.	We hereby inform you that the research committee in its meeting of 10 June 2020 decided to approve
the program as submitted by you on 7 May 2020, concerning:

 

		a.	The benefit track of the National Authority for Technological Innovation (hereinafter: the “Authority”)
where the request was submitted:

 

Benefit track
no. 1 – R&D Fund (hereinafter the “Track”)

 

		b.	Subject of the approved program: snc-based human-machine interface for communication with wearable
devices

 

		c.	Operator of the approved program: Wearable Devices Ltd. 

 

Registration no:
515056117

 

(hereinafter –
“Approved Program”)

 

2.

 

		a.	The research and development costs that were approved for implementing the Approved Program shall be in
an amount of up to: ILS 4,221,459

 

In words: four
million two hundred and twenty-one thousand four hundred and fifty-nine shekels

 

		b.	The approved grant rate is 50% of the development costs (the grant includes an addition for a national
priority zone (area/settlement around the Gaza strip) of up to: ILS 2,110,730

 

In words: two
million one hundred and ten thousand seven hundred and thirty shekels

  

	3.	The approval is stipulated on the fulfillment of the provisions of the Track and of the Research, Development
and Technological Innovation in Industry Encouragement Law, 5744-1984 (hereinafter: the “Innovation Law”), the rules and procedures
set forth thereunder, and subject to the following conditions:

 

		a.	The Approved Program shall be implemented as set forth in your request within a 12 month period –
from 1 May 2020 until 30 April 2021 (hereinafter the “Performance Period”).

 

Page 1 (continued
on Page 2)

 

    A-2

     

    

 

National Authority
for Technological Innovation

 

Jerusalem, 20 July 2020

Approval Letter: 71327

 (Budget Regulation: 38300224)

 Group: 17

  Merkava Request:
1001332688

Supplier no: 41054659

 

		b.	The company and controlling shareholder or interested party (under such meaning in the Securities Law,
5728-1968) of the company, as applicable, must submit a report to the research committee, on the dates set forth and published on the
Authority’s website, of any: (1) changes to the company’s control; (2) changes to the holdings of the company’s means
of control that turns a person who is not an Israeli citizen or resident or a company that is not an Israeli corporation to a direct interested
party of the company; upon such report the interested party shall execute a letter of undertaking in form to be published on the Authority’s
website; in this respect, “holding” or “means of control” – as defined in the Securities Law, 5728-1968.

 

		c.	Additional terms:

 

Royalties are
to be paid for all of the company’s revenues.

 

		d.	See the schedule on the subject of intellectual property.

 

		e.	In the event the company’s assets are charged in favor of an Israeli bank against credit, the company
must ensure that the charge shall be subject to the provisions of the Track and the Innovation Law, and the rules and procedures enacted
thereunder.

 

		f.	Should the program be related to an agreement with an academic institution or academic commercialization
company, the company must ensure that the agreement is subject to the provisions of the Track and Innovation Law, and the rules and procedures
set forth thereunder.

 

Electronically signed by:

Aharon Aharon, on: 20 July 2020, 11:09:45 

 

		Sincerely,
	 	 
	 	/s/ Aharon Aharon
	 	Aharon Aharon
	 	Director General of the Innovation Authority

 

		Attached:	

  

	1.	Details of the budgets of the schedule to the approval letter

 

	2.	Letter of undertaking

 

	3.	Rules set forth by the research committee for executing the
provisions of the Track and Innovation Law, and the rules and procedures set forth thereunder

 

	4.	Intellectual property schedule to the approval letter

 

Page 2 (Last Page)

 

    A-3

     

    

 

Exhibit B

 

Benefit Track No. 1 –
R&D Fund

 

		1.	General

 

		1.1.	The Israel Innovation Authority (hereinafter: the “Innovation Authority” or “Authority”)
directly or indirectly assists and incentivizes the promotion of industrial technological innovation in Israel through a variety of tracks,
tools and actions that it takes.

 

		1.2.	The purpose of Benefit Track No. 1 – R&D Fund (hereinafter: the “Benefit Track”)
is to support research and development programs of industrial corporations, by providing grants for such research and development programs.

 

		2.	Definitions

 

In this Benefit Track,
the following terms shall be designated the definition appearing in this section, except if defined otherwise in the Innovation Law or
in the Benefit Track itself. A term that was not explicitly defined in this Benefit Track shall be given the meaning pursuant to the Innovation
Law.

 

		2.1.	“Application”

 

Application to receive
a benefit during a certain period in the framework of a program.

 

		2.2.	“Government Entity”

 

A government
ministry or corporation established pursuant to law.

 

		2.3.	“Research and Development Costs”

 

Costs spent when
performing research and development pursuant to an Approved Program, with respect to which the Research Committee in the Benefit Track
procedures determined that they can be taken into account pursuant to terms set forth in this track.

 

		2.4.	“Research Committee” or “Committee”

 

Under its meaning
in section 3 below.

 

		2.5.	“Innovation Law”

 

The Encouragement
of Research, Development and Industrial Technological Innovation Law, 5744-1984.

 

    B-1

     

    

 

 

 

		2.6.	“entrepreneur from a group with preferential financing terms”

 

An individual who
formulated the idea at the basis of the program subject of the Application and who meets the following conditions:

 

		a.	They are all Israeli residents.

 

		b.	They are all part of, and declared when submitting the Application that they are part of, at least one
group with preferential financing terms.

 

		c.	When dealing with an individual – he/she is a full-time employee of the Applicant.

 

		d.	When dealing with an individual from a group with preferential financing terms for women (section 2.12(a)
below) – she must be employed full-time at the Applicant in the role of CEO and/or CTO.

 

		e.	When dealing with a few entrepreneurs – at least one of them is employed in the role of CEO and/or
CTO of the Applicant, and they are all employed full time at the Applicant or, subject to the Committee’s approval, less than full
time.

 

		2.7.	“Applicant” or “Submitter of the Application”

 

An industrial corporation
that submitted an application to receive a benefit that is granted in the framework of the Benefit Track.

 

		2.8.	“Complementary Financing”

 

Financing for an
Approved Program that is provided directly or indirectly by the Submitter of the Application or by a different financing entity that is
not a Government Entity or the Innovation Authority, which supplements the grant to a scope of 100% of the Approved Budget.

 

		2.9.	“Grant”

 

Financing provided
by the Innovation Authority to the Approval Recipient for the purpose of executing an Approved Program within the framework of the Approved
Budget.

 

		2.10.	“Approval Recipient”

 

A person whose Application
was approved as set forth in section 7.1 below.

 

		2.11.	“Trial Device”

 

A prototype, test
model or pilot device used for examining the programming, proof of value, unlocking changes and improvements or adjusting existing technology,
in a work environment partially or fully simulating its target market. In addition, their application shall be on a limited scale and
for a limited period of time, and prior to being released for serial production or to being commercially introduced.

 

    B-2

     

    

 

 

 

		2.12.	“group with preferential financing terms”

 

One of the following:

 

		a.	Women.

 

		b.	“minority population” – as such term is defined in Government Resolution No. 922 dated
30 December 2015.

 

		c.	An observant Jew, who is unique in terms of his religious observance and in terms of his education, nature
of the community and lifestyle, which distinguish such person from other observant Jews, who meets one or more of the following conditions:

 

		1.	The places of study of his kids up to the age of 18 are known Haredi educational institutions, which are
not formal institutions or “exempt” institutions, whose licenses are regulated by the Ministry of Education.

 

		2.	He learned in a Yeshiva Ketana [orthodox Jewish secondary school] or Yeshiva Gedola [Jewish
educational institution].

 

		3.	In the last five years, for at least one full year, he was entitled to a “scholarship for encouraging
the integration of married yeshiva students in the work force” (which in the past was referred to as “guaranteed income for
married yeshiva students”), under eligibility tests published by the Ministry of Education.

 

		4.	He received an exemption from military service pursuant to the Security Service Law [Consolidated Version],
5746-1986, due to affiliation with the Haredi community.

 

		5.	For women: she learned in a Haredi seminary, or her husband learned in a Yeshiva Ketana.

 

		2.13.	“Value-Added Rate”

 

The cost of production
performed in a certain country, less costs imported to that country for production, with respect to the product’s factory price.

 

		2.14.	“Control”

 

Under its meaning
in the Securities Law, 5728-1968.

 

		2.15.	“Startup Corporation”

 

An industrial corporation
that was incorporated 5 years or less before the date the Application was submitted, and the total requested budget in all of its Applications
that were submitted in this Benefit Track during the calendar year does not exceed ILS 5 million.

 

    B-3

     

    

 

 

 

		2.16.	“Startup Corporation of an entrepreneur from a group with preferential financing terms”

 

A Startup Corporation
with at least 33% of its share capital (on a fully diluted basis) directly or indirectly held by an entrepreneur from a group with preferential
financing terms.

 

		2.17.	“Industrial Corporation”

 

A corporation duly
incorporated and registered in Israel, operating pursuant to the laws of the State of Israel, which conducts research and development
for commercial purposes.

 

		2.18.	“Approved Program”

 

A program that was
approved by the Committee pursuant to the provisions of this Benefit Track.

 

		2.19.	“Approved Budget”

 

The total budget
of an Approved Program, consisting of the Grant and Complementary Financing, which only includes recognized costs that were approved by
the Committee, in accordance with the relevant procedures that it shall determine.

 

		3.	The Committee

 

		3.1.	Composition of the Committee

 

The following
shall be members of the Research Committee:

 

		a.	Chairman of the Board of the Innovation Authority – member and chairman of the Committee;

 

		b.	The CEO of the Innovation Authority – member and deputy chairman of the Committee;

 

		c.	Three employees of the Innovation Authority who shall be appointed by the CEO of the Innovation Authority
– members;

 

    B-4

     

    

 

 

 

		d.	Two employees of the Ministry of Economy and Industry with academic degrees in areas pertaining to the
work of the Committee, which shall include the Director General of the Ministry of Economy and Industry – members;

 

		e.	A representative in charge of budgeting at the Ministry of Finance to be appointed by the Minister of
Finance – member;

 

		f.	A representative of the Accountant General at the Ministry of Finance to be appointed by the Minister
of Finance – member;

 

		g.	Five representatives from the public – members.

 

		3.2.	Deputy chairman of the Committee

 

		a.	One of the Committee members from the Innovation Authority employees to be appointed by the Chairman of
the Board of the Innovation Authority and CEO of the Innovation Authority shall be authorized to serve as Deputy CEO of the Innovation
Authority in the role of deputy chairman of the Committee.

 

		b.	This employee of the Innovation Authority can serve as deputy chairman of the Committee subject to the
provision of written authorization from the Chairman of the Board of the Innovation Authority prior to the specific consideration of the
Committee.

 

		3.3.	The role of the Committee and its powers

 

		a.	The Research Committee shall serve as a research committee (under such meaning in the Innovation Law)
for purposes of this Benefit Track. The Research Committee has the power to make any decision required for the purpose of managing the
Benefit Track (provided it does not contradict the provisions of the Innovation Law, or the regulations, rules, procedures and provisions
set forth thereunder), including:

 

		1.	Consider any Application submitted in the framework of the Benefit Track.

 

		2.	Take any action for the purpose of examining and assessing the Applicant’s representations, including
with respect to the manner in which the program is implemented.

 

		3.	Make a decision with respect to approving the program within the framework of the Innovation Authority
budget and determine conditions for their approval, and make a decision regarding the provision of benefits for programs and their amount,
including the budgets submitted in the programs in full or in part.

 

    B-5

     

    

 

 

 

		4.	Approve or reject any Application submitted in the framework of the Benefit Track after examining the
Application’s compliance with the threshold conditions and according to the criteria.

 

		5.	Set forth preliminary conditions for a program approval becoming effective.

 

		6.	Set forth the conditions for executing the Approved Program, including milestones, timetables and timeframe
of the program.

 

		7.	Approve or reject in full or in part any change requested to be made in the Approved Program. It is clarified
that the provisions of section 6.1 (threshold condition) and 6.2 (criteria) below shall apply to the approval of changes to the program,
mutatis mutandis.

 

		8.	Monitor the implementation of an Approved Program and decide whether to set forth additional conditions
and milestones for it.

 

		9.	Approve an extension of the execution period of the Approved Program with no additional budget, until
full utilization of the Approved Budget.

 

		10.	Approve a shortening of the execution period of the Approved Program, should the Approved Budget be utilized
in full and should the targets of the Approved Program be achieved.

 

		11.	Terminate or cease the support of an Approved Program.

 

		12.	Determine and publish procedures for implementing this Benefit Track.

 

		b.	The Chairman of the Board of the Innovation Authority shall be entitled to appoint subcommittees from
among the members of the Research Committee, and to determine the auxiliary actions that the subcommittees can take for purposes of the
Committee’s activity.

 

		3.4.	Reward

 

Committee members
from among the public shall be entitled to a reward for participating in the Committee’s meetings, pursuant to the procedure determined
by the Innovation Authority Board in this respect.

 

    B-6

     

    

 

 

 

 

		4.	Framework of the public solicitation

 

		4.1.	The Application shall be submitted in one or more of the three ways set forth below, as shall be published
on the Innovation Authority’s website:

 

		a.	Invitation to tender

 

		1.	The Innovation Authority shall from time to time publish a designated public solicitation for submitting
Applications for receiving a grant. The public solicitation shall include, inter alia, the deadline for submitting the Applications.

 

		2.	All the Applications that were submitted by the deadline for submitting the Applications shall be presented
to the Committee, and they shall be examined against each other, pursuant to the allocated budget. Applications that were submitted late
shall be rejected outright.

 

		b.	Annual-regular submission

 

		1.	Applications for receiving a grant shall be submissible throughout the year, pursuant to the provisions
and rules set forth in the track’s procedures.

 

		2.	During any period as shall be set forth in the Benefit Track procedures, all the Applications that were
received and were ready for consideration by such deadline shall be presented to the Committee, and they shall be examined pursuant to
the provisions of the Benefit Track and pursuant to the allocated budget.

 

		c.	Submission on predetermined dates

 

		1.	The submission of Applications for receiving a grant shall be possible on a few predetermined dates during
the year, as shall be determined in the Benefit Track procedures.

 

		2.	All the Applications that were filed by the deadline for submitting Applications shall be presented to
the Committee, and they shall examine them against each other, pursuant to the allocated budget. Applications that were submitted late
shall be rejected outright.

 

		4.2.	In the framework of each process of submitting Applications for receiving a grant (as set forth in section
4.1 above), the Research Committee is entitled to devote the process to one or more of the following:

 

		a.	Applications where the Applicants are: (a) Startup Corporations; or (b) corporations that are not Startup
Corporations; or

 

		b.	Applications with limitations on the requested budget, including Applications of Applicants all of whose
Applications to the Innovation Authority in a calendar year do not exceed a certain amount.

 

    B-7

     

    

 

 

 

		4.3.	An Applicant who is interested in submitting more than one Application in the framework of a process for
submitting Applications to receive a grant (as set forth in section 4.1 above), shall submit all of its Applications on the same date
(within 24 hours from the date of its first submission in the same process, subject to the deadline for submitting Applications in the
process, if any), subject to the following provisions:

 

		a.	It is clarified that in processes of the annual-regular submission type and submission on predetermined
dates (sections 4.1(b) and 4.1(c) above, respectively), the Applicant must submit all of its Applications of that same calendar year on
the same date.

 

		b.	If the Applicant is a Startup Corporation whose previous Application in an annual-regular submission type
process (section 4.1(b) above) was rejected, and no reconsideration was submitted on the matter by the end of the date set forth in section
11 below (reconsideration) or if the Application was also rejected in the reconsideration, the Applicant shall be entitled to submit one
additional Application in that process during the same calendar year. It is clarified that such additional Application shall not exclude
an Applicant from the definition of a Startup Corporation as set forth in section 2.15 above, provided the total budget requested in the
additional Application does not exceed ILS 5 million.

 

		c.	The Research Committee shall be entitled, in special cases and for reasons to be committed to paper, to
allow the Applicant to submit additional Applications on a different date.

 

		5.	Manner of Application submission

 

		5.1.	An Application for receiving a grant shall be submitted subject and pursuant to the provisions and rules
of this Benefit Track and its procedures, and pursuant to the terms to be set forth in a public solicitation that shall be published on
the Authority’s website, including with respect to the deadline for submitting the Application.

 

		5.2.	An Application to receive a grant shall be submitted to the Innovation Authority on a designated form,
prepared in accordance with the rules and procedures that the Committee set forth or shall set forth from time to time, including a declaration
regarding the place of production and the Value-Added Rate of the Approval Recipient, including details on the holders of the rights to
the knowhow arising from research and development under the Approved Program and any right deriving therefrom, and shall be accompanied
by additional documents, as per the request of the Committee or of an entity authorized by it.

 

    B-8

     

    

 

 

 

		5.3.	The documents for submitting an Application to receive a grant shall be available for download on the
Authority’s website.

 

		5.4.	Applications to receive a grant shall be submitted as a file for an execution period of up to 12 months
or up to 24 months, as shall be set forth in the track’s procedures and pursuant to the following type of companies, in full or
in part: (a) Startup Corporations; or (b) corporations that are not Startup Corporations.

 

		5.5.	Applications are to be submitted to the Innovation Authority full and complete, including all the required
and relevant information and documents. For Applications submitted after the deadline for submitting Applications, if any, or Applications
with substantive deficiencies, as shall be set forth in the track’s procedures, no file shall be opened on the Innovation Authority’s
systems and the Applications shall not be considered by the Research Committee.

 

		6.	Examination of the Application

 

		6.1.	Threshold conditions for the provisions of a grant

 

The Application and
Applicant in the framework of this Benefit Track must be to the satisfaction of the Research Committee and meet all of the following threshold
conditions cumulatively. It is clarified and emphasized that the threshold conditions must be met on the date the Application
is submitted and for the duration of the entire program execution period, and that not meeting one of the following threshold conditions
shall result in the disqualification of the entire Application or the cancellation of the Approved Program:

 

		a.	The Applicant is an Industrial Corporation that submitted an application for research and development
support.

 

		b.	The research and development subject of the program, including all of its components, is to be conducted
in Israel, by Israeli residents, unless the Research Committee was convinced, for reasons to be committed to paper, that conducting the
program is essential owing to the fact that part of the program is not to be conducted in Israel or not by Israeli residents.

 

		c.	The research and development as part of an Approved Program is to be conducted by the Applicant or by
whomever the Applicant specified in the program that the research and development, or part thereof, would be transferred to be conducted
by it, or by a performing party that was approved under section 3.3(a)(7) above (change of program).

 

    B-9

     

    

 

 

 

		d.	The Applicant warranted that it shall be the holder of the knowhow arising from research and development
under the Approved Program and of any right deriving therefrom, including intellectual property rights, from the moment they are formed.
In an Application that includes co-ownership of knowhow, as defined in section 14.3 below, all the owners of the knowhow warranted as
foregoing.

 

		e.	The program subject of the Application shall not be executed pursuant to an order of anyone other than
the Application, in exchange for full or partial payment that is made against granting partial or full ownership rights in the knowhow
or the product.

 

		f.	The Submitter of the Application has no entirely or partially identical application for financing a program,
which is being examined in any of the Innovation Authority’s benefit tracks, including secondary tracks.

 

		g.	No financial aid for executing the file subject of the Application was received directly or indirectly
from a Government Entity or from the Innovation Authority, which was not in line with the provisions of this Benefit Track. No additional
benefit shall be granted for an approved file for which in the past a benefit was granted pursuant to the provisions of this Benefit Track.

 

		h.	The Applicant does not have any restricted accounts and is not in a process of receivership, stay of proceedings,
liquidation, etc.

 

		i.	The Applicant and its controlling shareholders are in compliance with the requirements of the Encouragement
of Research and Development in Industry (Approval Stipulation – Minimum Wage) Regulations, 5771-2011.

 

		j.	Should the Innovation Authority reject the Application submission process as set forth in section 4.2
above, the Applicant or the Application, as applicable, are: (a) a Startup Corporation or a corporation that is not a Startup Corporation,
as applicable; or (b) within the limits of the requested budget.

 

		6.2.	The criteria

 

The Committee shall
consider the Applications that met the threshold conditions and assess their nature pursuant to the following criteria:

 

		a.	The level of technological innovativeness and uniqueness of the program subject of the Application.

 

    B-10

     

    

 

 

 

		b.	The level of challenges in implementing the program subject of the Application.

 

		c.	The Applicant’s capabilities, including management capabilities and capabilities in bringing about
the completion of the program subject of the Applications and its business implementation.

 

		d.	The business-financial growth potential of the Applicant due to the success of the program subject of
the Application.

 

		e.	The technological and employment contribution of the program subject of the Application to Israel’s
economy and the growth to the scale of the Applicant’s activity in Israel, including production activity.

 

		6.3.	In each of the examination phases of the Application, the Committee shall be entitled to receive and be
supported by an opinion from various entities in the Innovation Authority and/or external entities, including an opinion from professional
examiners on behalf of the Innovation Authority.

 

		6.4.	The Research Committee, or anyone on its behalf, including external entities, shall be entitled to contact
the Applicant during the examination and assessment with a request for clarifications or with a request to receive additional information
and documents that are required for purposes of examining the Application. The Applicant shall send the Research Committee, or anyone
authorized to such end, any information and additional documents to be requested, which are required for the purpose of examining the
Application.

 

		7.	The Committee’s decision

 

		7.1.	After examining the Application as set forth above, the Committee shall make a decision on whether to
approve or reject the Application. Notice regarding such decision shall be sent to the Applicant.

 

		7.2.	If the Committee approves the file or part thereof:

 

		a.	The Committee shall determine the Approved Budget and the grant amount to be provided to the Applicant,
as set forth in section 8 below.

 

		b.	The Applicant shall be required to sign onto a budget and letter of undertaking in a form to be determined
by the Committee.

 

		c.	The Application’s approval shall take effect after the Authority signs a certification letter that
shall include, inter alia, the period of the file, the rate and amount of the grant, and additional terms if set by the Committee.

 

    B-11

     

    

 

 

 

		8.	Grant for an Approved Program

 

		8.1.	If the Committee approved the Application, it shall determine the grant amount to be provided to the Applicant,
pursuant to its assessment of the Application as set forth in section 6.2 above (the criteria), and in accordance with the objectives
of the Benefit Track as set forth below:

 

		a.	The grant shall be at a rate of 20%, 30%, 40% or 50% of the Approved Budget.

 

		b.	In its decision regarding the grant amount, the Research Committee shall give significant weight to the
declaration of the Approval Recipient with respect to the original production rate in Israel (as such term is defined in section 15.1
below).

 

		c.	A supplement shall be provided to the grant as set forth in section 8.1 above, pursuant to the rules set
forth in Provisions Annex A – Supplement to amounts set by the Research Committee, in National Priority Areas; in this respect,
“National Priority Areas” – the areas set forth under section 40D of the Encouragement of Capital Investments Law, 5719-1959,
or other areas set by the government, from time to time, with respect to benefits under such law.

 

		8.2.	If the Applicant is a Startup Corporation of an entrepreneur from a group with preferential financing
terms, and the program subject of the Application is the first program that the Applicant submitted in the framework of this Benefit Track
(including, for the avoidance of doubt, Benefit Track No. 23 – starting companies, which was integrated into this Benefit Track),
the following provisions shall apply:

 

		a.	In an Application for the first execution period of the program, should the requested budget not exceed
ILS 2.5 million, instead of the grant amount as set forth in section 8.1(a) above, the grant shall be 75% of the Approved Budget.

 

		b.	In an Application for the second execution period of the program, instead of the grant amount as set forth
in section 8.1(a) above, the grant shall be 70% of the Approved Budget.

 

		c.	No additional National Priority Areas as set forth in section 8.1(c) above shall be given to the grant.

 

		9.	Guarantees

 

The chairman of the
Research Committee is entitled to require guarantees for securing returns-in-kind and in order to ensure fulfillment of the provisions
of the Benefit Track, pursuant to the provisions to be set in this respect by the Innovation Authority Board.

 

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		10.	Loans

 

The Committee is
entitled to approve, per the Applicant’s request, that instead of a grant under the provisions of this Benefit Track the Applicant
shall be provided with a loan, in accordance with the provisions to be determined in this respect by the Innovation Authority Board.

 

		11.	Reconsideration

 

		11.1.	The Committee shall reconsider any decision that it issued, if within 45 days from the date notice was
received of the Committee’s decision, the Applicant, regarding which the Committee decision was issued, submitted a reasoned written
request for reconsideration.

 

		11.2.	Submission of a request for reconsideration by the Applicant requires the payment of a fee pursuant to
the regulations set forth in this respect by virtue of the Innovation Law.

 

		12.	Advance payments

 

The Research Committee
shall be entitled to approve advance payments on account of the grant, pursuant to the provisions to be set forth in this respect by the
Innovation Authority Board. It is clarified that an advance payment on account of the grant shall be considered a grant.

 

		13.	Double support

 

		13.1.	It is clarified that it is prohibited to receive additional assistance directly or indirectly from the
Innovation Authority and/or from a Government Entity, for components in the Approved Program.

 

		13.2.	If the program or part thereof was funded by anyone other than the Applicant, not in the framework of
an order of such other entity under section 6.1(e) above and not in the framework of assistance from the Innovation Authority, the financing
amount shall be deducted from the program’s Approved Budget.

 

		14.	Knowhow

 

		14.1.	The Approval Recipient must be and must ensure to remain the owner of the knowhow arising from research
and development pursuant to the Approved Program, and any right deriving therefrom, including intellectual property rights, from the time
of their formation, unless it received approval to transfer them pursuant to the provisions of this Benefit Track.

 

		14.2.	Knowhow arising from research and development under an Approved Program, which is not the product that
was developed as part of such program, and any right deriving therefrom, shall not be transferred to any other entity in or outside of
Israel. The Research Committee is in special cases entitled to approve a request to transfer knowhow to or outside of Israel that arises
from research and development under an Approved Program which is not the product that was developed in the framework of such program,
and any right arising therefrom as set forth in Provisions Annex B – Provisions regarding the transfer of knowhow and the granting
of Licenses.

 

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		14.3.	Notwithstanding section 14.1 above (the Approval Recipient and the owner of the knowhow), the Research
Committee is entitled to approve co-ownership of the Approval Recipient and an additional entity of the knowhow arising from research
and development pursuant to the Approved Program, and any right deriving therefrom, including intellectual property rights, all under
the conditions and subject to the provisions set forth in this section.

 

		a.	In this section 14.3:

 

		1.	“Israeli Research Institution”

 

Each of the following:

 

		(a)	An institution for higher education as such term is defined in the Innovation Law;

 

		(b)	A hospital and health corporation as defined in section 21 of the Budget Foundations Law;

 

		(c)	The head of the Agricultural Research Organization;

 

		(d)	An institution in Israel primarily engaged in academic research and development, in a scientific or technological
field, and which is active in the transfer of knowhow to industry, provided it is approved by the Committee as a research institution
with respect to this track in special cases and for reasons to be committed to paper.

 

		2.	“Application Company”

 

A corporation incorporated
in Israel that operates pursuant to the laws of the State of Israel and which is either of the following:

 

		(a)	It is wholly owned by an Israeli Research Institution, and it is primarily engaged in the commercialization
of the technologies created in the framework of the academic research of such research institution.

 

		(b)	A corporation whose primary activity is the commercialization of technologies created in an Israeli Research
Institution, provided the Committee approved it to be an Application Company with respect to this track in special cases and for reasons
to be recorded.

 

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		3.	“License”

 

A permit or license
for exclusive, unlimited and irreversible use of the knowhow, including knowhow that is the result of technological innovation activity
of an Israeli Research Institution, for an area of activity, provided the Approval Recipient is allowed to act as described in the request
for approving the Approved Program.

 

		4.	“Application that includes co-ownership of knowhow”

 

An Application that
defines that there are one or more additional entities that are not the Applicant, who shall be the owners, jointly or severally, together
with the Applicant, of knowhow arising from research and development under the Approved Program, and any right deriving therefrom, including
intellectual property rights (each of those hereinafter: the ”Owners of the Knowhow”). It is clarified that Applicants
are able to submit Applications that include co-ownership of knowhow as aforesaid, as part of Applications to be submitted separately,
to be examined by the Research Committee on such date.

 

		5.	“Foreign Research Institution”

 

An entity that is
not incorporated in Israel or that does not operate pursuant to the laws of the State of Israel, which is primarily engaged in academic
research and development, in a scientific or technological field, is engaged in the transfer of knowhow to industry, and whose integration
in the program is expected to significantly contribute to it achieving its objectives, provided the Committee approves it as a Foreign
Research Institution in respect of this track.

 

		b.	In the event of an Application that includes co-ownership of knowhow, three additional and cumulative
threshold conditions for the Application shall be added to the threshold conditions set forth in section 6.1 above, and the Applicant
must meet them to the Research Committee’s satisfaction, and they are:

 

		1.	The Owners of the knowhow to arise from research and development and any right deriving therefrom, including
intellectual property rights, who are not the Applicant, shall be one or more of the following: an industrial corporation, Israeli Research
Institution, Application Company or Foreign Research Institution.

 

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		2.	Every Owner of the knowhow arising from research and development and any right deriving therefrom, including
intellectual property rights, who is not the Applicant, has an essential and significant contribution to the implementation of the program
subject of the Application. The statements in this section above shall not apply in a case where the two following conditions are fulfilled
cumulatively:

 

		(a)	The additional Owner of the Knowhow is an Israeli Research Institution or an Application Company.

 

		(b)	The Application submitted is for a new program, which does not rely on knowhow that was developed as part
of a program that was approved in the past within the framework of one or more tracks of the Innovation Authority, or an Application for
a continuing program, which relies on knowhow that was developed as part of a program that was approved in the past within the framework
of one or more tracks of the Innovation Authority, provided it was submitted within 24 months from the commencement date of the first
execution period of such program.

 

		3.	There is an agreement between the Owners of the Knowhow that stipulates that the Applicant shall be the
owner of part of the new knowhow that it contributed to the formation of, and that the Applicant is granted a license for part of the
new knowhow that is owned by the other Owners of the Knowhow; or a different ownership arrangement to be approved by the Research Committee
and on the condition that this arrangement does not impact that Applicant’s ability to implement the Approved Program and to realize
its objectives.

 

		c.	Should the Research Committee approve the Application, all the rules of the track shall apply to the Approved
Program, including:

 

		1.	Every Owner of the Knowhow must be and ensure to be the owner of the knowhow arising from research and
development under the Approved Program, and any right deriving therefrom, including intellectual property rights, from the moment of their
conception. The Owners of the Knowhow shall be required to sign a letter of undertaking in form to be determined by the Research Committee
for such purpose.

 

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		2.	All the obligations under this Benefit Track and pursuant to the terms of the Approved Program shall apply
to each Owner of the Knowhow, including the obligation not to transfer the knowhow arising from research and development under the Approved
Program and any right deriving therefrom, including intellectual property rights, from the moment of their conception, unless it received
approval to transfer them pursuant to the provisions of this Benefit Track, and the obligation to pay royalties.

 

		3.	Notwithstanding the foregoing in sections 14.3(c)(1) and 14.3(c)(2) above, if one of the Owners of the
Knowhow is a Foreign Research Institution, the following rules shall apply:

 

		(a)	Any research and development costs of the Foreign Research Institution shall not be included in the Approved
Program.

 

		(b)	The Foreign Research Institution is able to use the knowhow that it holds and the rights deriving therefrom,
including the intellectual property rights, without limitation from the time of their conception, as long as its use of the knowhow arising
from research and development under the Approved Program and any right deriving therefrom, including intellectual property rights, does
not impact the ability of the Applicant and the Owner of the Knowhow that is not the Foreign Research Institution, to use the knowhow
and rights deriving therefrom, including the intellectual property rights; this arrangement must appear in the agreement between the parties
as set forth in section 14.3(b)(3) above. The Foreign Research Institution shall be required to sign a letter of undertaking in form to
be determined by the Research Committee for such purpose.

 

		14.4.	The provisions of section 14.1 above (the Approval Recipient and the Owner of the Knowhow) shall apply
in respect of the Approved Program, in whole or in part, where the Research Committee approved for the Approval Recipient on the approval
date of the program the grant of a right for the public good to use the source code of a computer software that constitutes knowhow deriving
from research and development under an Approved Program, which is not a product that was developed as part of such Approved Program, pursuant
to the provisions and the terms in respect of granting such rights of use, or any other right that was attached to knowhow as set forth
in Provisions Annex C – Provisions regarding the granting of a right of use for the public good of the code of computer software
that constitutes knowhow arising from research and development under an Approved Program, which is not the product that was developed
in the framework of such Approved Program (open source).

 

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		15.	Production in Israel and transfer of production outside of Israel

 

		15.1.	The product to be developed as a result of the research and development, or any part thereof, shall be
produced in Israel at a rate not falling below the production scale and Value-Added Rate in Israel that were included in the declaration
regarding the place of production and the Value-Added Rate of the Approval Recipient (in this Benefit Track: the “Original Production
Rate in Israel”).

 

		15.2.	If the declaration regarding the place of production and Value-Added rate included details with respect
to the product’s production or part thereof outside of Israel, the Approval Recipient shall pay royalties due to the production
outside of Israel, in amounts and under terms set forth pursuant to section 16 below.

 

		15.3.	Notwithstanding the foregoing in section 15.1 above (the Original Production Rate in Israel), for purposes
of achieving the objectives of this Benefit Track, the Research Committee is entitled in special cases and for reasons to be committed
to paper, during the program’s implementation or after it ends, pursuant to a request from the Approval Recipient, to approve the
transfer of production or of production rights of a product developed as part of the program or deriving therefrom (in this Benefit Track:
“Transfer of Production”), to outside Israel, for which the production rate in Israel fell below the original production
rate set forth in section 15.1 above, provided one of the following is fulfilled:

 

		a.	The Approval Recipient shall be charged with paying royalties due to the Transfer of Production, in amounts
and under the terms set forth pursuant to the provisions of section 16 below;

 

		b.	Against the Transfer of Production outside of Israel, the production or production rights of a product
of a similar or higher technological level than the product subject of the request for transfer shall be transferred to Israel (in this
section: the “Alternative Production”), provided the scope of employment and the creation of workplaces in Israel,
the Value-Added Rate in Israel and the marketing scale for the global market, which are supposed to derive from the production or production
rights to be transferred to Israel, shall be no lower than those that are supposed to derive from the production or production rights
under the Approved Program, which are to be transferred outside of Israel; the Research Committee shall only approve a transfer under
this section after the Approval Recipient deposited a bank guarantee, in a set amount, for guaranteeing the Alternative Production.

 

    B-18

     

    

 

 

 

In this section 15.3,
“Production Rights” – a permit for another entity to use knowhow that was developed as part of a program or that
derives from a program, for purposes of producing only one specific product, while all other rights to use and exploit the knowhow remain
with the transferor in Israel.

 

		15.4.	If an additional Application was submitted under section 15.3 above (transfer of production outside of
Israel), the following provisions shall apply for the purpose of determining the Original Production Rate in Israel of the Approval Recipient:

 

		a.	If the previous application under the provisions of section 15.3(a) above was approved – the production
rate in Israel, as amended pursuant to the approved application, shall be deemed the original production rate of the Approval Recipient;

 

		b.	If the previous application under the provisions of section 15.3(b) above was approved – the Alternative
Production under its meaning in said section shall be deemed to replace the production or the production rights that were transferred
outside of Israel in accordance with the approved application.

 

		15.5.	Notwithstanding the foregoing in section 15.3 above (transfer of production outside of Israel), the transfer
of production outside of Israel, which together with previous transfers of production of the Application Recipient leads to a reduction
in the Original Production Rate in Israel that does not exceed 10%, does not require the approval of the Research Committee, provided
the Approval Recipient announced this, in writing, prior to the execution of the transfer to the Research Committee, and the Research
Committee or subcommittee appointed under section 3.3(b) above, did not inform it of its refusal to transfer the production within 30
days from the date the notice was received. If the production was transferred outside of Israel as described in this section, the Approval
Recipient shall pay royalties due to such transfer of production, in amounts and under terms to be determined pursuant to section 16.

 

		15.6.	A Submitter of an Application or a provider of notice under this section, must, pursuant to a request
of the Research Committee or anyone on its behalf, provide the Committee in writing, within the time period set forth in the request,
with an explanation, details, information and documents in connection with the details included in the Application or in the notice, as
applicable.

 

		15.7.	The Research Committee shall set rules regarding the details that must be included in the Application
or in a notice under this section, and the documents that must be attached to it.

 

    B-19

     

    

 

 

 

		16.	Royalties

 

The Approval Recipient
must pay royalties in amounts and pursuant to the provisions set forth in Provisions Annex D – Provisions regarding the rate
of royalties and rules for their payment.

 

		17.	Supervisory and enforcement powers of the Innovation Authority

 

The Approval Recipient
warrants to allow at any time the Innovation Authority, or anyone on its behalf, including external entities, to audit its activity, on
dates and under conditions to be determined by them, and to act pursuant to instructions of the Innovation Authority as shall be determined
from time to time.

 

		18.	Government Entities

 

		18.1.	Except for a discussion of the Applications for receiving grants under this Benefit Track, at the request
of a Government Entity, and subject to the agreements reached between it and the Innovation Authority, the Research Committee shall be
entitled to provide its opinion on matters related to technological innovation, including with respect to research and/or development
programs that were submitted to the Government Entity by Industrial Corporations, or if this corresponds with the functions of the Authority
as set forth in section 5A. of the Innovation Law with respect to research and/or development programs that were submitted to a Government
Entity by entities that are not Industrial Corporations, in matters such as: the technological innovation of such corporation, the challenges
in implementing the program, the corporation’s capabilities in executing the program, the economic potential of the program and/or
of the corporation, and the program’s contribution to the Israeli economy.

 

		18.2.	For the avoidance of doubt it is clarified that the Research Committee is entitled to express its opinion
on any research and/or development program of an Industrial Corporation as set forth in section 18.1 above, and this power is not limited
to programs of Applicants under this Benefit Track only.

 

		19.	Withdrawal of the assistance

 

The provisions of
the Innovation Law, including Part VIII of the Innovation Law, with respect to withdrawing the assistance, shall apply to the benefits
granted within the framework of this Benefit Track.

 

		20.	Budget

 

		20.1.	It is clarified that the Innovation Authority Board is entitled to from time to time update the amounts
and rates set forth in this Benefit Track.

 

    B-20

     

    

 

 

		20.2.	Granting assistance and managing the Benefit Track are subject to the budget’s annual approval,
the budget’s restrictions, and the Approved Budget for the Benefit Track.

 

		20.3.	If on the date the Application is approved, the Innovation Authority’s budget has not yet been approved,
the approval shall be subject to the existence of a budget in the appropriate budgetary regulation, and no final decision shall be made
regarding the approved grant until after the budget’s approval by the relevant entities.

 

		21.	Miscellaneous

 

		21.1.	The provisions of the Innovation Law, the regulations, rules, procedures, terms and provisions set forth
thereunder (if any) shall apply to this Benefit Track, mutatis mutandis, including the provisions of Article IV in Part III of
the Innovation Law (the Research Committee), Part III.1 of the Innovation Law (duty of care and fiduciary duty of officers in the Innovation
Authority), section 15BB of the Innovation Law (application of laws), section 15DD of the Innovation Law (revenues of the Innovation Authority),
Part IV in the Innovation Law (approval of applications for granting benefits), Part V of the Innovation Law and Part VIII of the Innovation
Law (general provisions), including section 47A of the Innovation Law (penalties).

 

		21.2.	Procedures of the Benefit Track, as shall be determined and published from time to time by the Committee,
including with respect to the process of submitting the Applications and their consideration, are an integral part of this Benefit Track.
Should there be a contradiction between the provisions of this Benefit Track and the procedures, the provisions of this Benefit Track
shall prevail.

 

		21.3.	In any event, this Benefit Track should not be deemed an undertaking on behalf of the Innovation Authority
to approve Applications and/or offers to be submitted or to transfer any payment.

 

		21.4.	The procedures, rules, notices, etc., to be set forth with respect to this Benefit Track shall be published
on the Authority’s website.

 

		22.	Applicability and commencement

 

		22.1.	This track was in the past managed by the Office of the Chief Scientist of the Ministry of Economy and
Industry as part of the benefit tracks by virtue of which approvals were granted for programs under Part IV of the Innovation Law, and
as CEO directive no. 8.23. Under section 56(c) of the transitional provisions to Amendment No. 7 of the Innovation Law, upon the establishment
of the Innovation Authority, the benefit track under which approvals were granted for programs pursuant to Part IV of the Innovation Law
and the above CEO directives turned into this Benefit Track and Benefit Track No. 23 – commencing companies, which were operated
by the Innovation Authority, and were later combined with this Benefit Track.

 

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		22.2.	The provisions of the Benefit Track were amended on 13 Adar I, 5782, which is 14 February 2022 (hereinafter:
the “Commencement Date”); they replace the provisions of the Benefit Track dated 13 Tishrei 5782, which is 19 September
2021, and they shall apply to Applications submitted after the Commencement Date.

 

List of provisions annexes for
this Benefit Track:

 

Provisions Annex A - Supplement
to amounts set by the Research Committee, in National Priority Areas.

 

Provisions Annex B - Provisions
regarding the transfer of knowhow and the granting of licenses.

 

Provisions Annex C - Provisions
regarding the granting of a right of use for the public good of the code of computer software that constitutes knowhow arising from research
and development under an approved program, which is not the product that was developed in the framework of such Approved Program (open
source).

 

Provisions Annex D - Provisions
regarding the rate of royalties and rules for their payment.

 

    B-22

     

    

 

Exhibit C

 

Budget

 

[**]

 

 

C-1Exhibit
4.1

 

DESCRIPTION
OF THE REGISTRANT’S SECURITIES

REGISTERED
PURSUANT TO SECTION 12 OF THE

SECURITIES
EXCHANGE ACT OF 1934

 

As
of December 31, 2021, Lucid Diagnostics Inc. (“Lucid,” the “Company” or “we,” “us” or
“our”) had one class of securities registered under Section 12 of the Securities Exchange Act of 1934, as amended (the “Exchange
Act”): common stock, $0.001 par value per share. The common stock is listed on The Nasdaq Stock Market LLC.

 

In
the discussion that follows, we have summarized selected provisions of our certificate of incorporation, bylaws and the Delaware General
Corporation Law (the “DGCL”) relating to our common stock. This summary is not complete. This summary is subject to the relevant
provisions of the DGCL and is qualified in its entirety by reference to our amended and restated certificate of incorporation and our
bylaws. Please read the provisions of our amended and restated certificate of incorporation and our bylaws as currently in effect for
provisions that may be important to you.

 

General

 

The
Company is authorized to issue 100,000,000 shares of common stock, par value $.001, and 20,000,000 shares of preferred stock, par
value $.001. As of December 31, 2021, 34,917,907 shares of common stock are outstanding (inclusive of 1,940,740 shares
underlying unvested restricted stock awards granted under the Lucid Diagnostics Inc. 2018 Long-Term Incentive Equity Plan as of such
date), and no shares of our preferred stock are outstanding. 

 

Preferred Stock

 

Our board of directors has
the authority, without further action by our stockholders, to issue shares of preferred stock in one or more series and to fix the rights,
preferences, privileges, and restrictions thereof. These rights, preferences and privileges could include dividend rights, conversion
rights, voting rights, terms of redemption, liquidation preferences, and sinking fund terms, any or all of which may be greater than
the rights of common stock. The issuance of preferred stock could adversely affect the voting power of holders of common stock and the
likelihood that such holders will receive dividend payments and payments upon our liquidation. In addition, the issuance of preferred
stock could have the effect of delaying, deferring or preventing a change in control of our company or other corporate action. Although
we do not currently intend to issue any shares of preferred stock, we cannot assure you that we will not do so in the future.

 

Common Stock

 

Holders of our common stock
are entitled to one vote for each share held of record on all matters to be voted on by stockholders. There is no cumulative voting with
respect to the election of directors, with the result that the holders of more than 50% of the shares voted for the election of directors
can elect all of the directors. Subject to any preferential dividend rights of any outstanding shares of preferred stock, holders of
common stock are entitled to receive dividends, if declared by our board of directors, out of funds that we may legally use to pay dividends.
If we liquidate or dissolve, holders of common stock are entitled to share ratably in our assets once our debts and any liquidation preference
owed to any then-outstanding preferred stockholders are paid. Our common stockholders have no conversion, preemptive or other subscription
rights, and no liquidation preference, and there are no sinking fund or redemption provisions applicable to the common stock. All shares
of common stock that are outstanding are fully-paid and non-assessable.

  

As of December 31,
2021, 1,419,242 shares of our common stock are issuable upon the exercise of outstanding stock options, including 995,942
shares issuable upon the exercise of stock options granted under our equity incentive plans, and 1,890,740 shares are reserved
for issuance, but not subject to outstanding options or restricted stock awards, under our incentive equity plans. Furthermore, (i) in
February 2022, we entered into an asset purchase agreement with ResearchDx, Inc. (“RDx”), pursuant which we acquired certain
licenses and other related assets necessary to operate a CLIA-certified, CAP-accredited clinical laboratory, with $3,000,000 of the purchase
price payable in installments in cash or, at our election, in shares of our common stock valued at a price based on the current market
price; and (ii) in March 2022, we entered into a committed equity facility with an affiliate of Cantor Fitzgerald (“Cantor”),
pursuant to which Cantor has committed to purchase up to $50 million in shares of our common stock from time to time at our request,
at prices based on the current market price.

 

Page
1 of 4

(Exhibit
4.1)

 

    	 

    	 

    

 

Exhibit
4.1

(continued)

 

Dividends

 

We
have not paid any cash dividends on our shares of common stock to date. The payment of cash dividends in the future will be dependent
upon our revenues and earnings, if any, capital requirements and general financial condition and will be within the discretion of our
Board of Directors. It is the present intention of our Board of Directors to retain all earnings, if any, for use in our business operations
and, accordingly, our Board of Directors does not anticipate declaring any dividends in the foreseeable future.

 

Anti-Takeover
Provisions 

 

Some
provisions of Delaware law, our amended and restated certificate of incorporation and our amended and restated by-laws contain provisions
that could make it more difficult to acquire us by means of a tender offer or a proxy contest or otherwise, or to remove our incumbent
officers and directors.

 

These
provisions of Delaware law, our amended and restated certificate of incorporation and our amended and restated by-laws could have the
effect of preventing changes in the composition of our board of directors and management. These provisions may also have the effect of
discouraging others from attempting hostile takeovers and, as a consequence, they may also inhibit temporary fluctuations in the market
price of our common stock that often result from actual or rumored hostile takeover attempts. It is possible that these provisions could
make it more difficult to accomplish or could deter transactions that stockholders may otherwise consider to be in their best interest
or in our best interests, including transactions which provide for payment of a premium over the market price for our shares.

 

These
provisions are intended to discourage coercive takeover practices and inadequate takeover bids. These provisions are also designed to
encourage persons seeking to acquire control of us to first negotiate with our board of directors. We believe that the benefits of the
increased protection of our potential ability to negotiate with the proponent of an unfriendly or unsolicited proposal to acquire or
restructure us outweigh the disadvantages of discouraging these proposals because negotiation of these proposals could result in an improvement
of their terms.

 

Delaware
Anti-Takeover Statute

 

We
are subject to Section 203 of the DGCL, which prohibits persons deemed to be “interested stockholders” from engaging in a
“business combination” with a publicly held Delaware corporation for three years following the date these persons become
interested stockholders unless the business combination is, or the transaction in which the person became an interested stockholder was,
approved in a prescribed manner or another prescribed exception applies. Generally, an “interested stockholder” is a person
who, together with affiliates and associates, owns, or within three years prior to the determination of interested stockholder status
did own, 15% or more of a corporation’s voting stock. Generally, a “business combination” includes a merger, asset
or stock sale, or other transaction resulting in a financial benefit to the interested stockholder. The existence of this provision may
have an anti-takeover effect with respect to transactions not approved in advance by the Board of Directors. A Delaware corporation may
“opt out” of these provisions with an express provision in its original certificate of incorporation or an express provision
in its certificate of incorporation or by-laws resulting from a stockholders’ amendment approved by at least a majority of the
outstanding voting shares. We have not opted out of these provisions. As a result, mergers or other takeover or change in control attempts
of us may be discouraged or prevented.

 

Page
2 of 4

(Exhibit
4.1)

 

    	 

    	 

    

 

Exhibit
4.1

(continued)

 

Undesignated
Preferred Stock

 

The
ability of our board of directors, without action by the stockholders, to issue undesignated shares of preferred stock with voting or
other rights or preferences as designated by our board of directors could impede the success of any attempt to change control of us.
These and other provisions may have the effect of deferring hostile takeovers or delaying changes in control or management of our company.

 

Authorized
Common Stock

 

Our
authorized but unissued shares of common stock will be available for future issuance without stockholder approval. These additional shares
may be utilized for a variety of corporate purposes, including future public offerings to raise additional capital and corporate acquisitions.
The existence of authorized but unissued shares of common stock could render more difficult or discourage an attempt to obtain control
of a majority of our common stock by means of a proxy contest, tender offer, merger or otherwise.

 

Classified
Board of Directors

 

Our
board of directors is divided into three classes. The number of directors in each class will be as nearly equal as possible. Directors
elected to succeed those directors whose terms expire shall be elected for a term of office to expire at the third succeeding annual
meeting of stockholders after their election. The existence of a classified board may extend the time required to make any change in
control of the board of directors when compared to a corporation with an unclassified board. It may take two annual meetings for our
stockholders to effect a change in control of the board of directors, because in general less than a majority of the members of the board
of directors will be elected at a given annual meeting. Because our board of directors is classified and our certificate of incorporation
does not otherwise provide, under Delaware law, our directors may only be removed for cause.

 

Vacancies
on the Board

 

Our
amended and restated certificate of incorporation and our amended and restated by-laws provide that any vacancy occurring on the board
of directors, including by reason of removal of a director, and any newly created directorship may be filled only by a majority of the
remaining directors in office. This system of appointing directors may discourage a third party from making a tender offer or otherwise
attempting to obtain control of our company, because it generally makes it more difficult for stockholders to replace a majority of the
directors.

 

Advance
Notice Requirements for Stockholder Proposals and Director Nominations

 

Our
amended and restated by-laws provide advance notice procedures for stockholders seeking to bring business before our annual meeting of
stockholders, or to nominate candidates for election as directors at any meeting of stockholders. Our amended and restated by-laws also
will specify certain requirements regarding the form and content of a stockholder’s notice. These provisions may preclude our stockholders
from bringing matters before our annual meeting of stockholders or from making nominations for directors at our meetings of stockholders.

 

No
Cumulative Voting; Special Meeting of Stockholders

 

Stockholders
will not be permitted to cumulate their votes for the election of directors. Furthermore, special meetings of our stockholders may be
called only by Chief Executive Officer, our President, our board of directors, or a majority of our stockholders.

 

Page
3 of 4

(Exhibit
4.1)

 

    	 

     

    

 

Exhibit 4.1

(continued)

 

Exclusive
Forum Selection

 

Our
amended and restated certificate of incorporation requires, to the fullest extent permitted by law, subject to limited exceptions, that
derivative actions brought in our name, actions against directors, officers and employees for breach of fiduciary duty and other similar
actions may be brought only in the Court of Chancery in the State of Delaware and, if brought outside of Delaware, the stockholder bringing
the suit will be deemed to have consented to service of process on such stockholder’s counsel in any action brought to enforce
the exclusive forum provision. Any person or entity purchasing or otherwise acquiring any interest in shares of our capital stock shall
be deemed to have notice of and consented to the forum provisions in our amended and restated certificate of incorporation.

 

Notwithstanding
the foregoing, Section 27 of the Exchange Act creates exclusive federal jurisdiction over all suits brought to enforce any duty or liability
created by the Exchange Act or the rules and regulations thereunder. In addition, Section 22 of the Securities Act creates concurrent
jurisdiction for federal and state courts over all suits brought to enforce any duty or liability created by the Securities Act or the
rules and regulations thereunder. As a result, the exclusive forum provision provides that the Court of Chancery and the federal district
court for the District of Delaware will have concurrent jurisdiction over any action arising under the Securities Act or the rules and
regulations thereunder, and the exclusive forum provision will not apply to suits brought to enforce any duty or liability created by
the Exchange Act or the rules and regulations thereunder or any other claim for which the federal courts have exclusive jurisdiction.
To the extent the exclusive forum provision restricts the courts in which our stockholders may bring claims arising under the Securities
Act and the rules and regulations thereunder, there is uncertainty as to whether a court would enforce such provision. Investors cannot
waive compliance with the federal securities laws and the rules and regulations promulgated thereunder.

 

Although
we believe this provision benefits our company by providing increased consistency in the application of Delaware law in the types of
lawsuits to which it applies, a court may determine that this provision is unenforceable, and to the extent it is enforceable, the provision
may have the effect of discouraging lawsuits against our directors and officers and increasing the cost to stockholders of bringing such
lawsuits.

 

Listing
of our Common Stock

 

Our
common stock has been approved for listing on the Nasdaq Global Market under the symbol “LUCD.”

 

Transfer
Agent and Registrar

 

The
transfer agent and registrar for our common stock is Continental Stock Transfer & Trust Company located at 1 State Street, 30th Floor,
New York, NY 10004.

 

Page
4 of 4

(Exhibit
4.1)

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