Document:

exhibit_10dd.htm

    
      

      

    

    Exhibit
10dd

     

    
      
        

      

    

     

    OPTION
EXERCISE AGREEMENT

     

    among

     

    AMPAL-AMERICAN
ISRAEL CORPORATION

     

    and

     

    MERHAV
(M.N.F.) Limited

     

    dated as
of December 31, 2009

     

    
      
        

      

    

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

    
      TABLE
OF CONTENTS

       

    

    
      
        
          	 	 	 	
                  
                    Page(s)

                  

                
	 	 	 	 
	
                  ARTICLE I DEFINITIONS

                	 
      	
                   

                	1
	 	 	 	 
	
                  ARTICLE II EXERCISE OF OPTION

                	 
      	
                   

                	
                  4

                
	    2.1      
      Exercise of Option	4
	    2.2      
      Share Adjustment	5
	    2.3      
      Closing.	6
	 	 
	
                  ARTICLE III MERHAV’S REPRESENTATIONS AND
      WARRANTIES

                	
                   

                	 
      	6
	    3.1      
      Existence; Authority; Enforceability	6
	    3.2     
      Interests in the Project	7
	    3.3     
      Absence of Conflicts	7
	    3.4      
      Compliance With Law; Consents	7
	    3.5     
      Litigation	7
	    3.6     
      Fees	8
	    3.7     
      Disclosure	
                  8

                
	 	 
	
                  ARTICLE IV COVENANTS

                	
                   

                	 
      	
                  8

                
	    4.1     
      Due Diligence	
                  8

                
	    4.2     
      Further Assurances	
                  8

                
	 	 
	
                  ARTICLE V INDEMNITY SURVIVAL

                	
                   

                	 
      	
                  10

                
	    5.1      
      Survival	
                  10

                
	    5.2      
      Indemnification	
                  10

                
	    5.3     
      Procedures Relating to Indemnification	
                  10

                
	    5.4      
      Other Claims	
                  12

                
	    5.5     
      Indemnification Limitations	
                  12

                
	 	 
	
                  ARTICLE VI MISCELLANEOUS

                	
                   

                	 
      	
                  12

                
	    6.1     
      Governing Law	
                  13

                
	    6.2     
      Arbitration.	
                  13

                
	    6.3      
      Severability	
                  13

                
	    6.4      
      Interpretation	
                  13

                
	    6.5     
      Costs and Expenses	
                  13

                
	    6.6     
      Notices	
                  13

                
	    6.7     
      Counterparts	
                  14

                
	    6.8     
      Entire Agreement	
                  14

                
	    6.9      
      No Third Party Rights; Assignment	
                  14

                
	    6.10    Waivers and Amendments	
                  14

                

        

      

       

      
        
          
          

        

        
          
          

          
            

          

        

        
          
          

        

      

      
      

       

    

    OPTION
EXERCISE AGREEMENT

     

    OPTION
EXERCISE AGREEMENT (this “Agreement”), dated as
of December 31, 2009, by and among Ampal-American Israel Corporation, a New York
corporation (“Ampal”), and
Merhav (m.n.f.) Limited,
a company organized under the laws of the State of Israel (“Merhav”) (each, a
“Party” and,
collectively, the “Parties”).

     

    RECITALS

     

    WHEREAS,
Merhav, directly and through certain subsidiaries, including Merhav Renewable
Energies Limited, a corporation organized under the laws of Cyprus (the “Company”), intends to
develop a sugarcane ethanol-producing project in Colombia, as more fully
described on Exhibit A hereto (the “Project”);

     

    WHEREAS,
Merhav and Ampal entered in to an Option Agreement, dated as of December 24,
2007 (as amended by the Letter Agreement, dated December 25, 2008, the “Option Agreement”)
pursuant to which Ampal had an Option to purchase an equity interest in the
Project; and

     

    WHEREAS,
as partial consideration for entering into and amending the original the Option
Agreement Ampal loaned Merhav $20,000,000 evidenced by the Amended and Restated
Promissory Note, dated as of December 25, 2008, by Merhav in favor of Ampal (the
“Promissory
Note”); and

     

    WHEREAS,
in consideration for Merhav (i) delaying the payment date for the purchase price
of the equity interest upon the exercise of the Option and (ii) otherwise
amending the terms of the exercise of the Option as contained herein, Ampal has
agreed to extend the maturity of the Promissory Note as provided
herein.

     

    NOW,
THEREFORE, in consideration of the aforesaid premises and of the mutual
representations, warranties and covenants contained herein, and for other good
and valuable consideration, the receipt and sufficiency of which is hereby
acknowledged, the Parties hereby agree as follows:

     

    ARTICLE
I

     

    DEFINITIONS

     

    The
following terms shall have the following meanings for purposes of this
Agreement:

     

    “Adjusted Share
Amount” has the meaning set forth in Section 2.2.

     

    “Adjustment Termination
Date” means the date which is 180 days after commercial operations of the
Project commenced.

     

    “Affiliate” means (i)
with respect to any Person, a Person that controls, is controlled by, or is
under common control with such Person (it being understood, that a Person shall
be deemed to “control” another Person, for purposes of this definition, if such
Person directly or indirectly has the power to direct or cause the direction of
the management and policies of such other Person, whether through holding
ownership interests in such other Person, through agreements or otherwise); and
(ii) with respect to any natural Person, (1) any parent, grandparent, sibling,
child or spouse of such natural Person, or other Person related by marriage to
any such Persons, (2) any trust established for the benefit of such natural
Person or any Affiliate of such natural Person or (3) any executor or
administrator of the estate of such natural Person.

     

    
      
        
        

      

      
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    “Agreement” has the
meaning set forth in the Preamble.

     

    “Ampal Shares” has the
meaning set forth in Section 2.1(a).

     

    “Authority” means any
governmental, judicial, legislative, executive, administrative or regulatory
authority of Columbia, Israel and the United States or any state, local,
provincial or foreign government or any subdivision, agency, commission, office
or judicial, administrative or regulatory authority thereof.

     

    “Business Day” means
any day other than a Saturday, Sunday or a day on which banking institutions in
New York, New York or Israel are authorized or obligated by law or executive
order to close.

     

    “Charter Documents”
means any by-laws, charter, memorandum, certificate of incorporation, articles
of association and any other similar constitutive or governing
documents.

     

    “Closing Date” means
the date on which the sale and purchase of the Shares occurs in accordance with
Section 2.3.

     

    “Consent” means any
consent, waiver, approval, authorization, exemption, registration, permit,
license or declaration of or by any Person or any Authority, or expiration or
termination of any applicable waiting period under any Legal Requirement, that
is required with respect to any Party in connection with (i) the execution and
delivery of this Agreement or any other Transaction Document or (ii) the
consummation and performance of any of the transactions provided for hereby or
thereby.

     

    “Contract” or “Contracts” means any
and all contracts and agreements, including those that are franchises,
warranties, understandings, arrangements, leases, licenses, registrations,
authorizations, mortgages, bonds, notes and other instruments (whether written
or oral).

     

    “Judgments” means any
and all judgments, orders, writs, directives, rulings, decisions, injunctions,
decrees, settlement agreements or awards of any Authority or
arbitrator.

     

    “Legal Requirements”
means any and all (i) laws, ordinances and regulations, whether federal,
provincial, state or local, of Israel, the United States, or any other
applicable jurisdiction; (ii) codes, standards, rules, requirements and criteria
issued under any laws, ordinances and regulations, whether federal, provincial,
state or local of Israel, the United States or any other applicable
jurisdiction; and (iii) Judgments.

     

    
      
        
        

      

      
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    “Liabilities” means
any obligation, liability, or indebtedness of any kind, character or
description, whether absolute, contingent, accrued, liquidated, unliquidated,
known, unknown, executory or otherwise.

     

    “Lien” means any
mortgage, pledge, hypothecation, charge, assignment, deposit arrangement,
encumbrance, security interest, lien, fiduciary assignment and any security or
similar agreement of any kind or nature whatsoever.

     

    “Necessary Action”
means, with respect to a result required to be caused, all actions (to the
extent such actions are permitted by applicable Legal Requirements) reasonably
necessary to cause such result.

     

    “Note Balance” means
the outstanding balance of principal, interest and all other amounts due under
the Promissory Note as of the date hereof, which is $22,249,000.

     

    “Option” has the
meaning set forth in the  Option Agreement.

     

    “Option Agreement” has
the meaning set forth in the Recitals.

     

    “Merhav Loan” has the
meaning set forth in Section 4.4(b).

     

    “Party” or “Parties” has the
meaning set forth in the Preamble.

     

    “Per Share Purchase
Price” means the quotient of the Purchase Price divided by the number of
Ampal Shares.

     

    “Person” means an
individual, corporation, partnership, trust, limited liability company, a branch
of any legal entity, unincorporated organization, joint stock company, joint
venture, association or other entity, or any government, or any agency or
political subdivision thereof.

     

    “Pledge Agreement”
means the Pledge Agreement, dated as of December 24, 2007, between Merhav and
Ampal, delivered a security for the Loan.

     

    “Preamble” means the
preamble to this Agreement.

     

    “Promissory Note” has
the meaning set forth in the Recitals.

     

    “Project” has the
meaning set forth in the recitals.

     

    “Purchase Price” has
the meaning set forth in Section 2.1(b).

     

    “Qualified Financing
Date”  means the date on which long term debt financing was
obtained for the Project from Banco Do Brazil or any other unaffiliated Third
Party in an amount not less than $185 Million and the first disbursement under
the financing facility has been provided or other proof of such financing
commitment has been presented to Ampal to its full satisfaction.

     

    “Recitals” means the
recitals to this Agreement.

     

    
      
        
        

      

      
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    “Shares” means shares,
par value 1 Euro per share, of the Company.

     

    “Share Equivalents”
means any securities which entitle the holder thereof to acquire Shares at any
time, including without limitation, any debt, preferred stock, rights, options,
warrants or other instrument that is at any time convertible into or
exchangeable for, or otherwise entitles the holder thereof to receive, Shares or
other securities that entitle the holder to receive, directly or indirectly,
Shares.

     

    “Shareholders
Agreement” has the meaning set forth in Section 2.1(c) (ii).

     

    “Strategic Partner
Equity” means an equity interest not to exceed, after giving effect to
the sale or issuance of such equity interest, 10% of the outstanding equity
interests in the Project on a fully diluted basis, issued to a strategic partner
mutually agreed to by Ampal and Merhav.

     

    “Termination Date”
means December 31, 2010.

     

    “Transaction
Documents” means each of this Agreement, the Shareholders Agreement, the
Disclosure Letter, the Share Issuance
Documentation and any other agreement, certificate or instrument
delivered pursuant to any of the foregoing.

     

    “Share Issuance
Documentation” has the meaning set forth in Section
2.1(b)(i).

     

    ARTICLE
II

     

    EXERCISE
OF OPTION

     

    2.1           Exercise of
Option

     

       Subject
to the conditions set forth in this Agreement, including without limitation
Sections 2.1 (c), 2.1 (d) and Section 2.3 hereof.

     

    (a)           On
the Closing Date, against payment of the Purchase Price in accordance with
Section 2.1(b), Merhav shall sell, or cause the Company to issue, to Ampal or
its designee (after giving effect to such sale or issuance and subject to
adjustment as set forth in Section 2.3 herein) such number of Shares
representing a 25% interest in all the issued and outstanding equity interests
in the Company, on a fully diluted basis (the “Ampal
Shares”).

     

    (b)           The
Purchase Price for the Ampal Shares shall be the Note Balance as of the date of
this Agreement, and shall be paid, unless otherwise agreed by the parties, on
the Closing Date.  Merhav shall give Ampal 5 days notice of the
proposed Qualified Financing Date, which shall be the proposed scheduled Closing
Date.

     

    (c)           On
the Closing Date, Merhav shall deliver to Ampal (and Ampal’s obligations under
this Agreement shall be subject to the receipt or waiver by Ampal) of the
following:

     

    (i)           such
documentation reasonably requested by, and satisfactory to, Ampal necessary and
desirable to transfer to Ampal the Ampal Shares, free and clear of any Liens(the
“Share Issuance
Documentation”);

     

    
      
        
        

      

      
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    (ii)           a
duly executed Shareholder’s Agreement, among the equity holders in the Project,
substantially in the form of Exhibit B hereto (the
“Shareholders
Agreement”);

     

    (iii)           Merhav
shall have delivered to Buyer a certificate, dated as of the Closing Date and
executed by an officer of Merhav, certifying to the fulfillment of the
conditions specified in Section 2.3(b);

     

    (iv)           payment
in full of all outstanding amounts due and payable under the Promissory
Note;

     

    (v)           such
other documentation reasonably requested by Ampal; and

     

    (vi)           deliver
to Ampal a Disclosure Letter reasonably satisfactory to Ampal.

    

    
      (d)                      On
the Closing Date, Ampal shall deliver to Merhav (and Merhav’s obligations under
this Agreement shall be subject to the receipt or waiver by Merhav of) the
following:

       

    

    (vii)           the
Shareholder’s Agreement duly executed by Ampal, and

     

    (viii)           such
documentation reasonably requested by Merhav to evidence the cancellation of the
Promissory Note and the release of the pledge under the Pledge
Agreement.

     

         2.2           Share
Adjustment.  (a)  If
prior to the Adjustment Termination Date, other than with respect to any
Strategic Partner Equity, Merhav sells or the Company issues  Shares
(or Share Equivalents entitling any Person to acquire Shares) at a price per
Share less than the Per Share Purchase Price (if the holder of the Shares or
Share Equivalents so issued shall at any time, whether by operation of purchase
price adjustments, reset provisions, floating conversion, exercise or exchange
prices or otherwise, or due to warrants, options or rights issued in connection
with such sale or issuance, be entitled to receive Shares at a price less than
the Per Share Purchase Price, such issuance shall be deemed to have occurred for
less than the Per Share Price), then, the Per Share Purchase Price shall be
reduced to equal such lower price, and (i) if the adjustment occurs prior to the
Closing Date, Ampal shall receive on the Closing Date such number of Shares
equal to the Purchase Price divided by the Per Share Purchase Price as herein
adjusted (the “Adjusted Share
Amount”) and (ii) if such adjustment occurs after the Closing Date but
prior to the Adjustment Termination Date, Merhav shall cause the Company to
issue additional Shares to Ampal so that such Shares, together with the Shares
Ampal received on the Closing Date, equal the Adjusted Share
Amount.  Such adjustment shall be made whenever such Share or Share
Equivalents are issued or sold.  Merhav shall notify Ampal in writing,
no later than the 10 days prior to the issuance or sale of such Shares or Share
Equivalents, subject to this Section, indicating therein the applicable issuance
price, or of applicable reset price, exchange price, conversion price and other
pricing terms.

     

    
      
        
        

      

      
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    (b)           Notwithstanding
the forgoing, Merhav may cause the issuance of additional Shares in the Company
up to a maximum of 5% of the issued and outstanding Shares (after giving effect
to any such issuances), provided that all
holders of equity interests in the Company will be diluted pro rata with Ampal in
connection with any such issuances.

     

    2.3           Closing.

     

    (a)           The
Closing of the sale and purchase of the Ampal Shares will occur on the
Qualifying Financing Date or as soon as practicable thereafter (the “Closing
Date”), but no later than the Termination Date.

     

    (b)           In
addition to the conditions set forth in Section 2.1(c), Ampal’s obligations to
purchase the Ampal Shares hereunder is subject to the satisfaction, or waiver by
Ampal, of the following conditions:

     

    (i)           The
occurrence of the Qualified Financing Date;

     

    (ii)           From
the date hereof through the Closing Date, no material adverse change has
occurred to the business, properties, assets, condition (financial or otherwise)
of the Project has occurred (a “Material Adverse
Effect”);

     

    (iii)           There
(i) shall not be in effect any Legal Requirement directing that the transactions
provided for herein not be consummated as provided herein or which has the
effect of rendering it impossible or illegal to consummate such transactions or
(ii) there shall not be pending or threatened by any proceeding challenging or
seeking to prohibit or materially limit the transactions contemplated by this
Agreement or any other Transaction Document.

     

    (iv)           Merhav’s
and the Company’s representations and warranties made in this Agreement or any
other Transaction Document shall be true and correct in all material respects as
of the date hereof and as of the Closing Date as though made as of such date,
except to the extent such representations and warranties expressly relate to a
specified date (in which case such representations and warranties shall be true
and correct on and as of such specified date).   Merhav shall
have complied with all covenants required to be performed before the Closing
Date.

     

    ARTICLE
III

     

    MERHAV’S
REPRESENTATIONS AND WARRANTIES

     

    Merhav
hereby represents and warrants to Ampal on the date hereof:

     

    3.1           Existence; Authority;
Enforceability.  Merhav
is a company duly organized and validly existing under the laws of
Israel.  The Company is a company duly organized and validly existing
under the laws of Cyprus.  Each of Merhav and the Company has the
requisite power and authority to enter into each Transaction Document to which
it is a party and to perform its respective obligations
thereunder.  The execution, delivery and performance by each of Merhav
and the Company of each Transaction Document to which it will be a party and the
consummation by it of the transactions contemplated hereby and thereby have been
(or when required to be delivered will be) duly authorized and approved by all
corporate action of Merhav or the Company, as the case may be.  Each
of Merhav and the Company has duly and validly executed and delivered each
Transaction Document to which it is a party, and each such Transaction Document
constitutes (or when delivered shall constitute) its legal, valid and binding
obligation, enforceable against Merhav or the Company, as the case may be, in
accordance with its terms.

     

    
      
        
        

      

      
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    3.2           Interests in the
Project.  (a)  Merhav
currently owns 100% of the outstanding equity interests in the
Company.  All of the issued and outstanding interests in the Company
have been duly authorized, validly issued and are be fully paid, nonassessable,
free of preemptive rights, with no personal liability attaching to the ownership
thereof.  There are no outstanding securities convertible into,
exchangeable for, or carrying the right to acquire, any interest in the Company,
or subscriptions, warrants, options, calls, rights (pre-emptive or other) or
other arrangements or commitments obligating any person to issue or dispose of
any of its capital stock or any ownership interest therein.  When
issued, the Ampal Shares shall be duly authorized, validly issued, fully paid,
each assessable free of any preemptive right, with no liability attaching to the
ownership thereof, and delivered to Ampal free and clean of any liens, other
than an Agreement with Riagro S.A., pursuant to which Riagro shall be entitled
to up to a 2.5% equity interest in the Project, coming from Merhav’s holdings in
the Project.

     

    3.3           Absence of
Conflicts.  The
execution and delivery by each of Merhav and the Company of the Transaction
Documents to which it is a party and the performance of its respective
obligations hereunder and thereunder, and the consummation of the transactions
contemplated hereby and thereby does not and will not conflict with, or result
in the breach of any provision of, the Charter Documents of Merhav or the
Company, as the case may be, or any Contract or violate any Legal Requirement
applicable to Merhav or the Company, as the case may be.

     

    3.4           Compliance With Law;
Consents.  No
Consent is required to be made or obtained by Merhav or the Company in
connection with (i) the execution, delivery or performance of the Transaction
Documents to be entered into by Merhav or the Company or (ii) the consummation
of any of the transactions contemplated by the Transaction
Documents.  To the best of Merhav’s knowledge, each of Merhav, the
Company and the Project are in compliance in all material respects with all
applicable Legal Requirements, except where such failure would not have or could
not reasonably by expected to have a Material Adverse Effect on Merhav, the
Company, or the Project or Merhav’s or the Company’s ability to consummate the
transactions contemplated by, and perform its obligations, under the Transaction
Documents.

     

    3.5           Litigation.  There
is no (a) litigation pending on behalf of or against or, to the best knowledge
of Merhav, material litigation threatened in writing on behalf of or against the
Company, Merhav or the Project or any of their properties, rights or assets
(including cease and desist letters or requests for a license) or (b) litigation
which questions or challenges (i) the validity of this Agreement or any
Transaction Document or (ii) any action taken or to be taken by Merhav or the
Company pursuant to this Agreement or any Transaction Document or in connection
with the transactions contemplated hereby or thereby.

     

    
      
        
        

      

      
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    3.6           Fees.  Neither
Merhav nor any of its Affiliates has paid or become obligated to pay any fee or
commission to any broker, finder or intermediary in connection with the
transactions contemplated hereby.

     

    3.7           Disclosure.  Merhav
has provided to Ampal all documents and information (i) in Merhav’s or any of
its Affiliate’s possession relating to the Project, and (ii) that is reasonably
material in connection with its decision to exercise the Option. No
representation or warranty by Merhav contained in this Agreement or any other
Transaction Document and no information contained in any other instrument
furnished or to be furnished to Ampal pursuant hereto or in connection with the
transaction contemplated by this Agreement or any other Transaction Document
contains or will contain any untrue statement of a material fact or omits or
will omit to state a material fact necessary in order to make the statements
contained herein or therein not misleading.  Merhav is not aware of
any facts or circumstances which would cause the representations and warranties
of Merhav contained in this Agreement or any other Transaction Documents to be
untrue or incorrect.  To the knowledge of Merhav, after due inquiry,
there is no fact, circumstance or condition which has had or could reasonably be
expected to have a Material Adverse Effect on Merhav or the Project, which has
not been disclosed to Ampal or its representatives.

     

    ARTICLE
IV

     

    COVENANTS

     

    4.1           Due
Diligence.  In
addition, Merhav hereby agrees to promptly deliver to Ampal (x) any new material
information with respect to the Project in its possession or control and (y) any
reports, models, projections or other information provided to any other person
or entity.

     

    4.2           Further
Assurances.  Subject
to the terms and conditions herein, each of the Parties agrees to take, or use
reasonable commercial efforts in order to cause to be taken, all Necessary
Actions and to do, or use reasonable commercial efforts in order to cause to be
done, all things necessary, proper or advisable under all applicable Legal
Requirements to consummate and make effective the transactions contemplated by
the Transaction Documents to which it is a party.

     

    4.3           Amendment of Promissory
Note.  The
Promissory Note is hereby deemed amended to extend the maturity date to the
earlier of (i)December 31, 2010 and (ii) the Qualified Financing
Date.

     

    4.4           Loan to the
Company.  (a)  Merhav
and Ampal hereby agree that if they mutually determine that the Company needs
additional funds for the continued development and operation of the Project,
that, unless otherwise agreed, they shall each make a loan to the Company on
identical  terms, which shall include, but not be limited to the
following

     

    (i)           an
original principal amount of up to $15,000,000;

     

    (ii)           an
interest rate equal Ampal’s interest cost for funding such loan;

     

    
      
        
        

      

      
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    (iii)           convertible
into Shares of the Company at a conversion price equal to the Per Share Purchase
Price; provided, however, the Merhav
Loan shall not be so convertible so long as Merhav or any of its Affiliates
(other than Ampal or its designee) remain the lender under such Merhav Loan;
and

     

    (iv)           such
loans will to be subordinated in right of payment to any third-party financing
for the Project.

     

    (b)           Until
the first anniversary of any loan extended to the Company (or its subsidiaries
or Affiliates in connection with the Project) by Merhav in accordance with
Section 4.4(a) (the “Merhav Loan”), Ampal
shall have the right to purchase the Merhav Loan from Merhav for  a
purchase price equal to all the outstanding principal, interest and other
amounts due under the loan, without premium.

     

    4.5           Reporting
Requirements. (a)  Merhav shall, or shall cause the Company to,
provide Ampal, from time to time, with such information respecting the financial
condition and operations of the Project, the Company and its subsidiaries as
Ampal may reasonably request, including, without limitation,

     

    (i)           any
and all information that would be required for Ampal to comply with law,
including, United States federal and state securities laws, and Israeli
securities laws;

     

    (ii)           requirements
of NASDAQ and the Tel Aviv Stock Exchange, or any other stock exchange on which
Ampal shares may be listed;

     

    (iii)           as
soon as available and in any event within 21 days after the end of each of the
first three quarters of each fiscal year of the Company, a consolidated balance
sheet of the Company and its consolidated subsidiaries as of the end of such
quarter and a consolidated statement of income and cash flows of the Company and
its consolidated subsidiaries for the period commencing at the end of the
previous fiscal year and ending with the end of such quarter, setting forth in
each case in comparative form the corresponding figures as of the corresponding
date and for the corresponding period of the preceding fiscal year, all in
reasonable detail; and certified by the principal financial officer of the
Company, subject, however, to year-end auditing adjustments; and

     

    (iv)           as
soon as available and in any event within 40 days after the end of each fiscal
year of the Company, a consolidated balance sheet of the Company and its
consolidated subsidiaries as of the end of such fiscal year and the related
consolidated statements of income and cash flows of the Company and its
consolidated subsidiaries for such fiscal year setting forth in each case in
comparative form the corresponding figures as of the close of and for the
preceding fiscal year, all in reasonable detail and, if requested by Ampal,
audited by an internationally recognized accounting firm reasonably acceptable
to Ampal.

     

    
      
        
        

      

      
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    4.6           Organizational
Documents.  Prior to the Closing Date, Merhav shall cause the
Company to make such changes to the Company’s organizational documents as Ampal
reasonably requests, to reflect the agreements set forth in the Shareholder’s
Agreement.

     

    ARTICLE V

     

    INDEMNITY
SURVIVAL

     

    5.1           Survival.  Each
representation and warranty in this Agreement shall survive for a period of two
years after the date hereof, provided that (i) the
representation set forth in Section 3.1 and 3.2 shall survive indefinitely and
(ii) the survival periods set forth in this Section 5.1 shall not apply to any
claims involving fraud or bad faith on the part of any Party
hereto.

     

    5.2           Indemnification.  Merhav
shall indemnify Ampal, its Affiliates and each of their respective officers,
directors, employees, stockholders, agents and representatives (collectively,
each an “Indemnified
Party”) against and hold them harmless from each and any and all actions,
suits, proceedings, claims, liabilities, losses, charges, damages, costs and
reasonable expenses (including reasonable fees and expenses of counsel)
(collectively, “Losses”) suffered or
incurred by any such Indemnified Party arising from, in connection with,
relating to or otherwise in respect of (i) any breach of, or any inaccuracy in,
any representation or warranty made by Merhav in Article III of this Agreement,
or Merhav or the Company in any other Transaction Document or in any certificate
delivered by Merhav or any of it Affiliates pursuant hereto, in each case
disregarding all qualifications and exceptions contained therein relating to
materiality or material adverse effect or like words, solely for the purpose of
determining the Losses suffered by the relevant Ampal Indemnity,  or;
(ii) any breach of any covenant of Merhav or the Company in this Agreement or
any other Transaction Document.

     

    5.3           Procedures Relating to
Indemnification.  (a)  In
order for any Indemnified Party specified in Section 5.2 to make a claim for any
indemnification as provided for under Section 5.2 in respect of, arising out of
or involving a claim or demand made by any person against the Indemnified Party
(a “Third-Party
Claim”), such Indemnified Party must notify the indemnifying party (the
“Indemnifying
Party”) in writing, and in reasonable detail, of the Third-Party Claim
within twenty Business Days after receipt by such Indemnified Party of written
notice of the Third-Party Claim; provided, however,
that failure to give such notification shall not affect the indemnification
provided hereunder except to the extent the Indemnifying Party shall have been
prejudiced as a result of such failure.  Thereafter, the Indemnified
Party shall deliver to the Indemnifying Party, within five Business Days after
the Indemnified Party’s receipt thereof, copies of all notices and documents
(including court papers) received by the Indemnified Party relating to the
Third-Party Claim; provided, however, that failure to give such notification
shall not affect the indemnification provided hereunder except to the extent the
Indemnifying Party shall have been prejudiced as a result of such
failure.

     

    (b)           If
a Third-Party Claim is made against an Indemnified Party, the Indemnifying Party
shall be entitled to participate in the defense thereof and, if it so chooses
and acknowledges its obligation to indemnify the Indemnified Party therefor, to
assume the defense thereof with counsel selected by the Indemnifying Party;
provided that
such counsel is not objected to by the Indemnified Party in its reasonable
discretion.  Should the Indemnifying Party so elect to assume the
defense of a Third-Party Claim, the Indemnifying Party shall not be liable to
the Indemnified Party for legal expenses subsequently incurred by the
Indemnified Party in connection with the defense thereof (except in the case of
a conflict of interest, as described below).  If the Indemnifying
Party assumes such defense, the Indemnified Party shall have the right to
participate in the defense thereof and to employ counsel, at its own expense,
separate from the counsel employed by the Indemnifying Party, it being
understood that the Indemnifying Party shall control such defense (except that
if, in the reasonable judgment of the Indemnifying Party’s counsel, a conflict
of interest exists between the Indemnifying Party and the Indemnified Party, the
Indemnified Party may employ its own counsel, separate from the counsel employed
by the Indemnifying Party, and may control its defense to the extent deemed
necessary by the Indemnified Party).  The Indemnifying Party shall be
liable for the fees and expenses of counsel employed by the Indemnified Party
for any period during which the Indemnifying Party is not assuming the defense
thereof or during a conflict of interest (as described above).

     

    
      
        
        

      

      
        10

        
          

        

      

      
        
        

      

    

     

    (c)           If
the Indemnifying Party so elects to assume the defense of any Third-Party Claim,
all of the Indemnified Parties shall cooperate with the Indemnifying Party in
the defense or prosecution thereof.  In any event, the Indemnified
Party and its counsel shall cooperate with the Indemnifying
Party and its counsel and shall not assert any position in any proceeding
inconsistent with that asserted by the Indemnifying Party; provided, however,
that the foregoing shall not prevent the Indemnified Party from taking the
position that it is entitled to indemnification hereunder.  All
reasonable out-of-pocket costs and expenses incurred in connection with an
Indemnified Party’s cooperation shall be borne by the Indemnifying
Party.  Such cooperation shall include the retention and (upon the
Indemnifying Party’s request) the provision to the Indemnifying Party of records
and information which are relevant to such Third-Party Claim, and making
employees available on a mutually convenient basis to provide additional
information and explanation of any material provided
hereunder.  Whether or not the Indemnifying Party shall have assumed
the defense of a Third-Party Claim, the Indemnified Party shall not admit any
liability with respect to, or settle, compromise or discharge, such Third-Party
Claim without the Indemnifying Party’s prior written consent.  If the
Indemnifying Party shall have assumed the defense of a Third-Party Claim, the
Indemnified Party shall agree to any settlement, compromise or discharge of a
Third-Party Claim which the Indemnifying Party may recommend and which by its
terms releases the Indemnifying Party completely in connection with such
Third-Party Claim and which would not impose on the Indemnified Party and
obligation to pay any amount or otherwise adversely affect the Indemnified Party
or require any relief other than monetary damages (provided, however, that the
Indemnified Party shall not be required to consent to any settlement, compromise
or discharge which would require payments by the Indemnified Party in connection
with such Third Party Claim).

     

    (d)           Notwithstanding
the foregoing, the Indemnifying Party shall not be entitled to assume the
defense of any Third-Party Claim (and shall be liable for the fees and expenses
of counsel incurred by the Indemnified Party in defending such Third-Party
Claim) if the Third-Party Claim seeks an order, injunction or other equitable
relief or relief for other than money damages against the Indemnified
Party.  The indemnification required by Section 5.2 shall be made
only after final judgment which can not be further appealed.  All
claims under Section 5.2 other than Third-Party Claims shall be governed by
Section 54.

     

    
      
        
        

      

      
        11

        
          

        

      

      
        
        

      

    

     

    (e)           The
indemnification provisions of this Article V (i) shall apply without regard to,
and shall not be subject to, any limitation by reason of set-off, limitation or
otherwise and (ii) are intended to be comprehensive and not to be limited by any
requirements of law concerning prominence of language or waiver of any legal
right under any law (including, without limitation, rights under any workers
compensation statute or similar statute conferring immunity from
suit).

     

    5.4           Other
Claims.  In
the event any Indemnified Party should have a claim against any Indemnifying
Party under Section 5.2 that does not involve a Third-Party Claim being
asserted against or sought to be collected from such Indemnified Party, the
Indemnified Party shall deliver notice of such claim to the Indemnifying Party
with reasonable promptness.  The failure by any Indemnified Party so
to notify the Indemnifying Party shall not relieve the Indemnifying Party from
any liability which it may have to such Indemnified Party under
Section 5.2, except to the extent that the Indemnifying Party has
been  prejudiced as a result of such failure.  If the
Indemnifying Party does not notify the Indemnified Party within 20 Business Days
following its receipt of such notice that the Indemnifying Party disputes its
liability to the Indemnified Party under Section 5.2, such claim specified
by the Indemnified Party in such notice shall be conclusively deemed a liability
of the Indemnifying Party under Section 5.2 and the Indemnifying Party
shall pay the amount of such liability to the Indemnified Party on demand or, in
the case of any notice in which the amount of the Loss (or any portion thereof)
is estimated, on such later date when the amount of such Loss (or such portion
thereof) becomes finally determined.  If the Indemnifying Party has
timely disputed its liability with respect to such claim, as provided above, the
Indemnifying Party and the Indemnified Party shall resolve such dispute as
follows: (i) first, the parties shall negotiate in good faith for a period of up
to 15 Business Days to resolve such dispute, then (ii) if the Indemnifying Party
and the Indemnified Party are unable to reach an agreement, they shall resolve
such dispute in accordance with Section 6.2.

     

    5.5           Indemnification
Limitations.  (a)
Notwithstanding anything to the contrary herein, the indemnification
undertakings of Purchaser in this Article V shall be subject to the following
limitations: (i) Seller shall not be required to make any indemnification
payment hereunder until such time as the Loss suffered by the Purchaser
Indemnities exceeds $1,000,000 in the aggregate, in which case the Purchaser
Indemnitees shall be entitled to indemnification for the full amount of such
Losses, including those up to the $1,000,000 threshold and (ii) in any event,
Merhav shall not be under the obligation to make any indemnification payment
hereunder in excess, in the aggregate, of the Purchase Price.

     

    ARTICLE
VI

     

    MISCELLANEOUS

     

    6.1           Governing
Law.  This
Agreement shall be governed in all respects, including validity, interpretation
and effect, by the internal laws of the State of New York without regard to its
conflict of law principles (other than Section 5-1401 of the New York General
Obligation Law).

     

    
      
        
        

      

      
        12

        
          

        

      

      
        
        

      

    

     

    6.2           Arbitration.. All
disputes between the parties hereto arising under the terms of this Agreement or
any other Transaction Documents shall be arbitrated in New York City under the
rules of the American Arbitration Association then obtaining in the City of New
York judgment on any award made by the arbitrators hereunder may be rendered in
any court having jurisdiction.

     

    6.3           Severability.  Each
Section, subsection and clause of this Agreement and each other Transaction
Documents constitutes a separate and distinct undertaking, covenant or provision
hereof.  In the event that any provision of this Agreement or any
other Transaction Document shall finally be determined to be unlawful, such
provision shall be deemed severed from this Agreement or such Transaction
Document, but every other provision of this Agreement or such Transaction
Document shall remain in full force and effect.

     

    6.4           Interpretation.  Whenever
used in this Agreement, except as otherwise expressly provided or unless the
context otherwise requires, any noun or pronoun shall be deemed to include the
plural as well as the singular and to cover all genders.  Unless
otherwise specified, words such as “herein”, “hereof”, “hereby”, “hereunder” and
words of similar import refer to this Agreement as a whole and not to any
particular Section or subsection of this Agreement, and references herein to
“Articles” or “Sections” refer to Articles or Sections of this
Agreement.  The headings in this Agreement are intended solely for
convenience of reference and shall be given no effect in the construction or
interpretation of this Agreement.

     

    6.5           Costs and
Expenses.  Each
Party shall bear its own expenses incurred in connection with the negotiation,
preparation, execution and closing of this Agreement and each other Transaction
Document and the transactions provided for hereby and thereby.

     

    6.6           Notices.  All
notices or other communications required or permitted by this Agreement or any
other Transaction Document shall be effective upon receipt and shall be in
writing and delivered personally or by overnight courier, or sent by facsimile
(with confirmation copies delivered personally or by courier within three (3)
Business Days), as follows:

     

    If to
Merhav, to:

     

    Merhav
(m.n.f) Ltd

    33
Havatzelet Hasharon Street

    Herzlia,
Israel

    Attention:
Mr. Yossef Maiman and Mr. Leo Malamud

    Facsimile:+972-9-9501733

     

    If to
Ampal, to:

     

    Ampal-American
Israel Corporation

    10 Abba
Avan St.

    Ackerstein
Tower C, 9th
Floor

    P. O. Box
12215

    Herzlya 46733 Israel

    Attention:
Yoram Firon

    Facsimile:+972-9-952-6001

    

    
      
        
        

      

      
        13

        
          

        

      

      
        
        

      

    

     

    with
copies to:

     

    Bryan
Cave LLP

    1290
Avenue of the Americas

    New York,
NY, USA 10019

    Attention:
Kenneth Henderson, Esq.

    Facsimile:
(212) 541-1357

     

    or to
such other address as hereafter shall be furnished as provided in this Section
6.6 by any Party to any other Party.  Any demand, notice or other
communication given by personal delivery shall be conclusively deemed to have
been given on the day of actual delivery thereof and, if given by facsimile, on
the day of transmittal thereof if given during the normal business hours of the
recipient, and on the Business Day during which such normal business hours next
occur if not given during such hours on any day.

     

    6.7           Counterparts.  This
Agreement and each other Transaction Document may be executed in any number of
counterparts, each of which shall be deemed an original, but all of which
together shall constitute a single instrument.

     

    6.8           Entire
Agreement.  This
Agreement together with the other Transaction Documents set forth the entire
understanding and agreement between the Parties as to the matters covered herein
and therein and supersede and replace any prior understanding, agreement or
statement of intent, in each case, written or oral, of any and every nature with
respect thereto.  In the event of any inconsistency between this
Agreement and the other Transaction Documents, this Agreement shall govern as
between the Parties with respect to the matters set forth herein.

     

    6.9           No Third Party Rights;
Assignment.  This
Agreement is intended to be solely for the benefit of the Parties and is not
intended to confer any benefits upon, or create any rights in favor, of any
Person other than the Parties and shall not be assignable without the prior
written Consent of the other Parties.  Notwithstanding any of the
foregoing, Ampal may transfer its rights and interests hereunder to an
Affiliate.

     

    6.10         Waivers and
Amendments.  No
modification of or amendment to this Agreement or any other Transaction Document
shall be valid unless in writing signed by the Parties referring specifically to
this Agreement or such other Transaction Document and stating the Parties’
intention to modify or amend the same.  Any waiver of any term or
condition of this Agreement or any other Transaction Document must be in a
writing signed by the Party sought to be charged with such waiver referring
specifically to the term or condition to be waived, and no such waiver shall be
deemed to constitute the waiver of any other breach of the same or of any other
term or condition of this Agreement or any other Transaction
Document.

     

    
      
        
        

      

      
        14

        
          

        

      

      
        
        

      

    

     

    IN
WITNESS WHEREOF, the parties hereto have duly executed this Option Agreement as
of the date first above written.

     

    
      	 	
              AMPAL-AMERICAN ISRAEL
      CORPORATION

               

              By: /s/
      Irit Eluz

                     /s/ Yoram Firon

               

              
                By:     
      __________________________________

                Name:
      Irit
      Eluz                                            
      Yoram Firon

                Title:   SVP                                                                  
      VP

                 

                MERHAV
      (M.N.F)  LIMITED

                       
      

                  By:
      /s/ Leo Malamud

                       
       /s/
      Zvi Pinczowski

                    

                  By:      
      __________________________________

                  Name:  Leo
      Malamud                             Zvi
      Pinczowski

                  Title:    SVP                                                                   VP 

                

              

            

    

                                            

     [SIGNATURE
PAGE TO OPTION EXERCISE AGREEMENT]

     

    15DC8447.pdf -- Converted by SEC Publisher 4.2, created by BCL Technologies Inc., for SEC Filing

	
EMPLOYMENT AGREEMENT

     This Employment Agreement (“Agreement”) is made as of the 8th day of March, 2010, between CombinatoRx, Incorporated, a Delaware corporation (the “Company”), and Mark H.N. Corrigan,
M.D. (the “Executive”).

     WHEREAS, the Company desires to employ the Executive and the Executive desires to be employed by the Company beginning on January 5, 2010 (the “Commencement Date”) on the terms contained
herein.

     NOW, THEREFORE, in consideration of the mutual covenants and agreements herein contained and other good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, the
parties agree as follows:

     1. Position and Duties. The Executive shall serve as the Chief Executive Officer and President of the Company, and shall have supervision and
control over and responsibility for the day-to-day business and affairs of the Company and shall have such other powers and duties as may from time to time be prescribed by the Chairman of the Board of Directors of the Company (the
“Board”), provided that such duties are consistent with the Executive’s position or other positions that he may hold from time to time. The Executive shall report to the Board of Directors of the Company. The Executive’s primary
place of employment with the Company shall be the Company’s headquarters in Cambridge, Massachusetts. The Executive shall devote his full working time and efforts to the business and affairs of the Company. Notwithstanding the foregoing, the
Executive may serve on other boards of directors, with the approval of the Board, or engage in religious, charitable or other community activities as long as such services and activities are disclosed to the Board and do not materially interfere
with the Executive’s performance of his duties to the Company as provided in this Agreement.

	
2.      		
Compensation and Related Matters.	
	 
	 	
(a) Base Salary. The Executive’s initial annual base salary shall be $450,000.	
	 

The Executive’s base salary shall be subject to annual review by the Compensation Committee but shall not be reduced below $450,000 per annum. The base salary in effect at any given time is referred to herein as
“Base Salary.” The Base Salary shall be payable in a manner that is consistent with the Company’s usual payroll practices for senior executives. 

     (b) Incentive Compensation. The Executive shall be eligible to receive cash incentive compensation as determined by the Compensation
Committee from time to time. The Executive’s initial target annual incentive compensation shall be 50 percent of his Base Salary. The Executive’s target annual incentive compensation shall be reset annually but shall not be reduced below
50 percent of his Base Salary. To earn incentive compensation, the Executive must be employed by the Company on the day such incentive compensation is paid.

     (c) Expenses. The Executive shall be entitled to receive prompt reimbursement for all reasonable expenses incurred by him before the
termination of his employment in performing services hereunder, in accordance with the policies and procedures then in effect and established by the Company for its senior executive officers. Notwithstanding

the foregoing, the Company shall reimburse the Executive for all reasonable travel (which shall be deemed to include Business Class (or First Class if Business Class is not offered) airfare), entertainment and other expenses
incurred or paid by the Executive before the termination of his employment hereunder in connection with, or related to, the performance of his Chief Executive Officer and President of the Company duties, responsibilities or services under this
Agreement. 

     (d) Other Benefits. The Executive shall be entitled to participate in or receive benefits under all of the Company’s Employee Benefit
Plans in effect on the date hereof, or under plans or arrangements that provide the Executive with benefits at least substantially equivalent to those provided under such Employee Benefit Plans. As used herein, the term “Employee Benefit
Plans” includes, without limitation, each pension and retirement plan; supplemental pension, retirement and deferred compensation plan; savings and profit-sharing plan; stock ownership plan; stock purchase plan; stock option plan; life
insurance plan; medical insurance plan; disability plan; and health and accident plan or arrangement established and maintained by the Company on the date hereof for employees of the same status within the hierarchy of the Company. Notwithstanding
the foregoing, the Executive shall be entitled to participate in or receive benefits under any employee benefit plan or arrangement which may, in the future, be made available by the Company to him as Chief Executive Officer and President of the
Company or to its executives and key management employees, subject to and on a basis consistent with the terms, conditions and overall administration of such plan or arrangement. Any payments or benefits payable to the Executive under a plan or
arrangement referred to in this Section 2(d) in respect of any calendar year during which the Executive is employed by the Company for less than the whole of such year shall, unless otherwise provided in the applicable plan or arrangement, be
prorated in accordance with the number of days in such calendar year during which he is so employed. Should any such payments or benefits accrue on a fiscal (rather than calendar) year, then the proration in the preceding sentence shall be on the
basis of a fiscal year rather than calendar year. The Company, however, reserves the right to modify, terminate, or replace its employee benefit plans and policies.

     (e) Vacations. The Executive shall be entitled to four weeks’ vacation each year and the standard paid holidays observed by the Company.
For calendar year 2010, the Company and the Executive acknowledge and agree the Executive is entitled to four weeks of vacation beginning January 27, 2010.

     3. Termination. The Executive’s employment hereunder may be terminated without any breach of this Agreement under the following
circumstances:

	
 
		
 		
(a) 
		
 		
Death. The Executive’s employment hereunder shall terminate upon his 
	
	
death. 
		
 		
 
		
 		
 
	
	
 
	
	
 
		
 		
(b) 
		
 		
Disability. The Company may terminate the Executive’s employment if 
	

he is disabled and unable to perform the essential functions of the Executive’s then existing position or positions under this Agreement with or without reasonable accommodation for a period of 180 days (which need not be
consecutive) in any 12-month period. If any question shall arise as to whether during any period the Executive is disabled so as to be unable to perform the essential functions of the Executive’s then existing position or positions with or
without reasonable accommodation, the Executive may, and at the request of the Company shall,

2

submit to the Company a certification in reasonable detail by a physician selected by the Company to whom the Executive or the Executive’s guardian has no reasonable objection as to whether the Executive is so disabled or how
long such disability is expected to continue, and such certification shall for the purposes of this Agreement be conclusive of the issue. The Executive shall cooperate with any reasonable request of the physician in connection with such
certification. If such question shall arise and the Executive shall fail to submit such certification, the Company’s determination of such issue shall be binding on the Executive. Nothing in this Section 3(b) shall be construed to waive the
Executive’s rights, if any, under existing law including, without limitation, the Family and Medical Leave Act of 1993, 29 U.S.C. §2601 et seq. and the Americans with Disabilities
Act, 42 U.S.C. §12101 et seq.

     (c) Termination by Company for Cause. The Company may terminate the Executive’s employment hereunder for Cause by a vote of the Board at
a meeting of the Board called and held for such purpose. For purposes of this Agreement, “Cause” shall mean: (i) the Executive’s conviction of a felony; (ii) the Executive’s willful failure to perform (other than by reason of
disability), or gross negligence in the performance of, the Executive’s duties and responsibilities, which failure or negligence continues or remains uncured after 30 days’ written notice to the Executive setting forth in reasonable detail
the nature of such failure or negligence; (iii) material breach by the Executive of any provision of any agreement between the Executive and the Company, which breach continues or remains uncured after 30 days’ written notice to the Executive
setting forth in reasonable detail the nature of such breach; or (iv) material fraudulent conduct by the Executive with respect to the Company. 

     (d) Termination Without Cause. The Company may terminate the Executive’s employment hereunder at any time without Cause. Any termination
by the Company of the Executive’s employment under this Agreement which does not constitute a termination for Cause under Section 3(c) and does not result from the death or disability of the Executive under Section 3(a) or (b) shall be deemed a
termination without Cause.

     (e) Termination by the Executive. The Executive may terminate his employment hereunder at any time for any reason, including but not limited
to Good Reason. For purposes of this Agreement, “Good Reason” shall mean that the Executive has complied with the “Good Reason Process” (hereinafter defined) following the occurrence of any of the following events: (i) the
Company materially reducing the scope of the Executive’s duties and responsibilities or materially demoting or reducing the Executive’s authority; (ii) a material change to the Executive’s primary place of employment with the Company,
which results in the Company changing the Executive’s primary place of employment to a location that is more than 50 miles from the Executive’s primary place of employment with the Company immediately prior to such change; or (iii) the
Company materially reducing the Executive’s base salary. “Good Reason Process” shall mean that (i) the Executive reasonably determines in good faith that a “Good Reason” condition has occurred; (ii) the Executive notifies
the Company in writing of the first occurrence of the Good Reason condition within 60 days of the first occurrence of such condition; (iii) the Executive cooperates in good faith with the Company’s efforts, for a period not less than 30 days
following such notice (the “Cure Period”), to remedy the condition; (iv) notwithstanding such efforts, the Good Reason condition continues to exist; and (v) the Executive terminates his employment within 180 days after the first occurrence
of the Good 

3

Reason condition. If the Company cures the Good Reason condition during the Cure Period, Good Reason shall be deemed not to have occurred.

     (f) Notice of Termination. Except for termination as specified in Section 3(a), any termination of the Executive’s employment by the
Company or any such termination by the Executive shall be communicated by written Notice of Termination to the other party hereto, and shall be effective as of the applicable Date of Termination specified in Section 3(g). For purposes of this
Agreement, a “Notice of Termination” shall mean a notice which shall indicate the specific termination provision in this Agreement relied upon.

     (g) Date of Termination. “Date of Termination” shall mean: (i) if the Executive’s employment is terminated by his death, the
date of his death; (ii) if the Executive’s employment is terminated on account of disability under Section 3(b) or by the Company for Cause under Section 3(c), the date on which Notice of Termination is given; (iii) if the Executive’s
employment is terminated by the Company under Section 3(d), 30 days after the date on which a Notice of Termination is given; (iv) if the Executive’s employment is terminated by the Executive under Section 3(e) without Good Reason, 30 days
after the date on which a Notice of Termination is given, and (v) if the Executive’s employment is terminated by the Executive under Section 3(e) with Good Reason, the date on which a Notice of Termination is given after the end of the Cure
Period. Notwithstanding the foregoing, in the event that the Executive gives a Notice of Termination to the Company, the Company may unilaterally accelerate the Date of Termination and such acceleration shall not result in a termination by the
Company for purposes of this Agreement.

	
4.      		
Compensation Upon Termination.	
	 
	 	
(a) Termination Generally. If the Executive’s employment with the Company	
	 

is terminated for any reason, the Company shall pay or provide to the Executive (or to his authorized representative or estate) any earned but unpaid base salary, incentive compensation earned but not yet paid, unpaid expense
reimbursements, accrued but unused vacation and any vested benefits the Executive may have under any employee benefit plan of the Company (the “Accrued Benefit”) on or before the time required by law but in no event more than 30 days after
the Executive’s Date of Termination.

     (b) Termination by the Company Without Cause or by the Executive with Good Reason.
If the Executive’s employment is terminated by the Company without Cause as provided in Section 3(d), or the Executive terminates his employment for Good Reason as provided in Section 3(e), then the Company shall, through the Date of
Termination, pay the Executive his Accrued Benefit. In addition:

     (i) subject to the Executive signing a general release of claims in favor of the Company and related persons and entities in a form and manner satisfactory to the Company (the “Release”)
within the 21-day period following the Date of Termination and the expiration of the seven-day revocation period for the Release, the Company shall pay the Executive an amount equal to two times the Executive’s Base Salary (the “Severance
Amount”). The Severance Amount shall be paid in a lump sum on the first payroll date that occurs 30 days after the Date of Termination; and

4

     (ii) the Executive may continue to participate in the Company’s group health, dental and vision program for 24 months, with the cost of the premiums for such benefits paid by the Company;
provided, however, that the continuation of health benefits under this Section shall reduce and count against the Executive’s rights under the Consolidated Omnibus Budget Reconciliation Act of 1985, as amended (“COBRA”), and provided
further that the cost of premiums for such benefits attributable to the last six months of said 24 month period shall be subject to the provisions of Section 6(b).

     5. Change of Control Payment. The provisions of this Section 5 set forth certain terms of an agreement reached between the Executive and the
Company regarding the Executive’s rights and obligations upon the occurrence of a Change of Control of the Company. These provisions are intended to assure and encourage in advance the Executive’s continued attention and dedication to his
assigned duties and his objectivity during the pendency and after the occurrence of any such event. These provisions shall apply in lieu of, and expressly supersede, the provisions of Section 4(b) regarding severance pay and benefits upon a
termination of employment, if such termination of employment occurs within 24 months after the occurrence of the first event constituting a Change of Control. These provisions shall terminate and be of no further force or effect beginning 24 months
after the occurrence of a Change of Control.

     (a) Change of Control. If within 24 months after a Change of Control, the Executive’s employment is terminated by the Company without
Cause as provided in Section 3(d) or the Executive terminates his employment for Good Reason as provided in Section 3(e), then the Company shall, through the Date of Termination, pay the Executive his Accrued Benefit on or before the time required
by law but in no event more than 30 days after the Executive’s Date of Termination. In addition: 

     (i) subject to the signing of the Release by the Executive within 30 days after the Date of Termination and the expiration of the seven-day revocation period for the Release, the Company shall pay the
Executive a lump sum in cash in an amount equal to two times the Executive’s current Base Salary (or the Executive’s Base Salary in effect immediately prior to the Change of Control, if higher). Such payment shall be paid on the first
payroll date that occurs 30 days after the Date of Termination; and

     (ii) notwithstanding anything to the contrary in any applicable option agreement or stock-based award agreement, all stock options and other stock-based awards held by the Executive shall immediately
vest and become fully exercisable or issuable (without forfeiture restriction) as of the Date of Termination; and

     (iii) the Executive may continue to participate in the Company’s group health, dental and vision program for 24 months, with the cost of the premiums for such benefits paid by the Company;
provided, however, that the continuation of health benefits under this Section shall reduce and count against the Executive’s rights under COBRA, and provided further that the cost of premiums for such benefits attributable to the last six
months of said 24 month period shall be subject to the provisions of Section 6(b).

5

     (b) Definitions. For purposes of this Section 5, the following terms shall have the following meanings:

     A “Change of Control” shall be deemed to have occurred when any of the following events takes place: (i) any Person is or becomes the beneficial owner (as defined in Rule 13d-3 under the
Securities and Exchange Act of 1934, as amended), directly or indirectly, of 50 percent or more of the outstanding common stock of the Company; (ii) a sale, merger or consolidation after which securities possessing more than 50 percent of the total
combined voting power of the Company’s outstanding securities have been transferred to or acquired by a Person or Persons different from the Persons who held such percentage of the total combined voting power immediately prior to such
transaction; or (iii) the sale, transfer or other disposition of all or substantially all of the Company’s assets to one or more Persons (other than a wholly owned subsidiary of the Company or a parent company whose stock ownership after the
transaction is the same as the Company’s ownership before the transaction). For purposes of this Change of Control definition, “Person” means an individual, a corporation, a limited liability company, an association, a partnership, an
estate, a trust and any other entity or organization, other than the Company or any persons or entities directly or indirectly controlling, controlled by or under common control with the Company, where control may be by either management authority
or equity interest.

	
6.      		
Section 409A.	
	 
	 	
(a) Anything in this Agreement to the contrary notwithstanding, if at the time	
	 

of the Executive’s separation from service within the meaning of Section 409A of the Internal Revenue Code of 1986, as amended (the “Code”), the Company determines that the Executive is a “specified
employee” within the meaning of Section 409A(a)(2)(B)(i) of the Code, then to the extent any payment or benefit that the Executive becomes entitled to under this Agreement on account of the Executive’s separation from service would be
considered deferred compensation subject to the 20 percent additional tax imposed pursuant to Section 409A(a) of the Code as a result of the application of Section 409A(a)(2)(B)(i) of the Code, such payment shall not be payable and such benefit
shall not be provided until the date that is the earlier of (A) six months and one day after the Executive’s separation from service, or (B) the Executive’s death. If any such delayed cash payment is otherwise payable on an installment
basis, the first payment shall include a catch-up payment covering amounts that would otherwise have been paid during the six-month period but for the application of this provision, and the balance of the installments shall be payable in accordance
with their original schedule. Any such delayed cash payment shall earn interest at an annual rate equal to the applicable federal short term rate published by the Internal Revenue Service for the month in which the date of separation from service
occurs, from such date of separation from service until the payment.

     (b) All in-kind benefits provided and expenses eligible for reimbursement under this Agreement shall be provided by the Company or incurred by the Executive during the time periods set forth in this
Agreement. All reimbursements shall be paid as soon as administratively practicable, but in no event shall any reimbursement be paid after the last day of the taxable year of the Executive following the taxable year in which the expense was
incurred. The amount of in-kind benefits provided or reimbursable expenses incurred in one taxable year 

6

of the Executive shall not affect the in-kind benefits to be provided or the expenses eligible for reimbursement in any other taxable year. Such right to reimbursement or in-kind benefits is not subject to liquidation or exchange
for another benefit.

     (c) To the extent that any payment or benefit described in this Agreement constitutes “non-qualified deferred compensation” under Section 409A of the Code, and to the extent that such
payment or benefit is payable upon the Executive’s termination of employment, then such payments or benefits shall be payable only upon the Executive’s “separation from service.” The determination of whether and when a separation
from service has occurred shall be made in accordance with the presumptions set forth in Treasury Regulation Section 1.409A-1(h).

     (d) The parties intend that this Agreement will be administered in accordance with Section 409A of the Code. To the extent that any provision of this Agreement is ambiguous as to its compliance with
Section 409A of the Code, the provision shall be read in such a manner so that all payments hereunder comply with Section 409A of the Code. The parties agree that this Agreement may be amended, as reasonably requested by either party, and as may be
necessary to fully comply with Section 409A of the Code and all related rules and regulations in order to preserve the payments and benefits provided hereunder without additional cost to either party.

     (e) The Company makes no representation or warranty to the Executive or any other person if any provisions of this Agreement are determined to constitute deferred compensation subject to Section 409A
of the Code but do not satisfy an exemption from, or the conditions of, such Section.

     7. Noncompetition; Cooperation; Confidential Information; and Invention Assignment.

     (a) Noncompetition and Nonsolicitation. During the Executive’s employment with the Company and for 12 months thereafter, regardless of
the reason for the termination, the Executive (i) will not, directly or indirectly, whether as owner, partner, shareholder, consultant, agent, employee, co-venturer or otherwise, engage, participate, assist or invest in any Competing Business (as
hereinafter defined); (ii) will refrain from directly or indirectly employing, attempting to employ, recruiting or otherwise soliciting, inducing or influencing any person to leave employment with the Company (other than terminations of employment
of subordinate employees undertaken in the course of the Executive’s employment with the Company); and (iii) will refrain from soliciting or encouraging any customer or supplier to terminate or otherwise modify adversely its business
relationship with the Company. The Executive understands that the restrictions set forth in this Section 7(a) are intended to protect the Company’s interest in its confidential information and established employee, customer and supplier
relationships and goodwill, and agrees that such restrictions are reasonable and appropriate for this purpose. For purposes of this Agreement, the term “Competing Business” shall mean the business of discovering, developing and/or
commercializing: (i) pharmaceuticals that target calcium and sodium ion channels, (ii) combination pharmaceuticals and technologies that discover combination pharmaceuticals, (iii) modified release formulations of long-acting opioids, or
(iv) any other products that are competitive with or similar to the products of the Company or 

7

the products that the Company has under active development at the time of the termination of Executive's employment. Notwithstanding the foregoing, the Executive may own up to one percent (1%) of the outstanding stock of a
publicly held corporation which constitutes or is affiliated with a Competing Business, and the Executive's Board of Directors memberships on the date of this Agreement shall not be deemed to constitute a Competing Business.

     (b) Third-Party Agreements and Rights. The Executive hereby confirms that the Executive is not bound by the terms of any agreement with any
previous employer or other party which restricts in any way the Executive’s employment by the Company. The Executive represents to the Company that the Executive’s execution of this Agreement, the Executive’s employment with the
Company and the performance of the Executive’s proposed duties for the Company will not violate any obligations the Executive may have to any such previous employer or other party. In the Executive’s work for the Company, the Executive
will not disclose or make use of any information in violation of any agreements with or rights of any such previous employer or other party, and the Executive will not bring to the premises of the Company any copies or other tangible embodiments of
non-public information belonging to or obtained from any such previous employment or other party.

     (c) Litigation and Regulatory Cooperation. During and after the Executive’s employment, the Executive shall cooperate fully with the
Company in the defense or prosecution of any claims or actions now in existence or which may be brought in the future against or on behalf of the Company which relate to events or occurrences that transpired while the Executive was employed by the
Company. The Executive’s full cooperation in connection with such claims or actions shall include, but not be limited to, providing complete and truthful information and testimony, being available to meet with counsel to prepare for discovery
or trial and to act as a witness on behalf of the Company at mutually convenient times. During and after the Executive’s employment, the Executive also shall cooperate fully with the Company in connection with any investigation or review of any
federal, state or local regulatory authority as any such investigation or review relates to events or occurrences that transpired while the Executive was employed by the Company. The Company shall reimburse the Executive for any reasonable
out-of-pocket expenses incurred in connection with the Executive’s performance of obligations pursuant to this Section 7(c) and, if the Executive is no longer employed by the Company, will additionally pay the Executive a per diem (based upon
the Executive’s Base Salary at the time of the Executive’s Date of Termination) for any such cooperation other than the provision of testimony in a deposition or trial setting.

     (d) Injunction. The Executive agrees that it would be difficult to measure any damages caused to the Company which might result from any
breach by the Executive of the promises set forth in this Section 7, and that in any event money damages would be an inadequate remedy for any such breach. The Executive agrees that if the Executive breaches, or threatens to breach, any portion of
this Agreement, the Company shall be entitled, in addition to all other remedies that it may have, to an injunction or other appropriate equitable relief to restrain any such breach without showing or proving any actual damage to the
Company.

     (e) Confidential Information. The Executive agrees at all times during the term of Executive’s employment and thereafter, to hold in
strict confidence, and not to use, except for the benefit of the Company, or to disclose to any person, firm or corporation without 

8

written authorization of an officer of the Company, any Confidential Information. “Confidential Information” means any research conducted by the Executive either alone or with others during the Executive’s
employment by the Company, and all results and data generated in connection therewith, and any confidential or proprietary information, technical data, trade secrets or knowhow of the Company, including, but not limited to, research and product
plans, products, services, customer lists and customers, markets, developments, inventions, processes, formulas, technology, marketing, finances or other business information disclosed to the Executive by the Company, either directly or indirectly,
in writing, orally or otherwise. The Executive recognizes that the Company has received and in the future will receive from third parties confidential or proprietary information of such third parties subject to a duty on the Company’s part to
maintain the confidentiality of such information and to use such information only for certain limited purposes, and the Executive understands that such information is also Confidential Information. The Executive further understands that Confidential
Information does not include any of the foregoing information or items that has become publicly known and made generally available 

	
(f)      		
Inventions and Publication Reports.	
	 
	 	
(i) Inventions Retained and Licensed. The Executive has attached	
	 

hereto as Exhibit A a list describing all inventions, original works of authorship, developments, improvements, and trade secrets of every nature and kind, that were made
by the Executive prior to his employment with the Company (collectively referred to as “Prior Inventions”) or, if no such list is attached, the Executive represents that there are no such Prior Inventions. If, in the course of the
Executive’s employment with the Company, the Executive incorporates into a Company product, process or machine a Prior Invention owned by the Executive or in which the Executive has an interest, the Company is hereby granted and will have a
non-exclusive, royalty free, irrevocable, perpetual, worldwide license, with the right to grant sublicenses, to make, have made, modify, use, sell, and otherwise exploit or utilize in any manner such Prior Invention as part of or in connection with
such product, process or machine. The Executive further agrees that with respect to all Inventions or other matters that may arise during the Executive’s employment that may result in publishable material, with or without consideration, all
such publications rights shall belong exclusively to the Company. When and if such materials and items are published by the Company, the Company agrees to note the Executive’s involvement and development of such materials and items.

     (ii) Assignment of Inventions. The Executive agrees that he will promptly make full written disclosure to the Company, and will hold in trust
for the sole right and benefit of the Company, and hereby assigns to the Company, or the Company’s designee, the Executive’s full right, title, and interest in and to any and all inventions, original works of authorship, developments,
concepts, improvements or trade secrets, whether or not patentable or registrable under patent, copyright or similar laws, that the Executive may solely or jointly make, develop, conceive or reduce to practice, or cause to be made, developed,
conceived or reduced to practice, during the period of time the Executive is in the employ of the Company (collectively referred to as "Inventions”). The Executive further acknowledges that all original works of authorship that are made by the
Executive (solely or jointly with others) within the scope of and during the period 

9

of his employment with the Company and that are protectable by copyright are “works made for hire,” as that term is defined in the United States Copyright Act.

     (iii) Maintenance of Records. The Executive agrees to keep and maintain adequate and current written records of all Inventions made,
developed, conceived or reduced to practice by the Executive (solely or jointly with others) during the term of the Executive’s employment with the Company. The records will be in the form of notes, sketches, drawings, and any other format that
may be specified by the Company. The records will be available to and remain the sole property of the Company at all times.

     (iv) Patent and Copyright Registrations. The Executive agrees to assist the Company, or the Company’s designee, at the Company’s
expense, in every way to secure the Company’s rights in the Inventions and any copyrights, patents, mask work rights or other intellectual property rights relating thereto in any and all countries, including disclosing to the Company all
pertinent information and data with respect thereto, and executing all applications, specifications, oaths, assignments and all other instruments that the Company shall deem necessary in order to apply for and obtain such rights and in order to
assign and convey to the Company, the Company’s successors, assigns, and nominees the sole and exclusive rights, title and interest in and to such Inventions, and any copyrights, patents, mask work rights or other intellectual property rights
relating thereto. The Executive further agrees that his obligation to execute or cause to be executed, when it is in his power to do so, any such instrument or papers will continue after the termination of this Agreement. If the Executive is unable
because of his mental or physical incapacity or for any other reason to secure his signature to apply for or to pursue any application for any United States of America or foreign patents or copyright registrations covering Inventions or original
works of authorship assigned to the Company as above, then the Executive hereby irrevocably designates and appoints the Company and the Company’s duly authorized officers and agents as his agent and attorney in fact, to act for and in his
behalf and stead to execute and file any such applications and to do all other lawfully permitted acts to further the prosecution and issuance of letters patent or copyright registrations thereon with the same legal force and effect as if executed
by the Executive.

8. Consent to Jurisdiction. The parties hereby consent to the jurisdiction of the 

Superior Court of the Commonwealth of Massachusetts and the United States District Court for the District of Massachusetts. Accordingly, with respect to any such court action, the Executive (a) submits to the personal jurisdiction
of such courts; (b) consents to service of process; and (c) waives any other requirement (whether imposed by statute, rule of court, or otherwise) with respect to personal jurisdiction or service of process.

     9. Integration. This Agreement constitutes the entire agreement between the parties with respect to the subject matter hereof and supersedes
all prior agreements between the parties concerning such subject matter. 

10

     10. Withholding. All payments made by the Company to the Executive under this Agreement shall be net of any tax or other amounts required to
be withheld by the Company under applicable law.

     11. Successor to the Executive. This Agreement shall inure to the benefit of and be enforceable by the Executive’s personal
representatives, executors, administrators, heirs, distributees, devisees and legatees. In the event of the Executive’s death after his termination of employment but prior to the completion by the Company of all payments due him under this
Agreement, the Company shall continue such payments to the Executive’s beneficiary designated in writing to the Company prior to his death (or to his estate, if the Executive fails to make such designation).

     12. Enforceability. If any portion or provision of this Agreement (including, without limitation, any portion or provision of any section of
this Agreement) shall to any extent be declared illegal or unenforceable by a court of competent jurisdiction, then the remainder of this Agreement, or the application of such portion or provision in circumstances other than those as to which it is
so declared illegal or unenforceable, shall not be affected thereby, and each portion and provision of this Agreement shall be valid and enforceable to the fullest extent permitted by law.

     13. Survival. The provisions of this Agreement shall survive the termination of this Agreement and/or the termination of the Executive’s
employment to the extent necessary to effectuate the terms contained herein.

     14. Waiver. No waiver of any provision hereof shall be effective unless made in writing and signed by the waiving party. The failure of any
party to require the performance of any term or obligation of this Agreement, or the waiver by any party of any breach of this Agreement, shall not prevent any subsequent enforcement of such term or obligation or be deemed a waiver of any subsequent
breach.

     15. Notices. Any notices, requests, demands and other communications provided for by this Agreement shall be sufficient if in writing and
delivered in person or sent by a nationally recognized overnight courier service or by registered or certified mail, postage prepaid, return receipt requested, to the Executive at the last address the Executive has filed in writing with the Company
or, in the case of the Company, at its main offices in Cambridge, Massachusetts, attention of the Board.

     16. Amendment. This Agreement may be amended or modified only by a written instrument signed by the Executive and by a duly authorized
representative of the Company.

     17. Governing Law. This is a Massachusetts contract and shall be construed under and be governed in all respects by the laws of the
Commonwealth of Massachusetts, without giving effect to the conflict of laws principles of such Commonwealth. With respect to any disputes concerning federal law, such disputes shall be determined in accordance with the law as it would be
interpreted and applied by the United States Court of Appeals for the First Circuit.

11

     18. Counterparts. This Agreement may be executed in any number of counterparts, each of which when so executed and delivered shall be taken
to be an original; but such counterparts shall together constitute one and the same document.

     19. Gender Neutral. Wherever used herein, a pronoun in the masculine gender shall be considered as including the feminine gender unless the
context clearly indicates otherwise.

12

     IN WITNESS WHEREOF, the parties have executed this Agreement effective on the date and year first above written.

	
COMBINATORX, INCORPORATED

	
By: /s/ Jason F. Cole

Title: SVP and General Counsel

	
EXECUTIVE

	
/s/ Mark H. N. Corrigan

Mark H.N. Corrigan, M.D.

	
[Signature Page to Employment Agreement]

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