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

     

    

 

 

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.

 

    B-12

     

    

 

 

 

		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.

 

    B-13

     

    

 

 

 

		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.

 

    B-14

     

    

 

 

 

		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.

 

    B-15

     

    

 

 

 

		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.

 

    B-16

     

    

 

 

 

		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).

 

    B-17

     

    

 

 

 

		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.

 

    B-21

     

    

 

 

 

		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 10.5

 

 

 

 

 

Wearable
Devices Ltd.

(“the
Company”)

 

Compensation
Policy for Company’s Office Holders

 

Dated:
March 2022

 

 

 

 

 

 

 

 

 

     

     

    

 

Introduction

 

		1.1	Pursuant to the provisions of the Companies Law, 1999 (hereafter – “the Companies Law”),
on March 6, 2022, the Company’s Board of Directors approved a compensation policy (hereafter – the “Policy”)
with respect to the terms of service and / or employment of Company’s office holders (as defined below) (hereafter - the “office
holders”), after discussing and considering the recommendations of the Company’s Compensation Committee regarding this
matter.

 

		1.2	The provisions of the Policy shall be subject to the provisions of any cogent law applicable to the Company
and its office holders in any territory.

 

		1.3	The underlying principles and purposes of the Policy are as follows: (a) promoting the Company’s
goals, its work plan and its policy for the long-term; (b) compensating and providing incentives to office holders, while considering
the risks that the Company’s activities involve; (c) adjusting the compensation package to the size of the Company and the nature
and scope of its activities; (d) creating incentives that are suitable to Company’s office holders by compensating those entitled
for compensation under the Policy in accordance with their positions, areas of responsibility and contribution to the development of the
Company’s business, the promotion of its targets and the maximization of profits in the short and long-term, taking into account,
among other things, the need to recruit and retain qualified, highly-skilled officers in a global and competitive market; and (e) adjusting
the compensation of office holders to the contribution of the office holder to the achievement of the Company’s goals.

 

		1.4	This Policy is a multi-annual policy that will be effective for a period of three years from the date
of its approval. This policy shall be brought forward for re-approval by the Company’s Compensation Committee, the Company’s
Board of Directors and the general meeting of its shareholders after three years have elapsed since the date of approval thereof and so
forth, unless any changes need to be made to the Policy in accordance with the law and/or in accordance with the Company’s needs.

 

		1.5	Without derogating from the provisions set out in Section 1.4 above, the Company’s Compensation
Committee and Board of Directors shall check, from time to time, whether the compensation that is granted under this policy, does, indeed,
comply with the terms of this policy and the parameters set therein for each Company office holder.

 

		1.6	This Policy is based, among other things, on the Company’s assessments as to the competitive environment
in which it operates and the challenge it faces in recruiting and retaining high-quality officers in such an environment; it is also based
on employment terms generally accepted in public companies operating in the Company’s area of activity and on existing employment
agreements between the Company and its office holder, which – in order to remove any doubt – this policy cannot change.

 

		2.	The Policy

 

		2.1	Definitions

 

Office holder- as defined in the
Companies Law- 5759-1999, i.e., Chief Executive Officer (CEO), deputy CEO, Directors, Chairman, Subordinate office holder, any person
filling any of these positions in the Company even if he holds a different title, and any other manager directly subordinate to the CEO.

 

Subordinate office holder- Office
holder subordinate reporting directly to the CEO.

 

Foreign office holder- Office
holder who his / her residency is outside of Israel.

 

		2.2	Components of the Policy

 

In accordance with the Policy, the compensation
of the Company’s office holders shall be based on all or some of the following components:

 

		2.2.1	Basic salary component– refers to the monthly salary of that employee, excluding any social
benefits and related benefits, and in respect to compensation paid as consultancy fee or equivalent (to a non-employee office holder)
– the monthly gross consultation fees, excluding VAT (if applicable);

 

    2 

     

    

 

		2.2.2	Social and related benefits - social benefits as prescribed by local law (pension savings, contributions
towards severance pay, contributions towards training fund, vacation pay, sick leave, recreation pay, etc.) and related benefits, such
as company vehicle/vehicle maintenance, telephone expenses, laptop, meals at the workplace, gifts on public holidays, etc.

 

		2.2.3	Variable cash compensation (bonus) – short and medium-term compensation, which includes annual
bonuses, which are based on results and achievement of targets. The Company may also determine that a certain office holder will be paid
discretionary annual bonuses, considering his/her contribution to the Company and the restrictions placed under this policy.

 

		2.2.4	Variable equity-based compensation– share-based payment or another long-term compensation
(subject to the existence of valid long-term compensation plans and provided that the Company decides to award such compensation).

 

(The components in sections 2.2.3
and 2.2.4 above shall be called hereafter: “the variable components”).

 

At the time of approval of the compensation
package of an office holder, the Compensation Committee and Board of Directors of the Company shall assess the compliance of each of those
components and of the total cost of employment and/or consultancy fee with the criteria set out in this plan.

 

		2.3	Parameters for reviewing compensation terms

 

Generally, some or all of the following
parameters will be considered when reviewing the compensation terms of a Company office holder.

 

		2.3.1	Education, skills, expertise, tenure (specifically in the Company and in the office holder’s field
of expertise in general), professional experience and achievements of the office holder;

 

		2.3.2	The role of the office holder, his areas of responsibility and his employment or services terms under
previous wage agreements entered into with this office holder;

 

		2.3.3	The office holder’s contribution to the Company’s business, the achievement of its strategic
goals and implementation of its work plans, the maximization of its profits and the enhancement of its strength and stability.

 

		2.3.4	The extent of responsibility delegated to the office holder.

 

		2.3.5	The Company’s need to recruit or retain an office holder with unique skills, knowledge, or expertise.

 

		2.3.6	Whether a material change has been made to the role or function of the office holder, or to the Company’s
requirements from this office holder.

 

		2.3.7	The size of the Company and the nature of its activities.

 

		2.3.8	As to service and employment terms that include retirement grants – the term of service or employment
of the office holder, the terms of his service and employment over the course of this period, the Company’s performances in the
said period, the office holder’s contribution to the achievement of the Company’s goals and the circumstances of the retirement.

 

		2.3.9	(a) The market conditions of the industry in which the Company operates at any relevant time, including
the office holder’s salary compared to the salaries of other office holders working in similar positions (or in position of comparable
level) in companies whose characteristics are similar to those of the Company in terms of its activity (as described in section 2.3.1
below); (b) the availability of suitable candidates that can serve as office holders in the Company, the recruitment and retainment of
the office holders and the need to offer an attractive compensation package in a global competitive market; and (c) changes in the Company’s
area of activity and in the scope and complexity of its activities.

 

    3 

     

    

 

		2.4	Payroll review

 

		2.4.1	For the purpose of determining the payroll that can be offered to an office holder upon recruitment, the
Company will review from time to time the payroll generally accepted in the relevant markets for similar positions in companies, which
are similar to the Company in terms of its area of activity/scope of activity/complexity of activity/market value/revenues and other relevant
parameters (if such companies exist).

 

		2.4.2	The payroll review will be conducted by the Company itself, or by an external advisor, at the Company’s
discretion, after the Compensation Committee has issued its recommendations regarding this matter.

 

		2.5	Basic salary, benefits and other related benefits

 

		2.5.1	The basic salary of a new Company office holder shall be determined taking into accounts the parameters
described in section 2.3 above and the conclusions of the payroll review described in section 2.4 above (should such a review be conducted).

 

		2.5.2	The basic salary shall be in absolute numbers. The Company may determine that an office holder’s
salary shall be linked to a certain currency or index.

 

		2.5.3	In any case, the basic monthly salary, or alternatively, the monthly consultation fees shall not exceed
the maximum amount set out below (linked to the Consumer Price Index commencing May 2015):

 

	Position**	 	Maximum basic salary* in $	 
	Active Chairman of the Board of Directors (“Active Chairman”)	 	 	30,000	 
	Company’s CEO (“CEO”)	 	 	27,500	 
	Subordinate Office holders	 	 	25,000	 
	Foreign Office holders	 	 	25,000	 

 

	*	An amount paid to an office holder other than an Active Chairman, as monthly consultation fees (in respect
of which an invoice is issued), which is up to 1.3 times higher than the maximum basic salary set for his position, shall not be considered
to be a deviation from the Policy.

 

	**	The amounts presented above are in respect of a full-time position; those amounts shall change in proportion
to the scope of position of the office holder.

 

		2.5.4	Social benefits1,
                                            related benefits, reimbursement of expenses

 

The compensation package may
include benefits that are generally acceptable in the market where employee serves, such as vacation pay2, contributions
towards pension, life insurance, education fund, training fund saving, health insurance, social rights and benefits, mobile phone
(including grossing up of the taxable value of the phone), internet and landline, gifts on public holidays, recreation, medical
tests, medical insurance and/or undertaking such an insurance policy and other expenses, all as approved by the Compensation
Committee and the Company’s Board of Directors, at their discretion and in accordance with the applicable Company policy.

 

 

		1	As
to an office holder that has entered into engagement with the Company whereby no employer-employee relationship exists, the Company may
pay the social benefits described above on top of his monthly fee in lieu of the said expenses.

		2	An office holder shall be entitled to annual leave as prescribed
by law, but the Company may grant him further paid leave up to a maximum of 24 working days per year. The Company may allow the office
holder to accumulate vacation days over his term of office in accordance with Company’s procedures.

 

    4 

     

    

 

		2.5.5	Vehicle

 

Company office holders shall be entitled
to receive a Company vehicle (including by way of leasing) in the following costs:

 

		●	CEO- up to $70,000 or by way of
leasing in the amount of up to $1,700 per month excluding VAT, linked to the consumer price index. 
	 	 	 

		●	Subordinate office holders- up
to $60,000 or by way of leasing in the amount of up to $1,600 per month before VAT, linked to the consumer price index. 

 

Such entitlement may include grossing
up the taxable value of this benefit, fuel expenses, licensing, insurance and other related expenses.

 

The Company may add an amount equal
to the vehicle costs as additional salary to the office holder, provided that the total payroll will be in accordance to the limitation
of the Policy.

 

		2.5.6	Insurance, indemnification, and exemption

 

Insurance

 

		2.5.6.1	Company’s office holders shall be entitled to insurance coverage, including “run-off”
and/or SIDE A type policies, to be provided by a liability insurance policy of directors and office holders, including the controlling
shareholders, which the Company will purchase from time to time, subject to the approvals required by law.

 

		2.5.6.2	Subject to the provisions of the law, as amended from time to time, and without detracting from the provisions
of section 2.5.6.1 above, the Company’s office holders shall be entitled to benefit from coverage provided by a liability insurance
of directors and office holders, which the Company will purchase from time to time, subject to the approval of the Compensation Committee
alone (and the approval of the Board of Directors, if required by law), provided that the insurance policy meets the following criteria
and provided that the engagement with the insurer is entered into under market conditions and will not have a material effect on the Company’s
profitability, its assets or liabilities:

 

		a.	The limit of insurer’s liability under the insurance policy shall not exceed $15,000,000 million
per claim and during the insurance period covered by that policy, plus reasonable litigation expenses in excess of the abovementioned
limit.
	 	 	 

		b.	The insurance policy may include an entity cover that will cover the Company itself in case of lawsuits
filed against it under the securities law (whether those lawsuits are filed only against the Company and whether they are filed against
the Company and office holder thereof or an office holder in its related companies). Such cover will be subject to priorities for payment
of any insurance benefits according to which the rights of the Directors and Officers to receive indemnity from the Insurer’s take precedence
over the right of the Company itself.
	 	 	 

		c.	Without derogating Section 2.5.6.2(b) above, the total annual premium that the Company will pay to an
insurance company for the office holders liability insurance as described above, shall be (i) in market conditions and in an immaterial
cost; or (ii) shall not exceed a total of $1,200,000.
	 	 	 

		d.	In case of a material change in risk, or a change in control, or in case the policy is not renewed, the
Company shall be entitled to purchase a Run-Off coverage of up to 7 years (the “Run Off period”), for a premium for
the Run Off period in the rate of up to 300% of the last paid annual premium.
	 	 	 

		e.	The excess amounts set in the insurance policies shall not exceed the amounts normally applicable in the
insurance market for policies of this type as of the date of purchasing and renewing the insurance on a periodic basis.
	 	 	 

		f.	In this section 2.5.6.2, if the overages do not exceed 10%, this will not be considered as an exemption
of the Policy.

 

    5 

     

    

 

Indemnification and Exemption

 

		2.5.6.3	The Company’s office holders may be entitled to an indemnification arrangement in accordance with
arrangements that are normally acceptable and subject to the provisions of the law and the Company’s articles of association. The
overall amount of indemnification per event to each office holder and to all office holders together, individually or in aggregate, shall
not exceed the greater of: (i) 25% of the effective shareholders’ equity of the Company; and (ii) $5,000,000 (the maximum indemnification
amount).

 

For that purpose, the “effective
shareholders’ equity of the Company” means the amount of the Company’s shareholders’ equity in accordance
with the last consolidated audited or reviewed financial statements of the Company (as applicable) at the time of actual payment of the
indemnification. It is hereby clarified that the indemnification shall be paid in excess of any amount paid under the liability insurance
of directors and office holders, which the Company has purchased or will purchase from time to time.

 

		2.5.6.4	Company office holders may be entitled to an exemption arrangement in accordance with arrangements that
are normally acceptable and subject to the provisions of the law and the Company’s articles of association.

 

		2.6	Compensation in connection with termination of employment

 

		2.6.1	Advance notice period

 

		2.6.1.1	An office holder may be entitled to advance notice period or payment in lieu of advance notice period,
as follows:
	 	 	 

Chairman-
up to 60 days advance notice period.

 

CEO- up to 90 days
advance notice period.

 

Subordinate
office holder- up to 60 days advance notice period.

 

		2.6.1.2	Over the course of the advance notice period, the office holder shall continue to do his job in the Company
at the request of the Company, unless the Company decides that he will not do so, in which case the office holder may be entitled to continue
and receive over the advance notice period all employment and service terms, which were agreed upon in his employment agreement.

 

		2.6.1.3	The service or employment terms of the office holders may include a provision whereby the Company may
terminate the services or employment of the office holder without an advance notice period in cases which deny eligibility for severance
pay according to the law, including the following cases: (a) conviction of an offence involving moral turpitude; (b) an office holder
who will conduct himself in a disloyal and/or unreliable and/or dishonest manner in his relations with the Company and/or while carrying
out actions on its behalf and/or will harm the Company’s reputation; (c) in case the office holder will breach the confidentiality
duty towards the Company and/or his duty to protect the Company rights which were developed due to or as part of his work at the Company;
(d) Any other case in which the Company is legally entitled to refrain from payment of severance pay.

 

		2.6.2	Severance pay

 

Office holders, who are Company’s
employees, will be entitled to severance pay in accordance with the provisions of the local law.

 

    6 

     

    

 

2.6.3     Retirement
terms

 

		2.6.3.1	The retirement terms of Company’s office holders shall be determined by the Compensation Committee
and the Board of Directors, in accordance with the following table, while taking into account, among other things, the parameters set
out in section 2.3 above, the period of service or employment of the office holder, the terms of service and employment over the course
of this period, his contribution to the achievement of the Company’s and the circumstances of the retirement:

 

	Seniority	 	Validation of the right from 

termination of employment / services date
	3 Years and above	 	Up to 2 monthly salaries of adjustment
	5 Years and above	 	Up to 3 months salaries of adjustment

 

		2.7	Annual bonus

 

In addition to the basic salary,
the compensation package of Company’s office holders may include eligibility to an annual bonus that is based on measurable
targets and to an annual discretionary bonus (hereafter jointly: “the annual bonus”).

 

For the purpose of this
Annual bonus section, whenever the term “salary” is used, it means (i) in the case of an employed office holder –
the gross salary in terms of employer cost as paid to the office holder for the month of December in the relevant year, including
any social benefits and related benefits as detailed in section 2.5.4 and 2.5.5 herein and (ii) in the case of office holder with no
employer-employee relationship – the fee paid to the office holder for the month of December in the relevant year, excluding
VAT (if applicable).

 

		2.7.1	Components of the annual bonus

 

The Company may grant an Office holder
an annual bonus up to the maximum annual bonus as described in the table in section 2.7.7 below, based on the compensation plan which
will be approved by the compensation committee and the Board of Directors for each year in advance.

 

At the end of each year, the Compensation
Committee and Board of Directors will review the office holders’ meeting their measurable targets in order to determine that component
of the annual bonus, which is based on measurable targets. The Compensation Committee and Board of Directors may determine to pay only
part of the component of the annual bonus, which is based on measurable targets, if the office holder meets only some of the targets.

 

According to the rates stated below,
the components for each of the Office holders of the annual bonus will be:

 

		(i)	Measurable Company Targets (from the categories in the list below);
	 	 	 

		(ii)	Measurable Personal Targets (from the categories in the list below); and
	 	 	 

		(iii)	Discretionary Bonus (according to the limitations set forth herein)

 

	 	 	Measurable 

Company Targets	 	Measurable Personal

 Targets	 	Discretionary Bonus
	Active Chairman / CEO	 	0-100%	 	0-100%	 	0-35% (by Board of Directors), see section 2.7.3(1) below
	Subordinate Office holders	 	0-100%	 	0-100%	 	0-50% (by CEO), see section 2.7.3(2) below.

 

	2.7.2		Measurable Targets (Company and Personal)

 

Set forth below are several
suggested criteria for the annual bonus that is based on measurable targets. It should be clarified that this list is not a closed
and binding list. The Compensation Committee and the Board of Directors may consider adding or removing some of those criteria,
considering the role of each office holder, his areas of responsibility and the Company’s activity. a bonus that is based on
meeting principal and personal performance metrics that are quantified and set out in the Company’s work plan and attributed
to the relevant office holder. These performance metrics may include, among other things:

 

    7 

     

    

 

Active Chairman
and CEO Measurable Targets Criteria 

 

		(a)	Sales and marketing targets.

		(b)	Increase of revenue targets.

		(c)	Engagement in contracts with revenue potential in a determined amount.

		(d)	Engagement in collaboration contracts.

		(e)	Engagement of material contracts and/or strategic contracts.

		(f)	Achievement of product development milestones.

		(g)	Reducing costs.

		(h)	Achievement of targets/milestones relating to Company’s products and projects.

		(i)	Promotion of strategic plans and targets, including targets which were set for the office holder, and
which are relevant to the relevant office holder’s area of activity.

		(j)	Achievement of regulatory approvals.

		(k)	Achievement of reimbursement for the Company’s products.

		(l)	Achievement of financial indicators targets: gross margin, operational profit/loss, net profit/loss, cash
balance, revenue.

		(m)	Achievement of funding targets: raising loans, private placement, public or rights offering of shares,
bonds, etc.

		(n)	Achievement of achieving new and/or innovative technologies.

 

Subordinate
Measurable Targets Criteria 

 

		(a)	Sales and marketing targets.

		(b)	Increase of revenue targets.

		(c)	Engagement in contracts with revenue potential in a determined amount.

		(d)	Engagement in collaboration contracts.

		(e)	Engagement of material contracts and/or strategic contracts.

		(f)	Achievement of product development milestones.

		(g)	Reducing costs.

		(h)	Achievement of targets/milestones relating to Company’s products and projects.

		(i)	Promotion of strategic plans and targets, including targets which were set for the office holder, and
which are relevant to the relevant office holder’s area of activity.

		(j)	Achievement of regulatory approvals.

		(k)	Achievement of reimbursement for the Company’s products.

		(l)	Budget and work plan related targets.

		(m)	Inventory and Production related targets.

		(n)	Achievement of financial indicators targets: gross margin, operational profit/loss, net profit/loss, cash
balance, revenue.

		(o)	Achievement of funding targets: raising loans, private placement, public or rights offering of shares,
bonds, etc.

		(p)	Achievement of achieving new and/or innovative technologies.

 

		2.7.3	Discretionary bonus 

 

		(1)	With regard to the Company’s CEO and an active Chairman of the Board of Directors –
most of the annual bonus will be based on measurable targets and an immaterial portion of the annual bonus (for that purpose “immaterial
portion” – the higher of (a) a total of 3 (gross) monthly salaries or (b) 35% of the variable components of the bonus
(actual bonus and equity-based payment) shall be a discretionary bonus that is based on qualitative criteria.

 

Notwithstanding the above, if in
a specific year the Company does not pay the CEO or the active Chairman (as applicable) an annual bonus that is based on measurable targets
(i.e., if the discretionary annual bonus paid to the CEO or the active Chairman (as applicable) constitutes the total annual bonus paid
on that year), then the amount of the discretionary bonus that the Company may pay to the CEO and to the active Chairman (as applicable
and separately) shall not exceed three (3) gross monthly salaries of that office holder.

 

    8 

     

    

 

		(2)	With regard to Subordinate Office Holders– subject to the provisions of the law, Subordinate
Office Holders, may be eligible to an annual bonus that is based on measurable targets and to a discretionary annual bonus. It should
be clarified that the amount of the discretionary bonus that the Company may pay to Subordinate Office Holders, shall not exceed three
(3) gross monthly salaries of the Subordinate Office Holder.

 

The amount of the annual bonus that
is based on measurable targets shall be calculated based on measurable criteria, that will be determined (if they are determined) for
each and every office holder at a time close to the date of the discussion held by the Board of Directors for review of the Company’s
budget for the forthcoming year, in accordance with the role of the relevant office holder, by the competent organs of the Company (in
accordance with the provisions of the law and the positions of the Securities Authority, as amended from time to time), provided that
the targets applicable to Subordinate Office Holders, shall be determined by the Company’s Compensation Committee and Board of Directors,
at the recommendation of the CEO.

 

		2.7.4	Neutralization of one-off events

 

As part of the calculation of the eligibility
to annual bonus that is based measurable targets on the basis of financial statements data (if such targets are set) the Board of Directors
or the Compensation Committee will be authorized to neutralize the effect of “one-off events”, or alternatively to decide
that such events should not be neutralized in a certain year, as applicable.

 

		2.7.5	The Company’s competent organs shall approve this component
based, among other things, on data presented by the Company’s management and based on personal assessment and recommendation issued
by the Company’s CEO (with regard to Subordinate office holders) and by the Company’s Board of Directors with regard to active
Chairman and the CEO, while listing the underlying reasons for their recommendation.

 

Notwithstanding the foregoing, subject
to applicable law, the Company’s competent organs shall be entitled to approve payment of discretionary bonus on an Annual, quarterly,
monthly, or otherwise basis.

 

		2.7.6	Annual bonus that is based on measurable targets only

 

		2.7.6.1	Subject to the provisions of the law and the positions of the Israeli Securities Authority (as amended
from time to time):

 

		a.	The Compensation Committee and Board of Directors alone will be allowed to determine the measurable targets
applicable to active Chairman of the Board of Directors or any other director, if one of the following (1) or (2) is fulfilled:

 

		(1)	All of the following conditions are met: (a) the resolution is in line with the Policy; (b) the grant
in question is based only on measurable targets; (c) the amount of the potential grant is immaterial (up to three salaries); and (d) the
targets were pre-determined by the Compensation Committee and Board of Directors.

 

    9 

     

    

 

		(2)	All of the following conditions are met: (a) the resolution is in line with the Policy; (b) the office
holder in question serves both as a director and in an operational role in the Company; (c) The Compensation Committee and Board of Directors
approved the targets, other than the said directors, who receive from the Company a bonus based on measurable targets, did not take part
in the approval of those targets (whether in their capacity as directors or in their capacity as other office holders in the Company).

 

		b.	The Compensation Committee and Board of Directors alone will be allowed to determine the measurable targets
applicable to an office holder, who is a controlling shareholder or a relative thereof (as these terms are defined in the Companies Law),
if one of the following (1) or (2) is fulfilled:

 

		(1)	All of the following conditions are met: (a) the resolution is in line with the Policy; (b) the grant
in question is based only on measurable targets; (c) the amount of the potential grant is immaterial (up to three salaries); and (d) the
targets were pre-determined by the Compensation Committee and Board of Directors.

 

		(2)	The Board of Directors has determined a clear target that is based on financial statements data and which
applies in the same manner to the controlling shareholder and his relative and to other office holders, who are not related to the controlling
shareholder.

 

		2.7.7	The maximum annual bonus of office holders as of date of payment thereof (both in respect of Discretionary Bonus
and in respect of bonus based on Measurable Targets):

 

	Role	 	Maximum
Annual Bonus3
	Active Chairman	 	Up to 9 salaries (subject to the provisions of section 2.7.3(1) above)
	CEO	 	Up to 9 salaries (subject to the provisions of section 2.7.3(1) above)
	Other Subordinate Office holders	 	Up to 6 salaries

 

		2.7.8	The Compensation Committee and Board of Directors may decide to pay the annual bonus in cash and/or equity.
	 	 	 

		2.7.9	The Compensation Committee and Board of Directors may decide
to postpone the payment of the annual bonus or reduce the amount of the annual bonus to which the office holder is entitled, at their
own discretion.

 

		2.7.10	The Company may pay an office holder, who has not completed a full year of employment, a proportionate
share of the bonus according to the period of employment of the office holder.

 

		2.7.11	The office holder shall repay to the Company that portion of the bonus he received, which was based on
measurable targets, should it be determined that this component was paid to him on the basis of erroneous data and/or data that were restated
in the Company’s financial statements, provided that the date of restatement of the financial statements does not fall later than
three (3) years after the original approval of the relevant financial statements.

 

		2.8	One-Time Bonus

 

The Board of Directors, subject to the recommendation of
the Compensation Committee and the officer’s direct supervisor, may decide to grant a one-time bonus (beyond the Annual Bonus, as
described in Section 2.7 above), to an office holder, including the chairman and directors, in respect of special efforts performed by
the officer and / or in respect of the significant contribution of the officer to the Company’s operations, special projects or
extra ordinary achievements which are not in the Company’s general course of business (the “One-Time Bonus”).

 

The aggregate amount of one-time bonus and annual bonus,
shall not exceed 9 monthly base salaries. The One-Time Bonus is separate from the Special Bonus and the annual bonus.

 

An approval of a One-Time Bonus to
the CEO, that meets the aforesaid conditions, shall not be subject to the approval of the General Meeting, as long as the aggregate amount
of the all discretionary bonuses does not exceed 12 monthly salaries.

 

 

		1	The maximum values are in respect of the aggregate annual bonus
– bonus based on measurable targets and discretionary bonus.

 

    10 

     

    

 

		2.9	Special
Bonus- merger or sale or assignment by the Company of all or substantially all of its shares or assets.

 

The Board of Directors, subject
to the recommendation of the Compensation Committee and the officer’s direct supervisor, may decide to grant a special bonus
(beyond the Annual Bonus, as described in Section 2.7 above), to an office holder, including board members and chairman, in case of
a consummation of a merger, or sale or assignment by the Company of all or substantially all of the issued and outstanding shares of
the Company and/or all or substantially all of the Company’s assets (the “Special Bonus”). The Special
Bonus for all office holders together will be subject to a limit of 8% of the Transaction value, and in accordance with applicable
law (the “Special Bonus”). The Special Bonus is separate from the One-Time Bonus and the Annual Bonus.

 

An approval of a Special Bonus to
the CEO, that meets the aforesaid conditions, shall not be subject to the approval of the General Meeting, as long as the aggregate amount
of the all discretionary bonuses does not exceed 9 monthly salaries.

 

		2.10	Commissions 

 

The CEO, may decide to grant Office
holders that are providing services of sales and/or business development for the Company, with commissions, as shall be determined in
their employment agreement (the “Sales Office holders” and “Commission”, respectively). The purpose
of granting Commissions to Sales Office holders is to incentivize Sales Office holders to increase the amount of sales of Company’s products.
For each Sales Office holder, the aggregate amount of Commissions paid by the Company in each calendar year shall be up to 5% from direct
contribution to the Company’s income from sales, and in any case, the amount paid for each Sales Office holder shall not exceed $150,000.
The Commissions will be paid on either a monthly, quarterly or annual basis. The maximum amount of Commissions shall be considered from
time to time.

 

The Commission paid to a Sales Office
holder shall be separate from the Annual Bonus and/or Special Bonus given to them, or instead of Annual Bonus and/or Special Bonus, as
suggested by in each case by the CEO and approved by the Compensation committee.

 

The Commission shall be limited by the
ratio between the fixed compensation and variable compensation, as further specified in section 2.12 herein

 

		2.11	Long-term compensation

 

		2.11.1	The purpose of granting long term compensation is to create an identity of interests between the company’s
long term business results and the office holder’s compensation. In addition, granting long term compensation is a tool for preserving
good personnel. The principles for the long-term compensation are as follows:

 

		2.11.1.1	The Company will provide equity-based compensation, which can include options, Restricted Share Units
(“RSUs”) and or any other equity-based compensation in accordance with the Option Plan, to office holders, from time
to time at the Board’s discretion.

 

		2.11.1.2	Vesting Period- The vesting period will not be less
than one year, except in cases of acceleration, in accordance with the Policy, the employment agreement and / or services with the office
holder and as will be from time to time, or in case the vesting depends on milestones.

 

		2.11.1.3	Acceleration Mechanism- The Board of directors (and
in relation to the CEO or directors, as required by applicable law) may allow immediate acceleration for any unvested options and/or
RSUs granted to office holders, upon closing of a Deemed Liquidation (as defined below):

 

“Deemed Liquidation”
- shall mean: (i) the acquisition of the Company by, or the merger of the Company with another entity, consolidation, reorganization and/or
recapitalization; provided that any of the said events results in an event prescribed under subsection (iii) below; (ii) sale, assignment
or disposal by the Company of all or substantially all of the issued and outstanding shares of the Company; (iii) any other transaction
or series of transactions following which the shareholders of the Company prior to the closing of such transaction own, directly or indirectly,
less than 50% (fifty percent) of the voting power of the surviving entity (except in connection with public offering).

 

    11 

     

    

 

It is clarified that the Company’s
Board of Directors will be entitled to reduce the definition of “Deemed Liquidation” at the time of the equity-based grant,
and to determine that “a deemed liquidation is one or more of the aforementioned criteria.”

 

		2.11.1.4	Exercise Price- The exercise price of the equity-based compensation will be determined according
to the average price of the last 30 trading days share price, prior to the grant date.

 

		2.11.1.5	Expiration date - up to ten (10) years from the date of grant.

 

		2.11.1.6	The grant of equity-based compensation will be granted as far as possible under section 102 of the Income
Tax Ordinance to employees employed in Israel (in cases of workers abroad under the existing law in those countries).

 

		2.11.1.7	the equity-based compensation is subject to the following principles (and in any case- the lowest of):

 

		1.	The value of compensation in accordance with number of monthly salaries as specified below. The maximum
compensation value is for one-year term and shall be calculated on a linear basis.

 

		2.	the maximum rate of dilution for shareholders which will not exceed the rate listed below.

 

Maximum amounts
as follows:

 

	
    Subordinate

    Office holder
	 	CEO	 	Chairman	 	Role
	6	 	6	 	6	 	Maximum Monthly Salaries
	2%	 	2%	 	2%	 	Maximum Dilution Rate

 

 

		2.11.1.8	Other conditions for long-term compensation will be in accordance with the Wearable Devices Ltd. 2015
Share Option Plan (the “Plan”) or any other long term compensation plan that will be adopted by the Company.

 

2.11.1.9 The
above-mentioned ratios and guidance will be effective to grants following the closing of a public offering.

 

		2.12	The ratio between the variable
                                            components and the basic salary component4

 

	Role	 	The ratio between the variable components and the 

total compensation
	Active Chairman of the Board of Directors	 	Up to 60%
	CEO	 	Up to 60%
	Subordinate Office Holders, if any	 	Up to 60%
	Foreign Office holders 	 	Up to 60%

 

 

		4	For that purpose, the “variable components” include
the annual bonus, one-time bonus, special bonus and annual value of the share-based payment (excluding share-based expenses related to
grants made prior to the public offering).

 

    12 

     

    

 

		2.13	Extending the term of existing agreements with Company office holders and making amendments to those
agreements

 

		2.13.1	Prior to extending the term of the services or employment agreement with a Company office holder (whether
this involves changes to the terms of employment or not), the office holder’s existing compensation package will be assessed in
relation to the parameters set out in section 2.3 above and bearing in mind the payroll review, which was conducted by the Company as
per section 2.4 above.

 

		2.13.2	Subject to the provisions of the law and the positions of the Israeli Securities Authority, as amended
from time to time, immaterial changes (as defined below) made to the service or employment terms of the Company’s CEO will need
to be approved by the Compensation Committee alone, if it approves that the changes are, indeed, immaterial and the change complies with
the provisions of this Policy.

 

		2.13.3	Subject to the provisions of the law and the positions of the Israeli Securities Authority, as amended
from time to time, immaterial changes made to the service or employment terms of the Subordinate Office Holders shall be approved by the
Company’s CEO alone, and the approval of the Compensation Committee will not be required, provided that the service and employment
terms of that office holder comply with the provisions of this Policy.

 

In sections 2.13.2 and 2.13.3 above,
“immaterial changes to the service and employment terms” are changes, the aggregate value of which does not exceed
5% of the overall annual cost of compensation of the office holder.

 

		2.14	Compensation of directors 

 

		2.14.3	The directors of the Company will be entitled to annual compensation and participation compensation which
will be determined in accordance with the provisions of the Companies Regulations (rules regarding remuneration and expenses for an external
director), 2000 hereafter and the Companies Regulations (exemptions for dual companies), 2000 (“the compensation regulations”),
as they will be from time to time and according to the Company’s rank.
	 	 	 

		2.14.4	In addition, the directors of the Company will be entitled to compensation of travel and parking expenses.
In the case of a director (except for external directors) with additional expertise in the Company’s operations and / or in other areas
where the Board has decided that they are necessary for the Company, the Company will be entitled, to award that director, solely that
the aggregate amount of the annual compensation to which the director is entitled, does not exceed the amount specified in section 2.5.3.
	 	 	 

		2.14.5	The Company may grant equity-based compensation to directors, including external directors and independent
directors, from time to time, all in accordance with applicable law. The fair value of securities granted to directors at the grant date,
as reflected in the Company’s financial statements, will be calculated on the basis of accepted valuation methods (such as Black &
Scholes / Intermediate), and will not exceed 75% of the total annual compensation and participation compensation given to directors in
the 12 months preceding grant date, or up to $50,000.
	 	 	 

		2.14.6	All other provisions regarding the long-term compensation that apply to the officers under this Policy,
will also apply to the long-term compensation granted to directors.

 

    13 

     

    

 

		2.15	Recoupment Policy 

 

The Company may seek reimbursement
of all, or a portion of any compensation paid to an Office Holder based on financial data included in Company’s financial statements
in any fiscal year that are found to be inaccurate and are subsequently restated.

 

In any such event, Company will seek
reimbursement from the Office holders to the extent such Office Holders would not have been entitled to all or a portion of such compensation,
based on the financial data included in the restated financial statements. 

 

The Compensation Committee will be
responsible for approving the amounts to be recouped and for setting terms for such recoupment from time to time.

 

		2.16	Exchange Rate

 

Monetary amounts in this Policy are
quoted in $, yet subject to the applicable currency exchange rates.

 

		2.17	The ratio between the salary of office holders and the salary of all other Company employees as
of the date of the compensation policy

 

The ratio of the average and median
salary between the officers to the other full-time employees will be up to the following ratios:

 

	Role	 	Ratio to the average
    salary5	 	Ratio to Median
    salary
	CEO	 	7	 	7
	Subordinate office holders	 	6	 	6

  

As of the date of the compensation
policy in the Company, there are 12 full-time employees who are not office holders. It is clarified that for the purpose of calculating
the aforesaid ratios, only the employees of Wearable Devices Ltd. were included.

 

At the time of approval of the compensation
policy, the compensation committee examined the existing gaps between the officers and the other employees. The existing Ratio of CEO
and subordinate office holders to average salary is approximately 2. The compensation committee and the Board of Directors believe that
these data have a limited effect on determining the salaries of the Company’s officers, given the structure of the Company, the small
number of full-time employees and the low salary of CEO and office holders reflected by the financial condition of the company prior the
significant fund raising.

 

		3	The powers of the Compensation Committee and the Company’s Board of Directors regarding the
Policy

 

		3.7	The Company’s Board of Directors is charged with the management of the Policy and all actions required
for management thereof, including the power to interpret the provisions of the Policy where doubts arise as to the manner of its implementation.

 

		3.8	The Company’s Compensation Committee and Board of Directors will assess, from time to time, the
Policy and the need to adjust it, inter alia, in accordance with the considerations and principles set out in this policy, while taking
into account the changes in the Company’s goals, market conditions, Company’s profits and revenues in previous periods in
real time and any other relevant information.

 

		3.9	In order to assess the Company’s Policy, the Company’s Compensation Committee and its Board
of Directors will monitor the implementation of the Policy in the Company.

 

***

 

		5	The ratio to the average salary
and the median salary refers to the salary cost of the employees of Wearable Devices Ltd. only,
and does not include the cost of the salaries of the officers.

 

 

14

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