Document:

EX-10.6

 Exhibit 10.6 

COMPENSATION POLICY 

Valens Semiconductor Ltd. 

Compensation Policy for Executive Officers and Directors 

(As Adopted on [            ], 2021) 

 A. Overview and Objectives 

 

	1.	 Introduction 

This document sets forth the Compensation Policy for Executive Officers and Directors (this “Compensation Policy” or
“Policy”) of Valens Semiconductor Ltd. (“Valens” or the “Company”), in accordance with the requirements of the Companies Law, 5759-1999 and the regulations promulgated
thereunder (the “Companies Law”). 
 Compensation is a key component of Valens’ overall human capital strategy to
attract, retain, reward, and motivate highly skilled individuals that will enhance Valens’ value and otherwise assist Valens to reach its business and financial long-term goals. Accordingly, the structure of this Policy is established to tie
the compensation of each officer to Valens’ goals and performance. 
 For purposes of this Policy, “Executive Officers” shall
mean “Office Holders” as such term is defined in Section 1 of the Companies Law, excluding, unless otherwise expressly indicated herein, Valens’ directors. 

This policy is subject to applicable law and is not intended, and should not be interpreted as limiting or derogating from, provisions of
applicable law to the extent not permitted. 
 This Policy shall apply to compensation agreements and arrangements which will be approved
after the date on which this Policy is adopted and shall serve as Valens’ Compensation Policy for five (5) years, commencing as of its adoption, unless amended earlier. 

The Compensation Committee and the Board of Directors of Valens (the “Compensation Committee” and the
“Board”, respectively) shall review and reassess the adequacy of this Policy from time to time, as required by the Companies Law. 
  

	2.	 Objectives  

Valens’ objectives and goals in setting this Policy are to attract, motivate and retain experienced and talented leaders who will
contribute to Valens’ success and enhance shareholder value, while demonstrating professionalism in an achievement-oriented and merit-based culture that rewards long-term excellence, and embedding and modeling Valens’ core values as part
of a motivated behavior. To that end, this Policy is designed, among other things: 
  

	 	2.1.	 To closely align the interests of the Executive Officers with those of Valens’ shareholders in order to
enhance shareholder value; 

  

	 	2.2.	 To align a significant portion of the Executive Officers’ compensation with Valens’ short and
long-term goals and performance; 

  

	 	2.3.	 To provide the Executive Officers with a structured compensation package, including competitive salaries,
performance-motivating cash and equity incentive programs and benefits, and to be able to present to each Executive Officer an opportunity to advance in a growing organization; 

 

	 	2.4.	 To strengthen the retention and the motivation of Executive Officers in the long-term; 

 

	 	2.5.	 To provide appropriate awards in order to incentivize superior individual excellence and corporate performance;
and 

  

	 	2.6.	 To maintain consistency in the way Executive Officers are compensated. 

 

	3.	 Compensation Instruments 

Compensation instruments under this Policy may include the following: 
  

	 	3.1.	 Base salary; 

  
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	 	3.2.	 Benefits; 

  

	 	3.3.	 Cash bonuses; 

  

	 	3.4.	 Equity based compensation; 

 

	 	3.5.	 Change of control provisions; and 

 

	 	3.6.	 Retirement and termination terms. 

 

	4.	 Overall Compensation - Ratio Between Fixed and Variable Compensation 

 

	 	4.1.	 This Policy aims to balance the mix of “Fixed Compensation” (comprised of base salary and benefits)
and “Variable Compensation” (comprised of cash bonuses and equity-based compensation) in order to, among other things, appropriately incentivize Executive Officers to meet Valens’ short and long-term goals while taking into
consideration the Company’s need to manage a variety of business risks. 

  

	 	4.2.	 The total annual target bonus and equity-based compensation per vesting annum (based on the fair market value
at the time of grant calculated on a linear basis) of each Executive Officer shall not exceed 95% of such Executive Officer’s total compensation package for such year. 

 

	5.	 Inter-Company Compensation Ratio 

 

	 	5.1.	 In the process of drafting this Policy, Valens’ Board and Compensation Committee have examined the ratio
between employer cost associated with the engagement of the Executive Officers, including directors, and the average and median employer cost associated with the engagement of Valens’ other employees (including contractor employees as defined
in the Companies Law) (the “Ratio”). 

  

	 	5.2.	 The possible ramifications of the Ratio on the daily working environment in Valens were examined and will
continue to be examined by Valens’ Compensation Committee from time to time in order to ensure that levels of executive compensation, as compared to the overall workforce will not have a negative impact on work relations in Valens.

 B. Base Salary and Benefits 

 

	6.	 Base Salary 

  

	 	6.1.	 A base salary provides stable compensation to Executive Officers and allows Valens to attract and retain
competent executive talent and maintain a stable management team. The base salary varies among Executive Officers, and is individually determined according to the educational background, prior vocational experience, qualifications, corporate
role, business responsibilities and past performance of each Executive Officer. 

  

	 	6.2.	 Since a competitive base salary is essential to Valens’ ability to attract and retain highly skilled
professionals, Valens will seek to establish a base salary that is competitive with base salaries paid to Executive Officers in a peer group of other companies operating in technology sectors that are as much as possible similar in their
characteristics to Valens, the list of which shall be reviewed and approved by the Compensation Committee. To that end, Valens shall utilize comparative market data and practices as a reference, including a survey comparing and analyzing the level
of the overall compensation package offered to an Executive Officer of the Company with compensation packages for persons serving in similar positions (to that of the relevant officer) in the peer group. Such compensation survey may be conducted
internally or through an external independent consultant. 

  

	 	6.3.	 The Compensation Committee and the Board may periodically consider and approve base salary adjustments for
Executive Officers. The main considerations for salary adjustment will be similar to those used in initially determining the base salary, but may also include 

  
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change of role or responsibilities, recognition for professional achievements, regulatory or contractual requirements, budgetary constraints or market trends. The Compensation Committee and the
Board will also consider the previous and existing compensation arrangements of the Executive Officer whose base salary is being considered for adjustment. Any limitation herein based on the annual base salary shall be calculated based on the
monthly base salary applicable at the time of consideration of the respective grant or benefit. 

  

	7.	 Benefits 

  

	 	7.1.	 The following benefits may be granted to the Executive Officers in order, among other things, to comply with
legal requirements: 

  

	 	7.1.1.	 Vacation days in accordance with market practice; 

 

	 	7.1.2.	 Sick days in accordance with market practice; 

 

	 	7.1.3.	 Convalescence pay according to applicable law; 

 

	 	7.1.4.	 Monthly remuneration for a study fund, as allowed by applicable law and with reference to Valens’ practice
and the practice in peer group companies (including contributions on bonus payments); 

  

	 	7.1.5.	 Valens shall contribute on behalf of the Executive Officer to an insurance policy or a pension fund, as allowed
by applicable law and with reference to Valens’ policies and procedures and the practice in peer group companies (including contributions on bonus payments); and 

 

	 	7.1.6.	 Valens shall contribute on behalf of the Executive Officer towards work disability insurance, as allowed by
applicable law and with reference to Valens’ policies and procedures and to the practice in peer group companies. 

  

	 	7.2.	 Non-Israeli Executive Officers may receive other similar, comparable or
customary benefits as applicable in the relevant jurisdiction in which they are employed. Such customary benefits shall be determined based on the methods described in Section 6.2 of this Policy (with the necessary changes and adjustments).

  

	 	7.3.	 In the events of relocation and/or repatriation of an Executive Officer to another geography, such Executive
Officer may receive other similar, comparable or customary benefits as applicable in the relevant jurisdiction in which he or she is employed or additional payments to reflect adjustments in the cost of living. Such benefits may include
reimbursement for out-of-pocket one-time payments and other ongoing expenses, such as a housing allowance, a car allowance, home
leave visit, etc. 

  

	 	7.4.	 Valens may offer additional benefits to its Executive Officers, which will be comparable to customary market
practices, such as, but not limited to: cellular and land line phone benefits, company car and travel benefits, reimbursement of business travel including a daily stipend when traveling and other business related expenses, insurances, other
benefits (such as newspaper subscriptions, academic and professional studies), etc., provided, however, that such additional benefits shall be determined in accordance with Valens’ policies and procedures. 

C. Cash Bonuses 
  

	8.	 Annual Cash Bonuses - The Objective 

 

	 	8.1.	 Compensation in the form of an annual cash bonus is an important element in aligning the Executive
Officers’ compensation with Valens’ objectives and business goals. Therefore, annual cash bonuses will reflect a pay-for-performance element, with payout
eligibility and levels determined based on actual financial and operational results, in addition to other factors the Compensation Committee may determine, including individual performance. 

  
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	 	8.2.	 An annual cash bonus may be awarded to Executive Officers upon the attainment of
pre-set periodical objectives and individual targets determined by the Compensation Committee (and, if required by law, by the Board) for each fiscal year, or in connection with such officer’s engagement,
in case of newly hired Executive Officers, taking into account Valens’ short and long-term goals, as well as its compliance and risk management policies. The Compensation Committee and the Board shall also determine applicable minimum
thresholds that must be met for entitlement to the annual cash bonus (all or any portion thereof) and the formula for calculating any annual cash bonus payout, with respect to each fiscal year, for each Executive Officer. In special circumstances,
as determined by the Compensation Committee and the Board (e.g., regulatory changes, significant changes in Valens’ business environment, a significant organizational change, significant merger and acquisition events, etc.), the Compensation
Committee and the Board may modify the objectives and/or their relative weight during the fiscal year, or may modify payouts following the conclusion of the year. 

 

	 	8.3.	 In the event that the employment of an Executive Officer is terminated prior to the end of a fiscal year, the
Company may (but shall not be obligated to) pay such Executive Officer an annual cash bonus (which may or may not be pro-rated) assuming the Executive Officer is otherwise entitled to an annual cash bonus.

  

	 	8.4.	 The actual annual cash bonus to be paid to Executive Officers shall be approved by the Compensation Committee
and the Board. 

  

	9.	 Annual Cash Bonuses - The Formula 

Executive Officers other than the CEO 
  

	 	9.1.	 The performance objectives for the annual cash bonus of Valens’ Executive Officers, other than the chief
executive officer (the “CEO”), may be approved by Valens’ CEO (in lieu of the Compensation Committee) and may be based on company, division/ departmental/business unit and individual objectives. Measurable performance
objectives, which include the objectives and the weight to be assigned to each achievement in the overall evaluation, which will be based on actual financial and operational results, such as (by way of example and not by way of limitation) revenues,
operating income and cash flows and may further include, divisional or personal objectives which may include operational objectives, such as (by way of example and not by way of limitation) market share, initiation of new markets and operational
efficiency, customer focused objectives, project milestones objectives and investment in human capital objectives, such as (by way of example and not by way of limitation) employee satisfaction, employee retention and employee training and
leadership programs. The Company may also grant annual cash bonuses to Valens’ Executive Officers, other than the CEO, on a discretionary basis. 

  

	 	9.2.	 The target annual cash bonus that an Executive Officer, other than the CEO, will be entitled to receive for any
given fiscal year, will not exceed 100% of such Executive Officer’s annual base salary. 

  

	 	9.3.	 The maximum annual cash bonus, including for overachievement performance, that an Executive Officer, other than
the CEO, will be entitled to receive for any given fiscal year, will not exceed 175% of such Executive Officer’s annual base salary. 

CEO 
  

	 	9.4.	 The annual cash bonus of Valens’ CEO will be mainly based on measurable performance objectives and subject
to minimum thresholds as provided in Section 8.2 above. Such measurable performance objectives will be determined annually by Valens’ Compensation Committee (and, if required by law, by Valens’ Board) and will be based on company and
personal objectives. These measurable performance objectives, which include the objectives and the weight to be assigned to each achievement in the overall evaluation, will be based on overall company performance measures, which are based on actual
financial and operational results, such as (by way of example and not by way of limitation) revenues, sales, operating income, cash flow or the Company’s annual operating plan and long-term plan. 

  
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	 	9.5.	 The less significant part of the annual cash bonus granted to Valens’ CEO, and in any event not more than
30% of the annual cash bonus, may be based on a discretionary evaluation of the CEO’s overall performance by the Compensation Committee and the Board based on quantitative and qualitative criteria. 

 

	 	9.6.	 The target annual cash bonus that the CEO will be entitled to receive for any given fiscal year, will not
exceed 100% of his or her annual base salary. 

  

	 	9.7.	 The maximum annual cash bonus including for overachievement performance that the CEO will be entitled to
receive for any given fiscal year, will not exceed 200% of his or her annual base salary. 

  

	10.	 Other Bonuses 

 

	 	10.1.	 Special Bonus. Valens may grant its Executive Officers a special bonus as an award for special
achievements (such as in connection with mergers and acquisitions, offerings, achieving target budget or business plan objectives under exceptional circumstances, or special recognition in case of retirement) or as a retention award at the
CEO’s discretion for Executive Officers other than the CEO (and in the CEO’s case, at the Compensation Committee’s and the Board’s discretion), subject to any additional approval as may be required by the Companies Law (the
“Special Bonus”). Any such Special Bonus will not exceed 200% of the Executive Officer’s annual base salary. A Special Bonus can be paid, in whole or in part, in equity in lieu of cash and the value of any such equity component
of a Special Bonus shall be determined in accordance with Section 13.3 below. 

  

	 	10.2.	 Signing Bonus. Valens may grant a newly recruited Executive Officer a signing bonus. Any such signing
bonus shall be granted and determined at the CEO’s discretion for Executive Officers other than the CEO (and in the CEO’s case, at the Compensation Committee’s and the Board’s discretion), subject to any additional approval as
may be required by the Companies Law (the “Signing Bonus”). Any such Signing Bonus will not exceed 50% of the Executive Officer’s annual base salary. 

 

	 	10.3.	 Relocation/ Repatriation Bonus. Valens may grant its Executive Officers a special bonus in the event of
relocation or repatriation of an Executive Officer to another geography (the “Relocation Bonus”). Any such Relocation bonus will include customary benefits associated with such relocation and its monetary value will not exceed 75%
of the Executive Officer’s annual base salary. 

  

	11.	 Compensation Recovery (“Clawback”) 

 

	 	11.1.	 In the event of an accounting restatement, Valens shall be entitled to recover from its Executive Officers the
bonus compensation or performance-based equity compensation in the amount in which such compensation exceeded what would have been paid based on the financial statements, as restated, provided that a claim is made by Valens prior to the second
anniversary following the filing of such restated financial statements. 

  

	 	11.2.	 Notwithstanding the aforesaid, the compensation recovery will not be triggered in the following events:

  

	 	11.2.1.	 The financial restatement is required due to changes in the applicable financial reporting standards; or

  

	 	11.2.2.	 The Compensation Committee has determined that Clawback proceedings in the specific case would be impossible,
impractical, or not commercially or legally efficient. 

  
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	 	11.3.	 Nothing in this Section 11 derogates from any other “Clawback” or similar provisions regarding
disgorging of profits imposed on Executive Officers by virtue of applicable securities laws or a separate contractual obligation. 

 D.
Equity Based Compensation 
  

	12.	 The Objective 

 

	 	12.1.	 The equity-based compensation for Valens’ Executive Officers will be designed in a manner consistent with
the underlying objectives of the Company in determining the base salary and the annual cash bonus, with its main objectives being to enhance the alignment between the Executive Officers’ interests with the long-term interests of Valens and its
shareholders, and to strengthen the retention and the motivation of Executive Officers in the long term. In addition, since equity-based awards are structured to vest over several years, their incentive value to recipients is aligned with
longer-term strategic plans. 

  

	 	12.2.	 The equity-based compensation offered by Valens is intended to be in the form of share options and/or other
equity-based awards, such as restricted shares, RSUs or performance stock units, in accordance with the Company’s equity incentive plan in place as may be updated from time to time. 

 

	 	12.3.	 All equity-based incentives granted to Executive Officers (other than bonuses paid in equity in lieu of cash)
shall normally be subject to vesting periods in order to promote long-term retention of the awarded Executive Officers. Unless determined otherwise in a specific award agreement or in a specific compensation plan approved by the Compensation
Committee and the Board, grants to Executive Officers other than non-employee directors shall vest based on time, gradually over a period of at least 2-4 years, or based
on performance. The exercise price of options shall be determined in accordance with Valens’ policies, the main terms of which shall be disclosed in the annual report of Valens. 

 

	 	12.4.	 All other terms of the equity awards shall be in accordance with Valens’ incentive plans and other related
practices and policies. Accordingly, the Board may, following approval by the Compensation Committee, make modifications to such awards consistent with the terms of such incentive plans, subject to any additional approval as may be required by the
Companies Law. 

  

	13.	 General Guidelines for the Grant of Awards 

 

	 	13.1.	 The equity-based compensation shall be granted from time to time and be individually determined and awarded
according to the performance, educational background, prior business experience, qualifications, corporate role and the personal responsibilities of the Executive Officer. 

 

	 	13.2.	 In determining the equity-based compensation granted to each Executive Officer, the Compensation Committee and
the Board shall consider the factors specified in Section 13.1 above, and in any event, the total fair market value of an annual equity-based compensation award at the time of grant (not including bonuses paid in equity in lieu of cash) shall
not exceed: (i) with respect to the CEO - the higher of (w) 500% of his or her annual base salary or (x) 0.5% of the Company’s fair market value at the time of approval of the grant by the Board; and (ii) with respect to each of the
other Executive Officers - the higher of (y) 300% of his or her annual base salary or (z) 0.35% of the Company’s fair market value at the time of approval of the grant by the Board. 

 

	 	13.3.	 The fair market value of the equity-based compensation for the Executive Officers will be determined by
multiplying the number of shares underlying the grant by the market price of Valens’ ordinary shares on or around the time of the grant or according to other acceptable valuation practices at the time of grant, in each case, as determined by
the Compensation Committee and the Board. 

  
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 E. Retirement and Termination of Service Arrangements 

 

	14.	 Advanced Notice Period 

Valens may provide an Executive Officer, on the basis of his/her seniority in the Company, his/her contribution to the Company’s goals and
achievements and the circumstances of his/her retirement prior notice of termination of up to twelve (12) months in the case of the CEO and other Executive Officers, during which they may be entitled to all of the compensation elements, and to
the continuation of vesting of his/her equity-based compensation. Such advance notice may or may not be provided in addition to severance, provided, however, that the Compensation Committee shall take into consideration the Executive Officer’s
entitlement to advance notice in establishing any entitlement to severance and vice versa. 
  

	15.	 Adjustment Period 

Valens may provide an additional adjustment period of up to six (6) months to the CEO or to any other Executive Officer according to
his/her seniority in the Company, his/her contribution to the Company’s goals and achievements and the circumstances of retirement, during which the Executive Officer may be entitled to all of the compensation elements, and to the continuation
of vesting of his/her equity-based compensation. 
  

	16.	 Additional Retirement and Termination Benefits 

Valens may provide additional retirement and terminations benefits and payments as may be required by applicable law (e.g., mandatory severance
pay under Israeli labor laws), or which will be comparable to customary market practices. 
  

	17.	 Non-Compete Grant 

Upon termination of employment and subject to applicable law, Valens may grant to its Executive Officers a
non-compete grant as an incentive to refrain from competing with Valens for a defined period of time. The terms and conditions of the non-compete grant shall be decided
by the Board and shall not exceed such Executive Officer’s monthly base salary multiplied by twelve (12). The Board shall consider the existing entitlements of the Executive Officer in connection with the consideration of any non-compete grant. 
  

	18.	 Limitation Retirement and Termination of Service Arrangements 

The total non-statutory payments under Section 14-17 above
for a given Executive Officer shall not exceed the Executive Officer’s monthly base salary multiplied by twenty-four (24). The limitation under this Section 18 does not apply to benefits and payments provided under other chapters of this
Policy. 
 F. Exculpation, Indemnification and Insurance 
  

	19.	 Exculpation 

Each and every Director and Executive Officer may be exempted in advance for all or any of his/her liability for damage in consequence of a
breach of the duty of care, to the fullest extent permitted by applicable law. 
  

	20.	 Insurance and Indemnification 

 

	 	20.1.	 Valens may indemnify its directors and Executive Officers to the fullest extent permitted by applicable law,
for any liability and expense that may be imposed on the director or the Executive Officer, as provided in the indemnity agreement between such individuals and Valens, all subject to applicable law and the Company’s articles of association.

  
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	 	20.2.	 Valens will provide directors’ and officers’ liability insurance (the “Insurance
Policy”) for its directors and Executive Officers as follows: 

  

	 	20.2.1.	 The limit of liability of the insurer shall not exceed the greater of $200 million or 30% of the
Company’s shareholders equity based on the most recent financial statements of the Company at the time of approval of the Insurance Policy by the Compensation Committee; and 

 

	 	20.2.2.	 The Insurance Policy, as well as the limit of liability and the premium for each extension or renewal shall be
approved by the Compensation Committee (and, if required by law, by the Board) which shall determine that the sums are reasonable considering Valens’ exposures, the scope of coverage and the market conditions and that the Insurance Policy
reflects the current market conditions and that it shall not materially affect the Company’s profitability, assets or liabilities. 

  

	 	20.3.	 Upon circumstances to be approved by the Compensation Committee (and, if required by law, by the Board), Valens
shall be entitled to enter into a “run off” Insurance Policy (the “Run-Off Policy”) of up to seven (7) years, with the same insurer or any other insurance, as follows:

  

	 	20.3.1.	 The limit of liability of the insurer shall not exceed the greater of $200 million or 30% of the
Company’s shareholders equity based on the most recent financial statements of the Company at the time of approval by the Compensation Committee; and 

  

	 	20.3.2.	 The Run-Off Policy, as well as the limit of liability and the premium
for each extension or renewal shall be approved by the Compensation Committee (and, if required by law, by the Board) which shall determine that the sums are reasonable considering the Company’s exposures covered under such policy, the scope of
coverage and the market conditions and that the Run-Off Policy reflects the current market conditions and that it shall not materially affect the Company’s profitability, assets or liabilities.

  

	 	20.4.	 Valens may extend an Insurance Policy in effect to include coverage for liability pursuant to a future public
offering of securities as follows: 

  

	 	20.4.1.	 The Insurance Policy, as well as the additional premium shall be approved by the Compensation Committee (and if
required by law, by the Board) which shall determine that the sums are reasonable considering the exposures pursuant to such public offering of securities, the scope of coverage and the market conditions and that the Insurance Policy reflects the
current market conditions, and that it does not materially affect the Company’s profitability, assets or liabilities. 

 G.
Arrangements upon Change of Control 
  

	21.	 The following benefits may be granted to the Executive Officers (in addition to, or in lieu of, the
benefits applicable in the case of any retirement or termination of service) upon or in connection with a “Change of Control” or, where applicable, in the event of a Change of Control following which the employment
of the Executive Officer is terminated or adversely adjusted in a material way: 

  

	 	21.1.	 Acceleration of vesting of outstanding options or other equity-based awards; 

 

	 	21.2.	 Extension of the exercise period of equity-based grants for Valens’ Executive Officers for a period of up
to one (1) year, following the date of termination of employment; and 

  

	 	21.3.	 Up to an additional six (6) months of continued base salary and benefits following the date of termination
of employment (the “Additional Adjustment Period”). For avoidance of doubt, such additional Adjustment Period may be in addition to the advance notice and adjustment periods pursuant to Sections 14 and 15 of this Policy, but subject
to the limitation set forth in Section 18 of this Policy. 

  
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	 	21.4.	 A cash bonus not to exceed 150% of the Executive Officer’s annual base salary in case of an Executive
Officer other than the CEO and 200% in case of the CEO. 

 H. Board of Directors Compensation 

 

	22.	 All Valens’ non-employee Board members may be entitled to an
annual cash fee retainer of up to $60,000 (and up to $120,000 for the chairperson of Valens’ Board), an annual committee membership fee retainer of up to $10,000 and an annual committee chairperson cash fee retainer of up to $20,000 (it is
being clarified that the payment for the chairpersons would be in lieu of (and not in addition) to the payments referenced above for committee membership). 

  

	23.	 The compensation of the Company’s external directors, if any are required and elected, shall be in
accordance with the Companies Regulations (Rules Regarding the Compensation and Expenses of an External Director), 5760-2000, as amended by the Companies Regulations (Relief for Public Companies Traded in Stock Exchange Outside of Israel),
5760-2000, as such regulations may be amended from time to time. 

  

	24.	 Notwithstanding the provisions of Section 22 above, in special circumstances, such as in the case of a
professional director, an expert director or a director who makes a unique contribution to the Company, such director’s compensation may be different than the compensation of all other directors and may be greater than the maximum amount
allowed under Section 22. 

  

	25.	 Each non-employee member of Valens’ Board may be granted
equity-based compensation. The total fair market value of a “welcome” or an annual equity-based compensation at the time of grant shall not exceed the higher of (i) $250,000 or (x) 0.15% of the Company’s fair market value at the time
of approval of the grant by the Board, with a vesting period of between one (1) to three (3) years. 

  

	26.	 All other terms of the equity awards shall be in accordance with Valens’ incentive plans and other related
practices and policies. Accordingly, the Board may, following approval by the Compensation Committee, make modifications to such awards consistent with the terms of such incentive plans, subject to any additional approval as may be required by the
Companies Law. 

  

	27.	 In addition, members of Valens’ Board may be entitled to reimbursement of expenses in connection with the
performance of their duties. 

  

	28.	 The compensation (and limitations) stated under Section H will not apply to directors who serve as employee of
the Company. 

 I. Miscellaneous 
  

	29.	 Nothing in this Policy shall be deemed to grant to any of Valens’ Executive Officers, employees,
directors, or any third party any right or privilege in connection with their employment by or service to the Company, nor deemed to require Valens to provide any compensation or benefits to any person. Such rights and privileges shall be governed
by applicable personal employment agreements or other separate compensation arrangements entered into between Valens and the recipient of such compensation or benefits. The Board may determine that none or only part of the payments, benefits and
perquisites detailed in this Policy shall be granted, and is authorized to cancel or suspend a compensation package or any part of it. 

  

	30.	 An Immaterial Change in the Terms of Employment of an Executive Officer other than the CEO may be approved by
the CEO, provided that the amended terms of employment are in accordance with this Policy. An “Immaterial Change in the Terms of Employment” means a change in the terms of employment of an Executive Officer with an annual total cost to the
Company not exceeding an amount equal to two (2) monthly base salaries of such employee. 

  

	31.	 In the event that new regulations or law amendment in connection with Executive Officers’ and
directors’ compensation will be enacted following the adoption of this Policy, Valens may follow such new regulations or law amendments, even if such new regulations are in contradiction to the compensation terms set forth herein.

  
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 ********************* 

This Policy is designed solely for the benefit of Valens and none of the provisions thereof are intended to provide any rights or remedies to any person other
than Valens. 

  
 11ex_278321.htm

 

Exhibit 10.3

 

 

FIRST AMENDMENT TO CREDIT AGREEMENT

 

 

THIS AMENDMENT TO CREDIT AGREEMENT (this "Amendment") dated August 16, 2021, is entered into by and between NATURAL ALTERNATIVES INTERNATIONAL, INC., a Delaware corporation ("Borrower"), and WELLS FARGO BANK, NATIONAL ASSOCIATION ("Bank").

 

RECITALS

 

WHEREAS, Borrower is currently indebted to Bank pursuant to the terms and conditions of that certain Credit Agreement between Borrower and Bank dated May 24, 2021, as amended from time to time ("Credit Agreement").

 

WHEREAS, Bank and Borrower have agreed to certain changes in the terms and conditions set forth in the Credit Agreement and have agreed to amend the Credit Agreement to reflect said changes.

 

NOW, THEREFORE, for valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto agree that the Credit Agreement shall be amended as follows:

 

1.      The following is hereby added to the Credit Agreement as Section 1.1.1.:

 

"SECTION 1.1.1. TERM LOAN.

 

(a)     Term Loan. Subject to the terms and conditions of this Agreement, Bank hereby agrees to make a loan to Borrower in the principal amount of Ten Million Dollars ($10,000,000.00) ("Term Loan"), the proceeds of which shall be used to acquire real estate. Borrower's obligation to repay the Term Loan shall be evidenced by a promissory note dated August 16, 2021, as modified from time to time ("Term Note") Bank's commitment to grant the Term Loan shall terminate on September 16, 2021.

 

(b)     Repayment. Principal and interest on the Term Loan shall be repaid in accordance with the provisions of the Term Note.

 

(c)     Prepayment. Borrower may prepay principal on the Term Loan solely in accordance with the provisions of the Term Note."

 

-1-

 

 

2.    Section 1.4. is hereby deleted in its entirety, and the following substituted therefor:

 

"SECTION 1.4.         COLLATERAL.

 

As security for all indebtedness and other obligations of Borrower to Bank, other than indebtedness that is excluded from such secured obligations by the terms of the security agreement(s) required hereunder, Borrower shall grant to Bank security interests of first priority in (1) all Borrower's accounts receivables and other rights to payment, general intangibles, inventory and equipment, and (2) all assets acquired in any Permitted Acquisition (as defined below).

 

As security for all indebtedness and other obligations of Borrower to Bank under the Term Loan, Borrower shall grant to Bank a lien of not less than first priority on that certain real property owned by Borrower located at 5928 Farnsworth Court, Carlsbad, California 92008.

 

All of the foregoing shall be evidenced by and subject to the terms of such security agreements, financing statements, deeds or mortgages, and other documents as Bank shall reasonably require, all in form and substance satisfactory to Bank. Borrower shall pay to Bank immediately upon demand the full amount of all charges, costs and expenses (to include fees paid to third parties and all allocated costs of Bank personnel), expended or incurred by Bank in connection with any of the foregoing security, including without limitation, filing and recording fees and costs of appraisals, audits and title insurance."

 

	 	
			3.

				
			The following is hereby added to the Credit Agreement as Section 2.13:

			

 

"SECTION 2.13.         REAL PROPERTY COLLATERAL.

 

Except as disclosed by Borrower to Bank in writing prior to the date hereof, with respect to any real property collateral required hereby:

 

(a)    All taxes, governmental assessments, insurance premiums, and water, sewer and municipal charges, and rents (if any) which previously became due and owing in respect thereof have been paid as of the date hereof.

 

(b)    There are no construction, mechanics' or similar liens or claims which have been filed for work, labor or material (and no rights are outstanding that under law could give rise to any such lien) which affect all or any interest in any such real property and which are or may be prior to or equal to the lien thereon in favor of Bank.

 

(c)    To the best of the Borrower’s knowledge, none of the improvements which were included for purpose of determining the appraised value of any such real property lies outside of the boundaries and/or building restriction lines thereof, and no improvements on adjoining properties materially encroach upon any such real property.

 

(d)    There is no pending, or to the best of Borrower's knowledge threatened, proceeding for the total or partial condemnation of all or any portion of any such real property, and all such real property is in good repair and free and clear of any damage that would materially and adversely affect the value thereof as security and/or the intended use thereof."

 

-2-

 

 

	 	
			4.

				
			The following is hereby added to the Credit Agreement as Section 3.1.(d), (e), (f):

			

 

"(d)   Appraisals. Bank shall have obtained, at Borrower's cost, an appraisal of any real property collateral required hereby, and all improvements thereon, issued by an appraiser acceptable to Bank and in form, substance and reflecting values satisfactory to Bank, in its discretion.

 

(e)    Title Insurance. Bank shall have received a title policy insuring Bank's lien on all real property collateral required hereby to be of first priority, as Bank may in its discretion require and subject only to such exceptions as Bank shall approve in its discretion, with all costs thereof to be paid by Borrower. As used herein, “title policy” shall mean, at Bank’s election, an Extended Coverage ALTA or CLTA Policy of Title Insurance where available, Loan Policy of Title Insurance , or, with respect to any real property collateral located in any jurisdiction in which such policies are not available, an abstract of title together with a lawyer's title opinion and title guaranty thereon (or any comparable title protection acceptable to Bank in its sole discretion), in each case with such endorsements as Bank may require, issued by a company and in form and substance satisfactory to Bank, in such amount as Bank shall require.

 

(f)    Tax Service Contract. Bank shall have procured, at Borrower's cost, such tax service contract as Bank shall require for any real property collateral required hereby, to remain in effect as long as such real property secures any obligations of Borrower to Bank as required hereby."

 

5.    Section 4.9.(b) is hereby deleted in its entirety, and the following substituted therefor:

 

"(b)         Total Liabilities divided by Tangible Net Worth not greater than 1.50 to 1.0 at any time, with “Total Liabilities” defined as the aggregate of current liabilities and non-current liabilities less operating lease liabilities, and with “Tangible Net Worth” defined as the aggregate of total stockholders' equity plus subordinated debt and less any intangible assets."

 

	 	
			6.

				
			The following is hereby added to the Credit Agreement as Section 4.9.(d):

			

 

"(d)   Fixed Charge Coverage Ratio not less than 1.25 to 1.0 as of each fiscal quarter end, calculated on a rolling 4-quarter basis, with “Fixed Charge Coverage Ratio” defined as (a) the aggregate of net profit after taxes plus depreciation expense, amortization expense, interest expense, non-cash foreign exchange hedge losses, non-cash interest rate swap losses, and cash capital contributions minus dividends, redemptions and repurchases of equity interest, non-cash foreign exchange hedge gains, and non-cash interest rate swap gains, divided by (b) the aggregate of the current maturities of long-term debt, and interest expense."

 

-3-

 

 

7.    Section 5.2. is hereby deleted in its entirety, and the following substituted therefor:

 

"SECTION 5.2.         CAPITAL EXPENDITURES. Make any additional investment in fixed or capital assets (including assets leased under capital leases, excluding real estate right of use assets) in excess of an aggregate of (i) $7,500,000.00 in fiscal year ending June 30, 2021, (ii) $15,000,000.00 (excluding the purchase of 5928 Farnsworth Court) in fiscal year ending June 30, 2022, and (iii) $7,500,000.00 in any fiscal year thereafter."

 

8.    The effective date of this Amendment shall be the date that all of the following conditions set forth in this Section have been satisfied, as determined by Bank and evidenced by Bank’s system of record. Notwithstanding the occurrence of the effective date of this Amendment, Bank shall not be obligated to extend credit under this Amendment or any other Loan Document until all conditions to each extension of credit set forth in the Credit Agreement have been fulfilled to Bank's satisfaction.

 

(a)    Approval of Bank Counsel. All legal matters incidental to the effectiveness of this Amendment shall be satisfactory to Bank's counsel.

 

(b)    Documentation. Bank shall have received, in form and substance satisfactory to Bank, each of the following, duly executed by all parties:

 

	 	
			(i)

				
			This Amendment and each promissory note or other instrument or document required hereby.

			

	 	
			(ii)

				
			Collateral Exclusion Agreement.

			

	 	
			(iii)

				
			Security Agreement: Business Assets.

			

	 	
			(iv)

				
			Deed of Trust and Assignment of Rents and Leases.

			

	 	
			(v)

				
			Such other documents as Bank may require under any other Section of this Amendment.

			

 

(c)    Regulatory and Compliance Requirements. All regulatory and compliance requirements, standards and processes shall be completed to the satisfaction of Bank.

 

 

9.    Except as specifically provided herein, all terms and conditions of the Credit Agreement remain in full force and effect, without waiver or modification. All terms defined in the Credit Agreement shall have the same meaning when used in this Amendment. This Amendment and the Credit Agreement shall be read together, as one document.

 

-4-

 

 

10.    Borrower hereby remakes all representations and warranties contained in the Credit Agreement and reaffirms all covenants set forth therein. Borrower further certifies that as of the date of this Amendment and as of the date of Borrower’s execution of this Amendment there exists no Event of Default as defined in the Credit Agreement, nor any condition, act or event which with the giving of notice or the passage of time or both would constitute any such Event of Default.

 

11.    Borrower hereby covenants that Borrower shall provide to Bank from time to time such other information as Bank may request for the purpose of enabling Bank to fulfill its regulatory and compliance requirements, standards and processes. Borrower hereby represents and warrants to Bank that all information provided from time to time by Borrower or any Third Party Obligor to Bank for the purpose of enabling Bank to fulfill its regulatory and compliance requirements, standards and processes was complete and correct at the time such information was provided and, except as specifically identified to Bank in a subsequent writing, remains complete and correct today, and shall be complete and correct at each time Borrower is required to reaffirm the representations and warranties set forth in the Credit Agreement.

 

 

IN WITNESS WHEREOF, the parties hereto, intending to be legally bound hereby, have caused this Amendment to be effective as of the effective date set forth above.

 

 

	
			NATURAL ALTERNATIVES

				
			 

				
			WELLS FARGO BANK,

			NATIONAL ASSOCIATION

			
	INTERNATIONAL, INC.	 	 
	 	
			 

				
			 

				
			By:

				
			              /s/  

			
	By:	
			             /s/ 

				
			 

				
			 

				
			DAVID A. DALSIMER,

			
	 	
			MICHAEL FORTIN,

				
			 

				
			 

				
			VICE PRESIDENT

			
	 	CHIEF FINANCIAL OFFICER	 	 	 
	 	 	 	 	 
	By:	     /s/   	    	 	 
	 	KENNETH E. WOLF,	 	 	 
	 	PRESIDENT, SECRETARY	 	 	 
	 	 	 	 	 

 

         

 

 

-5-

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