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As filed with the Securities and Exchange Commission on July 11, 2019.
Registration No. 333-    ​
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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM F-1
REGISTRATION STATEMENT
UNDER THE SECURITIES ACT OF 1933
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INMODE LTD.
(Exact name of registrant as specified in its charter)
Not Applicable
(Translation of Registrant’s name into English)
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State of Israel
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3845
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Not Applicable
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(State or other jurisdiction of
incorporation or organization)
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(Primary Standard Industrial
Classification Code Number
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(I.R.S. Employer
Identification No.)
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Moshe Mizrahy
InMode Ltd.
Tavor Building, Sha’ar Yokneam
P.O. Box 533
Yokneam 2069206, Israel
Tel. +972-4-9096313
(Address, including zip code, and telephone number, including area code, of registrant’s principal executive offices)
Invasix Inc.
20996 Bake Parkway, Suite 106
Lake Forest, California 96230
Tel. +1-949-387-5711
(Name, address, including zip code and telephone number, including area code, of agent for service)
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Copies to:
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Anna T. Pinedo
Brian D. Hirshberg
Mayer Brown LLP
1221 Avenue of the Americas
New York, New York 10020-1001
Tel. (212) 506-2275
Fax (212) 849-5767
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Galia Amir Cheyne
Sagi Omer
Primes, Shiloh, Givon, Meir
Law Firm
16 Derech Hayam
Haifa 34741, Israel
Tel. (972-4) 838-8332
Fax (972-4) 838-1401
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Joshua G. Kiernan
Nathan Ajiashvili
Latham & Watkins LLP
885 Third Avenue
New York, New York 10022-4834
Tel. (212) 906-1200
Fax (212) 751-4864
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Chaim Friedland
Ari Fried
Gornitzky & Co.
Zion House
45 Rothschild Blvd.
Tel Aviv 6578403, Israel
Tel. (972-3) 710-9191
Fax (972-3) 560-6555
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Approximate date of commencement of proposed sale to the public: As soon as practicable after the effective date of this registration statement.
If any of the securities being registered on this Form are to be offered on a delayed or continuous basis pursuant to Rule 415 under the Securities Act of 1933, as amended, check the following box. ☐
If this Form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act of 1933, as amended, check the following box and list the registration statement number of the earlier effective registration statement for the same offering. ☐
If this form is a post-effective amendment filed pursuant to Rule 462(c) under the Securities Act of 1933, as amended, check the following box and list the registration statement number of the earlier effective registration statement for the same offering. ☐
If this form is a post-effective amendment filed pursuant to Rule 462(d) under the Securities Act of 1933, as amended, check the following box and list the registration statement number of the earlier effective registration statement for the same offering. ☐
Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933, as amended. ☒
If an emerging growth company that prepares its financial statements in accordance with U.S. GAAP, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 7(a)(2)(B) of the Securities Act of 1933, as amended. ☒
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CALCULATION OF REGISTRATION FEE
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Title of each class of securities to be registered
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Proposed Maximum Aggregate
Offering Price (1)
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Amount of
Registration Fee (2)
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Ordinary shares, par value NIS 0.01 per ordinary share
​ ​ ​ $ 75,000,000 ​ ​ ​ ​ $ 9,090.00 ​ ​
(1)
Estimated solely for the purpose of calculating the registration fee pursuant to Rule 457(o) under the Securities Act of 1933, as amended. Includes ordinary shares that the underwriters have the option to purchase.
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(2)
Calculated pursuant to Rule 457(o) based on an estimate of the proposed maximum offering price.
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The registrant hereby amends this registration statement on such date or dates as may be necessary to delay its effective date until the registrant shall file a further amendment which specifically states that this registration statement shall thereafter become effective in accordance with Section 8(a) of the Securities Act of 1933, as amended, or until the registration statement shall become effective on such date as the Securities and Exchange Commission, acting pursuant to said Section 8(a), may determine.
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The information contained in this preliminary prospectus is not complete and may be changed. This preliminary prospectus is not an offer to sell these securities, and we are not soliciting an offer to buy these securities in any jurisdiction where an offer or sale is not permitted.
Subject to Completion, dated July 11, 2019
PROSPECTUS
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          Shares
[MISSING IMAGE: LG_INMODE.JPG]
InMode Ltd.
Ordinary Shares
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This is our initial public offering of our ordinary shares. We are offering        of our ordinary shares. No public market currently exists for our ordinary shares. We currently expect the initial public offering price to be between $     and $     per ordinary share.
We have applied to list our ordinary shares on The Nasdaq Global Market under the symbol ‘‘INMD.’’
We are an ‘‘emerging growth company’’ as defined under federal securities laws and, as such, may elect to comply with certain reduced public company reporting requirements.
Investing in our ordinary shares involves risks that are described in the “Risk Factors” section beginning on page13 of this prospectus.
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Per Ordinary
Share
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Total
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Price to public
​ ​ ​ $      ​ ​ ​ ​ $      ​ ​
Underwriting discounts and commissions (1)
​ ​ ​ $ ​ ​ ​ ​ ​ $ ​ ​ ​
Proceeds to us (before expenses)
​ ​ ​ $ ​ ​ ​ ​ ​ $ ​ ​ ​
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(1)
See ‘‘Underwriting’’ for a description of the compensation payable to the underwriters.
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The underwriters may also exercise their option to purchase up to an additional      ordinary shares from us at the initial public offering price, less underwriting discounts and commissions, for 30 days after the date of this prospectus.
Neither the Securities and Exchange Commission nor any state securities commission has approved or disapproved of the securities being offered by this prospectus, or determined if this prospectus is truthful or complete. Any representation to the contrary is a criminal offense.
The underwriters expect to deliver the ordinary shares to purchasers on or about            , 2019.
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Joint Book-Running Managers
​ Barclays ​ ​
UBS Investment Bank​
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Lead Manager
Canaccord Genuity
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Co-Manager
Baird
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Prospectus dated            , 2019
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You should rely only on the information contained in this prospectus any amendment or supplement to this prospectus or in any free writing prospectus prepared by us or on our behalf. Neither we nor any of the underwriters have authorized anyone to provide you with different information. We are offering to sell, and seeking offers to buy, ordinary shares only in jurisdictions where offers and sales are permitted. The information in this prospectus is accurate only as of the date of this prospectus, regardless of the time of delivery of this prospectus or of any sale of our ordinary shares.
We own or have rights to trademarks, service marks or trade names that we use in connection with the operation of our business. In addition, our names, logos and website names and addresses are our service marks or trademarks. Other trademarks, service marks and trade names appearing in this prospectus are the property of their respective owners. Solely for convenience, the trademarks, service marks and trade names referred to in this prospectus are listed without the ©, ® and TM symbols, but we will assert, to the fullest extent under applicable law, our rights to these trademarks, service marks and trade names.
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PROSPECTUS SUMMARY
This summary highlights information contained elsewhere in this prospectus and does not contain all of the information that you should consider in making your investment decision. You should read the following summary together with the entire prospectus including our unaudited interim consolidated financial statements and audited consolidated financial statements and related notes appearing elsewhere in this prospectus. You should also consider carefully, among other matters, the matters we discuss in the sections titled “Risk Factors,” “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and “Business.” Unless otherwise indicated, all references in this prospectus to “InMode” or the “Company,” “we,” “our,” “ours,” “us” or similar terms refer to InMode Ltd., together with its consolidated subsidiaries, and “dollar” or “$” refer to U.S. dollars. The terms “shekels” and “NIS” refer to New Israeli Shekels, the lawful currency of the State of Israel. Unless otherwise indicated, the information in this prospectus assumes no exercise of the underwriters’ overallotment option.
Overview
We are a leading global provider of innovative, energy-based, minimally-invasive surgical aesthetic and medical treatment solutions. Within the global aesthetics market, our products and solutions are primarily designed to address three energy-based treatment categories comprised of: (i) face and body contouring; (ii) medical aesthetics; and (iii) women’s health. We have developed and commercialized products utilizing medically-accepted radio frequency energy, or RF energy, technology, which can penetrate deep into the subdermal fat, allowing adipose tissue remodeling. We believe our RF energy-based proprietary technologies — (i) Radio Frequency Assisted Lipolysis, or RFAL, (ii) Deep Subdermal Fractional Radio Frequency, or Deep Subdermal Fractional RF, (iii) Simultaneous Fat Destruction and Skin Tightening and (iv) Deep Heating Collagen Remodeling — represent a paradigm shift in the minimally-invasive aesthetic solutions market. These technologies are used by physicians to remodel subdermal adipose, or fatty, tissue in a variety of procedures including liposuction with simultaneous skin tightening, face and body contouring and ablative skin rejuvenation treatments. Our products, developed with our proprietary RF energy-based technologies, overcome many of the shortcomings of other aesthetic options by delivering surgical-grade results while significantly minimizing risks of scarring, downtime, pain and other complications typically accompanying surgical procedures. In addition to our minimally-invasive solutions, we design, develop, manufacture and market differentiated, non-invasive medical aesthetic products that target a wide array of procedures. These include simultaneous fat killing and skin tightening, permanent hair reduction through the use of our innovative dual wavelength technology and other treatments targeting skin appearance and texture through the use of our high power intense pulsed light, or IPL, technology. Our products, which we market and sell traditionally to plastic and facial surgeons, aesthetic surgeons, dermatologists and aesthetic obstetricians/gynecologists, or OB/GYNs, or collectively, our traditional customer base, may be used on a variety of body parts including the face, neck, abdomen, upper arms, thighs and intimate feminine regions.
In addition to the existing group of patients who currently undergo full surgical aesthetic procedures, we believe our minimally-invasive solutions satisfy an unmet market demand in two incremental groups of patients: (i) those whose skin laxity or other physical attributes have previously prevented them from undergoing surgical aesthetic procedures and (ii) those who would entertain the idea of surgical or minimally-invasive aesthetic procedures, but are averse to the associated costs, downtime and potential safety risks. We believe these patient populations will continue to represent a significant opportunity for our differentiated minimally-invasive aesthetic solutions.
We believe our products have consistently been at the forefront of technological development in the aesthetic solutions market. Since 2010, we have launched six product platforms: BodyTite , Optimas , Votiva , Contoura , Triton and EmbraceRF . Each product consists of the following components: a platform that incorporates multiple energy sources, one or more handpieces, our proprietary software and a simple, user interface with touch screen. Our platforms have a small footprint and are lightweight compared to our competitors’ systems, which are typically larger and heavier. Our products can be upgraded easily by the user in order to perform additional treatments by adding handpieces to and/or installing software on the existing platforms. The ease of upgrades enables our customers to meet demand for aesthetic solutions through additional service offerings.
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Our focus on innovation has resulted in a strong track record of sustained new and next-generation product development. We believe our ability to bring new products to market and continuously innovate is a distinct competitive advantage. We expect to launch three new product platforms by the end of 2019, all of which will be based on our existing RF energy-based proprietary technology, with the goal of further penetrating the market for surgical aesthetic and medical treatment solutions. Our three new product platforms are intended to address the treatment of cellulite appearance ( CelluTite ), body skin tightening ( Evolve ), and face and neck skin tightening ( Evoke ). Our CelluTite platform is comprised of three handpieces, each of which has been cleared by the U.S. Food and Drug Administration, or FDA, intended to address the treatment of cellulite appearance. Two of the handpieces are cleared for use in dermatological and general surgical procedures for electrocoagulation and hemostasis of tissues including fat, and the third handpiece has been cleared for use in treatments for the temporary reduction in the appearance of cellulite. We expect to introduce the CelluTite product platform to the market during the fourth quarter of 2019. The Evolve platform received FDA clearance in June 2019 and is expected to be introduced to the market during the second half of 2019. We submitted a premarket notification to the FDA pursuant to Section 510(k) of the Federal Food, Drug and Cosmetic Act for our Evoke product platform in July 2019. Subject to receipt of FDA clearance, we intend to introduce Evoke to the market during the second half of 2019. The CelluTite , Evolve and Evoke product platforms are subject to the same FDA 510(k) clearance process as our current products.
In response to customers’ desires to enhance and expand their offering of our aesthetic and wellness office-based procedures, we are developing additional RF energy-based platforms, handpieces and applicators targeted towards several medical specialties.
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For OB/GYNs, we currently sell the Votiva platform, which includes two handpieces, FormaV and Morpheus8 . We are currently developing additional handpieces and applicators as part of this platform to assist with the following procedures:
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non-incisional labiaplasty (a procedure to reshape the labia minora) using our AccuTite RFAL handpiece ( Aviva ); and
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post-partum restoration of abdominal muscles and pelvic floor restoration using our external and internal electro-muscle stimulation, or EMS, handpieces.
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For ophthalmologists, we are developing a new platform that, in addition to our existing aesthetic handpieces, we expect will assist with the following procedures:
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lower and upper eyelid contraction and fat reduction using the AccuTite and Morpheus8 handpieces; and
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treatment of periorbital wrinkles and dry eye with a new continuous bi-polar RF energy handpiece.
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Our new handpiece to treat dry eye and periorbital wrinkles is currently in an in-office ex vivo preclinical evaluation. We expect to introduce our new product platform for ophthalmologists comprising of three handpieces ( AccuTite , Morpheus8 and our new handpiece to treat dry eye and periorbital wrinkles) to the market during the second quarter of 2020.
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For ear, nose and throat physicians, or ENTs, we are in the initial stage of developing a new platform and handpiece that we believe will provide patients with a medical treatment solution for snoring. The handpiece is based on our Deep Subdermal Fractional RF technology and is expected to contract and stiffen the soft palate (located on the back of the roof of the mouth), which blocks the airway, causing tissues to vibrate during sleep. This platform and handpiece are in the concept design phase.
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We are focused on establishing and using clinical evidence to support and broaden our marketing claims and drive customer awareness and acceptance of our products. Traditionally, the aesthetic solutions market has relied heavily on marketing efforts and “before-and-after” pictures in an attempt to distinguish products. We believe our focus on establishing clinical evidence for the efficacy of our products has been important for adoption by our surgically-trained customers, who are accustomed to seeing extensive clinical data in their non-aesthetic practices. To date, we have a portfolio of 44 peer-reviewed publications and a
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number of our products have been used in 36 completed third-party clinical studies and 18 ongoing third-party clinical studies. While we did not have any involvement in the clinical studies mentioned above, such studies provide qualitative results that we believe are meaningful. However, because these were third-party studies, we do not have access to any raw data to conduct any quantitative analyses.
To complement our surgical aesthetic and medical treatment solutions, we offer post-sales training and support services. We provide physicians with training focused on the most beneficial ways to utilize our products, including safety and instructional videos to expand procedural offerings and hands-on, personalized marketing support. We believe that we provide one of the most extensive training and ongoing support programs available to physicians throughout the aesthetic solutions market.
Our revenue increased to approximately $30.6 million for the three months ended March 31, 2019, from approximately $20.9 million for the three months ended March 31, 2018. Our revenue increased to approximately $100.2 million for the year ended December 31, 2018 from approximately $53.5 million for the year ended December 31, 2017. For the three months ended March 31, 2019 and 2018, we recorded a gross margin of approximately 86% and 83%, respectively, and net income of approximately $10.2 million and $6.4 million, respectively. For the years ended December 31, 2018 and 2017, we recorded a gross margin of approximately 85% and 83%, respectively, and net income of approximately $22.4 million and $8.8 million, respectively. We have 18 FDA clearances and, in addition to the United States, where we have over 2,400 customers, we are permitted to sell our products in Europe, Argentina, Australia, Brazil, Canada, China, Colombia, the Commonwealth of Independent States, Israel, Mexico, Panama, Philippines, Russia, South Korea, Taiwan and Thailand. As of June 30, 2019, we sell and market our products in the United States, the United Kingdom, Spain and India, through a direct sales force of approximately 96 representatives. We also sell and market our products through 37 distributors in 44 countries. As of June 30, 2019, we had a global installed base of over 3,900 product platforms capable of running various multi-use applicators and utilizing minimally-invasive consumables.
Industry
Overview
The global market for aesthetic solutions is significant and growing. The American Society for Aesthetic Plastic Surgery, or ASAPS, estimates that U.S. consumers spent more than $8.5 billion on a total of 7.8 million aesthetic procedures in 2017, of which $6.6 billion was spent on surgical aesthetic procedures. According to ASAPS, in 2017, total aesthetic procedures in the United States grew 6%, with surgical aesthetic procedure growth of 11% and non-surgical aesthetic procedure growth of 4%.
According to the 2017 International Society of Aesthetic Plastic Surgery, or ISAPS, Global Aesthetic Survey, which includes survey results from 35,000 plastic surgeons in the top 30 countries for aesthetic procedures, approximately 23.4 million total aesthetic procedures, including 10.8 million surgical procedures and 12.6 million non-surgical procedures, were performed globally in 2017. Of these total procedures, approximately 18%, or 4.3 million, were performed in the United States.
According to ISAPS, the top five surgical and minimally-invasive procedure categories globally in 2017, by number of procedures, that we provide innovative aesthetic solutions for were liposuction (1.6 million), eyelid surgery (1.3 million), abdominoplasty (0.8 million), face/neck lift (0.7 million) and women’s health (0.2 million). The top five non-invasive procedure categories globally in 2017 that we provide innovative aesthetic solutions for were facial rejuvenation (2.1 million), hair removal (1.0 million), non-invasive fat reduction (0.5 million), cellulite treatment (0.3 million) and vascular lesions/sclerotherapy (0.1 million).
No one treatment procedure is offered by all physicians, and treatments vary in terms of the treatment goal and desired effect. As a result, the total aesthetic market, as reported by ASAPS and ISAPS, does not necessarily represent the total market potential for us or any other single product or treatment, but illustrates that each year patients elect to have millions of procedures performed to enhance their appearance. We believe our total addressable market potential also includes aesthetic procedures performed by non-plastic surgeons, which are not tracked by ASAPS and ISAPS data.
We believe the following factors are contributing to the growth in aesthetic procedures:
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the aging of the population in the western world;
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the growing global obesity epidemic;
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the increasing desire of many individuals to improve their appearance;
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the reduction in procedure costs, which has attracted a broader consumer base; and
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the impact of managed care and reimbursement on physician economics, which has motivated physicians to establish or expand the menu of elective, private-pay aesthetic procedures that they offer.
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Within each of our treatment categories, face and body contouring, medical aesthetics and women’s health, we believe our products provide a differentiated solution that overcomes many of the limitations of other existing treatment options.
Our Solution
Key benefits of our minimally-invasive surgical aesthetic and medical treatment solutions include:
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Small to no incisions, which reduces the drawbacks and risks typically associated with surgical procedures, such as significant pain, local or widespread scarring, infection, perforation and hemorrhage.
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Outpatient procedures that typically do not require general anesthesia, which decreases patient downtime, discomfort and other potential complications.
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Minimally-invasive procedures with similar efficacy to surgical procedures that have the ability to expand the addressable patient population for aesthetic procedures.
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Effective and long-lasting aesthetic solutions, many of which are supported by compelling clinical data, including 44 peer-reviewed publications.
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Differentiated, RF energy-based technology simultaneously kills fat and tightens skin, overcoming the many shortcomings of traditional surgical, minimally and non-invasive aesthetic procedures.
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Innovative dual wavelength laser technology that allows for permanent hair reduction on a wider range of skin types and hair textures than other aesthetic solutions currently on the market, reducing the number of treatments required.
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Typically less expensive than other aesthetic solutions on the market while providing comparable results as a result of less required physician time and training.
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Our Competitive Strengths
We attribute the growing commercial success of our various platforms and products to the following:
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Pioneer of the minimally-invasive aesthetic solutions market. We believe our proprietary technologies represent a paradigm shift in the minimally-invasive and surgical aesthetic solutions market. We believe our technologies and products demonstrate numerous performance advantages over other aesthetic options and enable physicians and patients to obtain results that can typically only be achieved with more expensive and invasive surgical procedures. Our RF proprietary energy-based technology simultaneously kills fat and tightens skin, overcoming many of the limitations of other surgical, minimally and non-invasive procedures, positioning us to address unmet patient needs and expand the addressable patient population for aesthetic solutions. Although each of our product platforms has a primary handpiece or applicator that is either minimally or non-invasive, our platforms are designed to be modular, which enables the user to provide complementary treatments using a single platform by attaching different handpieces and applicators.
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Strong brand recognition. Our brand is associated with product leadership, significant technological advances and extensive clinical data, which has led to strong customer loyalty. Unlike many of our competitors, our technology is not exclusively laser-based or limited to superficial treatment of skin. Instead, we have developed and commercialized products utilizing
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medically-accepted RF energy technology, which can penetrate deep into the subdermal fat, allowing adipose tissue remodeling. We believe our brand is synonymous throughout the physician and patient communities with having the broadest RF energy-based portfolio in the minimally-invasive aesthetics market for fat destruction and remodeling, face and body contouring and skin tightening.
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Provide comprehensive solutions for physicians and patients. We have an extensive product portfolio that includes solutions for a wide range of both minimally and non-invasive procedures across the aesthetic solutions market. For each of our products, we offer post-sales support services including training, installation, practice growth consulting and repair support that minimizes product downtime and associated lost revenues to physicians.
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Broad regulatory approvals supported by extensive clinical data. We have 18 FDA clearances and, in addition to the United States, are permitted to sell our products in Europe, Argentina, Australia, Brazil, Canada, China, Colombia, the Commonwealth of Independent States, Israel, Mexico, Panama, Philippines, Russia, South Korea, Taiwan and Thailand. To date, we also have a portfolio of 44 peer-reviewed publications, and there are 36 completed and 18 ongoing third-party clinical studies on a number of our products ( BodyTite, FaceTite, NeckTite, Optimas, Fractora, Forma, Lumecca, DiolazeXL, Votiva, FractoraV, FormaV, Contoura, BodyFX, MiniFX, Evolve, Morpheus8 and AccuTite ). While we did not have any involvement in the clinical studies mentioned above, such studies provide qualitative results that we believe are significant. However, because these were third-party studies we do not have access to any raw data to conduct any quantitative analyses. We believe our focus on demonstrated clinical data and effectiveness differentiates us from our competition and helps to validate our technology with surgically-trained physicians, who we believe are typically the most difficult segment of the market to penetrate.
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Strong management team with proven track record. Our management team has significant expertise in the medical aesthetics industry with a proven track record of successfully developing and commercializing innovative technology. Moshe Mizrahy and Dr. Michael Kreindel, our co-founders, previously founded Syneron Medical Ltd. Our senior executive team has an average of over 15 years of medical aesthetics industry experience and has served in various leadership roles at Syneron Medical Ltd. and Cynosure, Inc.
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Our Growth Strategy
Our objective is to expand our technological leadership in the aesthetic solutions market and to leverage our RF proprietary technologies to expand into the medical solutions market. We intend to achieve this goal by implementing the following strategies:
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Increase our sales presence to target and expand our addressable market globally. We plan to expand our direct sales organization and our distribution network and seek to recruit and train exceptionally talented sales representatives in existing and new markets to help us broaden the adoption of our products, drive further market penetration and expand beyond our traditional customer base.
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North America: We plan to expand our direct sales team in the United States and Canada by approximately 15 representatives by the end of 2019.
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Europe : We intend to establish sales and marketing organizations and a network of exclusive European distributors (in addition to our existing network in the United Kingdom and Spain).
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Latin America : We plan to expand our network of exclusive distributors in Argentina, Brazil, Colombia, Mexico and Panama.
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Asia-Pacific : In addition to our direct sales presence in India, we intend to establish a direct sales presence in China through our joint venture in Guangzhou, as well as expand our network of exclusive distributors in Australia, Japan, Philippines, South Korea, Taiwan and Thailand.
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Continue to further penetrate our existing customer base and drive recurring revenues. We believe that there are opportunities for us to generate additional revenue from existing customers who are already familiar with our products. Since our inception, approximately 30% of our North America customers have purchased a second platform to expand their treatment offerings. Additionally, we have experienced growth in the sales of consumables (handpieces that are, or contain, one-time use applicators that must be replaced following each treatment) over the past three years. Since inception, we have sold over 257,000 consumables. We expect that as our customer base grows, the percentage of our revenues attributable to consumables will increase. We also expect that certain customers will be candidates for technology upgrades to enhance the capabilities of their existing InMode products. In addition, as we continue to grow our support services program, we expect to seek to increase the number of customers that enter into service contracts and extended warranties, which would provide us with additional recurring revenues.
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Leverage our existing technology to expand into new minimally and non-invasive applications. We have an active research and development pipeline focused on additional solutions targeted to our traditional customer base. Our near-term product development portfolio consists of new and second generation solutions for various conditions, including wearable, non-invasive face and body reshaping, cellulite, large area lipolysis, severe vaginal laxity, labiaplasty, pelvic floor muscle restoration, post-partum treatments, snoring, dry eye and eyelid contraction and fat reduction. We expect to launch three new product platforms by the end of 2019, which we believe will allow us to continue to grow our revenues over the long term and further penetrate the market for aesthetic solutions. Each such product is or will be subject to the FDA regulatory framework, and specifically, the FDA’s 510(k) clearance requirements described in this prospectus.
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Expand our customer base beyond traditional customers. We intend to develop products that leverage our minimally and non-invasive technologies to address the unmet market needs of a non-traditional customer base, which includes ENTs, ophthalmologists, general practitioners and aesthetic clinicians. We intend to adapt our products to the expertise and skill level of these providers, further expanding our addressable market.
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Actively pursue business development opportunities. We may seek to engage in targeted business development activities, including acquisitions and strategic partnerships, in order to augment our product and technology portfolio in our existing and potentially adjacent markets. We believe we can leverage our global infrastructure and existing relationships to implement a disciplined tuck-in acquisition strategy.
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Expand our intellectual property and patent portfolio . We intend to expand our existing intellectual property and patent portfolio as we develop additional applications and continue to aggressively defend against potential infringement by our competitors.
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Preliminary Financial Results
We are currently finalizing our financial results for the three months ended June 30, 2019. While complete financial information and operating data are not yet available, set forth below are certain preliminary estimates of our financial results for such period. Our actual results may differ materially from these estimates due to the completion of our financial closing procedures, final adjustments and other developments that may arise between now and the time such financial results are finalized.
The following are our preliminary estimates for the three months ended June 30, 2019:
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Revenue is expected to be between $38.6 million and $38.8 million, an estimated 55% increase compared to revenue of  $25.0 million for the three months ended June 30, 2018. Consistent with our prior period results, this estimated increase is primarily attributable to higher revenues in North America, as a result of an expansion of our direct sales organization, an increase in the number of clinical workshops for customers and prospects in the region and an increased average sale price of our platforms in the region.
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Gross margin is expected to be between 86% and 87%, an estimated 3% increase compared to a gross margin of 84% for the three months ended June 30, 2018. This estimated increase is primarily attributable to an increase in average sale price of our platforms in North America.
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Operating income is expected to be between $15.5 million and $15.7 million, an estimated 97% increase compared to operating income of  $7.9 million for the three months ended June 30, 2018. This estimated increase is primarily attributable to an estimated increase in our gross profit exceeding the increase in our operating expenses. The increase in our operating expenses is primarily attributable to the expansion of our direct sales organization, an increase in compensation as a result of our increased North American revenue and an increase in costs related to our marketing activities.
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As of June 30, 2019, our total cash and cash equivalents, marketable securities and short-term bank deposits are expected to be approximately $82.8 million compared to $64.1 million as of March 31, 2019. This estimated increase is attributable to the same factors that resulted in the increase to our operating income.
The estimates above represent the most current information available to management and do not present all necessary information for an understanding of our financial condition as of and the results of operations for the three months ended June 30, 2019. We have provided a range for the preliminary results described above primarily because our financial closing procedures are not yet complete for the three months ended June 30, 2019. As a result, there is a possibility that our final results will vary from these preliminary estimates. The estimates are not necessarily indicative of any future period and should be read together with “Risk Factors,” “Special Note Regarding Forward-Looking Statements,” “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” “Selected Consolidated Financial Data” and our financial statements and related notes included elsewhere in this prospectus.
The preliminary financial data included in this prospectus has been prepared by, and is the responsibility of, our management. Our independent registered public accounting firm has not audited, reviewed, compiled, or applied agreed-upon procedures with respect to the preliminary financial data. Accordingly, our independent registered public accounting firm does not express an opinion or any other form of assurance with respect thereto.
Risks Associated with Our Business
Our business is subject to a number of risks of which you should be aware of before making an investment decision. These risks are discussed more fully in the “Risk Factors” section of this prospectus. These risks include, but are not limited to, the following:
•
our success depends upon market acceptance of our products;
​
•
if there is not sufficient demand for the procedures performed with our products, practitioner demand for our products could decline, resulting in unfavorable operating results;
​
•
the success and continued development of our products depends, in part, upon maintaining strong relationships with physicians and other healthcare professionals;
​
•
we rely heavily on our sales professionals to market and sell our products worldwide. If we are unable to hire, effectively train, manage, improve the productivity of, and retain our sales professionals, our business will be harmed, which would impair our future revenue and profitability;
​
•
due to our limited history of operations, we may not be able to continue our revenue growth and profitability;
​
•
the failure to attract and retain key personnel could adversely affect our business;
​
•
if we do not continue to develop and commercialize new products and identify new markets for our products and technologies, we may not remain competitive or expand beyond our traditional customer base, and our revenues and operating results could suffer;
​
•
product liability suits could be brought against us due to defective material or design, or due to misuse of our products, and could result in expensive and time-consuming litigation, payment of substantial damages and an increase in our insurance rates;
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​
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•
our products and operations are subject to extensive and continuing regulatory compliance obligations in the United States and other countries, and failure to meet those obligations could adversely harm our business;
​
•
we outsource almost all of the manufacturing of our products to a small number of manufacturing subcontractors. If our subcontractors’ operations are interrupted or if our orders exceed our subcontractors’ manufacturing capacity, we may not be able to deliver our products on time;
​
•
if we are unable to protect our intellectual property rights, our competitive position could be harmed. Our success and ability to compete depends in large part upon our ability to protect our proprietary technology;
​
•
third parties have and may in the future commence litigation against us claiming that our products infringe upon their patents or other intellectual property rights;
​
•
if we fail to obtain and maintain necessary FDA clearances for our products, if clearances for future products and proposed indications are delayed or not issued, if we or any of our third-party suppliers or manufacturers fail to comply with applicable regulatory requirements, or if there are regulatory changes, our commercial operations could be harmed;
​
•
as a foreign private issuer, we are exempt from a number of rules under the U.S. securities laws and Nasdaq corporate governance rules and are permitted to file less information with the Securities and Exchange Commission, or the SEC, than U.S. domestic public companies, which may limit the information available to holders of our ordinary shares; and
​
•
we may become subject to the requirements of the Investment Company Act of 1940, or the 1940 Act, which would limit our business operations and require us to spend significant resources to comply with such act.
​
Implications of Being an Emerging Growth Company
As a company with less than $1.07 billion in revenue during our last fiscal year, we qualify as an “emerging growth company” as defined in the Jumpstart Our Business Startups Act of 2012, or the JOBS Act. An emerging growth company may take advantage of specified reduced reporting and other burdens that are otherwise applicable generally to public companies. These provisions include, among others:
•
a requirement to have only two years of audited financial statements and only two years of related Management’s Discussion and Analysis of Financial Condition and Results of Operations disclosure in this prospectus;
​
•
an exemption from the auditor attestation requirement in the assessment of our internal control over financial reporting pursuant to the Sarbanes-Oxley Act of 2002, as amended, or the Sarbanes-Oxley Act; and
​
•
an exemption from compliance with any requirement that the Public Company Accounting Oversight Board, or PCAOB, may adopt regarding mandatory audit firm rotation or a supplement to the auditor’s report providing additional information about the audit and the financial statements.
​
We may take advantage of these provisions for up to five years or such earlier time that we are no longer an emerging growth company. We would cease to be an emerging growth company upon the earliest to occur of  (1) the last day of the fiscal year in which we have total annual gross revenues of  $1.07 billion or more, (2) the last day of the year after the five-year anniversary of this offering, (3) the date on which we have issued more than $1.0 billion in nonconvertible debt during the previous three years, or (4) the date on which we are deemed to be a large accelerated filer under the rules of the SEC. We may choose to take advantage of some but not all of these reduced burdens, and therefore the information that we provide holders of our ordinary shares may be different than the information you might receive from other public
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companies in which you hold equity. In addition, Section 107 of the JOBS Act also provides that an emerging growth company can take advantage of an extended transition period for complying with new or revised accounting standards applicable to public companies. We have irrevocably elected to opt out of such extended transition period.
Implications of Being a Foreign Private Issuer
Upon consummation of this offering, we will report under the Securities Exchange Act of 1934, as amended, or the Exchange Act, as a non-U.S. company with foreign private issuer status. Even after we no longer qualify as an emerging growth company, as long as we qualify as a foreign private issuer under the Exchange Act, we will be exempt from certain provisions of the Exchange Act that are applicable to U.S. domestic public companies, including:
•
the sections of the Exchange Act regulating the solicitation of proxies, consents or authorizations in respect of a security registered under the Exchange Act;
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•
the sections of the Exchange Act requiring insiders to file public reports of their stock ownership and trading activities and liability for insiders who profit from trades made in a short period of time; and
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•
the rules under the Exchange Act requiring the filing with the SEC of quarterly reports on Form 10-Q containing unaudited financial and other specified information or current reports on Form 8-K relating to the occurrence of specified significant events.
​
We intend to take advantage of these exemptions for as long as we qualify as a foreign private issuer.
Both foreign private issuers and emerging growth companies are also exempt from certain more stringent executive compensation disclosure rules. Thus, even if we no longer qualify as an emerging growth company but remain a foreign private issuer, we will continue to be exempt from the more stringent compensation disclosures required of companies that are neither an emerging growth company nor a foreign private issuer.
Corporate Information
We were incorporated in the State of Israel on January 2, 2008. In November 2017, our corporate name was changed from Invasix Ltd. to InMode Ltd. Our headquarters are located at Tavor Building, Sha’ar Yokneam, P.O. Box 533, Yokneam 2069206, Israel. Our phone number is +972-4-9096313. Our website address is www.inmodemd.com. The information contained on or that can be accessed through our website is not incorporated by reference into this prospectus, and you should not consider information on our website to be part of this prospectus or in deciding to purchase our ordinary shares.
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The Offering
Ordinary shares offered by us
     ordinary shares
Ordinary shares to be outstanding after this offering
     ordinary shares (     ordinary shares if the underwriters exercise their option to purchase additional ordinary shares in full).
Option to purchase additional ordinary shares
We have granted the underwriters an option, exercisable within 30 days from the date of this prospectus, to purchase up to      additional ordinary shares.
Use of proceeds
We estimate that the net proceeds to us from this offering will be approximately $    million, assuming an initial public offering price of  $     per ordinary share, which is the midpoint of the price range set forth on the cover page of this prospectus, after deducting estimated underwriting discounts and commissions and estimated offering expenses payable by us. We intend to use the net proceeds from this offering to expand our sales and marketing operations, to fund our research and development activities, and the remainder for general corporate purposes. See “Use of Proceeds.”
Risk factors
See “Risk Factors” and other information included in this prospectus for a discussion of factors that you should consider carefully before deciding to invest in our ordinary shares.
Proposed Nasdaq Global Market symbol
We have applied to have our ordinary shares listed on The Nasdaq Global Market, or Nasdaq, under the symbol “INMD.”
The number of ordinary shares that will be outstanding after this offering is based on 15,077,452 ordinary shares outstanding as of June 30, 2019. The number of ordinary shares referred to above to be outstanding after this offering and, unless otherwise indicated, the other information in this prospectus excludes:
•
5,333,725 ordinary shares issuable upon the exercise of options outstanding as of June 30, 2019 at a weighted-average exercise price of  $2.10 per ordinary share; and
​
•
497,900 ordinary shares reserved for future issuance under our 2018 Incentive Plan, as well as ordinary shares that may be issued pursuant to provisions in our 2018 Incentive Plan that automatically increase the ordinary share reserve under our 2018 Incentive Plan.
​
Unless otherwise indicated, all information contained in this prospectus assumes or gives effect to:
•
the adoption and effectiveness of our amended and restated articles of association upon the effectiveness of the registration statement of which this prospectus forms a part;
​
•
no exercise of the outstanding options described above; and
​
•
no exercise by the underwriters of their option to purchase up to     additional ordinary shares.
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Summary CONSOLIDATED Financial Data
The following tables present our summary consolidated financial data and should be read in conjunction with “Selected Consolidated Financial Data” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and our consolidated financial statements and related notes included elsewhere in this prospectus. The historical results are not necessarily indicative of the results to be expected for any future periods. We derived the summary statements of income data below for the three months ended March 31, 2019 and 2018 and the summary balance sheet data as of March 31, 2019 from our unaudited condensed consolidated financial statements included elsewhere in this prospectus. We have prepared the unaudited condensed consolidated financial statements on the same basis as the audited consolidated financial statements and have included, in our opinion, all adjustments, consisting only of normal recurring adjustments that we consider necessary for a fair statement of the financial information set forth in those statements. We have derived the summary statements of income data below for the years ended December 31, 2018 and 2017 from our audited consolidated financial statements included elsewhere in this prospectus. Our unaudited condensed consolidated financial statements and audited consolidated financial statements are presented in U.S. dollars and prepared in accordance with accounting principles generally accepted in the United States, or U.S. GAAP.
​ ​ ​
Three months ended March 31,
​ ​
Year ended December 31,
​
​ ​ ​
2019
​ ​
2018
​ ​
2018
​ ​
2017
​
​ ​ ​
(in thousands, except share and per share data)
​
Consolidated Statements of Income Data: ​ ​ ​ ​ ​
Revenues
​ ​ ​ $ 30,552 ​ ​ ​ ​ $ 20,911 ​ ​ ​ ​ $ 100,162 ​ ​ ​ ​ $ 53,456 ​ ​
Cost of revenues
​ ​ ​ ​ 4,271 ​ ​ ​ ​ ​ 3,532 ​ ​ ​ ​ ​ 15,057 ​ ​ ​ ​ ​ 9,053 ​ ​
Gross profit
​ ​ ​ ​ 26,281 ​ ​ ​ ​ ​ 17,379 ​ ​ ​ ​ ​ 85,105 ​ ​ ​ ​ ​ 44,403 ​ ​
Operating expenses: ​ ​ ​ ​ ​
Research and development
​ ​ ​ ​ 1,199 ​ ​ ​ ​ ​ 880 ​ ​ ​ ​ ​ 4,180 ​ ​ ​ ​ ​ 2,575 ​ ​
Sales and marketing
​ ​ ​ ​ 14,097 ​ ​ ​ ​ ​ 9,665 ​ ​ ​ ​ ​ 44,622 ​ ​ ​ ​ ​ 28,514 ​ ​
General and administrative
​ ​ ​ ​ 1,053 ​ ​ ​ ​ ​ 895 ​ ​ ​ ​ ​ 4,814 ​ ​ ​ ​ ​ 4,364 ​ ​
Legal settlements and loss contingencies
​ ​ ​ ​ — ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ 8,000 ​ ​ ​ ​ ​ — ​ ​
Total operating expenses
​ ​ ​ ​ 16,349 ​ ​ ​ ​ ​ 11,440 ​ ​ ​ ​ ​ 61,616 ​ ​ ​ ​ ​ 35,453 ​ ​
Operating income
​ ​ ​ $ 9,932 ​ ​ ​ ​ $ 5,939 ​ ​ ​ ​ $ 23,489 ​ ​ ​ ​ $ 8,950 ​ ​
Financial income, net
​ ​ ​ ​ 403 ​ ​ ​ ​ ​ 278 ​ ​ ​ ​ ​ 136 ​ ​ ​ ​ ​ 849 ​ ​
Income before taxes
​ ​ ​ $ 10,335 ​ ​ ​ ​ $ 6,217 ​ ​ ​ ​ $ 23,625 ​ ​ ​ ​ $ 9,799 ​ ​
Income tax
​ ​ ​ ​ 177 ​ ​ ​ ​ ​ (149 ) ​ ​ ​ ​ ​ 1,260 ​ ​ ​ ​ ​ 980 ​ ​
Net income
​ ​ ​ $ 10,158 ​ ​ ​ ​ $ 6,366 ​ ​ ​ ​ $ 22,365 ​ ​ ​ ​ $ 8,819 ​ ​
Net loss (income) attributable to non-controlling
interests
​ ​ ​ ​ (34 ) ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ 6 ​ ​ ​ ​ ​ — ​ ​
Net income attributable to controlling interest
​ ​ ​ $ 10,124 ​ ​ ​ ​ $ 6,366 ​ ​ ​ ​ $ 22,371 ​ ​ ​ ​ $ 8,819 ​ ​
Net income per ordinary share: ​ ​ ​ ​ ​
Basic
​ ​ ​ $ 0.67 ​ ​ ​ ​ $ 0.40 ​ ​ ​ ​ $ 1.47 ​ ​ ​ ​ $ 0.52 ​ ​
Diluted
​ ​ ​ $ 0.51 ​ ​ ​ ​ $ 0.31 ​ ​ ​ ​ $ 1.12 ​ ​ ​ ​ $ 0.46 ​ ​
Weighted average number of ordinary shares: ​ ​ ​ ​ ​
Basic
​ ​ ​ ​ 14,990,591 ​ ​ ​ ​ ​ 14,811,090 ​ ​ ​ ​ ​ 14,876,426 ​ ​ ​ ​ ​ 14,691,750 ​ ​
Diluted
​ ​ ​ ​ 19,728,929 ​ ​ ​ ​ ​ 19,398,499 ​ ​ ​ ​ ​ 19,563,722 ​ ​ ​ ​ ​ 16,584,637 ​ ​
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​ ​ ​
As of March 31, 2019
​
​ ​ ​
Actual
​ ​
Pro Forma (1)(2)
​
​ ​ ​
(in thousands)
​
Consolidated Balance Sheet Data: ​ ​ ​
Cash and cash equivalents
​ ​ ​ $ 18,951 ​ ​ ​ ​ $      ​ ​
Working capital (3)
​ ​ ​ ​ 58,057 ​ ​ ​ ​ ​ ​ ​ ​
Total assets
​ ​ ​ ​ 85,067 ​ ​ ​ ​ ​ ​ ​ ​
Total liabilities
​ ​ ​ ​ 27,491 ​ ​ ​ ​ ​ ​ ​ ​
Redeemable non-controlling interest
​ ​ ​ ​ 2,252 ​ ​ ​ ​ ​ ​ ​ ​
Retained earnings
​ ​ ​ ​ 43,030 ​ ​ ​ ​ ​ ​ ​ ​
Non-controlling interests
​ ​ ​ ​ 1,441 ​ ​ ​
Total shareholders’ equity
​ ​ ​ ​ 55,324 ​ ​ ​ ​ ​ ​ ​ ​
​
(1)
The pro forma consolidated balance sheet data gives effect to the issuance and sale of       ordinary shares by us in this offering at the assumed initial public offering price of  $     per ordinary share, which is the midpoint of the price range set forth on the cover page of this prospectus, after deducting estimated underwriting discounts and commissions and estimated offering expenses payable by us.
​
(2)
Each $1.00 increase (decrease) in the assumed initial public offering price of  $     per ordinary share would increase (decrease) our pro forma cash and cash equivalents, working capital total assets and total shareholders’ equity by $     million, assuming that the number of ordinary shares offered by us, as set forth on the cover page of this prospectus, remains the same and after deducting estimated underwriting discounts and commissions and estimated offering expenses payable by us. An increase (decrease) of       in the number of ordinary shares offered by us, as set forth on the cover page of this prospectus, would increase (decrease) our pro forma cash and cash equivalents, working capital, total assets and total shareholders’ equity by $     million, assuming no change in the assumed public offering price per ordinary share.
​
(3)
We define working capital as current assets less current liabilities. See our consolidated financial statements included elsewhere in this prospectus for further details regarding our current assets and current liabilities.
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​
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RISK FACTORS
Investing in our ordinary shares involves a high degree of risk. You should consider carefully the following risk factors, as well as the other information in this prospectus, before deciding to invest in our ordinary shares. Our business, financial condition or results of operations could be materially and adversely affected if any of these risks occurs and, as a result, the market price of our ordinary shares could decline and you could lose all or part of your investment. Additional risks and uncertainties not presently known to us or that we currently deem immaterial also may have similar adverse effects on us.
Risks Related to Our Business and Industry
Our success depends upon market acceptance of our products.
We design, develop, manufacture and commercialize innovative minimally and non-invasive aesthetic medical products. We have developed products that apply our technology to rejuvenate the skin’s appearance through body and face reshaping and tightening, the treatment of superficial benign vascular and pigmented lesions, hair removal, wrinkle reduction and the treatment of acne, cellulite and leg veins. We were established in 2008 and have expanded our product offerings to include six product platforms: BodyTite , Optimas , Votiva , Contoura , Triton and EmbraceRF . We expect to introduce three additional product platforms by the end of 2019. If we fail to significantly penetrate current or new markets with our products or fail to properly manage the manufacturing and distribution of multiple products, our business, financial condition and results of operations could be negatively impacted. The success of our products depends on adoption and acceptance of our technology. The rate of adoption and acceptance may be affected adversely by perceived issues relating to quality and safety, customers’ reluctance to invest in new technologies, the cost of competitive treatments and widespread acceptance of other technologies. Our business strategy is based, in part, on our expectation that we will continue to make novel product introductions and upgrades that we can sell to new and existing users of our products, and that we will be able to identify new markets for our existing technologies.
To increase our revenues, we must:
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continue to further penetrate our existing, traditional customer base, including plastic and facial surgeons, aesthetic surgeons, dermatologists and OB/GYNs, and drive recurring revenues by demonstrating to our customers that our products or product upgrades would be an attractive revenue-generating addition to their practices;
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•
expand our customer base to include non-traditional customers, such as ENTs, opthalmologists, general practitioners and aesthetic clinicians;
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•
leverage our existing technology to expand into new minimally and non-invasive applications that either add to or significantly improve our current products;
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•
increase our sales presence to target and expand our market globally;
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•
actively pursue business development opportunities including potential acquisitions and strategic partnerships to augment our product and technology portfolio; and
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•
expand and maintain our intellectual property and patent portfolio.
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In addition, the aesthetic solutions market is highly competitive and dynamic and marked by rapid and substantial technological development and product innovations. Demand for our products could be diminished by equivalent or superior products and technologies offered by competitors.
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If there is not sufficient demand for the procedures performed with our products, practitioner demand for our products could decline, resulting in unfavorable operating results.
Continued expansion of the global market for energy-based aesthetic procedures is a material assumption of our business strategy. Most procedures performed using our products are not reimbursable through government or private health insurance and are therefore elective procedures, the cost of which must be borne by the patient. The decision to utilize our products may therefore be influenced by a number of factors, including:
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consumer disposable income and access to consumer credit;
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•
the cost of procedures performed using our products;
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•
the cost, safety and effectiveness of alternative treatments, including treatments which are not based upon laser or other energy-based technologies and treatments which use pharmaceutical products;
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•
the success of our sales and marketing efforts;
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•
the education of our customers and patients on the benefits and uses of our products compared to competitors’ products and technologies; and
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•
consumer confidence, which may be impacted by economic and political conditions.
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If, as a result of these factors, there is not sufficient demand for the procedures performed with our products, practitioner demand for our products could decline, which could have a material adverse effect on our results of operations.
The success and continued development of our products depends, in part, upon maintaining strong relationships with physicians and other healthcare professionals.
If we fail to maintain our working relationships with physicians and other ancillary healthcare professionals, our products may not be developed and marketed in line with the needs and expectations of the professionals who use and support our products. If we are unable to maintain these strong relationships, or form new relationships with physicians and other healthcare professionals beyond our traditional customer base, the development and marketing of our products could suffer, which could have a material adverse effect on our business, financial condition and results of operations.
We rely heavily on our sales professionals to market and sell our products worldwide. If we are unable to hire, effectively train, manage, improve the productivity of, and retain our sales professionals, our business will be harmed, which would impair our future revenue and profitability.
Our success largely depends on our ability to hire, train, manage and improve the productivity levels of our sales professionals worldwide. We train our existing and recently recruited sales professionals to better understand our existing and new product technologies and how they can be positioned against our competitors’ products and increase the revenue of our customers. It may take time for the sales professionals to become productive and there can be no assurance that recently recruited sales professionals will be adequately trained in a timely manner, or that our direct sales productivity will improve, or that we will not experience significant levels of attrition in the future.
Due to the complex nature of some of our products, we could be subject to product liability claims, including adverse outcomes resulting from treatments.
Our systems are inherently complex in design and require ongoing scheduled maintenance. Our products may malfunction when used by our customers. Furthermore, our products are sold in jurisdictions that vary as to the specific qualifications or training required for purchasers or operators of the products. There is a risk that our products may be purchased or operated by physicians with varying levels of training, and in some cases, by practitioners such as nurses, chiropractors and technicians who may not be adequately trained. The purchase and use of our products by non-physicians, or persons who lack adequate training, may result in the misuse of our products, which could give rise to adverse treatment outcomes. If we are unable to prevent product malfunctions or misuse, or if we fail to do so in a timely manner, we could
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also experience, among other things, delays in the recognition of revenues or loss of revenues, particularly in the case of new products; legal actions by customers, patients and other third parties, which could result in substantial judgments against us or settlement costs; action by regulatory bodies; and diversion of development, engineering and management resources.
Such potential adverse effects may cause a significant increase in the premiums under our insurance policies. Further, the coverage limits of our product liability insurance policies may not be adequate to cover future claims. A successful claim brought against us in excess of, or outside of, our insurance coverage could have a material adverse effect on our business, financial condition and results of operations. Even if unsuccessful, such a claim could nevertheless have an adverse impact on us, due to damage to our reputation and diversion of management resources.
Due to our limited history of operations, we may not be able to continue our revenue growth and profitability.
We were incorporated in 2008 and launched our first product in 2010. Consequently, we have a somewhat limited history of operations. The future success of our business will depend, among other things, on our ability to increase product sales, successfully introduce new products, expand our sales force and distribution network and control costs, which we may be unable to do. As a result, we may not be able to continue to experience revenue growth and profitability.
We may have difficulty managing our growth which could limit our ability to increase sales and cash flow.
We have experienced significant growth in our operations and the number of our employees has significantly increased since inception. This growth has placed significant demands on our management, as well as our financial and operational resources. In order to achieve our business objectives, we will need to continue to grow our business. Continued growth would increase the challenges involved in:
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implementing appropriate operational and financial systems;
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•
expanding our sales and marketing infrastructure and capabilities;
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•
ensuring compliance with applicable FDA and other regulatory requirements;
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•
providing adequate training and supervision to maintain high quality standards; and
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•
preserving our culture and values.
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If our growth continues, it will require that we continue to develop and improve our operational, financial and other internal controls. If we cannot scale and manage our business appropriately, we will not realize our projected growth and our financial results will suffer.
The failure to attract and retain key personnel could adversely affect our business.
Our success also will depend in large part on our ability to continue to attract, retain and motivate qualified and highly skilled personnel. Competition for highly skilled employees is intense. We may be unable to continue to attract and retain sufficient numbers of highly skilled employees. Our inability to attract and retain additional key employees or the loss of one or more of our current key employees could adversely affect our business, financial condition and results of operations.
Our financial results may fluctuate from quarter to quarter.
We base our production, inventory and operating expenditure levels on anticipated orders. If orders are not received when expected in any given quarter, expenditure levels could be disproportionately high in relation to sales for that quarter. A number of additional factors, over which we have limited control, may contribute to fluctuations in our financial results, including:
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customer adoption of our products;
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•
the willingness of individuals to pay directly for aesthetic medical procedures, in light of the lack of reimbursement by third-party payors;
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•
continued availability of attractive equipment leasing terms for our customers, which may be negatively influenced by interest rate increases;
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•
changes in our ability to obtain and maintain regulatory approvals and maintain compliance with applicable regulatory requirements;
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•
positive or negative coverage in the media or clinical publications of our products or products of our competitors or industry;
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•
increases in the length of our sales cycle;
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•
performance of our independent distributors; and
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•
delays in, or failure of, product and component deliveries by our subcontractors and suppliers.
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Competition among providers of energy-based devices for the medical aesthetics market is characterized by rapid innovation. If we do not continue to develop and commercialize new products and identify new markets for our products and technologies and expand beyond our traditional customer base, we may not remain competitive, and our revenues and operating results could suffer.
The industry in which we operate is subject to continuous technological development and product innovation. If we do not continue to be innovative in the development of new products and applications, our competitive position will likely deteriorate as other companies successfully design and commercialize new products and applications. While we attempt to protect our products through patents and other intellectual property, there are few barriers to entry that would prevent new entrants or existing competitors from developing products that compete directly with ours. We expect that any competitive advantage we may enjoy from our current and future innovations may diminish over time, as companies successfully respond to our, or create their own, innovations. Accordingly, our success depends in part on developing new and innovative applications of laser and other energy-based technology and identifying new markets for and applications of existing products to new customers and technology. Our future growth also depends, in part, on our ability to expand beyond our traditional customer base to ENTs, ophthalmologists, general practitioners and aesthetic clinicians. If we are unable to develop and commercialize new products and identify and penetrate new markets for our products and technology, our products and technology could become obsolete and our revenues and operating results could be adversely affected.
Our long-term growth depends on our ability to enhance our products, expand our indications and develop and commercialize additional products.
It is important to our business that we continue to enhance our products and develop and introduce new products. Developing products is expensive and time-consuming and could divert management’s attention away from our core business. The success of any new product offering or product enhancement to our current products will depend on several factors, including our ability to:
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properly identify and anticipate physician and patient needs;
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•
develop and introduce new products and product enhancements in a timely manner;
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•
avoid infringing upon the intellectual property rights of third parties;
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•
demonstrate, if required, the safety and efficacy of new products with data from preclinical studies and clinical trials;
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•
obtain the necessary regulatory clearances or approvals for expanded indications, new products or product modifications; and
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•
be fully FDA-compliant with marketing of new devices or modified products.
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If we are not successful in expanding our indications and developing and commercializing new products and product enhancements, our ability to increase our revenue may be impaired, which could have a material adverse effect on our business, financial condition and results of operations.
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Our inability to compete effectively with our competitors may prevent us from achieving significant market penetration or improving our operating results.
Our products compete against products offered by public companies, including Allergan plc, Cutera, Inc., Hologic Inc. and Viveve Medical, Inc., as well as by private companies such as Lumenis Ltd., Sisram Medical Ltd. and Syneron Medical Ltd. Competition with these companies could result in reduced prices and profit margins and loss of market share, any of which could harm our business, financial condition and results of operations. We also face competition from medical products, including Botox, hyaluronic acid injections and collagen injections, and aesthetic procedures, such as face lifts, liposuction, sclerotherapy, electrolysis and chemical peels. Furthermore, we currently sell our products only to trained physicians and face competition from the medical spa market, which may offer a broader range of medical and non-medical products and technologies that are more readily available to customers at a lower cost. Our ability to compete effectively depends upon our ability to distinguish our company and our products from our competitors and their products, and includes the following factors:
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product performance;
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•
product pricing;
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•
product safety;
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•
intellectual property protection;
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•
quality of customer support;
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•
success and timing of new product development and introductions; and
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•
development of successful distribution channels.
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Furthermore, potential customers also may need to recoup the cost of expensive products that they already have purchased from our competitors and may decide not to purchase our products, or to delay such purchases. If we are unable to achieve continued market penetration, we will be unable to compete effectively and our business will be harmed.
Consolidation in our industry may make it more difficult for us to compete.
The trend towards consolidation in our industry has increased, and may continue to increase, the intensity of the competition in our industry and could result in increased downward pressure on our product prices. Recently, many of our competitors in the aesthetics market have acquired other companies that operate within the same market. If this trend continues, we will be forced to compete primarily with and against larger competitors with greater resources and distribution networks. Our competitors could use their greater financial resources to acquire other companies to gain enhanced name recognition and market share, as well as to develop new technologies or products that could effectively compete with our product lines. If we are unable to effect strategic mergers or acquisitions of our own and are unable to obtain capital and other resources that would allow us to compete effectively, our business will be harmed.
The introduction of disruptive technological breakthroughs, whether pharmaceutical or other newer therapeutic solutions, may present an additional threat to our success in our target markets.
The medical technology industry is intensely competitive. Pharmaceutical alternative treatments compete vigorously with traditional laser and other energy-based procedures, such as those carried out with our products. Some pharmaceutical companies, academic and research institutions or others may develop new, non-invasive or minimally invasive therapies that are more effective, more convenient or less expensive than our current or future products. The introduction of new technologies, along with these potential new therapies, could result in increased competition or make our products obsolete. Moreover, we could expand our business to include new, non-invasive or minimally invasive therapies which may compete with our current product offerings. We may not be able to respond effectively to technological changes and emerging industry standards, or to successfully identify, develop or support new technologies or enhancements to existing products in a timely and cost-effective manner. Any such developments could have a material adverse effect on our business, financial condition and results of operations.
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Our markets are characterized by evolving technological standards and changes in customer requirements, and we may not be able to react to such changes and introduce new products in a timely manner.
The aesthetics market is characterized by extensive research and development, technological change, frequent modifications and enhancements, innovations, new applications, evolving industry standards and changes in customer requirements. Our future growth depends in part on our ability to introduce new products on a timely basis, as well as to introduce other product enhancements that address the evolving customer needs. This requires us to design, develop, manufacture, assemble, test, market and support these new products or product enhancements on a timely and cost-effective basis. It also requires continued substantial investment in research and development.
During each stage of the research and development process we may encounter obstacles that could delay development and consequently increase our expenses. This may ultimately force us to abandon a potential product in which we have already invested substantial time and resources. Technologies in development could prove to be more complex than initially understood or not scientifically or commercially viable. Even if we develop new products and technologies ahead of our competitors, we will still need to obtain the requisite regulatory approvals for such products, including from public agencies, such as the FDA, before we can commercially distribute them. We cannot assure you that we will successfully identify new technological opportunities, develop and bring new or enhanced products to market, obtain sufficient or any patent or other intellectual property protection for such new or enhanced products or obtain the necessary regulatory approvals in a timely and cost-effective manner, or, if such products are introduced, that those products will achieve market acceptance. Our failure to do so, or to address the technological changes and challenges in our markets, could have a material adverse effect on our business, financial condition and results of operations.
We rely on our own direct sales force to sell our products in certain territories, which may result in higher fixed costs than our competitors and may slow our ability to reduce costs in the face of a sudden decline in demand for our products.
We rely on our own direct sales force to market and sell our products in certain territories. Some of our competitors rely predominantly on independent sales agents and third-party distributors. A direct sales force may subject us to higher fixed costs than those of companies that market competing products through independent third parties, due to the costs that we will bear associated with employee benefits, and training and managing sales personnel. As a result, we could be at a competitive disadvantage. Additionally, these fixed costs may slow our ability to reduce costs in the face of a sudden decline in demand for our products, which could have a material adverse effect on our business, financial condition and results of operations.
To successfully market and sell our products internationally, we must address many issues with which we have little or no experience.
International (non-U.S. and Canada) sales accounted for approximately 12% and 11% of our total revenue for the three months ended March 31, 2019 and year ended December 31, 2018, respectively. We believe that an increasing percentage of our future revenue will come from international sales as we expand our operations and develop opportunities in additional international territories. We currently depend on third-party distributors and a direct sales team in certain regions to sell our products internationally, including in connection with our joint venture in China. If these distributors or direct sales personnel underperform, we may be unable to increase or maintain our level of international revenue. We will need to attract additional distributors to grow our business and expand the territories in which we sell our products. Distributors may not commit the necessary resources to market and sell our products to the level of our expectations. If current or future distributors do not perform adequately, or we are unable to locate distributors in particular geographic areas, we may not realize expected international revenue growth. Additionally, we expect to expand our direct sales force in the United States, Canada, Europe and Latin America. If we are unable to do so successfully, our revenue from international operations will be adversely affected.
International sales are subject to a number of risks, including:
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difficulties in staffing and managing our foreign operations;
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difficulties in penetrating markets in which our competitors’ products are more established;
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reduced protection for intellectual property rights in some countries;
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export restrictions, trade regulations and foreign tax laws;
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fluctuating foreign currency exchange rates;
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obtaining and maintaining foreign certification and compliance with other regulatory requirements;
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customs clearance and shipping delays; and
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political and economic instability.
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If one or more of these risks were realized, it could require us to dedicate significant resources to remedy the situation, and if we are unsuccessful at finding a solution, our revenue may decline.
We outsource almost all of the manufacturing of our products to a small number of manufacturing subcontractors. If our subcontractors’ operations are interrupted or if our orders exceed our subcontractors’ manufacturing capacity, we may not be able to deliver our products on time.
We outsource almost all of the manufacturing of our products to four subcontractors located in Israel, two of which we are substantially dependent on, while we manufacture our laser and intense pulsed light, or IPL, handpieces in-house in Israel. These subcontractors have limited manufacturing capacity that may be inadequate if our customers place orders for unexpectedly large quantities of our products. In addition, because our subcontractors are located in Israel, they on occasion may feel the impact of potential economic or political instability in the region. If the operations of one or more of our subcontractors were halted or limited, even temporarily, or if they were unable or unwilling to fulfill large orders, we could experience business interruption, increased costs, damage to our reputation and loss of our customers. In addition, finding new subcontractors that meet our manufacturing requirements, comply with regulatory requirements, and are ISO certified could take several months.
Components used in our products are complex in design, and defects may not be discovered prior to shipment to customers, which could result in warranty obligations, reducing our revenue and increasing our costs.
In manufacturing our products, we and our subcontractors depend upon third-party suppliers for various components. Many of these components require a significant degree of technical expertise to produce. If our suppliers fail to produce components to specification, or if the suppliers, our subcontractors, or we, use defective materials or workmanship in the manufacturing process, the reliability and performance of our products will be compromised.
If our products contain defects that cannot be repaired easily and inexpensively, we may experience:
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loss of customer orders and delay in order fulfillment;
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damage to our brand reputation;
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increased cost of our warranty program due to product repair or replacement;
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inability to attract new customers;
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diversion of resources from our manufacturing and research and development departments into our service department;
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product recalls; and
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legal action.
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The occurrence of any one or more of the foregoing could materially harm our business, financial condition and results of operations.
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We and our manufacturing subcontractors depend upon third-party suppliers, making us vulnerable to supply shortages, price fluctuations or other degradations in performance of these suppliers, which could harm our business and financial condition.
Many of the components that comprise our products are currently manufactured by a limited number of suppliers. Although each of our components can be obtained from more than one supplier, we do not have the ability to manufacture the components we outsource. Additionally, our subcontractors rely on a limited number of suppliers, or in some cases, one supplier, for some of the materials and components used in our products. If our subcontractors were to lose such suppliers, there can be no assurance that they will be able to identify or enter into agreements with alternative suppliers on a timely basis on acceptable terms, if at all, which could cause interruptions in their operations. If any of these third-party suppliers fails to adequately perform, our revenue and profitability could be adversely affected. A supply interruption or an increase in demand beyond current suppliers’ capabilities could harm our ability to manufacture our products until we identify and qualify a new source of supply, which could take several months.
There is a risk that our suppliers will not always act consistent with our best interests, and may not always supply goods that meet our requirements. Any interruption in the supply of components or materials, or our inability to obtain substitute components or materials from alternate sources at acceptable prices in a timely manner, could impair our ability to meet the demand of our customers, which would have an adverse effect on our business, financial condition and results of operations.
Transitioning to a new supplier could be time-consuming and expensive, may result in interruptions in our operations and product delivery, could affect the performance specifications of our products or could require that we modify the design of certain product systems. If a change in manufacturer results in a significant change to any product, a new 510(k) clearance from the FDA or similar international regulatory authorization may be necessary before we implement the change, which could cause substantial delays.
There exists potential for misuse of our products, over which we have very little to no control, which could harm our reputation and our business.
In the United States, federal regulations allow us to sell our products to or on the order of  “licensed practitioners.” The definition of  “licensed practitioners” varies from state to state. As a result, depending on state law, our products may be purchased or operated by physicians or other licensed practitioners, including nurse practitioners, chiropractors and technicians. Outside the United States, many jurisdictions do not require specific qualifications or training for purchasers or operators of our products. Although we offer training on the use of our products, we do not supervise the treatments performed. Purchase and use of our products by non-physicians may result in product misuse. The potential misuse of our products by physicians and non-physicians may result in adverse treatment outcomes, which could harm our reputation and expose us to costly product liability litigation.
Our products include a limited time warranty which could result in substantial additional costs to us should we fail to monitor product quality effectively.
We generally provide a 12-month warranty on our products. After the warranty period, maintenance and support is provided on a service contract basis. If our products malfunction, warranty claims may become significant, which could cause a significant drain on our resources and materially adversely affect our results of operations.
Product liability suits could be brought against us due to defective material or design, or due to misuse of our products, and could result in expensive and time-consuming litigation, payment of substantial damages and an increase in our insurance rates.
If our products are alleged to be defectively designed, manufactured or labeled, contain defective components or are misused, we may become subject to substantial and costly litigation by our customers or their patients. Misusing our products or failing to adhere to operating guidelines could cause burns, scarring and tissue irregularities. In addition, if our operating guidelines are found to be inadequate, we may be subject to liability. We may in the future be involved, in claims related to the use of our products. Product liability claims could divert management’s attention from our core business, be expensive to defend and result in sizable damage awards against us. While we believe we are covered by insurance from
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recognized insurers in such amounts and covering such risks as is sufficient for the conduct of our business and as is customary for companies engaged in similar businesses, our insurance coverage may be inadequate in amount or scope sufficient to provide us with adequate coverage against all potential liabilities, or we may be unable to maintain such insurance or obtain new insurance in the future. Any product liability claims brought against us, with or without merit, could increase our product liability insurance rates or prevent us from securing continuing coverage, could harm our reputation in the industry and reduce product sales. Product liability claims in excess of our insurance coverage would be paid out of cash reserves harming our financial condition and reducing our operating results. In addition, if our cash reserves are not sufficient to cover such contingency, our financial results could be harmed.
We forecast sales to determine requirements for our products and if our forecasts are incorrect, we may experience either shipment delays or increased costs.
Our subcontractors keep limited materials and components on hand. To help them manage their manufacturing operations and minimize inventory costs, we forecast anticipated product orders to predict our inventory needs up to six months in advance and enter into purchase orders on the basis of these forecasts. Our limited historical experience may not provide us with enough data to accurately predict future demand. If our business expands, our demand would increase and our suppliers may be unable to meet our demand. If we overestimate our requirements, our subcontractors will have excess inventory, and may transfer to us any increase in costs. If we underestimate our requirements, our subcontractors may have inadequate components and materials inventory, which could interrupt, delay or prevent delivery of our products to our customers. Any of these occurrences would negatively affect our financial performance and the level of satisfaction our customers have with our business.
Under applicable employment laws, we may not be able to enforce covenants not to compete and therefore may be unable to prevent our competitors from benefiting from the expertise of some of our former employees.
We have entered into non-competition agreements with many of our professional employees. These agreements prohibit our employees, if they cease working for us, from competing directly with us or working for our competitors for a limited period. Under applicable employment laws, we may be unable to enforce these agreements, in whole or in part, and it may be difficult for us to restrict our competitors from gaining the expertise our former employees gained while working for us. For example, Israeli courts have required employers seeking to enforce non-compete undertakings of a former employee to demonstrate that the competitive activities of the former employee will harm one of a limited number of material interests of the employer which have been recognized by the courts, such as the secrecy of a company’s confidential commercial information or its intellectual property. If we cannot demonstrate that harm would be caused to us, we may be unable to prevent our competitors from benefiting from the expertise of our former employees.
We may become subject to the requirements of the 1940 Act, which would limit our business operations and require us to spend significant resources to comply with such act.
Section 3(a)(1)(C) of the 1940 Act defines an investment company as any issuer that “is engaged or proposes to engage in the business of investing, reinvesting, owning, holding or trading in securities, and owns or proposes to acquire investment securities having a value exceeding 40% of the value of such issuer’s total assets (exclusive of U.S. government securities and cash items).” As of March 31, 2019, we held approximately 16% of our total assets (excluding U.S. government securities and cash items) in investment securities. However, we exceeded the 40% asset threshold in June 2018, marking the beginning of a one-year safe harbor period under Rule 3a-2 under the 1940 Act. Rule 3a-2 provides temporary relief from the registration requirements of the 1940 Act to an issuer that, on a transient basis, is deemed to be an investment company. The transient investment company exemption is available to a company no more than once every three years. Assuming no other exclusion from the definition of investment company is available to us, we will have to comply with the 40% asset threshold for at least three years following December 31, 2018, the date we ceased being an inadvertent investment company. This may limit our ability to make certain investments or enter into joint ventures that could otherwise have a positive impact on our earnings. We do not intend to engage primarily in the business of investing, reinvesting, owning, holding or trading in
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investment securities but rather intend to engage primarily in the business of producing and distributing medical aesthetics products and solutions, and intend to continue to maintain our holdings of investment securities to less than 40% of our total assets (excluding U.S. government securities and cash items).
If we are deemed to be an investment company, the consequences of failing to register under the 1940 Act would be significant. For example, investment companies that fail to register under the 1940 Act are prohibited from conducting business in interstate commerce. The ramifications of registering as an investment company, both in terms of the restrictions imposed on us and the cost of compliance, would be significant. For example, in addition to expenses related to initially registering as an investment company, the 1940 Act also would impose various restrictions with regard to our ability to enter into affiliated transactions, the diversification of our assets, and our ability to borrow money. If we became subject to the 1940 Act at some point in the future, our ability to continue pursuing our business plan would be severely limited.
The expense and potential unavailability of insurance coverage for our customers and our company could adversely affect our ability to sell our products and our financial condition.
Some of our customers and prospective customers are required to maintain liability insurance to cover their operations and use of our products. Medical malpractice carriers are withdrawing coverage in certain states or substantially increasing premiums. If this trend continues or worsens, our customers may discontinue using our products and, industry-wide, potential customers may opt against purchasing light, laser or radio frequency-based products due to the cost or inability to procure insurance coverage.
Global economic and social conditions may adversely affect our business, financial condition and results of operations.
Any negative conditions in the national and global economic environments may adversely affect our business, financial condition and results of operations. During uncertain economic times and in tight credit markets, many of our customers may experience financial difficulties or be unable or unwilling to borrow money to fund their operations, including obtaining credit lines for purchasing our products, and may delay or reduce purchases or reduce the extent of their operations. The market for aesthetic procedures and the market for our premium products can be particularly vulnerable to economic uncertainty, since the end-users of our products may decrease the demand for our products when they have less discretionary income or feel uneasy about spending their discretionary income. In addition, in many instances, the ability of our customers to purchase our products depends in part upon the availability of obtaining financing at acceptable interest rates.
These factors could result in reductions in revenues from sales of our products, longer sales cycles, difficulties in collection of accounts receivable, slower adoption of new technologies and increased price competition. Payment by our customers of our receivables is dependent upon the financial stability of the economies of certain countries. In light of the current economic state of many countries outside of the United States, we continue to monitor the creditworthiness of our customers because weakness in the end-user market could negatively affect the cash flows of our customers who could, in turn, delay paying their obligations to us. This would increase our credit risk exposure and cause delays in our recognition of revenues on current and future sales to these customers. Any of these events would likely harm our business, and could have a material adverse effect on our business, financial condition and results of operations.
Any acquisitions that we make could disrupt our business and harm our financial condition.
We expect to evaluate potential strategic acquisitions of complementary businesses, products or technologies. We may also consider joint ventures and other collaborative projects. We may not be able to identify appropriate acquisition candidates or strategic partners, or successfully negotiate, finance or integrate any businesses, products or technologies that we acquire. Furthermore, the integration of any acquisition and management of any collaborative project may divert management’s time and resources from our core business and disrupt our operations. We do not have any experience with acquiring companies or products. If we decide to expand our product offerings, we may spend time and money on projects that do not increase our revenue. Any cash acquisition we pursue would diminish the proceeds from this offering available to us for other uses, and any stock acquisition would be dilutive to our shareholders. While we
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from time to time evaluate potential collaborative projects and acquisitions of businesses, products and technologies, and anticipate continuing to make these evaluations, we have no present understandings, commitments or agreements with respect to any acquisitions or collaborative projects.
We may need to raise additional capital in the future, which may cause dilution to our shareholders, restrict our operations or require us to relinquish rights to our intellectual property or future revenue streams.
In the future, we may finance our cash needs through a combination of equity offerings, debt financings, grants, and license and development agreements in connection with any collaborations. We do not have any committed external source of funds. In the event we seek additional funds, we may raise additional capital through the sale of equity or convertible debt securities. In such an event, your ownership interest will be diluted, and the terms of these securities may include liquidation or other preferences that adversely affect your rights as a holder of our ordinary shares. Debt financing, if available, could result in increased fixed payment obligations and may involve agreements that include restrictive covenants, such as limitations on our ability to incur additional debt, make capital expenditures, acquire, sell or license intellectual property rights or declare dividends, and other operating restrictions that could hurt our ability to conduct our business.
Investing in marketable securities is subject to risks.
As of March 31, 2019, we had $19.0 million in cash and cash equivalents, $29.0 million in marketable securities (including U.S. government securities), and $16.1 million in bank deposits. We historically have invested excess cash in marketable securities, which may consist of equity securities, corporate or government bonds and mutual fund securities. These investments are subject to general credit, liquidity, and market risks, including from changes in interest rates and downturns similar to the U.S. sub-prime mortgage defaults that affected various sectors of the financial markets and caused credit and liquidity issues during the 2008 global financial crisis. Although we have not realized any significant losses from our investments in marketable securities, we may realize losses in the fair value of these investments, an inability to access cash in these investments for a potentially meaningful period, or a complete loss of these investments, which would have a negative effect on our operations, liquidity and financial condition.
In addition, should our investments cease paying or reduce the amount of interest paid to us, our interest income would decline. The market risks associated with our marketable securities may have an adverse effect on our results of operations, liquidity and financial condition.
We have broad discretion in the use of our existing cash, cash equivalents and marketable securities and may not use them effectively,
Our management will have broad discretion in the application of our cash, cash equivalents and marketable securities. Because of the number and variability of factors that will determine our use of our cash, cash equivalents and marketable securities, their ultimate use may vary substantially from their currently intended use. Our management might not apply our cash, cash equivalents and marketable securities in ways that ultimately increase the value of your investment. The failure by our management to apply these funds effectively could harm our business. Pending their use, we may invest our cash in short-term, investment-grade, interest-bearing securities. These investments may not yield a favorable return to us. If we do not use our resources in ways that enhance shareholder value, we may fail to achieve expected financial results, which could cause our share price to decline.
Exchange rate fluctuations may decrease our earnings if we are not able to hedge our currency exchange risks successfully.
A majority of our revenues and a substantial portion of our expenses are denominated in U.S. dollars. However, a portion of our revenues and a portion of our costs, including personnel and some marketing and facilities expenses, are incurred in New Israeli Shekels, Canadian dollars and Euros. Inflation in Israel or Europe may have the effect of increasing the U.S. dollar cost of our operations in that country. If the U.S. dollar declines in value in relation to one or more of these currencies, it will become more expensive for
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us to fund our operations in the countries that use those other currencies. To date, we have not found it necessary to hedge the risks associated with fluctuations in currency exchange rates. In the future, if we do not successfully engage in hedging transactions, our results of operations may be subject to losses from fluctuations in foreign currency exchange rates.
Cyber-attacks as well as improper disclosure or control of personal information could result in liability and harm our reputation, which could adversely affect our business and results of operations. We may face liability if we breach our obligations related to the protection, security, nondisclosure of confidential customer information or disclosure of sensitive data or failure to comply with data protection laws and regulations.
Our business is heavily dependent on the security of our IT networks and those of our customers. Internal or external attacks on any of those could disrupt the normal operations of our engagements and impede our ability to provide critical services to our customers, thereby subjecting us to liability under our contracts. Additionally, our business involves the use, storage and transmission of information about our employees, our customers and clients of our customers. While we take measures to protect the security of, and unauthorized access to, our systems, as well as the privacy of personal and proprietary information, it is possible that our security controls over our systems, as well as other security practices we follow or those systems of our customers into which we operate and rely upon, may not prevent the improper access to or disclosure of personally identifiable or proprietary information. Such disclosure could harm our reputation and subject us to liability under our contracts and laws that protect personal data, resulting in increased costs or loss of revenue.
Further, data privacy is subject to frequently changing rules and regulations, which sometimes conflict among the various jurisdictions and countries in which we provide services and continue to develop in ways which we cannot predict. We are subject to U.S. federal and state laws regarding data privacy and security including Section 5 of the Federal Trade Commission Act, or FTC Act. We are also subject to foreign data privacy and security laws, including the Global Data Protection Regulation, or GDPR, the European Union-wide legal framework to govern data collection, use and sharing and related consumer privacy rights. The GDPR includes significant penalties for non-compliance. Our failure to adhere to or successfully implement processes in response to changing regulatory requirements in this area could result in legal liability or impairment to our reputation in the marketplace, which could have a material adverse effect on our business, financial condition and results of operations.
In the course of providing services to our customers, we may have access to confidential customer information, including nonpublic personal data. We are bound by certain agreements to use and disclose this information in a manner consistent with the privacy standards under regulations applicable to our customers and are subject to numerous U.S. and foreign jurisdiction laws and regulations designed to protect this information, such as the European Union Directive on Data Protection and various U.S. federal and state laws governing the protection of health or other individually identifiable information. If any person, including a team member of ours, misappropriates customer confidential information, or if customer confidential information is inappropriately disclosed due to a security breach of our computer systems, system failures or otherwise, we may have substantial liabilities to our customers or our customers’ clients and may incur substantial liability and penalties in connection with any violation of applicable privacy laws and/or criminal prosecution. In addition, in the event of any breach or alleged breach of our confidentiality agreements with our customers, these customers may terminate their engagements with us or sue us for breach of contract, resulting in the associated loss of revenue and increased costs and damaged reputation. We may also be subject to civil or criminal liability if we are deemed to have violated applicable regulations. We cannot assure you that we will adequately address the risks created by the regulations to which we may be contractually obligated to abide.
We may become subject to numerous foreign, federal, and state healthcare statutes and regulations and our failure to comply could result in a material adverse effect to our business and operations.
Although none of our products or procedures using our products are currently covered by any state or federal government healthcare programs, or any private commercial payor, we may become subject to foreign, federal, and state laws intended to prevent healthcare fraud and abuse, including those that apply to all payors. These laws could include state anti-kickback and false claims laws, which may extend to services
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reimbursable by any payor, as well as state consumer protection laws. Although we currently are not subject to transparency laws, we may become subject to such laws in the future. Such laws could include requirements to disclose payments to certain healthcare professionals and healthcare entities or disclosures related to sales and marketing, or that could require healthcare professionals to provide notice to their patients of ownership or financial arrangements with manufacturers.
Efforts to ensure that our internal operations and business arrangements with third parties comply with future applicable healthcare laws and regulations may involve substantial costs. These laws and regulations, among other things, could constrain our business, marketing and other promotional activities by limiting the kinds of financial arrangements, including financing programs, we may have with physicians or other potential purchasers of our products. It is possible that governmental authorities may conclude that our business practices, including our arrangements with physicians, some of whom received stock options as compensation for services provided, as well as fees for marketing to other physicians, are subject to and do not comply with current or future statutes, regulations, agency guidance or case law involving applicable healthcare laws. If our current or future operations are found to be in violation of any of these laws or any other governmental regulations that may apply to us, we may be subject to significant civil, criminal and administrative penalties which could adversely affect our ability to operate our business and pursue our strategy.
We are subject to anti-bribery, anti-corruption and anti-money laundering laws, including the U.S. Foreign Corrupt Practices Act, as well as export control laws, customs laws, sanctions laws and other laws governing our operations. If we fail to comply with these laws, we could be subject to civil or criminal penalties, other remedial measures and legal expenses, which could adversely affect our business, results of operations and financial condition.
As we grow our international presence and global operations, we will be increasingly exposed to trade and economic sanctions and other restrictions imposed by the United States, the European Union, the State of Israel and other governments and organizations. The U.S. Departments of Justice, Commerce, State and Treasury and other federal agencies and authorities have a broad range of civil and criminal penalties they may seek to impose against corporations and individuals for violations of economic sanctions laws, export control laws, the U.S. Foreign Corrupt Practices Act, or the FCPA, and other federal statutes and regulations, including those established by the Office of Foreign Assets Control, or OFAC. In addition, the U.K. Bribery Act of 2010, or the Bribery Act, prohibits both domestic and international bribery, as well as bribery across both private and public sectors. An organization that “fails to prevent bribery” by anyone associated with the organization can be charged under the Bribery Act unless the organization can establish the defense of having implemented “adequate procedures” to prevent bribery. Under these laws and regulations, as well as other anti-corruption laws, anti-money laundering laws, export control laws, customs laws, sanctions laws and other laws governing our operations, various government agencies may require export licenses, may seek to impose modifications to business practices, including cessation of business activities in sanctioned countries or with sanctioned persons or entities and modifications to compliance programs, which may increase compliance costs, and may subject us to fines, penalties and other sanctions. A violation of these laws or regulations would negatively affect our business, financial condition and results of operations.
We are in the process of implementing policies and procedures designed to ensure compliance by us and our directors, officers, employees, representatives, consultants and agents with the FCPA, OFAC restrictions, the Bribery Act and other export control, anti-corruption, anti-money-laundering and anti-terrorism laws and regulations. We cannot assure you, however, that our policies and procedures are or will be sufficient or that directors, officers, employees, representatives, consultants and agents have not engaged and will not engage in conduct for which we may be held responsible, nor can we assure you that our business partners have not engaged and will not engage in conduct that could materially affect their ability to perform their contractual obligations to us or even result in our being held liable for such conduct. Violations of the FCPA, OFAC restrictions, the Bribery Act or other export control, anti-corruption, anti-money laundering and anti-terrorism laws or regulations may result in severe criminal or civil sanctions, and we may be subject to other liabilities, which could have a material adverse effect on our business, financial condition and results of operations.
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Risks Related to Our Intellectual Property
If we are unable to protect our intellectual property rights, our competitive position could be harmed. Our success and ability to compete depends in large part upon our ability to protect our proprietary technology.
Our success and ability to compete depends in large part upon our ability to protect our proprietary technology. We rely primarily upon a combination of patents and trademarks, as well as nondisclosure, confidentiality and other contractual agreements to protect the intellectual property related to our brands, products and other proprietary technologies.
We generally apply for patents only in those countries where we intend to make, have made, use, offer for sale, or sell products. To date, we have only pursued patents in the United States, which we consider to be our main target market, and South Korea. Substantially all of our revenues for the three months ended March 31, 2019 and the years ended December 31, 2018 and 2017 were derived from the United States where we have patent protection. We do not seek protection in all countries where we sell products and we may not accurately predict all the countries where patent protection would ultimately be desirable. At this time, the countries in which we have not sought patent protection, but intend to offer our products for sale, are not our main target markets. We acknowledge that competitors may use our technologies in jurisdictions where we have not obtained patent protection to develop their own products and, further, may export otherwise infringing products to territories in which we do not have patent protection. Such activity may prevent us from protecting our proprietary technology, and thus, may harm our competitive position.
Our patent portfolio consists of four issued patents and nine pending patent applications in the United States relating to our technology and products. Our pending and future patent applications may not issue as patents or, if issued, may not issue in a form that will be advantageous to us. Any issued patents may be challenged, invalidated or legally circumvented by third parties. We cannot be certain that our patents will be upheld as valid, proven enforceable or prevent the development of competitive products. Other companies may also design around technologies we have patented. Third parties may have blocking patents that could prevent us from marketing our products or practicing our own patented technology. In addition, competitors could purchase one of our products and attempt to replicate some or all of the competitive advantages we derive from our development efforts, design around our protected technology, or develop their own competitive technologies that fall outside of our intellectual property rights. If our intellectual property is not adequately protected against competitors’ products and methods, our competitive position could be adversely affected, as could our business and financial results.
The U.S. Supreme Court and the U.S. Court of Appeals for the Federal Circuit have made, and will likely continue to make, changes in how the patent laws of the United States are interpreted. Similarly, foreign courts have made, and will likely continue to make, changes in how the patent laws in their respective jurisdictions are interpreted. We cannot predict future changes in the interpretation of patent laws or changes to patent laws that might be enacted into law by U.S. and foreign legislative bodies.
We rely on a combination of patent and other intellectual property laws and confidentiality, non-disclosure and assignment of inventions agreements, as appropriate, with our employees and consultants, to protect and otherwise seek to control access to, and distribution of, our proprietary information. These measures may not be adequate to protect our technology from unauthorized disclosure, third-party infringement or misappropriation. Parties may breach these agreements, and we may not have adequate remedies for any breach. Also, the laws of certain countries in which we develop, manufacture or sell our products may not protect our intellectual property rights to the same extent as the laws of the United States or Israel.
The aesthetics industry is highly competitive and marked by frequent litigation. New patent applications may be pending or may be filed in the future by third parties covering technology that we currently use or may ultimately use. Third parties may from time to time claim that our current or future products infringe their patent or other intellectual property rights and may seek to prevent, limit or interfere with our ability to make, use, sell or import our products. Moreover, if such a claim were to be decided adversely to us or if we settled such a claim on adverse terms, we could be forced to pay substantial damages, to license the technology in question at high rates or to redesign or modify our products so as to avoid any infringement. Any of those results could adversely affect our sales, margins and results of operations.
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If it appears necessary or desirable, we may try to obtain licenses for those patents or intellectual property rights that we are allegedly infringing, may infringe, or desire to use. Although holders of these types of intellectual property rights commonly offer these licenses, we cannot assure you that licenses will be offered or that the terms of any offered licenses will be acceptable to us. Our failure to obtain a license for key intellectual property rights from a third party for technology used by us could cause us to incur substantial liabilities and to suspend the manufacturing and selling of products utilizing the technology.
Alternatively, we could be required to expend significant resources to develop non-infringing technology. We cannot assure you that we would be successful in developing non-infringing technology.{h3}Third parties have and may in the future commence litigation against us claiming that our products infringe upon their patents or other intellectual property rights.
From time to time, we may be party to, or threatened with, litigation or other proceedings with third parties, including non-practicing entities, who allege that our products, components of our products, services, and/or proprietary technologies infringe, misappropriate or otherwise violate their intellectual property rights. The types of situations in which we may become a party to such litigation or proceedings include:
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we or our collaborators may initiate litigation or other proceedings against third parties seeking to invalidate the patents held by those third parties or to obtain a judgment that our products or processes do not infringe those third parties’ patents;
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we or our collaborators may participate at substantial cost in International Trade Commission proceedings to abate importation of products that would compete unfairly with our products
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if our competitors file patent applications that claim technology also claimed by us, we may be required to participate in interference, derivation or opposition proceedings to determine the priority of invention, which could jeopardize our patent rights and potentially provide a third party with a dominant patent position;
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if third parties initiate litigation claiming that our processes or products infringe their patent or other intellectual property rights, we and our collaborators will need to defend against such proceedings;
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if third parties initiate litigation or other proceedings seeking to invalidate patents owned by or licensed to us or to obtain a declaratory judgment that their product, service, or technology does not infringe our patents or patents licensed to us, we will need to defend against such proceedings;
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we may be subject to ownership disputes relating to intellectual property, including disputes arising from conflicting obligations of consultants or others who are involved in developing our products; and,
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if a license to necessary technology is terminated, the licensor may initiate litigation claiming that our processes or products infringe or misappropriate its patent or other intellectual property rights and/or that we breached our obligations under the license agreement, and we and our collaborators would need to defend against such proceedings.
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These lawsuits and proceedings, regardless of merit, are time-consuming and expensive to initiate, maintain, defend or settle, and could divert the time and attention of managerial and technical personnel, which could materially adversely affect our business. Any such claim could also force use to do one or more of the following:
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incur substantial monetary liability for infringement or other violations of intellectual property rights, which we may have to pay if a court decides that the product, service, or technology at issue infringes or violates the third party’s rights, and if the court finds that the infringement was willful, we could be ordered to pay treble damages and the third party’s attorneys’ fees;
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pay substantial damages to our customers or end users to discontinue use or replace infringing technology with non-infringing technology;
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stop manufacturing, offering for sale, selling, using, importing, exporting or licensing the product or technology incorporating the allegedly infringing technology or stop incorporating the allegedly infringing technology into such product, service, or technology;
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obtain from the owner of the infringed intellectual property right a license, which may require us to pay substantial upfront fees or royalties to sell or use the relevant technology and which may not be available on commercially reasonable terms, or at all;
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redesign our products, services, and technology so they do not infringe or violate the third party’s intellectual property rights, which may not be possible or may require substantial monetary expenditures and time;
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enter into cross-licenses with our competitors, which could weaken our overall intellectual property position;
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lose the opportunity to license our technology to others or to collect royalty payments based upon successful protection and assertion of our intellectual property against others;
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find alternative suppliers for non-infringing products and technologies, which could be costly and create significant delay; or
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relinquish rights associated with one or more of our patent claims, if our claims are held invalid or otherwise unenforceable.
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In April 2018, Syneron Medical Ltd., or Syneron, and Candela Corporation, together with Syneron, Syneron-Candela, filed claims with the International Trade Commission and with Massachusetts General Hospital, or MGH, in the United States District Court for the District of Massachusetts against our U.S. and Israeli subsidiaries, alleging that our fractional RF products infringed two U.S. patents owned by Syneron-Candela and MGH that purport to cover systems and methods for treating skin and arranging electrodes on skin therapy devices. In January 2019, we reached a settlement with Syneron-Candela and MGH that resolved all patent claims previously in dispute in exchange for a one-time cash payment that we made to Syneron-Candela and MGH in February 2019. As part of such settlement agreement, we entered into a sublicense agreement with Syneron-Candela and MGH that granted us and our affiliates a fully paid non-exclusive, royalty-free worldwide sublicense to practice the patents and applications previously in dispute in the licensed field. The sublicense shall continue until the expiration of the last surviving patent or application granted pursuant to the sublicense agreement. Although we may try to resolve any potential future claims or actions, we may not be able to do so on reasonable terms, if at all. Infringement and other intellectual property claims, with or without merit, can be expensive and time-consuming to litigate, and could divert management’s attention from our core business. If we lose this kind of litigation, a court could require us to pay substantial damages and could prohibit us from using technologies essential to our products, either of which would have a material adverse effect on our business, results of operations and financial condition.
We may become involved in litigation to protect the trademark rights associated with our company name or the names of our products. If we have to change the name of our company or products, we may experience a loss in goodwill associated with our brand name, customer confusion and a reduction in sales.
Some of our competitors may be able to sustain the costs of complex intellectual property litigation more effectively than we can because they have substantially greater resources. In addition, intellectual property litigation, regardless of its outcome, may cause negative publicity, adversely impact prospective customers, cause product shipment delays, or prohibit us from manufacturing, marketing or otherwise commercializing our products, services and technology. Any uncertainties resulting from the initiation and continuation of any litigation could have a material adverse effect on our ability to raise additional funds or otherwise have a material adverse effect on our business, results of operation, financial condition or cash flows.
In addition, we may indemnify our customers and distributors against claims relating to the infringement of intellectual property rights of third parties related to our products. Third parties may assert infringement claims against our customers or distributors. These claims may require us to initiate or defend protracted and costly litigation on behalf of our customers or distributors, regardless of the merits of these
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claims. If any of these claims succeed, we may be forced to pay damages on behalf of our customers, suppliers or distributors, or may be required to obtain licenses for the products or services they use. If we cannot obtain all necessary licenses on commercially reasonable terms, our customers may be forced to stop using our products or services.
Furthermore, because of the substantial amount of discovery required in connection with intellectual property litigation, there is a risk that some of our confidential information could be compromised by disclosure during this type of litigation. There could also be public announcements of the results of hearings, motions or other interim proceedings or developments, which could have a material adverse effect on the price of our ordinary shares. If securities analysts or investors perceive these results to be negative, it could have a material adverse effect on the price of our ordinary shares.
If our trademarks and trade names are not adequately protected, then we may not be able to build name recognition in our markets of interest and our business may be adversely affected.
Our registered or unregistered trademarks or trade names may be challenged, infringed, circumvented, declared generic or determined to be infringing on other marks. We may not be able to protect our rights in these trademarks and trade names, which we need in order to build name recognition with potential partners or customers in our markets of interest. If we are unable to establish name recognition based on our trademarks and trade names, then we may not be able to compete effectively and our business may be adversely affected.
We may be subject to claims that our employees, consultants or independent contractors have wrongfully used or disclosed confidential information of their former employers or other third parties.
We do and may employ individuals who were previously employed at universities or other pharmaceutical or medical device companies, including our competitors or potential competitors. Although we try to ensure that our employees, consultants and independent contractors do not use the proprietary information or know-how of others in their work for us, and we are not currently subject to any claims that our employees, consultants or independent contractors have wrongfully used or disclosed confidential information of third parties, we may in the future be subject to such claims. Litigation may be necessary to defend against these claims. If we fail in defending any such claims, in addition to paying monetary damages, we may lose valuable intellectual property rights or personnel. Even if we are successful in defending against such claims, litigation could result in substantial costs and be a distraction to management and other employees.
For example, in April 2017, Syneron-Candela filed a lawsuit in the United States District Court for the Western District of Tennessee against us and our wholly-owned subsidiaries in Israel and the United States, asserting claims for inducement to breach contract, interference with employment relationships, tortious interference with business and violation of the Tennessee Uniform Trade Secrets Act with respect to four former employees of Syneron-Candela who subsequently accepted employment with us. In January 2018, we reached a settlement and the case was dismissed with prejudice. Additionally, in May 2017, Cynosure, Inc., or Cynosure, filed a claim with the United States District Court for the Southern District of Texas (Houston) against us and our U.S. subsidiary, claiming that we unlawfully solicited certain former Cynosure employees, misappropriated Cynosure’s trade secrets, and aided and abetted the employees’ breach of their fiduciary duties to Cynosure. We reached a settlement in February 2018 and the case was dismissed with prejudice.
Intellectual property rights do not necessarily address all potential threats to our business.
The degree of future protection afforded by our intellectual property rights is uncertain because even granted intellectual property rights have limitations, and may not adequately protect our business, provide a barrier to entry against our competitors or potential competitors or permit us to maintain our competitive advantage. Moreover, if a third party has intellectual property rights that cover the practice of our technology, we may not be able to fully exercise or extract value from our intellectual property rights. The following examples are illustrative:
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others may be able to develop and/or practice technology that is similar to our technology or aspects of our technology, but that are not covered by the claims of the patents that we own or control, assuming such patents have issued or do issue;
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we or any future strategic partners might not have been the first to conceive or reduce to practice the inventions covered by the issued patent or pending patent application that we own or have exclusively licensed;
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we or any future strategic partners might not have been the first to file patent applications covering certain of our inventions;
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others may independently develop similar or alternative technologies or duplicate any of our technologies without infringing our intellectual property rights;
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it is possible that our pending patent applications will not lead to issued patents;
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issued patents that we own may not provide us with any competitive advantage, or may be held invalid or unenforceable, as a result of legal challenges by our competitors;
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our competitors might conduct research and development activities in countries where we do not have patent rights and then use the information learned from such activities to develop competitive products for sale in our major commercial markets;
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third parties performing manufacturing or testing for us using our products or technologies could use the intellectual property of others without obtaining a proper license;
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parties may assert an ownership interest in our intellectual property and, if successful, such disputes may preclude us from exercising exclusive rights over that intellectual property;
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we may not develop or in-license additional proprietary technologies that are patentable;
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we may not be able to obtain and maintain necessary licenses on commercially reasonable terms, or at all; and
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the patents of others may have an adverse effect on our business.
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Should any of these events occur, they could significantly harm our business and results of operations.
Risks Related to Government Regulation
Our business is subject to extensive and continuing regulatory compliance obligations. If we fail to obtain and maintain necessary market clearances from the FDA and other marketing authorizations from counterpart foreign regulatory authorities for our products and indications, if clearances or other marketing authorizations for future products and indications are delayed or not issued, if we or any of our third-party suppliers or manufacturers fail to comply with applicable regulatory requirements, or if there are U.S. federal or state level or counterparty foreign regulatory changes, our commercial operations could be harmed.
Our products are medical devices subject to extensive regulation by the applicable regulatory authorities where our products are or will be sold prior to their marketing for commercial use. In the United States, our products are subject to extensive regulation by the FDA for developing, testing, manufacturing, labeling, sale, marketing, advertising, promotion, distribution, import, export, shipping, establishment registration and device listing, inspections and audits, record keeping, recalls and field safety corrective actions and post-market surveillance, including reporting of certain events.
Before a new medical device, or a new use of, or claim for, an existing product can be marketed in the United States, it must first receive marketing authorization from the FDA unless it is exempt. The FDA marketing authorizations include a 510(k) clearance or premarket approval. A relatively small number of devices may be exempt from 510(k) clearance or may receive marketing authorization through the de novo classification pathway. These processes can be expensive and lengthy. The FDA’s 510(k) clearance process usually takes from three to 12 months, but it can last longer. The process of obtaining premarket approval is much more costly and uncertain than the 510(k) clearance process and it generally takes from one to three years, or even longer, from the time the application is filed with the FDA. Our future products and enhancements or changes to products may require new 510(k) clearance or premarket approval from the FDA. All products that we currently market in the United States that require an FDA marketing authorization have received 510(k) clearance for the uses for which they are marketed.
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Medical devices may be marketed only for the indications for which they are approved or cleared. We have obtained 510(k) clearance for the current treatments for which we offer our products. However, our clearances can be revoked under certain circumstances. If the FDA disagrees with us concerning the scope or applicability of a clearance or exemption with respect to a device, we may be required to change our promotional and/or labeling materials and/or stop marketing that device. Changes or modifications to an FDA-cleared device that could significantly affect its safety or effectiveness or that constitute a major change or modification in its intended use would require a new 510(k) clearance or possibly premarket approval. We may not be able to obtain additional 510(k) clearances or premarket approvals for new products or for modifications to, or additional indications for, our existing products in a timely fashion, or at all. Delays in obtaining future clearances or approvals would adversely affect our ability to introduce new or enhanced products in a timely manner, which in turn would harm our revenue and future profitability. We have made modifications to our devices in the past and may make additional modifications in the future that we believe do not or will not require additional clearances or approvals. If the FDA disagrees, and requires new clearances or approvals for the modifications, we may be required to recall and to stop marketing the modified devices. We also are subject to the FDA’s Medical Device Reporting regulations, which require us to report to the FDA if our products cause or contribute to a death or serious injury, or malfunction in a way that would likely cause or contribute to a death or serious injury.
The FDA or the applicable foreign regulatory bodies can delay, limit or deny clearance or approval of a device for many reasons, including:
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our inability to demonstrate to the satisfaction of the FDA or the applicable foreign regulatory bodies that our products are safe or effective for their intended uses;
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the disagreement of the FDA or the applicable foreign regulatory bodies with the design or implementation of our clinical trials or the interpretation of data from pre-clinical studies or clinical trials;
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serious and unexpected adverse device effects experienced by participants in our clinical trials;
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the data from our pre-clinical studies and clinical trials may be insufficient to support clearance or approval, where required;
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our inability to demonstrate that the clinical and other benefits of the device outweigh the risks;
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the manufacturing process or facilities we use may not meet applicable requirements; and
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the potential for approval policies or regulations of the FDA or applicable foreign regulatory bodies to change significantly in a manner rendering our clinical data or regulatory filings insufficient for clearance or approval.
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In addition, the FDA or applicable foreign regulatory bodies may change their clearance and approval policies, adopt additional regulations or revise existing regulations, or take other actions, which may prevent or delay approval or clearance of our future products under development or impact our ability to modify our currently cleared products on a timely basis. Such policy or regulatory changes could impose additional requirements upon us that could delay our ability to obtain new clearances, increase the costs of compliance or restrict our ability to maintain our current clearances. For example, as part of the Food and Drug Administration Safety and Innovation Act, or FDASIA, enacted in 2012, Congress reauthorized the Medical Device User Fee Amendments with various FDA performance goal commitments and enacted several “Medical Device Regulatory Improvements” and miscellaneous reforms, which are further intended to clarify and improve medical device regulation both pre- and post-clearance and approval. Some of these proposals and reforms could impose additional regulatory requirements upon us that could delay our ability to obtain new 510(k) clearances, increase the costs of compliance or restrict our ability to maintain our current clearances.
Additionally regulatory clearances or approvals to market a product can contain limitations on the indicated uses for such product. Product clearances and approvals can be withdrawn due to failure to comply with regulatory standards or the occurrence of unforeseen problems following initial clearance or approval. FDA regulations depend heavily on administrative interpretation, and there can be no assurance that future interpretations made by the FDA or other regulatory bodies will not adversely affect our operations. We and our manufacturers may be inspected by the FDA from time to time to determine
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whether we or our manufacturers are in compliance with applicable laws, including the cGMP regulations set forth in the QSR, including those relating to specifications, development, documentation, validation, testing, quality control and product labeling. A determination that we are in violation of FDA or other applicable foreign regulations or any of our product clearances or approvals could lead to imposition of civil penalties, including fines, product recalls or product seizures and, in certain cases, criminal sanctions.
The use, misuse or off-label use of our products may harm our reputation in the marketplace, result in injuries that lead to product liability suits or result in costly investigations, fines or sanctions by regulatory bodies if we are deemed to have engaged in the promotion of these uses, any of which could be costly to our business.
The use, misuse or off-label use of our products may harm our reputation or the image of our products in the marketplace, result in injuries that lead to product liability suits, which could be costly to our business, or result in legal sanctions if we are deemed or alleged to have engaged in off-label promotion.
A medical device may be authorized by the FDA for marketing through several regulatory mechanisms. The FDA classifies medical devices as Class I, Class II, or Class III, in increasing order of risk. Most of our products are Class I or Class II medical devices. As such, they are either exempt from premarketing authorization requirements or are subject to the 510(k) clearance process, and all are listed with the FDA pursuant to FDA’s medical device listing requirements.
Under FDA regulations, for each of our products we must only use labeling, including advertising and promotional materials, that is consistent with the specific indication(s) for use included in the FDA exemption regulation, clearance, or approval, that is applicable to the specific product. If the FDA or other authorities determine that our promotional or training materials constitute the unlawful promotion of an off-label use, they could request that we modify our training or promotional materials and/or subject us to regulatory or enforcement actions, including the issuance of an untitled letter, a warning letter, civil money penalties, seizure, injunction or criminal fines and penalties. For example, on July 30, 2018, we received a letter, dated July 24, 2018, from the FDA seeking information as to the regulatory bases for marketing of our FormaV and FractoraV handpieces based on our promotion and labeling of these devices for use in certain women’s health conditions and procedures. For the three months ended March 31, 2019 and 2018, we derived approximately 15% and 28%, respectively, of our total U.S. revenues from our FormaV and FractoraV handpieces and related products. For the years ended December 31, 2018 and 2017, we derived approximately 23% and 21%, respectively, of our total U.S. revenues from our FormaV and FractoraV handpieces and related products. We timely responded to the FDA in August 2018 answering the FDA’s questions. We informed the FDA that the Forma V had received 510(k) clearance for the temporary relief of minor muscle aches and pain, temporary relief of muscle spasm, and temporary improvement of local blood circulation and that we had determined that the device also fell within a Class II premarketing exemption enabling marketing of the device for therapeutic use in the treatment of sexual dysfunction or as an adjunct to Kegel’s exercise (tightening of the muscles of the pelvic floor to increase muscle tone) without the need to obtain a 510(k) clearance. We also informed the FDA that the FractoraV has received 510(k) clearance for use in dermatologic and general surgical procedures for electrocoagulation and hemostasis. In addition, we advised the FDA that we have modified our promotional and labeling materials to remove statements using the terms “sexual dysfunction,” “vaginal rejuvenation” or “urinary stress incontinence,” which were the subject of the agency’s letter to us. The FDA responded in September 2018 by stating that the agency had reviewed our response letter and verified the changes in terminology made to our website. Moreover, the FDA further responded in November 2018 and confirmed we addressed all items raised by the agency in its letter, and that the FDA continued to expect us to conduct a review of our marketing and promotional materials to make appropriate changes and remove materials containing uncleared claims regarding this matter. We have received no further communications from the agency regarding this matter. We cannot be certain whether any further information may be requested by the FDA in the future and/or any further action may be required on our part, and we cannot guarantee that the FDA will continue to deem our response and actions to have addressed all items raised by the agency in this matter. If the FDA issues a further communication finding that some or all of our modifications to our marketing and labeling materials are insufficient, or otherwise takes the position that our products are being marketed for off-label uses, we could be subject to further discussions with and/or action by the agency, including the possibility of a warning letter or other enforcement activity. Other federal, state or foreign governmental authorities might also take action if they consider our promotion or training materials to constitute promotion of an
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uncleared or unapproved use, which could result in significant fines or penalties under other statutory authorities, such as laws prohibiting false claims for reimbursement, or exclusion from participation in federal health programs. In each event, our reputation could be damaged and the use of our products in the marketplace could be impaired, or our business could face significant hardship. While no third-party claims have been brought against us to date, it is possible that the FDA letter may lead to private litigation by third parties, potentially including purchasers of FormaV and FractoraV handpieces or patients who were treated using those handpieces.
In addition, there may be increased risk of injury if physicians or others attempt to use our products off-label. The FDA does not restrict or regulate a physician’s use of a medical product within the practice of medicine, and we cannot prevent a physician from using our products for an off-label use. The use of our products for indications other than those for which our products have been approved or cleared by the FDA may not effectively treat the conditions not referenced in product indications, which could harm our reputation in the marketplace among physicians and patients. Physicians may also misuse our products or use improper techniques if they are not adequately trained in the particular use, potentially leading to injury and an increased risk of product liability. Product liability claims are expensive to defend and could divert management’s attention from our primary business and result in substantial damage awards against us. Any of these events could harm our business, results of operations and financial condition.
We are subject to ongoing regulatory obligations and a failure to comply with post-marketing regulatory requirements could subject us to enforcement actions, including substantial penalties, and might require us to recall or withdraw a product from the market.
Even after we have obtained the proper regulatory clearance or approval to market a product, we have ongoing responsibilities under FDA regulations and applicable foreign laws and regulations. The FDA, state and foreign regulatory authorities have broad enforcement powers. The regulations to which we are subject are complex and have become more stringent over time. Regulatory changes could result in restrictions on our ability to continue or expand our operations, higher than anticipated costs, or lower than anticipated sales.
Our products and/or their use are also subject to state regulations and additional regulations in other foreign jurisdictions outside of the United States, which may change at any time. We cannot predict the impact or effect of future legislation or regulations and any changes in regulations may impede sales.
Furthermore, the FDA and state authorities have broad enforcement powers. Our failure to comply with applicable regulatory requirements could result in enforcement action by the FDA or state agencies, which may include any of the following sanctions:
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warning letters or untitled letters, fines, injunctions, consent decrees and civil penalties;
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repair, replacement, refunds, recalls, termination of distribution, administrative detention or seizure of our products;
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operating restrictions or partial suspension or total shutdown of production;
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refusing our requests for 510(k) clearance or premarket approval of new products, new intended uses, or modifications to existing products;
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withdrawing 510(k) clearances or premarket approvals or foreign regulatory approvals that have already been granted, resulting in prohibitions on sales of our products; and
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criminal prosecution.
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The occurrence of any of these events could harm our business, financial condition and results of operations.
If we or our subcontractors fail to comply with federal and state regulation, including the FDA’s Quality System Regulation/Medical Device Good Manufacturing Practices and performance standards, our or our subcontractors’ manufacturing operations could be halted, and our business would suffer.
We and our subcontractors currently are required to demonstrate and maintain compliance with the FDA’s Quality System Regulation/Medical Device Current Good Manufacturing Practices, or QSR. The QSR is a complex regulatory scheme that covers the methods and documentation of the design, testing,
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control, manufacturing, labeling, quality assurance, packaging, storage and shipping of our products. Because our products use optical energy, including lasers, our products also are covered by a performance standard for lasers set forth in FDA regulations. The laser performance standard imposes specific record-keeping, reporting, product testing and product labeling requirements. These requirements include affixing warning labels to laser products, as well as incorporating certain safety features in the design of laser products. The FDA enforces the QSR and laser performance standards through periodic announced or unannounced inspections. We and our subcontractors are subject to such inspections. Although we place our own quality control employee at each of our subcontractor’s facilities, we do not have complete control over our subcontractor’s compliance with these standards.
Any failure by us or our subcontractors to take satisfactory corrective action in response to an adverse QSR inspection or to comply with applicable laser performance standards could result in enforcement actions against us or our subcontractors, including warning letters or untitled letters; fines, injunctions or civil penalties; suspension or withdrawal of approvals or clearances; seizures or recalls of our products; total or partial suspension of production or distribution; administrative or judicially imposed sanctions; the FDA’s refusal to grant pending or future clearances or approvals for our products; clinical holds; refusal to permit the import or export of our products; and criminal prosecution of us or our employees. Any of these actions could significantly and negatively impact the supply of our products, and could cause our sales and business to suffer. In addition, we are subject to standards imposed on our activities outside of the United States, such as obtaining KEMA certification (electrical safety testing and certification in Europe) and the Standards Institution of Israel (imposed on our activities in Israel), and failure to comply with such standards could adversely impact our business.
Our products may cause or contribute to adverse medical events or other undesirable side effects that we are required to report to the FDA, and if we fail to do so, we would be subject to sanctions that could harm our reputation, business, financial condition and results of operations. The discovery of serious safety issues with our products, or a recall of our products either voluntarily or at the direction of the FDA or another governmental authority, could have a negative impact on us.
We are subject to the FDA’s medical device reporting regulations and similar foreign regulations, which require us to report to the FDA when we receive or become aware of information that reasonably suggests that one or more of our products may have caused or contributed to a death or serious injury or malfunctioned in a way that, if the malfunction were to recur, it could cause or contribute to a death or serious injury. The timing of our obligation to report is triggered by the date we become aware of the adverse event as well as the nature of the event. We may fail to report adverse events of which we become aware within the prescribed timeframe. We may also fail to recognize that we have become aware of a reportable adverse event, especially if it is not reported to us as an adverse event or if it is an adverse event that is unexpected or removed in time from the use of the product. If we fail to comply with our reporting obligations, the FDA could take action, including warning letters, untitled letters, administrative actions, criminal prosecution, imposition of civil monetary penalties, revocation of our device clearance, seizure of our products or delay in clearance of future products.
The FDA and foreign regulatory bodies have the authority to require the recall of commercialized products in the event of material deficiencies or defects in design or manufacture of a product or in the event that a product poses an unacceptable risk to health. We may also choose to voluntarily recall a product if any material deficiency is found. A government-mandated or voluntary recall by us could occur as a result of an unacceptable risk to health, component failures, malfunctions, manufacturing defects, labeling or design deficiencies, packaging defects or other deficiencies or failures to comply with applicable regulations. Product defects or other errors may occur in the future. Depending on the corrective action we take to redress a product’s deficiencies or defects, the FDA may require, or we may decide, that we will need to obtain new approvals or clearances for the product before we may market or distribute the corrected product. Seeking such approvals or clearances may delay our ability to replace the recalled products in a timely manner. Moreover, if we do not adequately address problems associated with our products, we may face additional regulatory enforcement action, including FDA warning letters, product seizure, injunctions, administrative penalties or civil or criminal fines.
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Companies are required to maintain certain records of recalls and corrections, even if they are not reportable to the FDA. We may initiate voluntary withdrawals or corrections for our products in the future that we determine do not require notification of the FDA. If the FDA disagrees with our determinations, it could require us to report those actions as recalls and we may be subject to enforcement action. A future recall announcement could harm our reputation with customers, potentially lead to product liability claims against us and negatively affect our sales.
We may be unable to obtain or maintain international regulatory qualifications or approvals for our current or future products and indications, which could harm our business. Additionally, obtaining and maintaining regulatory approval in one jurisdiction does not mean we will be successful in obtaining regulatory approval for our products in other jurisdictions.
Sales of our products outside the United States are subject to foreign regulatory requirements that vary widely from country to country, including some regulatory requirements that we may not be fully aware, or that may change in ways that affect our ability to sell our products in those jurisdictions. Complying with international regulatory requirements can be an expensive and time-consuming process and approval is not certain. The regulatory process in foreign jurisdictions includes all the risks associated with obtaining FDA clearance, as well as additional risks not present in the FDA process. For example, the time required to obtain foreign clearance or approvals may be longer than that required for FDA clearance or approvals, and requirements for such clearances or approvals may significantly differ from FDA requirements, adding costs and variability. Foreign regulatory authorities may not approve our product for the same uses cleared by the FDA. Although we have obtained regulatory approvals to sell our products in the European Union and other countries outside the United States, we may be unable to maintain regulatory qualifications, clearances or approvals in these countries or to obtain approvals in other countries. We also may incur significant costs in attempting to obtain and in maintaining foreign regulatory approvals or qualifications. If we experience delays in receiving necessary qualifications, clearances or approvals to market our products outside the United States, or if we fail to receive those qualifications, clearances or approvals, we may be unable to market some of our products or enhancements in certain international markets effectively, or at all. Since the enactment of the Israeli Medical Equipment Law, 2012, or the Medical Equipment Law, in 2012, the manufacturing and marketing of medical and certain aesthetic devices, including our products, in Israel requires registration with the Israeli Ministry of Health. The Medical Equipment Law offers a fast-track registration process for devices that received approval from certain non-Israeli regulatory agencies, including FDA clearance or CE marks. We have taken advantage of such fast-track registration process in the past. If we are unable to obtain and maintain the necessary registration for any of our products in Israel, we may have to move the manufacturing of such unregistered products to a location outside of Israel and stop selling these products in Israel until the products are registered. We may also suffer harm to our reputation as a result.
New regulations may limit our ability to sell to non-physicians in the future.
Currently, we sell our products solely to physicians. However, where permitted under applicable laws, we intend to introduce certain of our products in the developing medical spa market, where aesthetic procedures are being performed at dedicated facilities by non-physicians under physician supervision. U.S., state and international regulations could change at any time, disallowing sales of our products to aestheticians, and/or limiting the ability of aestheticians and non-physicians to operate our products. We cannot predict the impact or effect of changes in U.S., state or international laws or regulations.
Risks Related to this Offering
Our ordinary shares have not been publicly traded, and we expect that the price of our ordinary shares will fluctuate substantially.
Before this offering, there has been no public market for our ordinary shares. An active public trading market may not develop after completion of this offering or, if developed, may not be sustained. The lack of a trading market may result in the loss of research coverage by securities analysts. Moreover, we cannot
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assure you that any securities analysts will initiate or maintain research coverage of our company and our ordinary shares. The price of the ordinary shares sold in this offering will not necessarily reflect the market price of our ordinary shares after this offering. The market price for our ordinary shares after this offering will be affected by a number of factors, including:
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fluctuations in our operating results or the operating results of our competitors;
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changes in the estimates of the future size and growth rate of our market opportunities;
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changes in the general economic, industry and market conditions;
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success of competitive technologies and procedures;
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recruitment or departure of key personnel;
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the announcement of new products or enhancements by us or our competitors;
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the commencement or outcome of litigation against us, or involving our general industry or both;
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changes in earnings estimates, investors’ perceptions, recommendations by securities analysts or our failure to achieve analysts’ earning estimates;
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developments in our industry, including the announcement of significant new technologies, procedures or acquisitions by us or our competitors;
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actual or expected sales of our ordinary shares by the holders of our ordinary shares; and
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the trading volume of our ordinary shares.
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In addition, the stock prices of many companies in the medical device industry have experienced wide fluctuations that often have been unrelated to the operating performance of those companies. These factors and price fluctuations may materially and adversely affect the market price of our ordinary shares.
An active trading market for our ordinary shares may not develop, and you may not be able to resell your ordinary shares at or above the public offering price.
Prior to this offering, there has been no public market for our ordinary shares. The initial public offering price has been determined by negotiation between the representatives of the underwriters and us. This price may not reflect the market price of our ordinary shares following this offering. In addition, an active trading market may not develop following completion of this offering or, if it is developed, may not be sustained. The lack of an active market may impair your ability to sell your shares at the time you wish to sell them or at a price that you consider reasonable. An inactive market may also impair our ability to raise capital by selling shares and may impair our ability to acquire other businesses, applications or technologies using our shares as consideration.
Purchasers in this offering will experience immediate and substantial dilution in net tangible book value.
The assumed initial public offering price will be substantially higher than the pro forma net tangible book value per share of our outstanding ordinary shares. As a result, investors purchasing ordinary shares in this offering will incur immediate dilution of  $     per ordinary share, based on an assumed initial public offering price of  $     per ordinary share, the midpoint of the range set forth on the cover page of this prospectus. Investors purchasing ordinary shares in this offering will pay a price per ordinary share that substantially exceeds the net tangible book value per ordinary share.
In addition, the exercise of outstanding options will, and future equity issuances may, result in further dilution to investors. As of June 30, 2019, there were outstanding options to purchase 5,333,725 ordinary shares under our share option plans at a weighted average exercise price of  $2.10 per ordinary share.
A significant share ownership position in our company is held by a small number of existing shareholders, who may make decisions with which you may disagree.
Our directors and officers, along with our two largest shareholders, in the aggregate, currently beneficially own or control approximately 75% of our outstanding ordinary shares and will beneficially own or control approximately    % of our outstanding ordinary shares following the completion of this
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offering, or    % if the underwriters exercise their over-allotment option in full. The interests of these shareholders may differ from your interests. These shareholders are not prohibited from selling a controlling interest in us to a third party. While these shareholders will not have the right to appoint board members directly after the closing of this offering, these shareholders, acting together, could exercise significant influence over our operations and business strategy and will have sufficient voting power to influence all matters requiring approval by our shareholders, including the ability to elect or remove directors, to approve or reject mergers or other business combination transactions, the raising of future capital and the amendment of our articles of association, which govern the rights attached to our ordinary shares. In addition, this concentration of ownership may delay, prevent or deter a change in control, or deprive you of a possible premium for your ordinary shares as part of a sale of our company. Furthermore, this concentration of ordinary share ownership may adversely affect the trading price for our ordinary shares because investors may perceive disadvantages in owning shares in companies where persons have a significant interest.
We will have broad discretion in how we use the proceeds of this offering and we may not apply the proceeds to uses that will benefit shareholders.
We intend to use the net proceeds of this offering to expand our sales and marketing operations, to fund our research and development activities, and the remainder for general corporate purposes, including potential acquisitions of complementary products, technologies or businesses and research and development. We have no current agreements or commitments with respect to any investment or acquisition, and we are not engaged in negotiations with respect to any investment or acquisition. Our management will have broad discretion over the use and investment of the net proceeds from this offering, and accordingly investors in this offering will need to rely upon the judgment of our management with respect to the use of proceeds. Our management could spend the proceeds in ways that you do not agree with or that do not improve our results of operations or enhance the value of our ordinary shares. Our failure to apply these proceeds effectively could have a material adverse effect on our business and cause the price of our ordinary shares to decline.
The requirements of being a public company may strain our resources and divert management’s attention.
The requirements of being a public company may strain our resources and divert management’s attention. As a public company, whose ordinary shares are listed in the United States, we will be subject to the reporting requirements of the Exchange Act, the Sarbanes-Oxley Act, the Dodd-Frank Wall Street Reform and Consumer Protection Act, the listing requirements of Nasdaq as applicable to foreign private issuers, and other applicable federal and state securities rules and regulations. We expect that compliance with these rules and regulations will increase our legal, accounting and financial compliance costs, make some activities more difficult, time-consuming or costly and increase demand on our business systems and resources. The Exchange Act requires, among other things, that we file annual and current reports with respect to our business and financial condition. Our management will be required to devote substantial time and attention to our public company reporting obligations and other compliance matters.
If equity research analysts do not publish research or reports about our business or if they issue unfavorable commentary or downgrade our ordinary shares, the price of our ordinary shares could decline.
The trading market for our ordinary shares will rely in part on the research and reports that equity research analysts publish about us and our business, our market or our competitors, if at all. We do not have control over these analysts and we do not have commitments from them to write research reports about us. The price of our ordinary shares could decline if no research reports are published about us or our business, if one or more equity research analysts downgrade our ordinary shares or if those analysts issue other unfavorable commentary or cease publishing reports about us or our business, or if any of those analysts issues a comparatively more favorable recommendation about our competitors.
Future sales of our ordinary shares could reduce the price of our ordinary shares.
Sales by shareholders of substantial amounts of our ordinary shares, or the perception that these sales may occur in the future, could materially and adversely affect the market price of our ordinary shares and could impair our ability to raise capital through the sale of additional equity securities and our ability to
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acquire other companies by using our ordinary shares as consideration. The ordinary shares we are offering for sale in this offering will be freely tradeable immediately following this offering. In addition, a substantial number of ordinary shares held by our current shareholders or issuable upon exercise of options will be eligible for sale in the public market after this offering, and could be sold pursuant to registration under the Securities Act of 1933, as amended, or the Securities Act, or an exemption from registration. Our executive officers, directors, and certain of our shareholders have agreed not to sell their ordinary shares for a period of 180 days after the date of this prospectus. As these restrictions on resale end, the market price of our ordinary shares could drop significantly if the holders of these restricted ordinary shares sell them or are perceived by the market as intending to sell them.
We have not paid dividends in the past and do not expect to pay dividends in the future, and any return on investment may be limited to the value of our ordinary shares.
We have never paid cash dividends on our ordinary shares and do not anticipate distributing cash or other dividends on our ordinary shares in the foreseeable future. The distribution of dividends on our ordinary shares will depend on our earnings, financial condition and other business and economic factors affecting us at such time as our board of directors may consider relevant. We may only distribute dividends out of  “profits,” as defined by the Israeli Companies Law, 1999, as amended, or the Companies Law, and provided that the distribution is not reasonably expected to impair our ability to fulfill our outstanding and anticipated obligations as they become due. See “Description of Share Capital — Dividend and Liquidation Rights” for additional information. If we do not distribute dividends, our ordinary shares may be less valuable because a return on your investment will only occur if the price of our ordinary shares appreciates.
We will incur significant increased costs as a result of operating as a public company in the United States, and our management will be required to devote substantial time to new compliance initiatives.
As a public company whose ordinary shares are listed in the United States, we will be subject to an extensive regulatory regime, requiring us, among other things, to maintain various internal controls and facilities and to prepare and file periodic and current reports and statements. Complying with these requirements will be costly and time consuming. We will need to retain additional employees to supplement our current finance staff, and we may not be able to do so in a timely manner, or at all. In the event that we are unable to demonstrate compliance with our obligations as a public company in a timely manner, or are unable to produce timely or accurate financial statements, we may be subject to sanctions or investigations by regulatory authorities and investors may lose confidence in our operating results and the price of our ordinary shares could decline.
We may be subject to securities litigation, which is expensive to defend and could divert management’s attention.
In the past, following periods of market volatility in the price of a company’s securities or the reporting of unfavorable news, security holders have often instituted class action litigation. If the market value of our securities experience adverse fluctuations and we become involved in this type of litigation, regardless of the outcome, we could incur substantial legal costs and our management’s attention could be diverted from the operation of our business, causing our business to suffer. Any adverse determination in litigation could also subject us to significant liabilities.
U.S. investors in the Company could suffer adverse tax consequences if we are characterized as a passive foreign investment company.
We believe that we were not a passive foreign investment company, or PFIC, for U.S. federal income tax purposes for our taxable year ended December 31, 2018, and we do not expect to be classified as a PFIC for the current year ending December 31, 2019 or the foreseeable future. However, the relevant rules for determining whether or not we are a PFIC as applied to our business are not entirely clear and certain aspects of such determination will be outside our control. Therefore, no assurance can be given that we will not be classified as a PFIC for any taxable year.
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If we are determined to be a PFIC at any time during which a U.S. Holder (as defined in “Taxation — Material U.S. Federal Income Tax Considerations to U.S. Holders”) holds our shares, such U.S. Holder may be subject to materially adverse consequences, including additional U.S. federal income tax liability and tax filing obligations. See “Taxation — Material U.S. Federal Income Tax Considerations to U.S. Holders — Passive Foreign Investment Company Considerations.” U.S. Holders are strongly urged to consult their tax advisors as to whether or not we will be a PFIC.
We are an emerging growth company and the reduced disclosure requirements applicable to emerging growth companies may make our ordinary shares less attractive to investors.
We are an emerging growth company, as defined in the JOBS Act, and we may take advantage of certain exemptions from various requirements that are applicable to other public companies that are not emerging growth companies.
For as long as we remain an emerging growth company we are permitted and intend to rely on exemptions from certain disclosure requirements that are applicable to other public companies that are not “emerging growth companies.” These exemptions include, among others:
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being permitted to provide only two years of audited financial statements, in addition to any required unaudited condensed consolidated interim financial statements, with correspondingly reduced “Management’s Discussion and Analysis of Financial Condition and Results of Operations” disclosure;
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not being required to comply with the auditor attestation requirements in the assessment of our internal control over financial reporting; and
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not being required to comply with any requirement that may be adopted by the Public Company Accounting Oversight Board regarding mandatory audit firm rotation or a supplement to the auditor’s report providing additional information about the audit and the financial statements.
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We will remain an emerging growth company until the earliest of: (i) the last day of our fiscal year during which we have total annual gross revenues of at least $1.07 billion; (ii) the last day of our fiscal year following the fifth anniversary of the closing of this offering; (iii) the date on which we have, during the previous three-year period, issued more than $1.0 billion in non-convertible debt; or (iv) the date on which we are deemed to be a “large accelerated filer” under the Exchange Act. We have irrevocably opted out of the extended transition period made available to emerging growth companies to comply with newly adopted public company accounting requirements.
When we are no longer deemed to be an emerging growth company, we will not be entitled to the exemptions provided in the JOBS Act discussed above. We cannot predict if investors will find our ordinary shares less attractive as a result of our reliance on exemptions under the JOBS Act. If some investors find our ordinary shares less attractive as a result, there may be a less active trading market for our ordinary shares and our ordinary share price may be more volatile.
If we fail to maintain an effective system of internal control over financial reporting, we may not be able to accurately report our financial results or prevent fraud. As a result, shareholders could lose confidence in our financial and other public reporting, which would harm our business and the trading price of our ordinary shares.
Effective internal control over financial reporting is necessary for us to provide reliable financial reports and, together with adequate disclosure controls and procedures, is designed to prevent fraud. Any failure to implement required new or improved controls, or difficulties encountered in their implementation could cause us to fail to meet our reporting obligations. In addition, any testing by us, as and when required, conducted in connection with Section 404 of the Sarbanes-Oxley Act, or Section 404, or any subsequent testing by our independent registered public accounting firm, as and when required, may reveal deficiencies in our internal controls over financial reporting that are deemed to be material weaknesses or that may require prospective or retroactive changes to our financial statements or identify other areas for further attention or improvement. Inferior internal controls could also cause investors to lose confidence in our reported financial information, which could have a negative effect on the trading price of our ordinary shares.
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We are a “foreign private issuer” and have disclosure obligations that are different from those of U.S. domestic reporting companies.
We are a foreign private issuer and are not subject to the same requirements that are imposed upon U.S. domestic issuers by the SEC. Under the Exchange Act, we will be subject to reporting obligations that, in certain respects, are less detailed and less frequent than those of U.S. domestic reporting companies. For example, we will not be required to issue quarterly reports or proxy statements that comply with the requirements applicable to U.S. domestic reporting companies. Furthermore, although under regulations promulgated under the Companies Law, as an Israeli public company listed on the Nasdaq, we will be required to disclose the compensation of our five most highly compensated officers on an individual basis, this disclosure will not be as extensive as that required of U.S. domestic reporting companies. We will also have four months after the end of each fiscal year to file our annual report with the SEC and will not be required to file current reports as frequently or promptly as U.S. domestic reporting companies. Furthermore, our officers, directors and principal shareholders will be exempt from the requirements to report transactions and short-swing profit recovery required by Section 16 of the Exchange Act. Also, as a “foreign private issuer,” we are not subject to the requirements of Regulation FD (Fair Disclosure) promulgated under the Exchange Act. These exemptions and leniencies will reduce the frequency and scope of information and protections available to you in comparison to those applicable to a U.S. domestic reporting companies.
As a “foreign private issuer,” we are permitted, and intend, to follow certain home country corporate governance practices instead of otherwise applicable SEC and Nasdaq requirements, which may result in less protection than is accorded to investors under rules applicable to domestic U.S. issuers.
As a “foreign private issuer,” we will be permitted, and intend, to follow certain home country corporate governance practices instead of those otherwise required under the listing rules of Nasdaq for domestic U.S. issuers. For instance, we intend to follow our home country law instead of the listing rules of Nasdaq that require that we obtain shareholder approval for certain dilutive events, such as the establishment or amendment of certain equity based compensation plans, an issuance that will result in a change of control of us, certain transactions other than a public offering involving issuances of a 20% or greater interest in the Company, and certain acquisitions of the stock or assets of another company. Under the Companies Law as currently applicable to us, there is no requirement to receive shareholder approval for the issuance of securities for such dilutive events, and under our amended and restated articles of association our board of directors is authorized to issue securities, including ordinary shares, warrants and convertible notes. Additionally, under the Companies Law, unless the articles of association otherwise provide, the quorum required for an ordinary meeting of shareholders must consist of at least two shareholders who hold at least 25% of the voting rights (instead of the 33 1 ∕ 3 % required under Nasdaq rules), and we are not required to have a nominating committee consisting solely of independent directors for the nomination of directors. See “Management — Corporate Governance Practices” for details on the differences between Israeli corporate governance practices and comparable U.S. requirements and other home country practices we intend to follow instead of the listing rules of Nasdaq. We may in the future elect to follow home country corporate governance practices in Israel with regard to other matters. Following our home country corporate governance practices as opposed to the requirements that would otherwise apply to a U.S. company listed on Nasdaq may provide less protection to you than what is accorded to investors under the listing rules of Nasdaq applicable to domestic U.S. issuers.
Risks Related to Our Operations in Israel
Political, economic and military instability in Israel may impede our ability to operate and harm our financial results.
Our principal executive offices and research and development facilities as well as our third-party manufacturers are located in Israel. In addition, all of our subcontractors are located in Israel. Accordingly, political, economic and military conditions in Israel and the surrounding region could directly affect our business. Since the establishment of the State of Israel in 1948, a number of armed conflicts have occurred between Israel and its Arab neighbors, Hamas (an Islamist militia and political group in the Gaza Strip) and Hezbollah (an Islamist militia and political group in Lebanon). Any hostilities involving Israel or the
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interruption or curtailment of trade between Israel and its present trading partners could affect adversely our operations. Ongoing and revived hostilities or other Israeli political or economic factors, could prevent or delay shipments of our products, harm our operations and product development and cause our sales to decrease. In the event that hostilities disrupt the ongoing operation of our facilities or the airports and seaports on which we depend to import and export our supplies and products, our operations may be materially adversely affected. Furthermore, in the past, the State of Israel and Israeli companies have been subjected to economic boycotts. Several countries, principally those in the Middle East, still restrict business with Israel and Israeli companies, and additional countries may impose restrictions on doing business with Israel and Israeli companies if hostilities in Israel or political instability in the region continues or increases. These restrictive laws and policies may seriously limit our ability to sell our products in these countries and may have an adverse impact on our operating results, financial conditions or the expansion of our business.
In addition, political uprisings and conflicts in various countries in the Middle East are affecting the political stability of those countries. This instability has raised concerns regarding security in the region and the potential for armed conflict. In Syria, a country bordering Israel, a civil war is taking place. In addition, there are concerns that Iran, which has previously threatened to attack Israel, may step up its efforts to achieve nuclear capability. Iran is also believed to have a strong influence among extremist groups in the region, such as Hamas in Gaza and Hezbollah in Lebanon. Additionally, the Islamic State of Iraq and Levant, or ISIL, a violent jihadist group whose stated purpose is to take control of the Middle East, has been growing in influence. The tension between Israel and Iran and/or these groups may escalate in the future and turn violent, which could affect the Israeli economy in general and us in particular. Any potential future conflict could also include missile strikes against parts of Israel, including our offices and facilities. Such instability may lead to deterioration in the political and trade relationships that exist between the State of Israel and certain other countries. Any armed conflicts, terrorist activities or political instability in the region could adversely affect business conditions, could harm our results of operations and could make it more difficult for us to raise capital. Parties with whom we do business may be disinclined to travel to Israel during periods of heightened unrest or tension, forcing us to make alternative arrangements when necessary in order to meet our business partners face to face. In addition, the political and security situation in Israel may result in parties with whom we have agreements involving performance in Israel claiming that they are not obligated to perform their commitments under those agreements pursuant to force majeure provisions in such agreements.
Our insurance does not cover losses that may occur as a result of an event associated with the security situation in the Middle East or for any resulting disruption in our operations. Although the Israeli government has in the past covered the reinstatement value of direct damages that were caused by terrorist attacks or acts of war, we cannot be assured that this government coverage will be maintained or, if maintained, will be sufficient to compensate us fully for damages incurred and the government may cease providing such coverage or the coverage might not suffice to cover potential damages. Any losses or damages incurred by us could have a material adverse effect on our business. Any armed conflicts or political instability in the region would likely negatively affect business conditions generally and could harm our results of operations.
Our operations may be disrupted by the obligations of our personnel to perform military service.
Many of our employees in Israel, including members of our senior management, are obligated to perform up to 36 days, and in some cases longer periods, of military reserve duty annually until they reach the age of 40 (or older, for citizens who hold certain positions in the Israeli armed forces reserves) and, in the event of a military conflict or emergency situations, could be called to immediate active duty for extended periods of time. In response to increases in terrorist activity, there have been periods of significant call-ups of military reservists. It is possible that there will be similar large-scale military reserve duty call-ups in the future. Our operations could be disrupted by the absence due to military service of a significant number of our employees or of one or more of our key employees for extended periods of time, and such disruption could materially adversely affect our business. Additionally, the absence of a significant number of the employees of our Israeli suppliers and subcontractors related to military service or the absence for extended periods of one or more of their key employees for military service may disrupt their operations which may subsequently disrupt our operations.
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We may become subject to claims for remuneration or royalties for assigned service invention rights by our employees, which could result in litigation and adversely affect our business.
We have entered into assignment of invention agreements with our employees pursuant to which such individuals agree to assign to us all rights to any inventions created during their employment or engagement with us. A significant portion of our intellectual property has been developed by our employees in the course of their employment with us. Under the Israeli Patent Law, 1967, or the Patent Law, inventions conceived by an employee during the scope of his or her employment with a company and as a result thereof are regarded as “service inventions,” which belong to the employer, absent a specific agreement between the employee and employer giving the employee service invention rights. The Patent Law also provides that if there is no agreement between an employer and an employee with respect to the employee’s right to receive compensation for such “service inventions,” the Israeli Compensation and Royalties Committee, a body constituted under the Patent Law, shall determine whether the employee is entitled to remuneration for his or her service inventions and the scope and conditions for such remuneration. Although our employees have agreed to assign to us service invention rights, as a result of uncertainty under Israeli law with respect to the efficacy of waivers of service invention rights, we may face claims demanding remuneration in consideration for assigned inventions. As a consequence of such claims, we could be required to pay additional remuneration or royalties to our current and/or former employees, or be forced to litigate such claims, which could negatively affect our business.
Our operations may be affected by negative economic conditions or labor unrest in Israel.
General strikes or work stoppages, including at Israeli ports, have occurred periodically or have been threatened in the past by Israeli trade unions due to labor disputes. These general strikes or work stoppages may have an adverse effect on the Israeli economy and on our business, including our ability to deliver products to our customers and to receive raw materials from our suppliers in a timely manner and could have a material adverse effect on our results of operations.
You may have difficulties enforcing a U.S. judgment against us, our executive officers and directors and Israeli experts named in this prospectus in Israel or the United States, asserting U.S. securities laws claims in Israel or serving process on our officers and directors and these experts in Israel.
We are incorporated in Israel and our corporate headquarters are located in Israel. A significant portion of our assets and the assets of certain of our directors and executive officers are located outside the United States. Therefore, a judgment obtained against us or any of them in the United States, including one based on the civil liability provisions of the U.S. federal securities laws, may not be collectible in the United States and may not be enforced by an Israeli court. Further, if a foreign judgment is enforced by an Israeli court, it will be payable in Israeli currency. It also may be difficult for you to assert U.S. securities law claims in original actions instituted in Israel. Additionally, it may be difficult for an investor, or any other person or entity, to initiate an action with respect to U.S. securities laws in Israel. Israeli courts may refuse to hear a claim based on an alleged violation of U.S. securities laws reasoning that Israel is not the most appropriate forum in which to bring such a claim. In addition, even if an Israeli court agrees to hear a claim, it may determine that Israeli law and not U.S. law is applicable to the claim. If U.S. law is found to be applicable, the content of applicable U.S. law must be proven as a fact by expert witnesses, which can be a time consuming and costly process. Certain matters of procedure will also be governed by Israeli law. There is little binding case law in Israel that addresses the matters described above. As a result of the difficulty associated with enforcing a judgment in Israel, you may not be able to collect any damages awarded by either a United States or foreign court. For more information regarding the enforceability of civil liabilities against us, our directors and our executive officers, please see “Enforceability of Civil Liabilities.”
The tax benefits available to us require us to meet several conditions and may be terminated or reduced in the future, which would increase our costs and taxes.
We have generated income and are able to take advantage of tax exemptions and reductions resulting from the “Benefited Enterprise” status of our facilities in Israel. Our “Benefited Enterprise” status provides us with a ten-year tax exemption for undistributed income. The first year in which we were exempted from tax as stated above was 2012 and such ten-year eligibility period of tax exemption will terminate in 2021. Our entitlement to these tax benefits as a “Benefited Enterprise” is subject to the conditions stipulated by
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Israeli law. Specifically, we must produce all of our products, directly or through subcontractors, in Israel. Additionally, for any given year, we must meet one of the following conditions: (i) our revenues from any one country cannot exceed 75% of our total revenues, or (ii) 25% or more of our total revenues are derived from sales in a country with a population of at least 14 million. If we fail to meet these conditions in the future, the tax benefits could be canceled and we could be required to refund any tax benefits we might already have enjoyed. These tax benefits may not be continued in the future at their current levels or at any level. The termination or reduction of these tax benefits will increase our expenses in the future, which would reduce our expected profits or increase our losses. Additionally, if we increase our activities outside of Israel, for example, by future acquisitions, our increased activities generally will not be eligible for inclusion in Israeli tax benefit programs.
Provisions of our amended and restated articles of association and Israeli law may delay, prevent or make difficult an acquisition of our company which could prevent a change of control even when the terms of such transaction are favorable to us and our shareholders and, therefore, could depress the price of our ordinary shares.
As a company incorporated under the laws of the State of Israel, we are subject to Israeli corporate law. Israeli corporate law regulates mergers, requires tender offers for acquisitions of ordinary shares above specified thresholds, requires special approvals for transactions involving directors, officers or certain significant shareholders and regulates other matters that may be relevant to these types of transactions. In addition, our amended and restated articles of association, which will be effective upon the effectiveness of the registration statement of which this prospectus forms a part, contain provisions that may make it more difficult to acquire us, such as classified board provisions. Furthermore, Israeli tax considerations may make potential transactions unappealing to us or to some of our shareholders. These provisions of our amended and restated articles of association and Israeli law may delay, prevent or make difficult an acquisition of us, which could prevent a change of control and therefore depress the price of our ordinary shares. See “Description of Share Capital — Anti-Takeover Provisions; Mergers and Acquisitions” for additional information.
Your rights and responsibilities as a holder of our ordinary shares will be governed by Israeli law, which differs in some material respects from the rights and responsibilities of shareholders of U.S. companies.
The rights and responsibilities of the holders of our ordinary shares are governed by our articles of association and by Israeli law. These rights and responsibilities differ in some material respects from the rights and responsibilities of shareholders in typical U.S. corporations. In particular, a shareholder of an Israeli company has certain duties, including to act in good faith and fairness and in a customary manner in exercising its rights and performing its obligations towards the company and other shareholders and to refrain from abusing its power in the company including, among other things, in voting at the general meeting of shareholders on certain matters, such as an amendment to the company’s articles of association, an increase of the company’s authorized share capital, a merger of the company, and approval of related party transactions that require shareholder approval. A shareholder also has a general duty to refrain from discriminating against other shareholders. In addition, a controlling shareholder or a shareholder who knows that it possesses the power to determine the outcome of a shareholder vote or to appoint or prevent the appointment of an officer of the company has a duty to act in fairness towards the company with regard to such vote or appointment. See “Management — Approval of Related Party Transactions under Israeli Law — Shareholders” for additional information. There is limited case law available to assist in understanding the nature of these duties or the implications of these provisions. These provisions may be interpreted to impose additional obligations on holders of our ordinary shares that are not typically imposed on shareholders of U.S. corporations.
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SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS
This prospectus contains forward-looking statements that involve substantial risks and uncertainties. All statements, other than statements of historical facts, included in this prospectus regarding our strategy, future operations, future financial position, future revenues, projected costs, prospects, plans, objectives of management and expected market growth are forward-looking statements. The words “anticipate,” “believe,” “estimate,” “expect,” “intend,” “may,” “plan,” “predict,” “project,” “will,” “would” and similar expressions are intended to identify forward-looking statements, although not all forward-looking statements contain these identifying words. These forward-looking statements include, among other things, statements about:
•
our ability to identify and penetrate new markets for our products and technology;
​
•
our ability to innovate, develop and commercialize our existing and new products and expand beyond our traditional customer base;
​
•
our ability to obtain and maintain regulatory clearances;
​
•
our expectation regarding the safety and efficacy of our products;
​
•
commercial experience of our management team;
​
•
our commercialization, marketing and manufacturing capabilities and strategy;
​
•
our estimates regarding the potential market opportunity for our products;
​
•
developments and projections relating to our competitors or our industry;
​
•
our ability to differentiate and distinguish our products from those of our competitors;
​
•
our estimates regarding expenses, future revenue, capital requirements and needs for additional financing;
​
•
our sales and marketing capabilities and strategy in the United States and internationally;
​
•
the implementation of our business model, strategic plans for our business, products and technology;
​
•
our ability to attract or retain key personnel;
​
•
our intellectual property portfolio and position and our ability to protect our intellectual property rights;
​
•
our assessment of the impact to us of any third-party litigation claiming patent infringement;
​
•
our estimates regarding expenses, future revenues, capital requirements and needs for additional financing; and
​
•
our expectations regarding the time during which we will be an emerging growth company under the JOBS Act.
​
We may not actually achieve the plans, intentions or expectations disclosed in our forward-looking statements, and you should not place undue reliance on our forward-looking statements. Forward-looking statements are based on our management’s current expectations, estimates, forecasts and projections about our business and the industry in which we operate and our management’s beliefs and assumptions, and are not guarantees of future performance or development and involve known and unknown risks, uncertainties and other factors that are in some cases beyond our control. Actual results or events could differ materially from the plans, intentions and expectations disclosed in the forward-looking statements we make. We have included important factors in the cautionary statements included in this prospectus, particularly in the “Risk Factors” section, that could cause actual results or events to differ materially from the forward-looking statements that we make.
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You should read this prospectus and the documents that we have filed as exhibits to the registration statement, of which this prospectus is a part, completely and with the understanding that our actual future results may be materially different from what we expect. The forward-looking statements contained in this prospectus are made as of the date of this prospectus, and we do not assume any obligation to update any forward-looking statements except as required by applicable law.
MARKET, INDUSTRY AND OTHER DATA
In this prospectus, we have used industry and market data obtained from our own internal estimates and research as well as from industry publications and research, surveys and studies conducted by third parties. We have compiled, extracted and reproduced industry and market data from external sources that we believe to be reliable. We caution prospective investors not to place undue reliance on the above mentioned data. Unless otherwise indicated in the prospectus, the basis for any statements regarding our competitive position is based on our own assessment and knowledge of the market in which we operate. The industry in which we operate is subject to a high degree of uncertainty and risk due to a variety of factors, including those described in the section titled “Risk Factors.” These and other factors could cause results to differ materially from those expressed in the estimates made by the independent parties and by us.
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USE OF PROCEEDS
We estimate that the net proceeds to us from our issuance and sale of     ordinary shares in this offering will be approximately $    million, based on the assumed initial public offering price of  $    per ordinary share, which is the midpoint of the price range set forth on the cover page of this prospectus, after deducting estimated underwriting discounts and commissions and estimated offering expenses payable by us.
Each $1.00 increase (decrease) in the assumed initial public offering price of  $     per ordinary share, the midpoint of the price range set forth on the cover of this prospectus, after deducting estimated underwriting discounts and commissions and estimated offering expenses payable by us, would increase (decrease) net proceeds to us from this offering by approximately $     million, assuming that the number of ordinary shares offered by us, as set forth on the cover page of this prospectus, remains the same. We may also increase or decrease the number of ordinary shares we are offering. Each increase (decrease) of      in the number of ordinary shares we are offering would increase (decrease) the net proceeds to us from this offering by approximately $     million, assuming no change in the assumed public offering price per ordinary share.
The principal purposes of this offering are to obtain additional capital to support our operations, to create a public market for our ordinary shares, to facilitate our future access to the public equity markets and to increase awareness of our Company among potential customers. We intend to use the net proceeds from this offering as follows:
•
approximately $     million to hire additional sales and marketing personnel and expand our global sales and marketing programs;
​
•
approximately $     million to fund research and development activities; and
​
•
the remainder for working capital and general corporate purposes.
​
We may also use a portion of the net proceeds from this offering to acquire or invest in products, technologies or businesses that are complementary to our business. However, we currently have no agreements or commitments to complete any such transaction.
Our expected use of net proceeds from this offering represents our current intentions based upon our present plans and business condition. As of the date of this prospectus, we cannot predict with certainty all of the particular uses for the net proceeds to be received upon the completion of this offering or the amounts that we will actually spend. The amounts and timing of our actual use of net proceeds will vary depending on numerous factors. As a result, our management will have broad discretion in the application of the net proceeds of this offering, and investors will be relying on our judgment regarding the application of the net proceeds.
Pending their use, we plan to invest the net proceeds of this offering in short- and intermediate-term interest-bearing investments.
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DIVIDEND POLICY
We have never declared or paid cash dividends to our shareholders and currently we do not intend to pay cash dividends in the foreseeable future. We intend to reinvest any future earnings in developing and expanding our business.
Our ability to pay cash dividends may be limited by Israeli law, which permits the distribution of dividends only out of profits. See “Description of Share Capital — Dividend and Liquidation Rights.” In addition, the payment of cash dividends may be subject to Israeli withholding taxes. See “Taxation —  Material Israeli Tax Considerations.”
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CAPITALIZATION
The following table sets forth our cash and cash equivalents and capitalization as of March 31, 2019. Our capitalization is presented:
•
on an actual basis; and
​
•
on a pro forma basis to give effect to our issuance and sale of     ordinary shares in this offering, based on the assumed initial public offering price of  $    per ordinary share, which is the midpoint of the price range set forth on the cover page of this prospectus, after deducting estimated underwriting discounts and commissions and estimated offering expenses payable by us.
​
You should read this table in conjunction with our consolidated financial statements and related notes appearing elsewhere in this prospectus, as well as the sections of this prospectus titled “Selected Consolidated Financial Data” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations.”
​ ​ ​
As of March 31, 2019
​
​ ​ ​
Actual
​ ​
Pro Forma (1)
​
​ ​ ​
Unaudited
(dollars in thousands, except share data)
​
Cash and cash equivalents
​ ​ ​ $   18,951 ​ ​ ​ ​ $ ​ ​ ​
Shareholders’ equity: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​
Ordinary shares, NIS 0.01 par value: 20,000,000 ordinary shares authorized, 15,062,452 shares issued and outstanding, actual;                      ordinary shares authorized,     ordinary shares issued and outstanding, pro forma
​ ​ ​ $ 42 ​ ​ ​ ​ $ ​ ​ ​
Additional paid-in capital
​ ​ ​ ​ 10,708 ​ ​ ​ ​ ​ ​ ​ ​
Accumulated other comprehensive income
​ ​ ​ ​ 103 ​ ​ ​ ​ ​ ​ ​ ​
Retained earnings
​ ​ ​ ​ 43,030 ​ ​ ​
        ​
​
Non-controlling interests
​ ​ ​ ​ 1,441 ​ ​ ​ ​ ​          ​ ​
Total shareholders’ equity
​ ​ ​ $ 55,324 ​ ​ ​ ​ $ ​ ​ ​
Total capitalization
​ ​ ​ $ 55,324 ​ ​ ​ ​ $ ​ ​ ​
​
(1)
Each $1.00 increase (decrease) in the assumed initial public offering price of  $     per ordinary share, the midpoint of the price range set forth on the cover of this prospectus, would increase (decrease) our pro forma cash and cash equivalents, additional paid-in capital, total shareholders’ equity and total capitalization by approximately $     million, assuming that the number of ordinary shares offered by us, as set forth on the cover page of this prospectus, remains the same, and after deducting estimated underwriting discounts and commissions and estimated offering expenses payable by us. We may also increase or decrease the number of ordinary shares we are offering. Each increase (decrease) of       in the number of ordinary shares we are offering would increase (decrease) our pro forma cash and cash equivalents, additional paid-in capital, total stockholders’ equity and total capitalization by approximately $     million, assuming no change in the assumed public offering price per ordinary share, after deducting estimated underwriting discounts and commissions and estimated offering expenses payable by us.
​
The outstanding share information in the table above excludes:
•
5,365,725 ordinary shares issuable upon the exercise of options outstanding as of March 31, 2019 at a weighted-average exercise price of  $1.93 per ordinary share; and
​
•
545,900 ordinary shares reserved for future issuance under our 2018 Incentive Plan as of March 31, 2019, as well as ordinary shares that may be issued pursuant to provisions in our 2018 Incentive Plan that automatically increase the ordinary share reserve under our 2018 Incentive Plan.
​
​
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DILUTION
Our net tangible book value as of March 31, 2019 was $57.6 million, or $3.82 per ordinary share. Net tangible book value per ordinary share represents the amount of our total consolidated tangible assets less our total consolidated liabilities, divided by the number of ordinary shares outstanding.
Pro forma net tangible book value dilution per ordinary share represents the difference between the amount per ordinary share paid by purchasers of ordinary shares in this offering and net tangible book value per ordinary share immediately after the completion of this offering on a pro forma basis. After giving effect to the sale of       ordinary shares by us in this offering at the assumed initial public offering price of  $    per ordinary share, which is the midpoint of the price range set forth on the cover page of this prospectus, after deducting estimated underwriting discounts and commissions and estimated offering expenses payable by us, our pro forma net tangible book value would have been approximately $    million, or approximately $    per ordinary share based on     ordinary shares outstanding upon completion of this offering. This represents an immediate increase in pro forma net tangible book value of $    per ordinary share to existing shareholders and an immediate dilution of  $    per ordinary share to purchasers of ordinary shares in this offering. The following table illustrates this per ordinary share dilution:
​
Assumed initial public offering price per ordinary share
​ ​
       ​
​ ​ ​ $         ​ ​
​
Net tangible book value per ordinary share as of March 31, 2019
​ ​ ​ $ 3.82 ​ ​ ​ ​ ​ ​ ​ ​
​
Increase in net tangible book value per ordinary share attributable to this offering
​ ​ ​ $ ​ ​ ​ ​ ​ ​ ​ ​ ​
​
Pro forma net tangible book value per ordinary share after this offering
​ ​ ​ ​ ​ ​ ​ ​ ​ $ ​ ​ ​
​
Dilution per ordinary share to investors in this offering
​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​
Each $1.00 increase (decrease) in the assumed initial public offering price of  $     per ordinary share, the midpoint of the price range set forth on the cover page of this prospectus, would increase (decrease) our pro forma net tangible book value by $     per ordinary share and would increase (decrease) dilution to investors in this offering by $    per ordinary share, assuming that the number of ordinary shares offered by us, as set forth on the cover page of this prospectus, remains the same, and after deducting estimated underwriting discounts and commissions and estimated offering expenses payable by us. We may also increase or decrease the number of ordinary shares we are offering. Each increase (decrease) of      in the number of ordinary shares we are offering would increase (decrease) our pro forma net tangible book value by $     per ordinary share and would increase (decrease) dilution to investors in this offering by $    per ordinary share, assuming no change in the assumed public offering price per ordinary share, after deducting estimated underwriting discounts and commissions and estimated offering expenses payable by us.
If the underwriters exercise their option to purchase additional ordinary shares in full, our pro forma net tangible book value after giving effect to this offering would be $    per ordinary share, which amount represents an immediate increase in pro forma net tangible book value of  $     per ordinary share to existing shareholders and an immediate dilution in net tangible book value of  $     per ordinary share to new investors.
If all of our outstanding stock options had been exercised as of March 31, 2019, our pro forma net tangible book value as of March 31, 2019, before giving effect to the issuance and sale of ordinary shares in this offering, would have been $     million, or $     per ordinary share, and our pro forma net tangible book value as of March 31, 2019 after this offering would have been $    million, or $    per share, causing dilution to new investors of  $     per ordinary share.
The following table presents, on a pro forma basis, as of March 31, 2019, the differences between the number of ordinary shares purchased from us, the total consideration paid to us, and the average price per ordinary share paid by existing shareholders and by new investors purchasing ordinary shares at the assumed initial offering price of  $    per ordinary share, which is the midpoint of the price range set forth on the cover page of this prospectus, before deducting estimated underwriting discounts and commissions and estimated offering expenses payable by us. The total number of ordinary shares does not include ordinary shares issuable upon the exercise of the over-allotment option granted to the underwriters.
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​ ​ ​
Ordinary Shares Purchased
​ ​
Total Consideration
​ ​
Average Price Per
Ordinary Share
​
​
Number
​ ​
Percent
​ ​
Amount
​ ​
Percent
​
Existing shareholders
​ ​
         ​
​ ​ ​ ​ ​ % ​ ​ ​ ​ $ ​ ​ ​ ​ ​ ​ ​ % ​ ​ ​ ​ $ ​ ​ ​
New investors
​ ​ ​ ​               ​ ​ ​ ​ ​               ​ ​ ​ ​ ​               ​ ​ ​ ​ ​               ​ ​ ​ ​ ​ ​ ​ ​
Total
​ ​ ​ ​ ​ ​ ​ ​ ​ ​ 100.0 % ​ ​ ​ ​ $     ​ ​ ​ ​ ​ 100.0 % ​ ​ ​ ​ ​ ​ ​ ​
If the underwriters exercise their option to purchase additional ordinary shares in full, the total consideration paid by new investors and the average price per ordinary share paid by new investors would be approximately $             million and $             per ordinary share, respectively.
The above tables and discussions are based on our ordinary shares outstanding as of March 31, 2019, which gives effect to the pro forma transactions described above and excludes:
•
5,365,725 ordinary shares issuable upon the exercise of options outstanding as of March 31, 2019 at a weighted-average exercise price of  $1.93 per ordinary share; and
​
•
545,900 ordinary shares reserved for future issuance under our 2018 Incentive Plan, as well as ordinary shares that may be issued pursuant to provisions in our 2018 Incentive Plan that automatically increase the ordinary share reserve under our 2018 Incentive Plan.
​
The pro forma information discussed above is illustrative only. Our net tangible book value following the completion of this offering is subject to adjustment based on the actual initial public offering price of our ordinary shares and other terms of this offering determined at pricing.
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SELECTED CONSOLIDATED FINANCIAL DATA
The following tables present our selected consolidated financial data and should be read in conjunction with “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and our consolidated financial statements and related notes appearing elsewhere in this prospectus. The historical results are not necessarily indicative of the results to be expected for any future. We derived the selected consolidated statements of income data below for the three months ended March 31, 2019 and 2018 and the selected balance sheet data as of March 31, 2019 and 2018 from our unaudited condensed consolidated financial statements included elsewhere in this prospectus. We have prepared the unaudited condensed consolidated financial statements on the same basis as the audited consolidated financial statements and have included, in our opinion, all adjustments, consisting only of normal recurring adjustments that we consider necessary for a fair statement of the financial information set forth in those statements. We derived the selected consolidated statements of income data below for the years ended December 31, 2018 and 2017 and the selected balance sheet data as of December 31, 2018 and 2017 from our audited consolidated financial statements included elsewhere in this prospectus. Our unaudited condensed consolidated financial statements and audited consolidated financial statements are presented in U.S. dollars and prepared in accordance with U.S. GAAP.
​ ​ ​
Three months ended March 31,
​ ​
Year ended December 31,
​
​ ​ ​
2019
​ ​
2018
​ ​
2018
​ ​
2017
​
​ ​ ​
(in thousands, except share and per share data)
​
Consolidated Statements of Income Data:
​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​
Revenues
​ ​ ​ $ 30,552 ​ ​ ​ ​ $ 20,911 ​ ​ ​ ​ $ 100,162 ​ ​ ​ ​ $ 53,456 ​ ​
Cost of revenues
​ ​ ​ ​ 4,271 ​ ​ ​ ​ ​ 3,532 ​ ​ ​ ​ ​ 15,057 ​ ​ ​ ​ ​ 9,053 ​ ​
Gross profit
​ ​ ​ ​ 26,281 ​ ​ ​ ​ ​ 17,379 ​ ​ ​ ​ ​ 85,105 ​ ​ ​ ​ ​ 44,403 ​ ​
Operating expenses: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​
Research and development
​ ​ ​ ​ 1,199 ​ ​ ​ ​ ​ 880 ​ ​ ​ ​ ​ 4,180 ​ ​ ​ ​ ​ 2,575 ​ ​
Sales and marketing
​ ​ ​ ​ 14,097 ​ ​ ​ ​ ​ 9,665 ​ ​ ​ ​ ​ 44,622 ​ ​ ​ ​ ​ 28,514 ​ ​
General and administrative
​ ​ ​ ​ 1,053 ​ ​ ​ ​ ​ 895 ​ ​ ​ ​ ​ 4,814 ​ ​ ​ ​ ​ 4,364 ​ ​
Legal settlements and loss contingencies
​ ​ ​ ​ — ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ 8,000 ​ ​ ​ ​ ​ — ​ ​
Total operating expenses
​ ​ ​ ​ 16,349 ​ ​ ​ ​ ​ 11,440 ​ ​ ​ ​ ​ 61,616 ​ ​ ​ ​ ​ 35,453 ​ ​
Operating income
​ ​ ​ $ 9,932 ​ ​ ​ ​ $ 5,939 ​ ​ ​ ​ $ 23,489 ​ ​ ​ ​ $ 8,950 ​ ​
Financial income, net
​ ​ ​ ​ 403 ​ ​ ​ ​ ​ 278 ​ ​ ​ ​ ​ 136 ​ ​ ​ ​ ​ 849 ​ ​
Income before taxes
​ ​ ​ $ 10,335 ​ ​ ​ ​ $ 6,217 ​ ​ ​ ​ $ 23,625 ​ ​ ​ ​ $ 9,799 ​ ​
Income tax
​ ​ ​ ​ 177 ​ ​ ​ ​ ​ (149 ) ​ ​ ​ ​ ​ 1,260 ​ ​ ​ ​ ​ 980 ​ ​
Net income
​ ​ ​ $ 10,158 ​ ​ ​ ​ $ 6,366 ​ ​ ​ ​ $ 22,365 ​ ​ ​ ​ $ 8,819 ​ ​
Net loss (income) attributable to non-controlling interests
​ ​ ​ ​ (34 ) ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ 6 ​ ​ ​ ​ ​ — ​ ​
Net income attributable to controlling interest
​ ​ ​ $ 10,124 ​ ​ ​ ​ $ 6,366 ​ ​ ​ ​ $ 22,371 ​ ​ ​ ​ $ 8,819 ​ ​
Net income per ordinary share: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​
Basic
​ ​ ​ $ 0.67 ​ ​ ​ ​ $ 0.40 ​ ​ ​ ​ $ 1.47 ​ ​ ​ ​ $ 0.52 ​ ​
Diluted
​ ​ ​ $ 0.51 ​ ​ ​ ​ $ 0.31 ​ ​ ​ ​ $ 1.12 ​ ​ ​ ​ $ 0.46 ​ ​
Weighted average number of ordinary shares: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​
Basic
​ ​ ​ ​ 14,990,591 ​ ​ ​ ​ ​ 14,811,090 ​ ​ ​ ​ ​ 14,876,426 ​ ​ ​ ​ ​ 14,691,750 ​ ​
Diluted
​ ​ ​ ​ 19,728,929 ​ ​ ​ ​ ​ 19,398,499 ​ ​ ​ ​ ​ 19,563,722 ​ ​ ​ ​ ​ 16,584,637 ​ ​
​
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​ ​ ​
As of March 31,
​ ​
As of December 31,
​
​ ​ ​
2019
​ ​
2018
​ ​
2017
​
​ ​ ​
(in thousands)
​
Consolidated Balance Sheet Data: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​
Cash and cash equivalents
​ ​ ​ $ 18,951 ​ ​ ​ ​ $    24,721 ​ ​ ​ ​ $    17,593 ​ ​
Working capital (1)
​ ​ ​ ​ 58,057 ​ ​ ​ ​ ​ 48,335 ​ ​ ​ ​ ​ 23,694 ​ ​
Total assets
​ ​ ​ ​ 85,067 ​ ​ ​ ​ ​ 81,056 ​ ​ ​ ​ ​ 39,442 ​ ​
Total liabilities
​ ​ ​ ​ 27,491 ​ ​ ​ ​ ​ 34,193 ​ ​ ​ ​ ​ 16,923 ​ ​
Redeemable non-controlling interests
​ ​ ​ ​ 2,252 ​ ​ ​ ​ ​ 2,187 ​ ​ ​ ​ ​ 3,066 ​ ​
Retained earnings
​ ​ ​ ​ 43,030 ​ ​ ​ ​ ​ 32,971 ​ ​ ​ ​ ​ 10,819 ​ ​
Non-controlling interests
​ ​ ​ ​ 1,441 ​ ​ ​ ​ ​ 1,413 ​ ​ ​ ​ ​ — ​ ​
Total shareholders’ equity
​ ​ ​ ​ 55,324 ​ ​ ​ ​ ​ 44,676 ​ ​ ​ ​ ​ 19,453 ​ ​
​
(1)
We define working capital as current assets less current liabilities. See our consolidated financial statements included elsewhere in this prospectus for further details regarding our current assets and current liabilities.
​
​
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MANAGEMENT’S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following discussion of our financial condition and results of operations should be read in conjunction with “Selected Consolidated Financial Data” and our consolidated financial statements and the related notes to those statements included elsewhere in this prospectus. In addition to historical consolidated financial information, the following discussion and analysis contains forward-looking statements that involve risks, uncertainties and assumptions. Our actual results and timing of selected events may differ materially from those anticipated in these forward-looking statements as a result of many factors, including those discussed under “Risk Factors” and elsewhere in this prospectus.
Overview
We design, develop, manufacture and commercialize innovative, energy-based, minimally-invasive surgical aesthetic and medical treatment solutions. Our proprietary minimally-invasive RFAL, Deep Subdermal Fractional RF, Simultaneous Fat Destruction and Skin Tightening and Deep Heating Collagen Remodeling technologies are used by physicians to remodel subdermal adipose, or fatty, tissue in a variety of procedures including fat reduction with simultaneous skin tightening, face and body contouring and ablative skin rejuvenation treatments. Our non-invasive medical aesthetic products target a wide array of procedures including simultaneous fat killing and skin tightening, permanent hair reduction through the use of our innovative dual wavelength technology, and other treatments targeting skin appearance and texture through the use of our high power IPL technology. Our products may be used on a variety of body parts, including the face, neck, abdomen, upper arms, thighs and intimate feminine regions. Since 2010, we have launched six product platforms ( BodyTite , Optimas , Votiva , Contoura , Triton and EmbraceRF ) that we market and sell traditionally to plastic and facial surgeons, aesthetic surgeons, dermatologists and OB/​GYNs.
Our revenues increased to approximately $30.6 million for the three months ended March 31, 2019, from approximately $20.9 million for the three months ended March 31, 2018. Our revenues increased to approximately $100.2 million for the year ended December 31, 2018 from approximately $53.5 million for the year ended December 31, 2017. For the three months ended March 31, 2019 and 2018, we recorded a gross profit margin of approximately 86% and 83%, respectively, and net income of approximately $10.2 million and $6.4 million, respectively. For the years ended December 31, 2018 and 2017, we recorded a gross profit margin of approximately 85% and 83%, respectively, and net income of approximately $22.4 million and $8.8 million, respectively.
We were incorporated in January 2008 and have a limited history of operations, having commenced sales in 2010. In February 2016, we received FDA clearance enabling us to market our RFAL-based BodyTite products for use in dermatological and general surgical procedures for electrocoagulation and hemostasis. We sell our products directly in the United States, Canada, United Kingdom, Spain and India, and indirectly through third-party distributors in other countries. As of June 30, 2019, we had a global installed base of over 3,900 product platforms capable of running various multi-use applicators and minimally-invasive consumables.
As a result of continued innovation, recently received FDA clearances and product launches, we increased our sales and marketing efforts in connection with product introductions and other marketing activities, as well as expanded the number of our direct salespersons in North America from 55 representatives as of December 31, 2017, to 86 representatives as of June 30, 2019.
We outsource a majority of the manufacturing of our products to four subcontractors in Israel, while we manufacture our laser and IPL handpieces in-house in Israel. Outsourcing allows us to carry low inventory levels and maintain fixed unit costs without incurring significant capital expenditures. Our manufacturing subcontractors provide us fully assembled, or “turn-key,” services. We control and monitor the quality of our products by having one of our quality control employees at each of our subcontractor’s facilities. All assembled products are sent to our warehouse in Israel where they are inspected and tested. We ship the finished products to our distributors upon receipt of a purchase order or to our subsidiaries to replenish inventory levels. Usually, products are tested again locally by our distributors or subsidiaries prior to being shipped and sold to the customer.
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We anticipate that our quarterly results of operations may fluctuate from quarter to quarter due to several factors, including seasonality, unexpected delays in the introduction and market acceptance of our products, unexpected delays in our manufacturing operations, introduction of new and improved products by our competitors and the performance of our direct sales organization.
Components of Our Results of Operations
Revenues
We generate our revenues primarily from the sale of energy-based medical aesthetic products, which consist of platforms and non-consumable handpieces. To a lesser extent, we generate revenue from the sale of consumables and from the sale of extended warranties. For the three months ended March 31, 2019 and 2018, we derived approximately 91% and 93%, respectively, of our revenues from the sale of medical aesthetic products and approximately 9% and 7%, respectively, of our revenues from the sale of consumables and extended warranties. For the years ended December 31, 2018, 2017 and 2016, we derived approximately 93% of our revenues from the sale of medical aesthetic products and approximately 7% of our revenues from the sale of consumables and extended warranties. We expect our revenues from the sale of consumables and extended warranties to increase over time as our installed base continues to grow. We have experienced growth in sales of consumables in the past three years. Recent revenue growth has been driven by, and we expect continued growth as a result of, increased patient and physician awareness of our medical aesthetic products and additional sales representatives. We have expanded our sales and marketing organization to help us drive and support revenue growth and intend to continue this expansion.
For the three months ended March 31, 2019 and 2018, we derived approximately 23% and 35%, respectively, of our total revenues from the sale of products and solutions relating to our BodyTite and EmbraceRF platforms in the United States, approximately 22% and 17%, respectively, of our total revenues from the sale of products and solutions relating to our Optimas platform in the United States, approximately 15% and 28%, respectively, of our total revenues from the sale of products and solutions in the United States primarily designed to address women’s health and approximately 13% and 8%, respectively, of our total revenues from the sale of products and solutions relating to our Contoura platform in the United States. For the years ended December 31, 2018, 2017 and 2016, we derived approximately 27%, 26% and 17%, respectively, of our total revenues from the sale of products and solutions relating to our BodyTite and EmbraceRF platforms in the United States, approximately 19%, 10% and 0%, respectively, of our total revenues from the sale of products and solutions relating to our Optimas platform in the United States and approximately 23%, 21% and 0%, respectively, of our total revenues from the sale of products and solutions in the United States primarily designed to address women’s health. For the years ended December 31, 2018, 2017 and 2016, we derived less than 10% of our total revenues from the sale of products and solutions related to our Contoura platform in the United States. In the future, we expect that the contributions to revenues from the sale of products and solutions relating to our BodyTite, EmbraceRF and Optimas platforms and women’s health related treatments in the United States will continue to be similar to the contributions to revenues for year ended December 31, 2018 (excluding the impact of new products from which we generate revenues). We do not anticipate that the platforms that are currently under development will contribute meaningfully to our revenues in 2019.
We sell our products directly in the United States, Canada, United Kingdom, Spain and India, and indirectly through third-party distributors in other countries. For the three months ended March 31, 2019, we derived approximately 88% of our revenues in North America compared to approximately 89% of our revenues for the three months ended March 31, 2018. For the year ended December 31, 2018, we derived approximately 89% of our revenues in North America compared to approximately 83% of our revenues for the year ended December 31, 2017.
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The following table provides information regarding the breakdown of our revenue by geographic region for the three months ended March 31, 2019 and 2018 and for the years ended December 31, 2018 and 2017:
​ ​ ​
Percent of Revenue
​
​ ​ ​
Three months ended
March 31,
​ ​
Years ended
December 31,
​
Geographic region
​ ​
2019
(%)
​ ​
2018
(%)
​ ​
2018
(%)
​ ​
2017
(%)
​
North America (excluding Mexico) (1)
​ ​ ​ ​ 88 ​ ​ ​ ​ ​ 89 ​ ​ ​ ​ ​ 89 ​ ​ ​ ​ ​ 83 ​ ​
Europe ​ ​ ​ ​ 7 ​ ​ ​ ​ ​ 8 ​ ​ ​ ​ ​ 6 ​ ​ ​ ​ ​ 9 ​ ​
Asia-Pacific ​ ​ ​ ​ 3 ​ ​ ​ ​ ​ 1 ​ ​ ​ ​ ​ 3 ​ ​ ​ ​ ​ 6 ​ ​
Other ​ ​ ​ ​ 2 ​ ​ ​ ​ ​ 2 ​ ​ ​ ​ ​ 2 ​ ​ ​ ​ ​ 2 ​ ​
Total
​ ​ ​ ​ 100 ​ ​ ​ ​ ​ 100 ​ ​ ​ ​ ​ 100 ​ ​ ​ ​ ​ 100 ​ ​
​
(1)
For the three months ended March 31, 2019 and 2018, we derived approximately 79% and 83%, respectively, of our total revenues from the United States. For the years ended December 31, 2018 and 2017, we derived approximately 81% and 80%, respectively, of our total revenues from the United States.
​
We believe that there are opportunities for us to generate additional revenue from existing customers who are already familiar with our products. For example, one-third of our customers purchase a second platform to expand their treatment offerings within 18 months of their first transaction. We intend to continue to make significant investments in research and development activities, increase the number of sales representatives in our sales and marketing organization and introduce innovative next-generation pipeline products to our customers. As a result, we expect that certain existing customers will be candidates for technology upgrades to enhance the capabilities of their existing InMode products. In addition, as we continue to grow our support services program, we expect to increase the number of customers that enter into service contracts and extended warranties with us, which would result in additional recurring revenues. We also plan to expand our current product line in order to reach non-traditional customers, such as ENTs, ophthalmologists, general practitioners and aesthetic clinicians, and generate additional revenue.
Cost of Revenues
Our cost of revenues consists primarily of the expenses we incur to have our products manufactured and assembled by third parties and the direct costs we incur in order to obtain the materials, labor and overhead that are needed to manufacture and assemble our products.
Our cost of revenues also includes shipping, handling, service and warranty expenses, as well as salaries and personnel-related expenses for our operations management team, which is comprised of subcontractor supervisors and purchasing and quality control employees. We expect our cost of revenues to increase in absolute dollars primarily as, and to the extent, our revenue grows.
Our cost of revenues as a percentage of revenues has been, and we expect it to continue to be, affected by a variety of factors, including manufacturing costs, the average selling price of our products, the maturity of our existing products, promotional prices being offered to existing customers for our new products, and to a lesser extent the sales mix between the United States and the rest of the world as our average selling price in the United States tends to be higher than in the rest of the world. We expect our gross margin to be positively affected over time to the extent we are successful in reducing manufacturing costs as our sales volume increases and our average selling prices are maintained. However, our gross margin may fluctuate from period to period.
Research and Development Expenses
Our research and development expenses consist of salaries and personnel-related expenses, including share-based compensation expenses, for our employees that are primarily engaged in research, development and engineering activities. Our research and development expenses also include regulatory-related costs and
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expenses, external engineering fees, materials used and other overhead expenses that are incurred in connection with the design and development of our products. We expense all of our research and development costs as incurred. While we do not track our research and development spending by technology, product or application, we do expect that our overall research and development costs will increase in absolute dollars in the future as we develop more products and technologies. We expect research and development expenses as a percentage of our total revenue to vary over time depending on the level and timing of initiating new product development efforts.
Sales and Marketing Expenses
Our sales and marketing expenses consist primarily of salaries, commissions and personnel-related expenses, including share-based compensation expenses, for our employees that are engaged in sales and marketing activities, which include marketing and public support of our products, participation in trade shows and industry events, promotional and public relations activities, and administrative functions in support of sales and marketing. We expect sales and marketing expenses to continue to increase in absolute dollars as we continue to expand our marketing organization to both drive and support our planned growth in revenue. However, we expect sales and marketing expenses to decrease as a percentage of our total revenue primarily as, and to the extent, our revenue grows.
General and Administrative Expenses
Our general and administrative expenses consist primarily of salaries and personnel-related expenses, including share-based compensation expenses, for executive, accounting and administrative personnel, professional fees and other general corporate expenses. We expect our general and administrative expenses will increase in the future as we increase our headcount and expand our administrative infrastructure to support our growth and operations as a public company. We also expect to see an increase in our share-based compensation expense with the establishment of our new equity plan in connection with this offering and related grants either in the form of restricted stock or options. During the three months ended March 31, 2019 and the year ended December 31, 2018, the majority of our general and administrative expenses were attributable to legal costs and expenses related to our patent litigations. We expect general and administrative expenses to remain flat as a percentage of our total revenue due to the dismissal of all patent litigation following the entry into a settlement agreement in January 2019.
Financial Income (Expenses), Net
Our financial income, net, consists primarily of the interest we earn on our cash, cash equivalents, deposits, marketable securities and long-term installment sales contracts with end-users, taking into consideration appropriate exchange rate adjustments.
Income Tax
We are subject to income taxes in Israel, the United States and numerous foreign jurisdictions.
Our facilities in Israel were granted the status of  “Benefited Enterprise” that provides us with a ten-year corporate tax exemption for undistributed income, provided that we meet certain conditions, including that the production of all of our products, directly or through subcontractors, is performed in Israel. The first year in which we were exempted from Israeli corporate tax was 2012 with the ten-year eligibility period of tax exemption expected to terminate in 2021.
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Three Months Ended March 31, 2019 Compared to Three Months Ended March 31, 2018
​ ​ ​
Three months ended March 31,
​
​ ​ ​
2019
​ ​
2018
​
​ ​ ​
($)
​ ​
(%)
​ ​
($)
​ ​
(%)
​
​ ​ ​
(in thousands)
​
Revenues ​ ​ ​ ​ 30,552 ​ ​ ​ ​ ​ 100 ​ ​ ​ ​ ​ 20,911 ​ ​ ​ ​ ​ 100 ​ ​
Cost of revenues
​ ​ ​ ​ 4,271 ​ ​ ​ ​ ​ 14 ​ ​ ​ ​ ​ 3,532 ​ ​ ​ ​ ​ 17 ​ ​
Gross profit
​ ​ ​ ​ 26,281 ​ ​ ​ ​ ​ 86 ​ ​ ​ ​ ​ 17,379 ​ ​ ​ ​ ​ 83 ​ ​
Operating expenses: ​ ​ ​ ​ ​
Research and development
​ ​ ​ ​ 1,199 ​ ​ ​ ​ ​ 4 ​ ​ ​ ​ ​ 880 ​ ​ ​ ​ ​ 4 ​ ​
Sales and marketing
​ ​ ​ ​ 14,097 ​ ​ ​ ​ ​ 46 ​ ​ ​ ​ ​ 9,665 ​ ​ ​ ​ ​ 46 ​ ​
General and administrative
​ ​ ​ ​ 1,053 ​ ​ ​ ​ ​ 3 ​ ​ ​ ​ ​ 895 ​ ​ ​ ​ ​ 5 ​ ​
Total operating expenses
​ ​ ​ ​ 16,349 ​ ​ ​ ​ ​ 53 ​ ​ ​ ​ ​ 11,440 ​ ​ ​ ​ ​ 55 ​ ​
Income from operations
​ ​ ​ ​ 9,932 ​ ​ ​ ​ ​ 33 ​ ​ ​ ​ ​ 5,939 ​ ​ ​ ​ ​ 28 ​ ​
Financial income, net
​ ​ ​ ​ 403 ​ ​ ​ ​ ​ 1 ​ ​ ​ ​ ​ 278 ​ ​ ​ ​ ​ 1 ​ ​
Income before taxes
​ ​ ​ ​ 10,335 ​ ​ ​ ​ ​ 34 ​ ​ ​ ​ ​ 6,217 ​ ​ ​ ​ ​ 29 ​ ​
Income tax (tax benefit)
​ ​ ​ ​ 177 ​ ​ ​ ​ ​ 1 ​ ​ ​ ​ ​ (149 ) ​ ​ ​ ​ ​ (1 ) ​ ​
Net income
​ ​ ​ ​ 10,158 ​ ​ ​ ​ ​ 33 ​ ​ ​ ​ ​ 6,366 ​ ​ ​ ​ ​ 30 ​ ​
Net income attributable to non-controlling interests
​ ​ ​ ​ 34 ​ ​ ​ ​ ​ 0 ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ — ​ ​
Net income attributable to controlling interest
​ ​ ​ ​ 10,124 ​ ​ ​ ​ ​ 33 ​ ​ ​ ​ ​ 6,366 ​ ​ ​ ​ ​ 30 ​ ​
Revenue.    Our revenues increased by approximately $9.6 million, or 46%, to approximately $30.6 million for the three months ended March 31, 2019, compared to approximately $20.9 million for the three months ended March 31, 2018. This increase was primarily attributable to increased sales resulting from our increased participation in global marketing, tradeshows and clinical workshops, which we believe has resulted in increased patient and physician awareness of our technologies and product offerings through personal experience and referrals. Additionally, this increase in revenue is also attributable to the expansion of our direct sales organization, which continued to expand worldwide.
Our revenues in North America increased by approximately $8.3 million, or 45%, to approximately $26.9 million for the three months ended March 31, 2019, compared to approximately $18.6 million for the three months ended March 31, 2018. This increase was primarily attributable to the expansion of our direct sales organization and an increase in clinical workshops for customers and prospects.
Our revenues in Europe increased by approximately $0.5 million, or 27%, to approximately $2.1 million for the three months ended March 31, 2019, compared to approximately $1.6 million for the three months ended March 31, 2018. This increase was primarily driven by the expansion of the direct sales team in the United Kingdom and Spain and their subsequent training, experience and familiarity with our products.
Our revenues from the sale of consumables and extended warranties for the three months ended March 31, 2019 increased by approximately 70% compared to the three months ended March 31, 2018. This increase was primarily attributable to the growth in our installed platform base, as well as increased patient and physician awareness of our technologies and product offerings through personal experience and referrals.
Cost of Revenues.    Our cost of revenues increased by approximately $0.7 million, or 21%, to approximately $4.3 million for the three months ended March 31, 2019, compared to approximately $3.5 million for the three months ended March 31, 2018. This increase was primarily due to increased costs to purchase manufactured products to support the higher sales volume. Our gross margin increased to approximately 86% for the three months ended March 31, 2019, compared to approximately 83% for the three months ended March 31, 2018, primarily due to a reduction in fixed expenses and service costs related to legacy products.
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Research and Development Expenses.    Our research and development expenses increased by approximately $0.3 million, or 36%, to approximately $1.2 million for the three months ended March 31, 2019, compared to approximately $0.9 million for the three months ended March 31, 2018. This increase was primarily attributable to an increase in salaries and related expenses resulting from our increased headcount.
Sales and Marketing Expenses.    Our sales and marketing expenses increased by approximately $4.4 million, or 46%, to approximately $14.1 million for the three months ended March 31, 2019, compared to approximately $9.7 million for the three months ended March 31, 2018. This increase was primarily attributable to the expansion of our direct sales organization and an increase in compensation related to revenue increases in North America.
General and Administrative Expenses.    Our general and administrative expenses increased by approximately $0.2 million, or 18%, to approximately $1.1 million for the three months ended March 31, 2019, compared to approximately $0.9 million for the three months ended March 31, 2018. This increase was primarily attributable to an increase in salaries and related expenses resulting from our increased headcount and increased premiums and related expenses under our product liability insurance policy as a result of our increase in sales compared to the prior period.
Financial Income, Net.    Our financial income, net, was approximately $0.4 million for the three months ended March 31, 2019, compared to approximately $0.3 million for the three months ended March 31, 2018. This increase was primarily attributable to an increase in income from interest derived from our increased investments in government and corporate debt securities and bank deposits.
Income Tax.    Our income tax was approximately $0.2 million for the three months ended March 31, 2019, compared to a tax benefit of approximately $0.2 million for the three months ended March 31, 2018.
Year Ended December 31, 2018 Compared to Year Ended December 31, 2017
​ ​ ​
Years ended December 31,
​
​ ​ ​
2018
​ ​
2017
​
​ ​ ​
($)
​ ​
(%)
​ ​
($)
​ ​
(%)
​
​ ​ ​
(in thousands)
​
Revenues ​ ​ ​ ​ 100,162 ​ ​ ​ ​ ​ 100 ​ ​ ​ ​ ​ 53,456 ​ ​ ​ ​ ​ 100 ​ ​
Cost of revenues
​ ​ ​ ​ 15,057 ​ ​ ​ ​ ​ 15 ​ ​ ​ ​ ​ 9,053 ​ ​ ​ ​ ​ 17 ​ ​
Gross profit
​ ​ ​ ​ 85,105 ​ ​ ​ ​ ​ 85 ​ ​ ​ ​ ​ 44,403 ​ ​ ​ ​ ​ 83 ​ ​
Operating expenses: ​ ​ ​ ​ ​
Research and development
​ ​ ​ ​ 4,180 ​ ​ ​ ​ ​ 4 ​ ​ ​ ​ ​ 2,575 ​ ​ ​ ​ ​ 5 ​ ​
Sales and marketing
​ ​ ​ ​ 44,622 ​ ​ ​ ​ ​ 45 ​ ​ ​ ​ ​ 28,514 ​ ​ ​ ​ ​ 53 ​ ​
General and administrative
​ ​ ​ ​ 4,814 ​ ​ ​ ​ ​ 5 ​ ​ ​ ​ ​ 4,364 ​ ​ ​ ​ ​ 8 ​ ​
Legal settlements and loss contingencies
​ ​ ​ ​ 8,000 ​ ​ ​ ​ ​ 8 ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ — ​ ​
Total operating expenses
​ ​ ​ ​ 61,616 ​ ​ ​ ​ ​ 62 ​ ​ ​ ​ ​ 35,453 ​ ​ ​ ​ ​ 66 ​ ​
Income from operations
​ ​ ​ ​ 23,489 ​ ​ ​ ​ ​ 23 ​ ​ ​ ​ ​ 8,950 ​ ​ ​ ​ ​ 17 ​ ​
Financial income, net
​ ​ ​ ​ 136 ​ ​ ​ ​ ​ 1 ​ ​ ​ ​ ​ 849 ​ ​ ​ ​ ​ 2 ​ ​
Income before taxes
​ ​ ​ ​ 23,625 ​ ​ ​ ​ ​ 24 ​ ​ ​ ​ ​ 9,799 ​ ​ ​ ​ ​ 18 ​ ​
Income tax
​ ​ ​ ​ 1,260 ​ ​ ​ ​ ​ (2 ) ​ ​ ​ ​ ​ 980 ​ ​ ​ ​ ​ (2 ) ​ ​
Net income
​ ​ ​ ​ 22,365 ​ ​ ​ ​ ​ 22 ​ ​ ​ ​ ​ 8,819 ​ ​ ​ ​ ​ 16 ​ ​
Net loss attributable to non-controlling interests
​ ​ ​ ​ 6 ​ ​ ​ ​ ​ 0 ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ — ​ ​
Net income attributable to controlling interest
​ ​ ​ ​ 22,371 ​ ​ ​ ​ ​ 22 ​ ​ ​ ​ ​ 8,819 ​ ​ ​ ​ ​ 16 ​ ​
Revenue.    Our revenues increased by approximately $46.7 million, or 87%, to approximately $100.2 million for the year ended December 31, 2018, compared to approximately $53.5 million for the year ended December 31, 2017. This increase was primarily attributable to an increased patient and physician awareness of our technologies and product offerings and the expansion of our direct sales organization. In
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addition, approximately $11.8 million, or 25%, of this increase was attributable to the introduction of new products, including our Votiva platform that launched in the third quarter of 2017. Approximately $4.3 million, or 9%, of the increase was attributable to an increase in our average selling prices in North America.
Our revenues in North America increased by approximately $44.8 million, or 100%, to approximately $89.4 million for the year ended December 31, 2018, compared to approximately $44.6 million for the year ended December 31, 2017. This increase was primarily attributable to the expansion of our direct sales organization, which increased sales in North America, the commercial launch of our Votiva platform, during the third quarter of 2017, and an increase in our average selling prices in North America.
Our revenues in Europe increased by approximately $1.1 million, or 24%, to approximately $5.7 million for the year ended December 31, 2018, compared to approximately $4.6 million for the year ended December 31, 2017. This increase was primarily driven by the establishment of a direct sales team in the United Kingdom and Spain, which increased sales in those regions and an increase in the number of distributors in Europe.
Our revenues from the sale of consumables and extended warranties for the year ended December 31, 2018 increased by approximately 107% compared to the year ended December 31, 2017. This increase was primarily attributable to the growth in our installed platform base, as well as patients and physicians becoming more familiar with our products.
Cost of Revenues.    Our cost of revenues increased by approximately $6.0 million, or 66%, to approximately $15.1 million for the year ended December 31, 2018, compared to approximately $9.1 million for the year ended December 31, 2017. This increase was primarily due to increased costs to purchase manufactured products to support the higher sales volume. Our gross margin increased to approximately 85% for the year ended December 31, 2018, compared to approximately 83% for the year ended December 31, 2017, primarily due to the increase in our average selling prices in North America, as well as a higher percentage of revenue derived from North America as compared to other regions, because our average selling price in the United States tends to be higher than in rest of the world.
Research and Development Expenses.    Our research and development expenses increased by approximately $1.6 million, or 62%, to approximately $4.2 million for the year ended December 31, 2018, compared to approximately $2.6 million for the year ended December 31, 2017. This increase was primarily attributable to the increased costs of materials used in research and development activities.
Sales and Marketing Expenses.    Our sales and marketing expenses increased by approximately $16.1 million, or 56%, to approximately $44.6 million for the year ended December 31, 2018, compared to approximately $28.5 million for the year ended December 31, 2017. This increase was primarily attributable to the expansion of our direct sales organization and an increase in compensation related to revenue increases in North America.
General and Administrative Expenses.    Our general and administrative expenses increased by approximately $0.4 million, or 10%, to approximately $4.8 million for the year ended December 31, 2018, compared to approximately $4.4 million for the year ended December 31, 2017. This increase was primarily attributable to an increase in salaries and related expenses resulting from our increased headcount and increased premiums and related expenses under our product liability insurance policy offset by a decrease in legal costs and expenses related to our patent litigations.
Legal Settlements and Loss Contingencies.    Our legal settlements and loss contingencies were approximately $8.0 million for the year ended December 31, 2018, compared to approximately $0 million for the year ended December 31, 2017. This increase was primarily attributable to a settlement agreement entered into in January 2019.
Financial Income, Net.    Our financial income, net was approximately $0.1 million for the year ended December 31, 2018, compared to approximately $0.8 million for the year ended December 31, 2017. This decrease in financial income, net was primarily attributable to loss from foreign currency translation and
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loss from marketable equity securities revaluation. This decrease was partially offset by an increase in income from dividend and interest derived from our investments in government and corporate debt securities, in the year ended December 31, 2018, as compared to a gain on foreign currency translation in the year ended December 31, 2017.
Income Tax.    Our income taxes increased by approximately $0.3 million, or 29%, to approximately $1.3 million for the year ended December 31, 2018, compared to approximately $1.0 million for the year ended December 31, 2017. In 2018, the tax benefit derived from our “Benefited Enterprise” status was approximately $5.1 million, which represents approximately 22% of our income before taxes.
Selected Quarterly Results of Operations
The following table sets forth our unaudited consolidated quarterly results of operation for the periods indicated. You should read the following table in conjunction with our audited consolidated financial statements. We have prepared the unaudited consolidated quarterly financial information on the same basis as our consolidated financial statements. The unaudited consolidated quarterly financial information includes all adjustments, consisting only of normal and recurring adjustments, that we consider necessary for a fair representation of our operating results for the quarters presented.
​ ​ ​
For the three months ended,
​
​ ​ ​
2019
​ ​
2018
​ ​
2017
​
​ ​ ​
Mar. 31
​ ​
Dec. 31
​ ​
Sep. 30
​ ​
Jun. 30
​ ​
Mar. 31
​ ​
Dec. 31
​ ​
Sep. 30
​ ​
Jun. 30
​ ​
Mar. 31
​
​ ​ ​
(unaudited)
(in thousands)
​
Revenues ​ ​ ​ $ 30,552 ​ ​ ​ ​ $  28,783 ​ ​ ​ ​ $  25,418 ​ ​ ​ ​ $  25,050 ​ ​ ​ ​ $  20,911 ​ ​ ​ ​ $  19,807 ​ ​ ​ ​ $  14,293 ​ ​ ​ ​ $  13,877 ​ ​ ​ ​ $  5,479 ​ ​
Cost of revenues
​ ​ ​ ​ 4,271 ​ ​ ​ ​ ​ 3,939 ​ ​ ​ ​ ​ 3,669 ​ ​ ​ ​ ​ 3,917 ​ ​ ​ ​ ​ 3,532 ​ ​ ​ ​ ​ 3,556 ​ ​ ​ ​ ​ 2,075 ​ ​ ​ ​ ​ 2,327 ​ ​ ​ ​ ​ 1,095 ​ ​
Gross profit
​ ​ ​ ​ 26,281 ​ ​ ​ ​ ​ 24,844 ​ ​ ​ ​ ​ 21,749 ​ ​ ​ ​ ​ 21,133 ​ ​ ​ ​ ​ 17,379 ​ ​ ​ ​ ​ 16,251 ​ ​ ​ ​ ​ 12,218 ​ ​ ​ ​ ​ 11,550 ​ ​ ​ ​ ​ 4,384 ​ ​
Operating expenses: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​
Research and development
​ ​ ​ ​ 1,199 ​ ​ ​ ​ ​ 1,354 ​ ​ ​ ​ ​ 1,005 ​ ​ ​ ​ ​ 941 ​ ​ ​ ​ ​ 880 ​ ​ ​ ​ ​ 774 ​ ​ ​ ​ ​ 674 ​ ​ ​ ​ ​ 510 ​ ​ ​ ​ ​ 617 ​ ​
Sales and marketing
​ ​ ​ ​ 14,097 ​ ​ ​ ​ ​ 12,521 ​ ​ ​ ​ ​ 11,106 ​ ​ ​ ​ ​ 11,330 ​ ​ ​ ​ ​ 9,665 ​ ​ ​ ​ ​ 10,434 ​ ​ ​ ​ ​ 7,491 ​ ​ ​ ​ ​ 6,734 ​ ​ ​ ​ ​ 3,855 ​ ​
General and administrative
​ ​ ​ ​ 1,053 ​ ​ ​ ​ ​ 1,656 ​ ​ ​ ​ ​ 1,244 ​ ​ ​ ​ ​ 1,019 ​ ​ ​ ​ ​ 895 ​ ​ ​ ​ ​ 1,322 ​ ​ ​ ​ ​ 1,223 ​ ​ ​ ​ ​ 1,118 ​ ​ ​ ​ ​ 701 ​ ​
Legal settlements and loss contingencies
​ ​ ​ ​ — ​ ​ ​ ​ ​ 8,000 ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ — ​ ​
Total operating expenses
​ ​ ​ ​ 16,349 ​ ​ ​ ​ ​ 23,531 ​ ​ ​ ​ ​ 13,355 ​ ​ ​ ​ ​ 13,290 ​ ​ ​ ​ ​ 11,440 ​ ​ ​ ​ ​ 12,530 ​ ​ ​ ​ ​ 9,388 ​ ​ ​ ​ ​ 8,362 ​ ​ ​ ​ ​ 5,173 ​ ​
Income (loss) from operations
​ ​ ​ ​ 9,932 ​ ​ ​ ​ ​ 1,313 ​ ​ ​ ​ ​ 8,394 ​ ​ ​ ​ ​ 7,843 ​ ​ ​ ​ ​ 5,939 ​ ​ ​ ​ ​ 3,721 ​ ​ ​ ​ ​ 2,830 ​ ​ ​ ​ ​ 3,188 ​ ​ ​ ​ ​ (789 ) ​ ​
Financial income (expenses), net
​ ​ ​ ​ 403 ​ ​ ​ ​ ​ (487 ) ​ ​ ​ ​ ​ 415 ​ ​ ​ ​ ​ (70 ) ​ ​ ​ ​ ​ 278 ​ ​ ​ ​ ​ 218 ​ ​ ​ ​ ​ 221 ​ ​ ​ ​ ​ 247 ​ ​ ​ ​ ​ 163 ​ ​
Income (loss) before
taxes
​ ​ ​ ​ 10,335 ​ ​ ​ ​ ​ 826 ​ ​ ​ ​ ​ 8,809 ​ ​ ​ ​ ​ 7,773 ​ ​ ​ ​ ​ 6,217 ​ ​ ​ ​ ​ 3,939 ​ ​ ​ ​ ​ 3,051 ​ ​ ​ ​ ​ 3,435 ​ ​ ​ ​ ​ (626 ) ​ ​
Income tax (tax benefit)
​ ​ ​ ​ 177 ​ ​ ​ ​ ​ 1,045 ​ ​ ​ ​ ​ 171 ​ ​ ​ ​ ​ 193 ​ ​ ​ ​ ​ (149 ) ​ ​ ​ ​ ​ 620 ​ ​ ​ ​ ​ 144 ​ ​ ​ ​ ​ 123 ​ ​ ​ ​ ​ 93 ​ ​
Net income (loss)
​ ​ ​ $ 10,158 ​ ​ ​ ​ $ (219 ) ​ ​ ​ ​ $ 8,638 ​ ​ ​ ​ $ 7,580 ​ ​ ​ ​ $ 6,366 ​ ​ ​ ​ $ 3,319 ​ ​ ​ ​ $ 2,907 ​ ​ ​ ​ $ 3,312 ​ ​ ​ ​ $ (719 ) ​ ​
Seasonality
Our business is not significantly impacted by seasonality; however, our fourth quarter has historically generated slightly stronger operating results. We have historically experienced stronger sales in the fourth quarter in correlation with our customers’ spending patterns and budget cycles. Most physicians operate on an annual budget cycle with a fiscal year that begins on January 1. It is not uncommon to experience a higher level of purchasing activity from physicians in the final months and weeks of their fiscal year. Consequently, our fourth quarter revenues may be greater than other quarters. Our business is also impacted by general economic conditions, which may impact future seasonal variations.
Liquidity and Capital Resources
Historically, we have funded our operations primarily from cash flows from operations and from private placements of our ordinary shares. Since our inception in January 2008, we have not received any debt financing from banks or issued any preferred or debt securities. We have received aggregate net proceeds of approximately $5.1 million from issuances of our ordinary shares.
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As of March 31, 2019, we had working capital of approximately $58.1 million, and our primary source of liquidity was approximately $64.1 million in cash and cash equivalents, marketable securities and bank deposits.
We anticipate that the proceeds of this offering and cash flows from operations will be adequate to fund our expected capital expenditures and other cash requirements and commitments through at least the next 12 months. If existing cash and cash generated from operations are insufficient to satisfy our liquidity requirements, we may seek to sell additional equity or debt securities or obtain a credit facility. If we raise additional funds by issuing equity securities, our shareholders would experience dilution. Debt financing, if available, may involve covenants restricting our operations or our ability to incur additional debt. Any debt financing or additional equity that we raise may contain terms that are not favorable to us or our shareholders. Additional financing may not be available at all, or in amounts or on terms unacceptable to us. If we are unable to obtain additional financing, we may be required to delay the development, commercialization and marketing of our aesthetic medical products.
Cash Flows
The following table represents a summary of our cash flow for the periods indicated:
​ ​ ​
Three months ended
March 31,
​ ​
Years ended
December 31,
​
​ ​ ​
2019
​ ​
2018
​ ​
2018
​ ​
2017
​
​ ​ ​
(in thousands)
​
Net cash provided by (used in): ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​
Operating activities
​ ​ ​ $ 2,771 ​ ​ ​ ​ $ 7,397 ​ ​ ​ ​ $ 36,886 ​ ​ ​ ​ $ 14,609 ​ ​
Investing activities
​ ​ ​ ​ (8,693 ) ​ ​ ​ ​ ​ (1,993 ) ​ ​ ​ ​ ​ (29,739 ) ​ ​ ​ ​ ​ (5,684 ) ​ ​
Financing activities
​ ​ ​ ​ 122 ​ ​ ​ ​ ​ 150 ​ ​ ​ ​ ​ 186 ​ ​ ​ ​ ​ 1,785 ​ ​
Effects of exchange rate changes on cash
​ ​ ​ ​ 30 ​ ​ ​ ​ ​ (11 ) ​ ​ ​ ​ ​ (205 ) ​ ​ ​ ​ ​ 187 ​ ​
Net increase (decrease) in cash and cash equivalents
​ ​ ​ $ (5,770 ) ​ ​ ​ ​ $ 5,543 ​ ​ ​ ​ $ 7,128 ​ ​ ​ ​ $ 10,897 ​ ​
Net Cash Provided by Operating Activities
Net cash provided by operating activities decreased by approximately $4.6 million, or 63%, to approximately $2.8 million for the three months ended March 31, 2019, compared to approximately $7.4 million for the three months ended March 31, 2018. This decrease was primarily attributable to the payment of a settlement agreement entered into in January 2019. Net cash provided by operating activities increased by approximately $22.3 million, or 152%, to approximately $ 36.9 million for the year ended December 31, 2018, compared to approximately $14.6 million for the year ended December 31, 2017. This increase was primarily attributable to an increase in our net income. As we expect our revenues to continue to grow, we anticipate our accounts receivables and inventory will similarly continue to grow, including our available working capital.
Net Cash Used in Investing Activities
Net cash used in investing activities increased by approximately $6.7 million, or 336%, to approximately $8.7 million for the three months ended March 31, 2019, compared to approximately $2.0 million for the three months ended March 31, 2018. This increase was primarily attributable to investment in short-term deposits and purchases of marketable securities, which increased from approximately $0 million and $9.4 million, respectively, as of March 31, 2018, to approximately $16.1 million and $29.1 million, respectively, as of March 31, 2019. Net cash used in investing activities increased by approximately $24.0 million, or 423%, to approximately $29.7 million for the year ended December 31, 2018, compared to approximately $5.7 million for the year ended December 31, 2017. This increase was primarily attributable to purchases of marketable securities, which increased from approximately $7.4 million as of December 31, 2017, to approximately $26.5 million as of December 31, 2018.
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Net Cash Provided by Financing Activities
Net cash provided by financing activities was approximately $0.1 million for the three months ended March 31, 2019, and approximately $0.2 million for the three months ended March 31, 2018. This decrease was primarily attributable to proceeds from exercise of options. Net cash provided by financing activities was approximately $0.2 million for the year ended December 31, 2018, and approximately $1.8 million for the year ended December 31, 2017. This decrease was primarily attributable to funding from a non-controlling partner in our Chinese joint venture in 2017.
Contractual Obligations and Commitments
The following table summarizes our contractual obligations and commitments as of March 31, 2019:
​ ​ ​ ​ ​ ​ ​ ​ ​
Payments Due by Period
​
​ ​ ​
Total
​ ​
Less than
1 year
​ ​
1 – 3 years
​ ​
3 – 5 years
​ ​
More than
5 years
​
​ ​ ​
($) (in thousands)
​
Operating lease (including imputed
interest)
​ ​ ​ ​ 1,800 ​ ​ ​ ​ ​ 508 ​ ​ ​ ​ ​ 1,221 ​ ​ ​ ​ ​ 71 ​ ​ ​ ​ ​ — ​ ​
Subcontracting agreement
​ ​ ​ ​ 2,400 ​ ​ ​ ​ ​ 2,400 ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ — ​ ​
Quantitative and Qualitative Disclosure of Market Risks
Foreign Currency Risk
Our consolidated revenues are generated primarily in U.S. dollars. In addition, a substantial portion of our consolidated costs are incurred in dollars. We believe that the U.S. dollar is the primary currency of the economic environment we operate in. Thus, the U.S. dollar is our primary functional and reporting currency.
Our transactions and balances originally denominated in dollars are presented at their original amounts. Balances in non-dollar currencies are translated into U.S. dollars using historical and current exchange rates for non-monetary and monetary balances, respectively. For non-U.S. dollar transactions and other items in the consolidated statements of income (indicated below), the following exchange rates are used: (i) for transactions, exchange rates at transaction dates or average rates; and (ii) for other items (derived from non-monetary balance sheet items such as depreciation and amortization), historical exchange rates. Currency translation gains and losses are presented in financial income or expenses, as appropriate.
A significant portion of our operations is conducted through operations in countries other than the United States and Israel. Revenues from our global operations that were recorded in U.S. dollars represented approximately 83% for the three months ended March 31, 2019, and 84% for the year ended December 31, 2018.
The functional currencies of our subsidiaries are their respective local currencies or the U.S. dollar. For purposes of consolidation, the financial statements of the Foreign Subsidiaries are translated into U.S. dollars in accordance with Accounting Standards Codification, or ASC, No. 830, “Foreign Currency Matters” (“ASC 830”). Assets and liabilities are translated at period-end exchange rates, while revenues and expenses are translated at exchange rates for each transaction. All gains and losses resulting from translation are presented in other comprehensive income within the consolidated statements of comprehensive income.
Interest Rate Risk
The primary objective of our investment activities is to preserve principal while maximizing the interest income we receive from our investments, without increasing risk. Currently, we do not have any outstanding borrowings. We intend to invest our cash balances primarily in bank deposits and fixed-income securities issued by corporations, the United States and non-U.S. governments. We are exposed to market risks resulting from changes in interest rates relating primarily to our financial investments in cash, cash
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equivalents, deposits and marketable securities. We do not use derivative financial instruments to limit exposure to interest rate risk. Our interest gains may decline in the future as a result of changes in the financial markets; however, we believe any such potential loss would be immaterial to us.
Off Balance Sheet Arrangements
As of June 30, 2019, we have not engaged in any off balance sheet arrangements.
Related Parties
For a description of our related party transactions, see “Certain Relationships and Related Party Transactions.”
Critical Accounting Policies and Estimates
Our discussion and analysis of our financial condition and results of our operations is based upon our audited consolidated financial statements, which have been prepared in accordance with U.S. GAAP. The preparation of our consolidated financial statements requires us to make estimates and judgments that affect the reported amount of assets, liabilities, sales and expenses and related disclosure of contingent assets and liabilities. On a periodic basis, we evaluate our estimates, including those related to revenue recognition, warranty provision, income taxes and share-based compensation. We base our estimates on historical experience, authoritative pronouncements and various other assumptions that we believe to be reasonable under the circumstances. Actual results could differ from those estimates.
The following are our critical accounting policies and the significant judgments and estimates affecting the application of those policies in our consolidated financial statements.
Revenue Recognition
We recognize revenue in accordance with Accounting Standards Update No. 2014-09 (“ASC 606”) “Revenue from Contracts with Customers,” when our customers obtain control of promised goods or services, in an amount that reflects the consideration that the entity expects to receive in exchange for those goods or services. To determine revenue recognition for arrangements within the scope of ASC 606, we perform the following five steps:
i.
identify the contract(s) with a customer;
​
ii.
identify the performance obligations in the contract — we determined that our arrangements are generally comprised of the following elements that are recognized as separate performance obligations: products, consumables and extended warranties. Installation and training services are not essential to the functionality of our products;
​
iii.
determine the transaction price;
​
iv.
allocate the transaction price to the performance obligations in the contract — we estimated the standalone selling prices of the services to be provided based on expected pricing of service contract purchased on a standalone basis and used the residual approach to estimate the selling price of the products; and
​
v.
recognize revenue when (or as) the performance obligation is satisfied.
​
We apply the five-step model to contracts only when it is probable that we will collect the consideration we are entitled to in exchange for the goods or services we transfer to our customer, after considering any price concession expected to be provided to the customer, when applicable. At contract inception, we assess the goods or services promised within each contract and determine those that are performance obligations, and assess whether each promised good or service is distinct. We then recognize as revenue the amount of the transaction price that is allocated to the respective performance obligation when (or as) the performance obligation is satisfied.
We early adopted ASC 606 using the full retrospective transition method.
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From time to time, we may decide to enter into installment sales contracts with certain end users that provide them with long-term (generally up to 60 months) financing of the purchase of our product. The interest rate used in these contracts reflects the credit characteristics of the party receiving financing in the contract, as well as any collateral or security provided by the customer. Interest income on these receivables is recognized as financing income and earned over the term of the contract.
We recognize any variable consideration at the time that it is probable that a significant reversal in the amount of cumulative revenue recognized will not occur when the uncertainty associated with the variable consideration is subsequently resolved. Variable consideration mainly includes price concessions related to installment sales contracts.
We also generate revenues from long-term maintenance contracts, or Extended Warranties. Revenue from Extended Warranties is recognized ratably, on a straight-line basis, over the period of the applicable service contract. Contract liabilities include deferred revenues derived from these maintenance agreements.
Revenue from repairs performed in the absence of Extended Warranties is recognized when the related services are performed and it is probable that we will collect the consideration we are entitled to. We classify the portion of contract liabilities not expected to be earned in the subsequent 12 months as long-term.
We do not grant any right of return, refund, cancelation or termination.
Income Taxes
We account for income taxes in accordance with ASC 740, “Income Taxes” (“ASC 740”), using the liability method whereby deferred tax assets and liability account balances are determined based on the differences between financial reporting and the tax basis for assets and liabilities, and are measured using the enacted tax rates and laws that will be in effect when the differences are expected to reverse. We provide a valuation allowance, if necessary, to reduce deferred tax assets to the amounts that are more likely-than-not to be realized.
ASC 740 also contains a two-step approach to recognizing and measuring a liability for uncertain tax positions. The first step is to evaluate the tax position taken or expected to be taken in a tax return by determining if the weight of available evidence indicates that it is more likely than not that, on an evaluation of the technical merits, the tax position will be sustained on audit, including resolution of any related appeals or litigation processes.
The second step is to measure the tax benefit as the largest amount that is more than 50% likely to be realized upon ultimate settlement. We accrue interest and penalties related to unrecognized tax benefits in our income taxes.
Share-Based Compensation
We account for share-based compensation in accordance with ASC 718 which requires that all share-based payments to employees and non-employees be recognized in our consolidated statements of income based on their fair values. The grant date fair value of share-based compensation is recognized as an expense over the requisite service period, net of estimated forfeitures. We recognize compensation expense for awards conditioned only on continued service that have a graded vesting schedule using the accelerated method based on the multiple-option award approach, and classify these amounts in our consolidated statements of income based on the department to which the related employee and non-employee reports.
Option Valuations
We selected the binomial option-pricing model to determine the fair value of each option grant to our employees and non-employees.
The binomial model includes assumptions regarding dividend yields, expected volatility, and risk-free interest rates, early exercise multiple and expected lives. These assumptions reflect our best estimates, but these items involve inherent uncertainties based on market conditions that are generally outside of our
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control. As a result, if other assumptions had been used in the current period, share-based compensation expense could have been materially impacted. Furthermore, if management uses different assumptions in future periods, share-based compensation expense could be materially impacted in future years.
Expected dividend yield :    We have never declared or paid any cash dividends and we do not plan to pay cash dividends in the foreseeable future.
Volatility:    The expected volatility is based on the historical volatility of comparable companies.
Risk-free interest rate:    The risk-free interest rate assumption is based on observed interest rates appropriate for the expected term of the options granted in dollar terms.
Early exercise multiple:    Since our ordinary shares are not publicly traded, the early exercise multiple was based on academic empirical findings. The early exercise multiple of grantees in private companies is expected to be higher due to the lack of marketability that leads to a longer exercise period for options.
The underlying data used for computing the fair value of the options are as follows:
​ ​ ​
For the three months ended
March 31,
​ ​
For the year ended
December 31,
​
​ ​ ​
2019
​ ​
2018
​
Dividend yield
​ ​
0%
​ ​
0%
​
Expected volatility
​ ​
51.91%
​ ​
51.20%
​
Risk-free interest rate
​ ​
2.56 – 2.60%
​ ​
2.96%
​
Early exercise multiple
​ ​
150% – 250%
​ ​
150% – 250%
​
Contractual term
​ ​
7 years
​ ​
7 years
​
These assumptions represent our best estimates and involve inherent uncertainties and the application of our judgment. As a result, if we use significantly different assumptions or estimates, our share-based compensation expense could be materially different.
The following table shows information concerning options granted to employees and non-employees during the period from March 31, 2017 through June 30, 2019:
Grant Date
​ ​
Number of
Options
Granted
​ ​
Exercise
Price
​ ​
Fair Value
per Share
​ ​
Fair Value
per Option  
​
June 1, 2017
​ ​ ​ ​ 1,452,550 ​ ​ ​ ​ $ 1.00 ​ ​ ​ ​ $ 1.04 ​ ​ ​ ​ $ 0.47 ​ ​
November 1, 2017
​ ​ ​ ​ 12,000 ​ ​ ​ ​ $ 1.00 ​ ​ ​ ​ $ 5.58 ​ ​ ​ ​ $ 4.58 ​ ​
December 31, 2017
​ ​ ​ ​ 20,000 ​ ​ ​ ​ $ 1.00 ​ ​ ​ ​ $ 7.35 ​ ​ ​ ​ $ 6.39 ​ ​
February 15, 2018
​ ​ ​ ​ 2,000 ​ ​ ​ ​ $ 1.00 ​ ​ ​ ​ $ 8.70 ​ ​ ​ ​ $ 7.75 ​ ​
September 17, 2018
​ ​ ​ ​ 198,100 ​ ​ ​ ​ $ 11.30 ​ ​ ​ ​ $ 11.30 ​ ​ ​ ​ $ 4.54 ​ ​
January 6, 2019
​ ​ ​ ​ 95,000 ​ ​ ​ ​ $ 13.40 ​ ​ ​ ​ $ 13.40 ​ ​ ​ ​ $ 3.74 ​ ​
January 7, 2019
​ ​ ​ ​ 171,000 ​ ​ ​ ​ $ 13.40 ​ ​ ​ ​ $ 13.40 ​ ​ ​ ​ $ 3.74 ​ ​
April 1, 2019
​ ​ ​ ​ 17,000 ​ ​ ​ ​ $ 18.30 ​ ​ ​ ​ $ 18.30 ​ ​ ​ ​ $ 5.05 ​ ​
April 5, 2019
​ ​ ​ ​ 38,000 ​ ​ ​ ​ $ 18.30 ​ ​ ​ ​ $ 18.30 ​ ​ ​ ​ $ 5.05 ​ ​
April 6, 2019
​ ​ ​ ​ 8,000 ​ ​ ​ ​ $ 18.30 ​ ​ ​ ​ $ 18.30 ​ ​ ​ ​ $ 5.05 ​ ​
Ordinary Share Valuation
In preparation for our initial public offering, in January 2019 and February 2019, with the assistance of a third-party valuation firm, we performed prospective valuations of our ordinary shares as of December 31, 2018 and February 28, 2019 which determined that their fair value was $13.40 and $18.30 per ordinary share, respectively. In July 2018, with the assistance of a third-party valuation firm, we performed retrospective valuations of our ordinary shares as of December 31, 2016, May 31, 2017, March 31, 2018 and July 31, 2018, which determined that their fair values were $0.78, $1.04, $9.90 and $11.30 per ordinary share, respectively. For the purpose of determining our equity value, we used the discounted cash flow, or
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DCF, method. Under the DCF method, our projected after-tax cash flows available to return to holders of invested capital were discounted back to present value, using an appropriate discount rate. Since it is not possible to project our after-tax cash flows beyond a limited number of years, the DCF method relies on determining a “terminal value” representing the aggregate value of the future after-tax cash flows after the end of the period for which annual projections are possible. The discount rate, known as the weighted average cost of capital, or WACC, accounts for the time value of money and the appropriate degree of risk inherent in a business. The DCF method requires significant assumptions, in particular, regarding our projected cash flows and the discount rate applicable to our business. For the purpose of the abovementioned valuations we applied discount rates in the range of 13.0%-16.5%, and projected after-tax cash flows based on the possible scenarios in regards to our prospective as a result of the realization of the legal proceedings against us at each valuation date.
Having determined our equity value, we allocated it among the different elements of our share capital using the option pricing method, or OPM. Under the OPM, each security — ordinary shares and options — is treated as a call option having an exercise price based on the amount and optimal conversion price. The value of the call option is determined using the Black-Scholes option pricing model. The Black-Scholes model requires significant assumptions and in particular the assumptions regarding the volatility of our ordinary shares.
Accounts Receivable and Allowance for Doubtful Accounts
Our accounts receivable balance, net of allowance for doubtful accounts, was approximately $7.4 million as of March 31, 2019, compared to approximately $7.5 million as of March 31, 2018. The allowance for doubtful accounts as of March 31, 2019 was approximately $0.4 million compared to approximately $0.3 million as of March 31, 2018. Our accounts receivable balance, net of allowance for doubtful accounts, was approximately $7.6 million as of December 31, 2018, compared to approximately $6.9 million as of December 31, 2017. The allowance for doubtful accounts for the years ended December 31, 2018 and 2017 was approximately $0.4 million. This increase is primarily attributable to increasing sales.
We maintain an allowance, or reserve, for doubtful accounts based upon known collectability issues. While our credit losses have historically been within our expectations and the allowances established, we may not continue to experience the same credit losses that we have in the past, which could cause our provisions for doubtful accounts to increase. We work to mitigate bad debt exposure through our credit evaluation policies and geographical dispersion of sales.
Inventories Valuation
We state all inventories at the lower of cost or net realizable value. We determine our finished products using a “moving average” method and we determine our raw materials using a “first in, first out” method. Our inventory balance was approximately $7.1 million as of March 31, 2019, compared to approximately $5.9 million as of March 31, 2018. Our inventory balance was approximately $7.0 million as of December 31, 2018, compared to approximately $5.0 million as of December 31, 2017. We review the need for inventory allowances when conditions indicate that the selling price could be less than cost due to physical deterioration, usage, obsolescence, reductions in estimated future demand and reductions in selling prices. We balance the need to maintain strategic inventory levels with the risk of obsolescence due to changing technology and customer demand levels. Unfavorable changes in market conditions may result in a need for inventory reserves that could adversely impact our gross margins. Conversely, favorable changes in demand could result in higher gross margins when we sell products.
Product Warranty and Service Costs
We generally provide, as a standard, a one-year parts delivery and labor warranty on end-user sales of our aesthetic treatment systems. Distributors generally provide a one-year manufacturing warranty on parts only. We estimate and provide for future costs for initial product warranties at the time revenue is recognized. We base product warranty costs on related material costs, delivery cost, technical support labor costs and overhead.
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We provide for the estimated cost of product warranties by considering historical material, delivery, labor and overhead expenses and applying the experience rates to the outstanding warranty period for products sold. As we sell new products to our customers, we exercise considerable judgment in estimating the expected failure rates and warranty costs. If actual product failure rates, material usage, service delivery costs or overhead costs differ from our estimates, we would be required to revise our estimated warranty liability.
Recent Accounting Pronouncements
For accounting pronouncements adopted prior to January 1, 2019, see note 2(w1) in our consolidated financial statements.
For accounting pronouncements adopted from January 1, 2019, see note 2(b) in our condensed consolidated financial statements.
JOBS Act
On April 5, 2012, the JOBS Act was signed into law. Section 107 of the JOBS Act provides that an “emerging growth company” can take advantage of the extended transition period provided in Section 7(a)(2)(B) of the Securities Act for complying with new or revised accounting standards.
This means that an “emerging growth company” can delay the adoption of certain accounting standards until those standards would otherwise apply to private companies. We have irrevocably elected to opt out of such extended transition period.
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BUSINESS
Overview
We are a leading global provider of innovative, energy-based, minimally-invasive surgical aesthetic and medical treatment solutions. Within the global aesthetics market, our products and solutions are primarily designed to address three energy-based treatment categories comprised of: (i) face and body contouring; (ii) medical aesthetics; and (iii) women’s health. We have developed and commercialized products utilizing medically-accepted RF energy technology, which can penetrate deep into the subdermal fat, allowing adipose tissue remodeling. We believe our RF energy-based proprietary technologies — (i) RFAL, (ii) Deep Subdermal Fractional RF, (iii) Simultaneous Fat Destruction and Skin Tightening and (iv) Deep Heating Collagen Remodeling — represent a paradigm shift in the minimally-invasive aesthetic solutions market. These technologies are used by physicians to remodel subdermal adipose, or fatty, tissue in a variety of procedures including liposuction with simultaneous skin tightening, face and body contouring and ablative skin rejuvenation treatments. Our products, developed with our proprietary RF energy-based technologies, overcome many of the shortcomings of other aesthetic options by delivering surgical-grade results while significantly minimizing risks of scarring, downtime, pain and other complications typically accompanying surgical procedures. In addition to our minimally-invasive solutions, we design, develop, manufacture and market differentiated, non-invasive medical aesthetic products that target a wide array of procedures. These include simultaneous fat killing and skin tightening, permanent hair reduction through the use of our innovative dual wavelength technology and other treatments targeting skin appearance and texture through the use of our high power IPL technology. Our products, which we market and sell traditionally to plastic and facial surgeons, aesthetic surgeons, dermatologists and OB/GYNs may be used on a variety of body parts including the face, neck, abdomen, upper arms, thighs and intimate feminine regions.
In addition to the existing group of patients who currently undergo full surgical aesthetic procedures, we believe our minimally-invasive solutions satisfy an unmet market demand in two incremental groups of patients: (i) those whose skin laxity or other physical attributes have previously precluded them from undergoing surgical aesthetic procedures and (ii) those who would entertain the idea of surgical or minimally-invasive aesthetic procedures, but are averse to the associated costs, downtime and potential safety risks. We believe these patient populations will continue to represent a significant opportunity for our differentiated minimally-invasive aesthetic solutions.
We believe our products have consistently been at the forefront of technological development in the aesthetic solutions market. Since 2010, we have launched six product platforms: BodyTite , Optimas , Votiva , Contoura , Triton and EmbraceRF . Each product consists of the following components: a platform that incorporates multiple energy sources, one or more handpieces, our proprietary software and a simple user interface with touch screen. Our platforms have a small footprint and are lightweight compared to our competitors’ systems, which are typically larger and heavier. Our products can be upgraded easily by the user in order to perform additional treatments by adding handpieces and/or installing software in the existing platform. The ease of upgrades enables our customers to meet demand for aesthetic solutions through additional service offerings.
Our focus on innovation has resulted in a strong track record of sustained new and next-generation product development. We believe our ability to bring new products to market and continuously innovate is a distinct competitive advantage. We expect to launch three new product platforms by the end of 2019, all of which will be based on our existing RF energy-based proprietary technology, with the goal of further penetrating the market for surgical aesthetic and medical treatment solutions. Our three new product platforms are intended to address the treatment of cellulite appearance ( CelluTite ), body skin tightening ( Evolve ), and face and neck skin tightening ( Evoke ). Our CelluTite platform is comprised of three handpieces, each of which has been cleared by the FDA, intended to address the treatment of cellulite appearance. Two of the handpieces are cleared for use in dermatological and general surgical procedures for electrocoagulation and hemostasis of tissues including fat, and the third handpiece has been cleared for use in treatments for the temporary reduction in the appearance of cellulite. We expect to introduce the CelluTite platform to the market during the fourth quarter of 2019. The Evolve platform received FDA clearance in June 2019 and is expected to be introduced to the market during the second half of 2019. We submitted a premarket notification to the FDA pursuant to Section 510(k) of the Federal Food, Drug and
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Cosmetic Act for our Evoke product platform in July 2019. Subject to receipt of FDA clearance, we intend to introduce Evoke to the market during the second half of 2019. The CelluTite , Evolve and Evoke product platforms are subject to the same FDA 510(k) clearance process as our current products.
We expect that these new product platforms will complement our existing portfolio of products, allowing us to increase our offerings to existing customers and attract new customers. We believe that introducing new product platforms is important in order to satisfy consumer demand and respond to evolving technological developments.
In response to customers’ desires to enhance and expand their offering of our aesthetic and wellness office-based procedures, we are developing additional RF energy-based platforms, handpieces and applicators targeted towards several medical specialties.
•
For OB/GYNs, we currently sell the Votiva platform, which includes two handpieces, FormaV and Morpheus8 . We are currently developing additional handpieces and applicators as part of this platform to assist with the following procedures:
​
•
non-incisional labiaplasty (a procedure to reshape the labia minora) using our AccuTite RFAL handpiece ( Aviva ); and
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•
post-partum restoration of abdominal muscles and pelvic floor restoration using our external and internal EMS handpieces.
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•
For ophthalmologists, we are developing a new platform that, in addition to our existing aesthetic handpieces, we expect will assist with the following procedures:
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•
lower and upper eyelid contraction and fat reduction using the AccuTite and Morpheus8 handpieces; and
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•
treatment of periorbital wrinkles and dry eye with a new continuous bi-polar RF energy handpiece.
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Our new handpiece to treat dry eye and periorbital wrinkles is currently in an in-office ex vivo preclinical evaluation. We expect to introduce our new product platform for ophthalmologists comprising of three handpieces ( AccuTite , Morpheus8 and our new dry eye and periorbital wrinkles treatment handpiece) to the market during the second quarter of 2020.
•
For ENTs, we are in the initial stage of developing a new platform and handpiece that we believe will provide patients with a medical treatment solution for snoring. The handpiece is based on our Deep Subdermal Fractional RF technology and is expected to contract and stiffen the soft palate (located on the back of the roof of the mouth), which blocks the airway, causing tissues to vibrate during sleep. This platform and handpiece are in the concept design phase.
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We are focused on establishing and using clinical evidence to support and broaden our marketing claims and drive customer awareness and acceptance of our products. Traditionally, the aesthetic solutions market has relied heavily on marketing efforts and “before-and-after” pictures in an to attempt to distinguish products. We believe our focus on establishing clinical evidence for the efficacy of our products has been important for adoption by our surgically-trained customers, who are accustomed to seeing extensive clinical data in their non-aesthetic practices. To date, 36 third-party clinical studies have been completed and 18 third-party clinical studies are in the process of being conducted using our products. We also have a portfolio of 44 peer-reviewed publications. While we did not have any involvement in the clinical studies mentioned above, such studies provide qualitative results that we believe are meaningful. However, because these were third-party studies, we do not have access to any raw data to conduct any quantitative analyses.
To complement our surgical aesthetic and medical treatment solutions, we offer post-sales training and support services. We provide physicians with training focused on the most beneficial ways to utilize our products, including safety and instructional videos to expand procedural offerings and hands-on, personalized marketing support. We believe that we provide one of the most extensive training and ongoing support programs available to physicians throughout the aesthetic solutions market.
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Our revenue increased to approximately $30.6 million for the three months ended March 31, 2019, from approximately $20.9 million for the three months ended March 31, 2018. Our revenue increased to approximately $100.2 million for the year ended December 31, 2018 from approximately $53.5 million for the year ended December 31, 2017. For the three months ended March 31, 2019 and 2018, we recorded a gross margin of approximately 86% and 83%, respectively, and net income of approximately $10.2 million and $6.4 million, respectively. For the years ended December 31, 2018 and 2017, we recorded a gross margin of approximately 85% and 83%, respectively, and net income of approximately $22.4 million and $8.8 million, respectively. We have 18 FDA clearances and in addition to the United States, where we have over 2,400 customers, are permitted to sell our products in Europe, Argentina, Australia, Brazil, Canada, China, Colombia, the Commonwealth of Independent States, Israel, Mexico, Panama, Philippines, Russia, South Korea, Taiwan and Thailand. As of June 30, 2019, we sell and market our products in the United States, Canada, United Kingdom, Spain and India, through a direct sales force of approximately 96 representatives. We also sell and market our products through 37 distributors in 44 countries. As of June 30, 2019, we had a global installed base of over 3,900 product platforms capable of running various multi-use applicators and utilizing minimally-invasive consumables.
Industry
Overview
The global market for aesthetic solutions is significant and growing. ASAPS estimates that U.S. consumers spent more than $8.5 billion on a total of 7.8 million aesthetic procedures in 2017, of which $6.6 billion was spent on surgical aesthetic procedures. According to ASAPS, in 2017 total aesthetic procedures in the United States grew 6%, with surgical aesthetic procedure growth of 11% and non-surgical aesthetic procedure growth of 4%.
According to the 2017 ISAPS Global Aesthetic Survey, which includes survey results from 35,000 plastic surgeons in the top 30 countries for aesthetic procedures, approximately 23.4 million total aesthetic procedures, including 10.8 million surgical procedures and 12.6 million non-surgical procedures, were performed in 2017. Of these total procedures, approximately 18%, or 4.3 million, were performed in the United States. According to ISAPS, the top five surgical and minimally-invasive procedure categories in 2017, by number of procedures, that we provide innovative aesthetic solutions for were liposuction (1.6 million), eyelid surgery (1.3 million), abdominoplasty (0.8 million), face and neck lifts (0.7 million) and women’s health (0.2 million). The top five non-invasive procedure categories in 2017 that we provide innovative aesthetic solutions for were facial rejuvenation (2.1 million), hair removal (1.0 million), non-invasive fat reduction (0.5 million), cellulite treatment (0.3 million) and vascular lesions/sclerotherapy (0.1 million).
No one treatment procedure is offered by all physicians and treatments vary in terms of the treatment goal and desired effect. As a result, the total aesthetic market, as reported by ASAPS and ISAPS, does not necessarily represent the market potential for us or any other single product or treatment, but illustrates that each year patients elect to have millions of procedures performed to enhance their appearance. We believe our total addressable market also includes aesthetic procedures performed by non-plastic surgeons, which are not tracked by ASAPS and ISAPS data.
We believe the following factors are contributing to the growth in aesthetic procedures:
•
the aging of the population in the western world;
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•
the growing global obesity epidemic;
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•
the increasing desire of many individuals to improve their appearance;
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•
the reduction in procedure costs, which has attracted a broader consumer base; and
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•
the impact of managed care and reimbursement on physician economics, which has motivated physicians to establish or expand the menu of elective, private-pay aesthetic procedures that they offer.
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Within each of our treatment categories, face and body contouring, medical aesthetics and women’s health, we believe our products provide a differentiated solution that overcomes many of the limitations of other existing treatment options.
Face and Body Contouring Market
The most common face and body contouring treatments typically involve excess fat removal, or liposuction and the correction and reduction of skin laxity, or skin tightening. Within those treatment types, various surgical, minimally-invasive or non-invasive energy-based techniques exist, including:
•
Liposuction. The existing surgical and minimally-invasive techniques for fat reduction include surgical liposuction and laser lipolysis, while non-invasive techniques include cryolipolysis, ultrasound lipolysis and other energy-based systems. To date, surgical liposuction remains the most commonly performed plastic surgery procedure in the United States. According to ASAPS, 304,850 liposuction procedures were performed in the United States in 2017, compared to 180,833 non-surgical fat reduction procedures during the same period.
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•
Skin Tightening. The existing surgical techniques for the correction and reduction of skin laxity include facelifts, breast lifts, lower body lifts, arm lifts and tummy tucks, while minimally and non-invasive techniques include radio frequency, ultrasound and other energy-based systems. According to ASAPS, surgical techniques including breast lifts and tummy tucks were among the top five surgical procedures performed in the United States in 2017.
​
According to Medical Insight, Inc., the global market for all body shaping and skin tightening device platforms and consumables is expected to expand by 14% per year, reaching $2.3 billion in 2022.
Medical Aesthetic Market
Common medical aesthetic treatments include hair reduction, skin rejuvenation and resurfacing, and vascular and pigmented lesion removal. These treatments are predominantly performed in a minimally and non-invasive fashion, using intense pulses of a highly-focused laser or other optical energy to selectively target hair follicles, veins or collagen in the dermis, as well as cells responsible for pigmentation in the epidermis. The most common medical aesthetic treatments, in addition to face and body contouring, include:
•
Permanent Hair Reduction . Non-invasive hair reduction procedures utilizing laser, IPL or other optical energy.
​
•
Skin Rejuvenation. A range of non-invasive and ablative procedures that stimulate production of new collagen in the skin to repair wrinkles and other surface imperfections. Surgical treatments using ablative techniques have largely been supplanted by non-invasive and, particularly, fractional techniques.
​
•
Acne Reduction. Minimally and non-invasive procedures that target bacteria and cessation of oil production, primarily using light energy-based devices and fractional techniques.
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•
Vascular and Pigmented Lesion Removal. Non-invasive procedures typically performed using laser and IPL energy-based devices to penetrate below the surface of the skin in order to remove vascular and pigmented lesions. Energy-based treatments have displaced alternative surgical techniques, such as sclerotherapy, as they achieve comparable results in a non-invasive manner.
​
According to Medical Insight, Inc., the global market for platforms and consumables in the non-invasive medical aesthetic market is expected to expand by 6% per year, reaching $2.3 billion in 2022.
Women’s Health Market
As average life expectancy continues to increase and awareness of women’s wellness continues to grow, women are more frequently looking for solutions to address conditions such as vaginal atrophy and vaginal relaxation syndrome. With over 800 million women between the ages of 50 and 80 worldwide, women’s health represents a large and growing market. Several popular surgical, minimally-invasive or non-invasive energy-based techniques exist, including:
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•
Vaginoplasty. A surgical procedure that involves the removal of excess lining within the vagina, and the suturing of the underlying muscles together to reduce the size of the vagina.
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•
Vagina/Labial Remodeling. A minimally-invasive procedure that involves heating targeted connective tissue with thermal energy, while cooling the mucosal epithelial surface over the targeted tissue.
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•
CO 2 Laser Therapy. A non-invasive procedure that generates microscopic laser “spots” where thermal energy is absorbed by the sub-epithelial layers.
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•
Mono and Bipolar Radio Frequency. A precise, non-invasive procedure that provides full depth heating in the subdermal tissue layers.
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•
Ultrasound Therapy. A non-invasive procedure that involves sending thermal energy waves into the tissue.
​
According to Medical Insight, Inc., the global market for women’s health platforms and consumables is expected to expand by 16% per year, reaching $413 million in 2022.
Physician and Patient Market Opportunity
Aesthetic treatment procedures have traditionally been performed by plastic and facial surgeons, aesthetic surgeons, dermatologists and OB/GYNs. These physicians represent our traditional customer base. More recently, a broader group of physicians in the United States, including ENTs, ophthalmologists, general practitioners and aesthetic clinicians, have incorporated aesthetic treatment procedures into their practices. These non-traditional customers are motivated to offer aesthetic procedures in order to generate a reliable revenue stream that is unaffected by managed care and government payor reimbursement economics. We believe that there are approximately 300,000 potential non-traditional physician customers in the United States and Canada, representing a significant market opportunity that is only beginning to be addressed by suppliers of energy-based aesthetic equipment.
In addition to the existing group of patients who undergo full surgical aesthetic procedures, we have identified an unmet market demand for two new additional groups of patients, referred to as the “Treatment Gap” group and the “Sideline” group. We believe these potential patient populations represent a significant opportunity for our innovative and differentiated minimally-invasive aesthetic solutions.
The Treatment Gap group consists of patients, typically ranging from 35 to 55 years of age, who have sufficient financial resources to afford aesthetic solutions but are limited in the types of existing procedural options available to them prior to the introduction of our proprietary (i) RFAL, (ii) Deep Subdermal Fractional RF, (iii) Simultaneous Fat Destruction and Skin Tightening and (iv) Deep Heating Collagen Remodeling technologies. For example, for patients whose skin is not amenable to liposuction, such as those patients whose skin lacks an adequate degree of elastin, thereby preventing the skin from retracting, the only available alternatives to reduce skin looseness were high-cost surgeries requiring full anesthesia, such as an abdominoplasty, facelift, blepharoplasty or brachioplasty. In these procedures, the excess skin is gathered, cut and removed, typically leaving the patient with significant scars. In addition, there is a large population of patients whose skin is not of the quality needed for a liposuction procedure but also not damaged enough to be a candidate for a surgical procedure. We believe this Treatment Gap group represents a significant market opportunity for us.
In addition to the Treatment Gap group, we believe there is also a large group of potential patients that would entertain having surgery-like results if the procedure was delivered in a painless, safe and fast manner. We believe this Sideline group has the ability to expand our current market significantly.
Current Treatment Landscape
Many existing surgical, minimally and non-invasive procedures are available to treat the aforementioned conditions; however, each has certain limitations.
Surgical and Minimally-Invasive Procedures
Although each of these treatments has varying degrees of effectiveness, we believe they present the following limitations:
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Surgical risks . Surgical and minimally-invasive procedures carry risks of infection, local or widespread scarring, perforation, and hemorrhage. These procedures generally require a general or local anesthesia, which has additional risks.
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Pain and downtime . Surgical procedures may involve pain and require weeks of post-surgical recovery. As a result, patients may need to spend significant time away from work and take prescribed pain medications for extended periods of time post-surgery. In addition, body lifts may severely limit muscle movement in the treated area during recovery, which can limit a patient’s mobility for a significant period of time. Existing minimally-invasive procedures typically require a relatively large surgical incision, which can also cause pain and discomfort. Patients generally require at least two days of recovery time after a minimally-invasive procedure, which may require the patient to miss work and necessitate prescribed pain medications post-surgery.
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Potentially undesired results . Surgical procedures may cause non-uniform fat reduction, dimpling, lumpiness, numbness, scarring, discoloration or sagging skin in the treated area. Follow-up surgeries may be required to correct these problems. Existing minimally-invasive procedures can cause skin or tissue damage if, among other things, the physician does not carefully control the intensity of energy delivered to the treatment area.
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High cost . Surgical and existing minimally-invasive procedures are significantly more expensive for patients than non-invasive aesthetic procedures. In addition, there is an opportunity cost for physicians as these procedures require direct physician involvement and supervision.
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Limited repeatability . The process of removing or destroying fat cells with surgical or existing minimally-invasive procedures triggers the body’s wound healing response, which leads to the formation of scar tissue in the treated area. If a patient desires further fat reduction or is not satisfied with the aesthetic results from a procedure, the scar tissue in the treated area may prevent the patient from undergoing follow-up procedures to enhance or correct the original treatment results.
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Physician skill and technique dependent . The aesthetic results achieved through surgical and existing minimally-invasive procedures often depend upon a particular physician’s skill and training. In addition, these procedures require significant physician time.
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Non-Invasive Procedure Limitations
Although current non-invasive procedures are generally safer and less expensive than surgical and minimally-invasive procedures, we believe these procedures have the following limitations:
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Limited, inconsistent and unpredictable results . Existing non-invasive procedures have limited efficacy and produce inconsistent fat reduction and skin rejuvenation results. In addition, the technology used to perform these procedures is not capable of selectively targeting fat cells, blood cells, hair follicles and deeper-lying pigments, which can lead to unpredictable results, including damage to the surrounding tissue.
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Multiple treatments required . Existing non-invasive procedures based on radio frequency or laser energy often require multiple treatments over several weeks before the patient obtains noticeable aesthetic results, requiring the patient to schedule multiple, time-consuming office visits.
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Maintenance or diet and exercise required . Certain existing non-invasive procedures have only a temporary treatment effect, and thus require periodic maintenance treatments to sustain the desired aesthetic results. Additionally, some of these procedures require the patient to change his or her diet habits and exercise routines during the several-week treatment period.
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Technique dependent . Existing non-invasive procedures often require highly trained personnel to conduct the treatment. Poor technique may lead to reduced efficacy and inconsistent aesthetic results.
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Prior to the introduction of our products, we believed that the market was poised to accept new sophisticated technology that can address the shortcomings of the then-available solutions. We also believe that in selecting solutions, physicians are increasingly focusing on the economics of owning aesthetic
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treatment equipment, including the likelihood of increased revenues, as well as the predictability of ownership costs and are placing greater emphasis on product reliability, the quality of service provided by the manufacturer, minimization of downtime required for maintenance, the length of warranty coverage and the ongoing cost of purchasing consumables and handpieces following the initial platform purchase.
Our Solution
Key benefits of our minimally-invasive surgical aesthetic and medical treatment solutions include:
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Small to no incisions, which reduces the drawbacks and risks typically associated with surgical procedures such as significant pain, local or widespread scarring, infection, perforation and hemorrhage.
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Outpatient procedures that typically do not require general anesthesia, which can decrease patient downtime, discomfort and other potential complications and typically reduces cost.
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Minimally-invasive procedures with similar efficacy to surgical procedures that have the ability to expand the addressable patient population for aesthetics procedures.
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Effective and long-lasting aesthetic solutions, many of which are supported by compelling clinical data, including 44 peer-reviewed publications.
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Differentiated, RF energy-based technology simultaneously kills fat and tightens skin, overcoming the many shortcomings of traditional surgical, minimally and non-invasive aesthetic procedures.
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Innovative dual wavelength laser technology that allows for permanent hair reduction on a wider range of skin types and hair textures than other aesthetic solutions currently on the market, reducing the number of treatments required.
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Typically less expensive than other aesthetic solutions on the market that provide comparable results as a result of less required physician time and training required.
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Leader in RF Energy
We believe we are the leader in using RF energy for both minimally-invasive and subdermal ablative aesthetic purposes. RF energy is different from optical energy because it is not absorbed by the epidermis and is able to be targeted to penetrate deep into the tissue. The application of RF energy in medicine is a well established practice. For example, RF energy is the basis of magnetic resonance imaging, or MRI, and surgical diathermy, used to cauterize blood vessels to prevent excessive bleeding, both commonplace applications administered regularly in medical practice. RF energy is also used in cardiology for ablative interventions and in oncology surgery for tumor/metastasis ablation.
RF energy can be delivered to the skin in a variety of ways, the most common being monopolar delivery, whereby RF energy is delivered through a single probe placed on the skin with a grounding pad distant to the probe site. Alternatively, in bipolar delivery, RF energy is delivered from a probe with two electrodes placed over the treatment area. Bipolar delivery has an important advantage over monopolar delivery: depth of penetration of the RF energy is not dependent on the tissue impedance, or electrical resistance, which varies from person to person, or the cross-sectional area of the probe. That is not the case with monopolar delivery. Instead, in bipolar delivery, depth of penetration of the RF energy depends on the distance between the two electrodes on the probe, with increasing distance resulting in increased depth of penetration. We believe we are the leader in the development, design and commercialization of bipolar RF energy devices for minimally-invasive and subdermal ablative aesthetic purposes.
Radio-Frequency Assisted Lipolysis
Using our expertise in bipolar RF energy delivery, we developed what we believe is the next generation of lipolysis and adipose tissue remodeling technology, a new category that delivers a thermal response to the adipose tissue, skin and subdermal matrix. Our RFAL products deliver directional RF energy into the subcutaneous fat to coagulate, liquefy and remodel adipose tissue and heat the subcutaneous fibrous septa, or partitions, resulting in substantial collagen contraction of subdermal space. We believe we are the first company to utilize bipolar radio frequency in a minimally-invasive manner. Our RFAL products generate a
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higher power and more efficient energy transfer than laser energy systems and allow the treatment of larger volumes of the subcutaneous tissue with optimal thermal profiles, facilitating the significant tightening of the tissue. The shrinkage of tissue is significant and can reach double-digit percentages of the heated tissue volume. The thermal energy is delivered by an innovative handpiece comprised of two electrodes: the internal electrode is inserted into the fat layer while the other larger electrode is applied externally to the skin surface above the cannula tip. The internal cannula is passed through the subcutaneous fat while the external electrode is moved above and over the skin’s surface. The small, conductive tip of the cannula delivers RF energy into the subcutaneous fat, liquefying it and simultaneously contracting fibrous septa. The liquefied fat can then be removed from the body through a suction cannula. Our RFAL products also apply gentle uniform heating of the dermis, thereby promoting skin tightening. Figure 1 below shows how the RF energy is delivered through the handpiece to simultaneously liquefy fat and tighten the skin.
Our BodyTite platform and the BodyTite and FaceTite handpieces rely on our proprietary RFAL technology. To date, there have been more than 55,000 successful RFAL procedures conducted with positive clinical results using our BodyTite platform and the BodyTite and FaceTite handpieces. We have demonstrated that RFAL has the potential to elicit three-dimensional soft tissue contraction reliably and predictably to both serve otherwise non-traditional liposuction candidates, as well as to improve outcomes in patients for whom liposuction is an option.
[MISSING IMAGE: TV498959_IMG1.JPG]
Figure 1: RFAL mechanism of action.
Deep Subdermal Fractional RF
Our Deep Subdermal Fractional RF delivers RF energy into the subdermal fat tissue to depths of up to four millimeters, or mm. Deep Subdermal Fractional RF provides skin tightening and adipose tissue remodeling directly under the dermal layer. Our Deep Subdermal Fractional RF products deliver RF energy under the dermis through an array of pins producing localized heat and small micro-lesion dots in the treatment area. The heat generated by the pins in the subdermal tissue promotes collagen restructuring and tissue reshaping. Physicians can offer a versatile fractional treatment creating a three-dimensional matrix of coagulation volumes inside the tissue. Deep Subdermal Fractional RF is used for wrinkle reduction, skin tightening and treatment of cellulite appearance. The most common areas of treatment are the face and neck. Our Fractora and FractoraV handpieces rely on our proprietary Deep Subdermal Fractional RF technology and are used in conjunction with our BodyTite, Optimas and Votiva platforms. Figure 2 below shows how the RF energy is delivered through the coated pins on the handpiece to reshape tissue under the dermal layer.
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[MISSING IMAGE: TV498959_IMG3.JPG]
Figure 2: Deep Subdermal Fractional RF mechanism of action.
Simultaneous Fat Destruction and Skin Tightening
Our Simultaneous Fat Destruction and Skin Tightening proprietary technology combines vacuum and bipolar RF energy with high and low amplitudes to both permanently kill adipose tissue and contract the skin. We believe our Simultaneous Fat Destruction and Skin Tightening technology is the first and only RF-based, non-invasive body contouring technology that permanently kills adipose tissue. Our BodyFX product platform and MiniFX handpieces utilize our Simultaneous Fat Destruction and Skin Tightening technology to address problematic fatty tissue in larger body areas such as the abdomen, back and thighs.
Deep Heating Collagen Remodeling
Our Deep Heating Collagen Remodeling propriety technology delivers heat in a uniform and volumetric form targeting deep into tissue while providing collagen remodeling with real-time control of the device’s temperature. The versatility of this technology allows the operator to provide a customized solution to address a variety of women’s wellness concerns that occur due to aging, hormonal stress or physical damage. Our FormaV handpiece on our Votiva product platform utilizes Deep Heating Collagen Remodeling technology while harnessing continuous bipolar RF energy with real-time temperature measurement. RF energy generated heat is delivered uniformly to vaginal tissue through a consumable applicator to provide vaginal and labia contraction with patients often seeing effects of the procedure immediately.
Pulse/Continuous Bi-polar RF
Continuous Bi-polar RF is electrical energy in the RF spectrum (1 MHz) that results from the flow of an electric charge between two electrodes. This conducted energy increases ion movement in the tissue and generates kinetic energy that is transformed to thermal energy (heating). In turn, this thermal energy causes controlled damage to the tissue and triggers a natural healing mechanism and tissue-renewal resulting in tissue tightening and remodeling. The distance between the electrodes allows for control of the depth of penetration of the bi-polar RF energy into the tissue. The distance between the electrodes is chosen based on the particular treatment and according to the tissue to be treated (generally varies between a few millimeters to 3–4 centimeters). Bi-polar RF can be delivered to the tissue in one of two modes: either pulse or continuous. In pulse mode, pulse duration is pre-determined and RF energy automatically stops. In continuous mode, the RF energy is delivered uninterrupted into the tissue for as long as the operator deems appropriate. As part of the design, continuous bi-polar RF energy allows real-time measurement of the patient’s skin temperature. This allows our products to provide real-time feedback to the operator throughout the treatment process and enhances overall safety and efficiency. All of our RF platforms (both existing and expected) and RF handpieces (both minimally and non-invasive) have both pulse bi-polar RF
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and continuous bi-polar RF capabilities. Our proprietary RFAL based products (such as our BodyTite product platform and FaceTite handpiece) and Deep Heating Collagen Remodeling based products (such as our FormaV handpiece) primarily utilize the continuous bi-polar RF feature. Our proprietary Deep Subdermal Fractional RF based products (such as our Fractora handpiece) and Simultaneous Fat Destruction and Skin Tightening products (such as our BodyFX handpiece) primarily utilize the pulse feature depending on the procedure and target result. Figure 3 below shows how RF energy is delivered through the handpiece by an electric charge between two electrodes continuously into the tissue.
[MISSING IMAGE: TV516203_IMG-BIPOLAR.JPG]
Figure 3: Pulse/Continuous Bi-polar RF mechanism of action.
Non-invasive Medical Aesthetic Technologies
In addition to our proprietary minimally-invasive solutions, we continue to develop innovative non-invasive medical aesthetic solutions, including:
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Simultaneous non-invasive fat killing and skin tightening . We believe our technology is the first and only RF-based, non-invasive body contouring technology that permanently kills adipose tissue while simultaneously contracting the skin. This technology addresses problematic fatty tissue in large body areas such as the abdomen, back and thighs. Customers use this technology with the Contoura platform and the BodyFX and MiniFX handpieces.
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Dual wavelength for permanent hair reduction. Our single-pulse, dual wavelength product for permanent hair reduction, Triton , combines two wavelengths in one platform, overcoming certain limitations of standard lasers. This optimal mix of wavelengths allows the highest efficiency and safety. We believe Triton is the only FDA-cleared, single-pulse, dual wavelength product for permanent hair reduction. Customers use this technology with the Triton Duo Light and Triton Duo Dark handpieces.
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High-power Intense Pulsed Light . Our high-power IPL is a breakthrough technology that delivers up to three times more energy than typical IPL devices within the 500 to 600 nanometer, or nm, range to improve efficacy for vascular and pigmented lesions. It is optimized to treat a variety of skin types and conditions in a single session. Customers use this technology with the Optimas platform and the Lumecca handpiece.
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Controlled continuous RF heating . We believe our controlled continuous RF technology is the first auto-adjusting non-invasive thermal skin treating technology for deep and uniform tissue stimulation. This technology uses bipolar RF energy delivery that allows uniformity between the electrodes to provide a comfortable thermal effect with immediate and subsequent contraction. Customers use this technology with the Optimas , Votiva and Contoura platforms and the Forma , FormaV and Plus handpieces.
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Differentiated and Comprehensive Post-Sales Support
To complement our innovative aesthetic solutions, we offer post-sales training and support services. We provide physicians training focused on the most beneficial ways to utilize our products, including a disciplined focus on safety. Our clinical training and support program consists of three key components:
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A visit by a new physician to one of our many highly qualified plastic surgery facilities for instruction followed by a live patient demonstration;
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A visit to the new physician’s office by a trained registered nurse or physician’s assistant to attend the first day of treatments to in-service; and
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Open house workshops organized by us, wherein the new physician invites his or her patient base and we assist him or her in “kick starting” marketing efforts. These events typically secure significant procedural revenues for the physician.
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In addition, we offer ongoing livestream cases for customers where they can observe and interact in real-time with both our training staff and highly qualified physician instructors on a regular basis. Advanced training is also available for physicians who choose to expand their education on highly skilled procedures, including non-excisional breast lifting or brachioplasty. We are continuing to build a library of on-line instructional videos as both a reference tool and to expand physicians’ procedural offerings. We also provide support to help customers educate and engage patients about the new minimally-invasive procedures available to them through our InPractice program. This program provides hands-on, personalized marketing support for customers’ practices including signage, educational collateral, digital marketing and advertising assets. We believe that we provide one of the most extensive training and ongoing support programs available to physicians throughout the aesthetics industry.
Our Competitive Strengths
We attribute the growing commercial success of our various platforms and products to the following:
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Pioneer of the minimally-invasive aesthetic solutions market. We believe our proprietary technologies represent a paradigm shift in the minimally-invasive and surgical aesthetic solutions market. We believe our technologies and products demonstrate numerous performance advantages over other aesthetic options and enable physicians and patients to obtain results that can generally only be achieved with more expensive and invasive surgical procedures. Our RF proprietary energy-based technology simultaneous kills fat and tightens skin, overcoming many of the limitations of other surgical, minimally and non-invasive procedures, positioning us to address unmet patient needs and expand the addressable patient population for aesthetic solutions. Although each of our product platforms has a primary handpiece or applicator that is either minimally or non-invasive, our platforms are designed to be modular, which enables the user to provide complementary treatments using a single platform by attaching different handpieces or applicators.
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Strong brand recognition. Our brand is associated with product leadership, significant technological advances and extensive clinical data, which has led to strong customer loyalty. Unlike many of our competitors, our technology is not exclusively laser-based or limited to superficial treatment of the skin. Instead, we have developed and commercialized products utilizing medically-accepted RF energy technology, which can penetrate deep into the subdermal fat, allowing adipose tissue remodeling. We believe our brand is synonymous throughout the physician and patient communities with having the broadest RF energy-based portfolio in the minimally-invasive aesthetics market for fat destruction and remodeling, face and body contouring and skin tightening.
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Provide comprehensive solutions for physicians and patients. We have an extensive product portfolio that includes solutions for a wide range of both minimally and non-invasive procedures across the aesthetic solutions market. For each of our products, we offer post-sales support services including training, installation, practice growth consulting and repair support that minimizes product downtime and associated lost revenues to physicians.
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Broad regulatory approvals supported by extensive clinical data. We have 18 FDA clearances and in addition to the United States, are permitted to sell in Europe, Argentina, Australia, Brazil, Canada, China, Colombia, the Commonwealth of Independent States, Israel, Mexico, Panama, Philippines, Russia, South Korea, Taiwan and Thailand. To date, we also have a portfolio of 44 peer-reviewed publications and there are 36 completed and 18 ongoing third-party clinical studies on a number of our products ( BodyTite, FaceTite, NeckTite, Optimas, Fractora, Forma, Lumecca, DiolazeXL, Votiva, FractoraV, FormaV, Contoura, BodyFX, MiniFX, Evolve, Morpheus8 and AccuTite ). While we did not have any involvement in the clinical studies mentioned above, such studies provide qualitative results that we believe are significant. However, because these were third-party studies, we do not have access to any raw data to conduct any quantitative analyses. We believe our focus on demonstrated clinical data and effectiveness differentiates us from our competition and helps to validate our technology with surgically-trained physicians, who we believe are typically the most difficult segment of the market to penetrate.
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Strong management team with proven track record. Our management team has significant expertise in the medical aesthetics industry with a proven track record of successfully developing and commercializing innovative technologies. Moshe Mizrahy and Dr. Michael Kreindel, our co-founders, previously founded Syneron Medical Ltd. Our senior executive team has an average of over 15 years of medical aesthetics industry experience and has served in various leadership positions at Syneron Medical Ltd. and Cynosure, Inc.
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Our Growth Strategy
Our objective is to expand our technological leadership in the aesthetic solutions market and to leverage our RF proprietary technologies to expand into the medical solutions market. We intend to achieve this goal by implementing the following strategies:
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Increase our sales presence to target and expand our addressable market globally. We plan to expand our direct sales organization and our distribution network and seek to recruit and train exceptionally talented sales representatives in existing and new markets to help us broaden the adoption of our products, drive further market penetration and expand beyond our traditional customer base.
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United States and Canada: We plan to expand our direct sales team by approximately 15 representatives by the end of 2019.
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Europe : We intend to establish sales and marketing organizations and a network of exclusive European distributors (in addition to our existing networks in the United Kingdom and Spain).
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Latin America : We plan to expand our network of exclusive distributors in Argentina, Brazil, Colombia, Mexico and Panama.
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Asia-Pacific : In addition to our direct sales presence in India, we intend to establish a direct sales presence in China through our joint venture in Guangzhou, as well as expand our network of exclusive distributors in Australia, Japan, Philippines, South Korea, Taiwan and Thailand.
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Continue to further penetrate our existing customer base and drive recurring revenues. We believe that there are opportunities for us to generate additional revenue from existing customers who are already familiar with our products. Since our inception, approximately 30% of our North American customers have purchased a second platform to expand their treatment offerings. Additionally, we have experienced growth in the sales of consumables over the past three years. Since inception, we have sold over 257,000 consumables. We expect that as our customer base
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grows, the percentage of our revenues attributable to consumables will increase. We also expect that certain customers will be candidates for technology upgrades to enhance the capabilities of their existing InMode products. In addition, as we continue to grow our support services program, we expect to seek to increase the number of customers that enter into service contracts and extended warranties, which would provide us with additional recurring revenues.
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Leverage our existing technology to expand into new minimally and non-invasive applications. We have an active research and development pipeline focused on additional solutions targeted to our traditional customer base. Our near-term product development portfolio consists of new and second generation solutions for various conditions, including wearable, non-invasive face and body reshaping products, cellulite, large area lipolysis, fractional RF treatment of severe vaginal laxity pelvic floor muscle restoration, labiaplasty procedures, post-partum treatments, snoring treatments, dry eye and eyelid treatments. We expect to launch three new product platforms by the end of 2019, which we believe will allow us to continue to grow our revenues over the long term and further penetrate the market for aesthetic solutions. Each such product is or will be subject to the FDA regulatory framework, specifically, the FDA’s 510(k) clearance requirements, described in this prospectus.
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Expand our customer base beyond traditional customers. We intend to develop products that leverage our minimally and non-invasive technologies to address the unmet market needs of a non-traditional customer base, which includes ENTs, ophthalmologists, general practitioners and aesthetic clinicians. We intend to adapt our products to the expertise and skill level of these providers, further expanding our addressable market.
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Actively pursue business development opportunities. We may seek to engage in targeted business development activities, including acquisitions and strategic partnerships, in order to augment our product and technology portfolio in our existing and potentially adjacent markets. We believe we can leverage our global infrastructure and existing relationships to implement a disciplined tuck-in acquisition strategy.
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Expand our intellectual property and patent portfolio. We intend to expand our existing intellectual property and patent portfolio as we develop additional applications and continue to aggressively defend against potential infringement by our competitors.
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Our Products
We offer a broad portfolio of aesthetic treatment solutions that consist of a variety of minimally and non-invasive aesthetic medical products. The following table provides information concerning our products and their applications.
Product
Platform 		​ ​
Energy
Source(s)
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Year
Introduced
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Handpiece(s)
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Primary (not Exclusive) Applications *
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BodyTite
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Bipolar RF
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2010
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BodyTite
FaceTite
NeckTite
AccuTite
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Body Contouring (MI)
Face Contouring (MI)
Neck Contouring (MI)
Face/Body Contouring (MI)
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Optimas
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Laser
Bipolar RF
IPL
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2016
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Fractora
Forma
Lumecca
DiolazeXL
Vasculaze
Morpheus8
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Skin Rejuvenation (MI)
Skin Rejuvenation (NI)
Skin Rejuvenation & Pigmentation (NI)
Hair Removal (NI)
Vascular Lesion (NI)
Facial Wrinkles and Texture (MI)
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Votiva
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Bipolar RF
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2017
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FractoraV
FormaV
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Women’s Health (MI)
Woman’s Health (NI)
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Product
Platform 		​ ​
Energy
Source(s)
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Year
Introduced
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Handpiece(s)
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Primary (not Exclusive) Applications *
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Contoura
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Bipolar RF
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2017
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BodyFX
MiniFX
Plus
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Body Contouring (NI)
Face/Neck Contouring (NI)
Skin Tightening (NI)
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Triton
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Laser
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2018
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Triton Duo Light
Triton Duo Dark
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Hair Removal (NI)
Hair Removal (NI)
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EmbraceRF
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Bipolar RF
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2018
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FaceTite
Morpheus8
AccuTite
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Face Remodeling (MI)
Facial Wrinkles and Texture (MI)
Face/Body Contouring (MI)
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*
“MI” = Minimally-Invasive and “NI” = Non-Invasive
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In addition to the products described above, prior versions of our products continue to be used by customers. Outside of the United States, we also offer some alternative versions of our aesthetic treatment solutions, in some cases under different trademarks, which are tailored to the specific preferences and needs of certain countries and regions.
Components of Our Products
Each of our products consists of the following components:
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platform;
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one or more handpieces; and
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our proprietary software.
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Platforms
Our platforms are mostly electronic boxes, comprised of RF energy generators and modules supporting lasers and IPL, as applicable, a 110/220VAC input power supply, controller and a user interface with touch screen. The user interface allows the physician to select the handpiece and set treatment parameters to meet the requirements of a particular application and patient. Using the touch screen, the physician can independently adjust the energy level, pulse width and other parameters depending on application to optimize the treatment’s safety and effectiveness. The user interface on our multiple energy workstations also allows the user to change energy sources with the press of a button. The control system communicates the operator’s settings from the user interface to the system’s modules and manages system operation and performance.
Handpieces
Our handpieces are used to apply the energy to the patient treatment area. The handpieces are designed for specific targeted body areas, type of energy to maximize treatment safety and efficacy for specific treatment. Certain of our handpieces have a contained thermal field that ensures a controlled and safe treatment through our Acquire, Control and Extend, or ACE, technology. Our ACE technology ensures that no areas are under or over treated using therapeutic temperatures safely and efficiently. Built-in safeguards, including real time measurements of skin temperature, impedance monitoring, power cut-off and audible feedback, help ensure patient safety throughout the procedure. A number of our handpieces are, or contain, one-time use applicators, or consumables, that must be replaced following each treatment.
Minimally-Invasive
BodyTite —  The minimally-invasive, consumable BodyTite handpiece, introduced in 2010, utilizes directional RF energy for RFAL treatments using needle-size cannula and external electrodes to apply RF energy to the subcutaneous adipose tissue. The tissue is heated to 50°C to 70°C to destroy fat and contract connective tissue, simultaneously remodeling the dermis at external temperatures of up to 42°C. This handpiece allows tissue treatment using a 17cm cannula that provides treatment depth up to 50mm.
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FaceTite/NeckTite —  The minimally-invasive, consumable FaceTite and NeckTite handpieces, introduced in 2012, utilize directional RF energy for RFAL treatments using cannula with diameters of 1.8mm and 2.2mm and external electrodes to apply RF energy to the subcutaneous adipose tissue. The tissue is heated to 50°C to 70°C to destroy fat and contract connective tissue, simultaneously remodeling the dermis at external temperatures up to 42°C. This handpiece allows tissue treatment using a 10cm cannula that provides treatment depth up to 25mm.
AccuTite —  The minimally-invasive AccuTite handpiece, introduced in April 2019, utilizes directional RF energy for RFAL treatments using sub-millimeter cannula with diameters of 0.9mm and external electrodes to apply RF energy to subcutaneous adipose tissue. The tissue is heated to 50°C to 70°C to destroy fat and contract connective tissue, simultaneously remodeling the dermis at external temperatures of up to 42°C. This handpiece allows tissue treatment using a 60mm cannula that provides treatment depth up to 25mm. Additionally, in May 2019, we began marketing AccuTite for Aviva , a minimally-invasive procedure that restores the function and appearance of the vulva by offering a non-excisional alternative to a labiaplasty. Aviva is powered by AccuTite to deliver safe and uniform heat to the entire soft tissue matrix of the labia minora, labia majora, clitoral hood, vaginal introitus and perineal body.
Fractora/FractoraV  — The minimally-invasive Fractora handpiece, introduced in 2011, uses customizable fractional energy and superficial fractional resurfacing for subdermal adipose tissue remodeling. The handpiece offers two treatment depths (skin surface and subdermal) and is safe on all skin types including type IV. The consumable applicator tip contains 24-coated pins with a length of up to 4mm.
Morpheus8  — The minimally-invasive Morpheus8 handpiece, introduced in 2018, uses RF energy for subdermal adipose tissue remodeling, which is programmable by the user according to treatment area. The handpiece offers treatment depth up to 4mm. The upper part of the needle and external electrodes are coated with a polymer to prevent skin surface thermal damage while delivering RF energy into the subdermal space.
Non-Invasive
BodyFX/MiniFX  — The non-invasive BodyFX and MiniFX handpieces, introduced in 2013, combine vacuum and bipolar RF energy with high and low amplitudes to both permanently kill adipose tissue and contract the skin. The BodyFX handpiece, intended for use on various parts of the body, comprises a vacuum cavity with a depth of 0.5in and a size of 2in x 1in. The MiniFX handpiece, better suited to address problematic fatty tissue in smaller areas, uses a chamber size of approximately 1in x 1in.
DiolazeXL (810nm) —  The non-invasive DiolazeXL (810nm) handpiece, introduced in 2017, is a high-speed, gold standard 810nm (diode) laser indicated for permanent hair reduction. DiolazeXL ’s differentiated triple contact cooling technology (pre, parallel and post), or 3PC technology, provides for a safe and comfortable patient experience. The handpiece covers a spot size of 12mm x 26mm to allow for the removal of a variety of hair colors and thickness. This handpiece offers short and long pulse durations and repetition rates that enable treatment times up to 6cm 2 /second.
Triton Duo Light (755nm & 810nm) —  The non-invasive Triton Duo Light handpiece, introduced in 2017, combines two wavelengths for optimal treatment of light skin patients. The handpiece utilizes a blend of 755nm (Alexandrite) and 810nm (diode) laser wavelengths that have been optimized for hair removal on patients with skin types I to IV. We believe the Triton platform is the only FDA-cleared device capable of firing two wavelengths in one pulse. The handpiece covers a spot size of 12mm x 26mm and provides two pulse durations and high repetition rates.
Triton Duo Dark (810nm & 1064nm) —  The non-invasive Triton Duo Dark handpiece, introduced in 2017, combines two wavelengths for optimal treatment of dark skin patients. The handpiece utilizes a blend of 810nm (diode) and 1064nm (Nd:YAG) laser wavelengths that have been optimized for hair removal on patients with skin types I to IV. We believe the Triton platform is the only FDA-cleared device capable of firing two wavelengths in one pulse. The handpiece covers a spot size of 12mm x 26mm and provides two pulse durations and high repetition rates.
Forma  — The non-invasive Forma handpiece, introduced in 2013, uses our ACE technology to deliver auto-adjusting uniform RF energy-generated heat (up to 43°C) for collagen remodeling and skin contraction of the face and neck. We believe Forma is the first thermal face and neck skin tightening device
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to have both temperature monitoring and automatic, user programmable, RF on/off control. This handpiece has an RF energy output power of up to 65 watts and covers a spot size of 22mm x 20mm.
FormaV  — The non-invasive FormaV handpiece, introduced in 2017, uses our ACE technology to deliver auto-adjusting uniform RF energy generated heat (up to 43°C) to vaginal tissue through a consumable applicator.
Plus  — The non-invasive Plus handpiece, introduced in 2013, uses our ACE technology to deliver auto-adjusting uniform RF generated heat (up to 43°C) for collagen remodeling and skin contraction of the body. We believe Plus is the first thermal body skin tightening device to have both temperature monitoring and automatic, user programmable, RF on/off control. This handpiece has an RF energy output of up to 65 watts and covers a spot size of 45mm x 45mm.
Lumecca  — The non-invasive Lumecca handpiece, introduced in 2015, is an IPL optimized for both light and dark skin that uses a xenon flash lamp to deliver filtered optical energy in the 515nm to 1200nm range for light skin treatment and 580nm to 1200nm range for darker skin. Lumecca is intended for treatment of superficial vascular and pigmented lesions. The handpiece covers a spot size of 30mm x 10mm with a peak optical power of 10,000 watts.
Vasculaze  — The non-invasive Vasculaze handpiece, introduced in 2018, is a 1064nm wavelength diode laser intended for use in the coagulation and hemostasis of benign vascular legions such as, but not limited to, reticular leg veins, spider veins, hemangiomas, port wine stains and venus lakes. Vasculaze is optimized with high peak power, strong contact cooling and an ergonomic head intended to maximize treatment efficiency. The handpiece covers a spot size of 3mm x 4mm and has pulse duration of 20 to 100 milliseconds, or msec.
Proprietary Software
Our software permits the user to define treatment parameters to be communicated to the electronic modules in the platform and deliver RF or optical energy through the handpiece to the patient. In addition, our software controls and manages proper system performance and automatic temperature control, system self-calibration, system setup and detection of any malfunction of the system. We believe our software’s automative capabilities allow physicians to dedicate their attention and focus to patient treatment rather than system monitoring. Our users upgrade their products through the purchase of additional treatment applicators and corresponding software plugs. All of our software complies with applicable medical specifications and regulations.
Applications and Procedures
Our products provide our customers with a broad range of applications among both traditional procedures and emerging applications.
Face and Body Contouring
Minimally-Invasive
Generally performed by a physician, RFAL delivers directional RF energy into a patient’s subcutaneous fat to coagulate and liquefy adipose tissue and heat the subcutaneous fibrous septa, resulting in substantial collagen contraction of the subdermal space. RF energy is delivered through an innovative handpiece comprised of two electrodes. The internal electrode is inserted into the fat layer, while the other larger electrode is applied externally to the skin surface above the cannula tip. The internal cannula passes through the subcutaneous fat, while the external electrode slides over the skin’s surface. The small conductive tip of the cannula concentrates RF energy in the subcutaneous fat, liquefying it and simultaneously contracting the fiber septa. This liquefied fat can then be removed from the body. Our RFAL technology can be administered on all regions of the body and typical treatments are approximately 30 to 90 minutes each under local anesthesia. We received 510(k) FDA clearance for our RFAL technology in 2016. Users conduct minimally-invasive face and body contouring using RFAL technology with the BodyTite platform and BodyTite , FaceTite and AccuTite handpieces.
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Generally performed by a physician, Deep Subdermal Fractional RF, delivers RF energy into the subcutaneous adipose tissue to depths of up to 4mm through an array of coated needles producing localized heat and matrix of small lesions in the subcutaneous fat. The heat generated by the pins in the subdermal tissue promotes connective tissue restructuring. As a result, physicians can offer a versatile fractional treatment creating a three-dimensional collagen contraction and subdermal fat coagulation. The deep fractional remodeling is used when fat layer is not thick enough to use RFAL technology or when patient wants only superficial result. Deep Subdermal Fractional RF can be used for wrinkle reduction, skin tightening and treatment of cellulite appearance. In addition to reshaping, Deep Subdermal Fractional RF provides long term results for inflammatory acne by coagulating enlarged sebaceous glands. The most common areas of treatment are the face and neck. Patients generally receive between one to three treatments for approximately 30 minutes each. Treatments are typically spaced two to three weeks apart. We received two 510(k) FDA clearances for Fractora in 2011 and 2016. Customers use this technology with the BodyTite and Optimas platforms using the Fractora handpiece.
Non-Invasive
Administered by physicians and other aesthetic practitioners, our differentiated fat reduction solution is based on skin shaping using a vacuum and delivering both low amplitude bipolar RF energy for gentle deep tissue heating and high amplitude RF energy to simultaneously kill fat and tighten skin. The handpiece is placed over the desired area of the body and vacuum energy shapes the skin into the cavity for safe and effective RF energy delivery allowing greater volumes of fat to be treated (up to 2.5cm in depth). Subsequently, temperature-controlled RF energy is applied to preheat the tissue and fat uniformly to 42°C to 43°C. High amplitude RF energy delivered in ultra-short pulse duration is then administered via electrodes causing apoptosis of adipose tissue and resulting in simultaneous skin contraction. Our technology can be administered on all regions of the body. Patients generally receive six treatments for approximately 10 to 20 minutes each. Treatments are typically spaced one to two weeks apart. We received 510(k) FDA clearance for this technology in 2013. Users conduct non-invasive face and body contouring with the Contoura platform using the BodyFX or MiniFX handpieces.
Medical Aesthetics
Skin Rejuvenation/Vascular & Pigmented Lesion Treatment
Generally performed by a physician or other aesthetic professional, different types of energy and treatments are provided depending on the handpiece. The application of IPL energy enables the improvement of photodamage, as well as other pigmented abnormalities and superficial vascular lesions. A 1064nm laser is used for the treatment of larger and deeper veins. Patients often see results after a single treatment but typically two to three treatments of approximately 15 minutes each are recommended. Treatments are typically spaced two to four weeks apart. We received 510(k) FDA clearance for superficial vascular and pigmented lesion treatments in 2013 and for hair removal and permanent hair reduction in 2017 and 2018, respectively. Users rejuvenate the skin with the Optimas platform using the Vasculaze and Lumecca handpieces.
Sub-Necrotic Thermal Tissue Remodeling
Administered by physicians and other aesthetic practitioners, the application is based on uniform and deep heating of the skin and subdermal layer using bipolar RF energy. The handpiece is moved over the desired area of the treatment area, while maintaining the designated temperature for the predetermined time for safe and effective collagen remodeling. Subsequently, temperature-controlled RF energy is applied automatically to heat tissue uniformly to 42°C to 43°C. The Forma handpiece is utilized to target fat and heats the tissue to depths of up to 4.5mm while the Plus handpiece is used for larger body areas and provides effect up to 6mm in depth. Patients generally receive six treatments for approximately 10 to 20 minutes each. Treatments are typically spaced one to two weeks apart. We received three 510(k) FDA clearances for this technology in 2014, 2016 and 2017. Users conduct facial treatment with the Optimas platform using the Forma handpiece and body contouring with the Contoura platform using the Plus handpiece.
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Permanent Hair Reduction
Administered by a user, who is not necessarily a physician, our differentiated dual wavelength technology incorporated in the Triton platform fires two wavelengths in a single pulse destroying the hair follicles located in the dermis and subdermal layers. This procedure is continued over the target area and can last from a few minutes to 90 minutes depending on the size of the treatment area. In general, permanent hair reduction requires four to six treatments spaced four to eight weeks apart. More sessions may be required for stubborn hairs. Due to our unique dual wavelength technology, our Triton platform allows practitioners to address all skin types and tones. We received 510(k) FDA clearance for our Optimas and dual wavelength Triton platforms for permanent hair reduction treatments in 2016 and 2018, respectively. Users perform permanent hair reduction procedures with our Optimas and Triton platforms using the DiolazeXL and Triton Duo Light and Triton Duo Dark handpieces, respectively.
Women’s Health
Performed by a physician, the administration of energy addresses women’s wellness. Depending on the handpiece, the administration of bipolar RF energy or subdermal heating is applied to gently warm and massage the internal vaginal tissue ( FormaV ), the external vaginal tissue ( FractoraV ), or to deliver uniform heat to the entire soft tissue matrix of the labia minora, labia majora, clitoral hood, vaginal introiotus and perineal body ( Aviva procedure administered by the AccuTite handpiece). Depending on the treatment type, patients typically receive between two to three treatments of approximately 15 minutes each. Treatments are typically spaced two to three weeks apart. We received 510(k) FDA clearance for FormaV for certain indications in 2017. In July 2018 we received a letter from the FDA seeking information as to the regulatory basis for marketing of our FormaV and FractoraV devices based on our promotion and labeling of these devices for use in certain women’s health conditions and procedures. We timely responded to the FDA by immediately altering the wording of our promotional and labeling materials, and we submitted a response letter in August 2018 answering the FDA’s questions and advising the agency that we had modified our promotional and labeling materials to remove certain statements regarding uses of our products for conditions and procedures that were questioned by the FDA in the agency’s informational request letter. The FDA responded in September 2018 by stating that the agency had reviewed our response letter and verified the changes in terminology made to our website. Moreover, the FDA further responded in November 2018 and confirmed we addressed all items raised by the agency in its letter, and that the FDA continues to expect us to conduct a review of our marketing and promotional materials to make appropriate changes and remove materials containing uncleared claims. We have received no further communications from the agency regarding this matter.
Sales and Marketing
Our primary strategy to increase market penetration relies on selling directly to our traditional customer base of plastic and facial surgeons, aesthetic surgeons, dermatologists and OB/GYNs. We believe we are the only company commercializing minimally-invasive aesthetic solutions specifically targeting the surgical community and believe our products represent a significant opportunity for these practitioners to deliver improved patient treatment results and significantly increase their ability to generate additional revenue. We are also targeting a newer aesthetic market opportunity consisting of ENTs, ophthalmologists, general practitioners and aesthetic clinicians as an incremental growth opportunity.
We target potential customers through office visits, trade shows, professional journals and various forms of paid and unpaid media. We also conduct clinical workshops featuring recognized expert panelists and key opinion leaders to promote existing and new treatment techniques using our products. We believe that these workshops enhance customer loyalty and provide us with new sales opportunities. We plan to continue to offer a large number of workshops spanning from single-day workshops to three-day workshops. We also use direct mail programs to target specific segments of the market that we seek to access, such as members of medical societies and attendees at meetings sponsored by medical societies or associations. In addition, we maintain an active public relations program that has resulted in treatments based on our products being featured in various televised and printed media outlets including InStyle, Shape, The Doctors and Harper’s Bazaar .
We currently sell and market our products in the United States, Canada, the United Kingdom, Spain and India, through a direct sales force of approximately 96 representatives. We also sell and market our
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products through 37 distributors in 44 countries. Our U.S. and Canadian sales efforts are headquartered in Lake Forest, California and Toronto, Canada, respectively. To support the continued roll-out of our products and further penetrate the market, we anticipate that our direct salesforce in the United States and Canada will continue to increase.
In international markets, to complement our direct sales force in the United Kingdom, Spain and India, we sell our products through a network of distributors. As of June 30, 2019, we had an international sales management team of six employees supporting 37 independent distributors. The percentage of our revenues from customers located outside of the United States and Canada for the three months ended March 31, 2019 and 2018 was 12% and 11%, respectively. The percentage of our revenues from customers located outside the United States and Canada for the years ended December 31, 2018 and 2017 was approximately 11% and 17%, respectively. We intend to increase penetration of our customer base in international markets and expand into attractive new international markets, including within the United Kingdom, Spain and India, by identifying and training qualified distributors. In addition, we may opportunistically hire a direct sales force and expand our marketing campaigns in select international markets. We require our distributors to provide customer training, to invest in equipment and marketing and to attend certain exhibitions and industry meetings.
Service and Support
We support our customers with a range of services, including installation and product training, business and practice development consulting and product service and maintenance. In connection with the direct sales of our products, we arrange for the installation of the system and initial product training. In the United States, our dedicated sales representatives install our systems and our clinical support staff provides customer training. Outside of the United States, our trained third-party distributors install our systems and provide training. The cost of installation and initial training are all included in the purchase price of our systems.
We service our products in three service centers: (1) the U.S. market is serviced through our facility in Lake Forest, California, (2) the Canadian market is serviced through our facility in Toronto, Canada, and (3) the rest of the world is serviced through our distributors and our facility in Yokneam, Israel. In the event of a technical malfunction, our customers first contact us (if in the United States or Canada) or our distributors (if outside of the United States or Canada) telephonically. If a product requires service or repair that cannot be addressed telephonically, we or our distributors ship a temporary “loaner” system to the customer as soon as possible, often overnight. This unique “loaner” system reduces any product downtime and associated lost revenues for the physician. We then arrange for shipment of the defective product to one of our service centers in the United States or Canada. Outside the United States or Canada, the product is sent to our distributors or our facility in Israel. Either we or our distributors quickly repair the faulty product and ship it back to the customer. We have designed our products in a light-weight, modular fashion to enable quick and efficient service and support. Specifically, we build our platforms to be less than 35 kilograms in weight to ensure acceptance by traditional, commercial third-party logistics providers for next-day delivery of replacement products without requiring specialized shipping procedures. We believe our depot service and support model provides for more efficient and less costly operations.
Our standard warranty term is 12 months, however, many of our products are sold with multi-year warranties. Our standard warranty covers parts, labor, participation in our loaner program and a white glove, door-to-door, shipping service for expedited repair service, and can be extended for an additional charge. We believe that we have a significant opportunity to increase our recurring customer revenue by increasing the number of our customers that enter into service contracts and extended warranties for our systems. All of our distributors have a service department and are required by us to maintain a full inventory of spare parts. All service staff is trained by our service department in Israel.
Manufacturing and Supply
We rely primarily on outsourced manufacturing to produce our devices while maintaining control over the production process. Outsourcing allows us to carry low inventory levels and maintain fixed unit costs without incurring significant capital expenditures. We outsource almost all of the manufacturing of our products to four subcontractors located in Israel, two of which we are substantially dependent on as part of
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our business. Through our strategic arrangement with Flextronics (Israel) Ltd., or Flex, we maintain dedicated manufacturing lines supervised by us in Flex’s medical grade manufacturing facility in Migdal Haemek, Israel. Within the Flex facility, all proprietary manufacturing, testing and assembly equipment has been built and is owned by us. We also use three separate manufacturers in addition to Flex to produce our products.
We believe our outsourced manufacturers’ processes comply with all applicable United States and international quality and safety standards, such as ISO 13485:2016, CE and the FDA quality system regulations. We conduct in-house prototype development and present detailed manufacturing documents to our subcontractors, who then purchase most of the necessary components and manufacture the product. These manufacturing subcontractors provide us fully assembled, or “turn-key,” services. We control and monitor the quality of our products by having one of our quality control employees at each of our subcontractor’s facilities.
The contracts we have with manufacturing subcontractors do not have minimum purchase requirements and allow us to purchase end products entered into on a purchase order basis. Under these contracts, our manufacturing subcontractors provide manufacturing services pursuant to our written specifications. These manufacturing services include labor, materials, testing, packaging and delivery, as well as allocating production and storage space within their facilities for our products. Pricing under these contracts are reviewed between us and the manufacturing subcontractors every three months. The contracts have one-year terms that automatically renew for successive one-year terms unless either we or the manufacturing subcontractor provide three months written notice prior to the expiration of the term. To date, we have not experienced any significant manufacturing delays. The contracts can be terminated by either party, without cause, with four months prior written notice.
We manufacture all laser and IPL handpieces in our facility in Yokneam, Israel and procure other major components of our products on behalf of our third-party manufacturers from a limited number of suppliers. We have flexibility to adjust the number of lasers and other components that we either manufacture or procure as well as the delivery schedules. The forecasts that we use are based on historical demands and expected future plans. Lead times may vary significantly depending on the size of the order, time required to fabricate and test the components, specific supplier requirements and current market demand for the components. We intend to reduce any potential for delays of supply by maintaining relationships with multiple suppliers of major components. To date, we have not experienced significant delays in obtaining our major components.
Research and Development
Our research and development activities are conducted internally by a team of ten research and development staff based in Israel. Our research and development efforts are focused on the development of new products, as well as on the extension of our existing products to introduce new applications in the minimally and non-invasive and medical aesthetic markets. We expect to concentrate our research and development efforts in the coming years on developing procedures and platforms based on our proprietary technologies: (i) RFAL, (ii) Deep Subdermal Fractional RF (iii) Simultaneous Fat Destruction and Skin Tightening and (iv) Deep Heating Collagen Remodeling, and developing new technologies. We have a number of new projects and products under development, mainly focusing on additional minimally and non-invasive aesthetic and medical treatments.
Our research and development expenditures for the three months ended March 31, 2019 and 2018 were approximately $1.2 million and $0.9 million, respectively. Our research and development expenditures for the years ended December 31, 2018 and 2017 were approximately $4.2 million and $2.6 million, respectively. We expect to continue to increase our expenditures on research and development.
Intellectual Property
We rely on a combination of patent and trademark laws to protect our intellectual property rights.
Patents and Patent Applications
As of June 30, 2019, we own four issued U.S. patents and one issued Korean patent. As of June 30, 2019, we have filed nine patent applications that are pending in the United States Patent and Trademark
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Office. Our issued U.S. patents are projected to expire between 2027 and 2038. These patents and patent applications cover the technologies described herein, and contribute to the protection of our rights to our proprietary technology. Our patents relate to radio frequency (RF) based technology that may be used for minimally invasive aesthetic solutions, such as fat destruction, and fractional skin ablation relating to skin tightening and fat destruction, among others, and cover our existing products. Without these patents, we cannot guarantee that we can prevent others from manufacturing similar products that are covered by our patent rights. We also rely on our issued patents to make, use, sell, and distribute our products. The term of the patents depends on the legal term for patents in the countries in which they are granted. In most countries, including the United States, the patent term is generally 20 years from the earliest claimed filing date of a non-provisional patent application in the applicable country. We also rely upon trademarks in various jurisdictions covering the InMode brand and our product lines, as well as upon U.S. copyright law for protection of the software programs associated with our products.
We cannot assure you that patents will issue from any of our pending applications or that, if patents issue, they will be of sufficient scope or strength to provide meaningful protection for our technology. Our policy is to obtain patents and to seek to operate without infringing on the intellectual property rights of third parties. Loss or invalidation of our patents, or a finding of unenforceability or limitation of scope of our patents, could have a material adverse effect on us. The patent position of many inventions in the areas related to our business is highly uncertain, involves many complex legal, factual and technical issues and has recently been the subject of litigation industry-wide. There is no certainty in predicting the breadth of allowable patent claims or the degree of protection afforded under any issued patents.
Notwithstanding the scope of the patent protection available to us, a competitor could develop treatment methods or devices that are not covered by our patents. Furthermore, numerous U.S. and foreign issued patents and patent applications owned by third parties exist in the fields in which we are developing products. Because patent applications can take many years to issue, there may be applications unknown to us, which applications may later result in issued patents that our existing or future products or proprietary technologies may be alleged to infringe. Third parties may also obtain patents that we may need to license from them in order to conduct our business.
It is possible that patents issued to us will be successfully challenged or that patents issued to others may preclude us from commercializing our products under development. Litigation to establish or challenge the validity of patents, to defend against infringement, unenforceability or invalidity claims or to assert infringement, invalidity or unenforceability claims against others, if required, can be lengthy and expensive, and may result in determinations materially adverse to us. We cannot assure you that the products currently marketed or under development by us will not be found to infringe patents issued or licensed to others.
Patent Litigation
We may receive allegations from third parties contending that we are infringing their patents. If such third parties were to commence infringement suits against us, and such third-party patents were found by a court to be valid, enforceable and infringed upon by us, then we could be required to pay damages and/or make royalty payments, and we could also be enjoined from continuing the infringing activity. Depending on the nature of the patent found to be infringed upon by us, a court order requiring us to cease such infringement could have a material adverse effect on us. We might be unable to design-around such patents or continue offering the products or services found to be infringing, or we could suffer other adverse consequences.
In January 2016, Syneron filed a claim with the United States District Court for the Central District of California against our U.S. and Israeli subsidiaries alleging that certain of our products infringed four U.S. patents owned by Syneron. In September 2018, the court granted summary judgment and ruled in our favor on all claims asserted against us related to the intellectual property in dispute. In April 2018, Syneron and Candela Corporation, or Syneron-Candela, filed claims with the International Trade Commission and with Massachusetts General Hospital, or MGH, in the United States District Court for the District of Massachusetts against our U.S. and Israeli subsidiaries, alleging that our fractional RF products infringed two U.S. patents owned by Syneron-Candela and MGH that purport to cover systems and methods for treating skin and arranging electrodes on skin therapy devices. In January 2019, we entered into a settlement agreement with Syneron-Candela and MGH that resolved all patent claims previously in dispute
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in exchange for a one-time cash payment that we made to Syneron-Candela and MGH in February 2019. As part of such settlement agreement, we entered into a sublicense agreement with Syneron-Candela and MGH that granted us and our affiliates a fully paid non-exclusive, royalty-free worldwide sublicense to practice the patents and applications previously in dispute in the licensed field. The sublicense shall continue until the expiration of the last surviving patent or application granted pursuant to the sublicense agreement.
Although we may try to resolve any potential future claims or actions, we may not be able to do so on reasonable terms, if at all. Infringement and other intellectual property claims, with or without merit, can be expensive and time-consuming to litigate, and could divert management’s attention from our core business. If we lose this kind of litigation, a court could require us to pay substantial damages and could prohibit us from using technologies essential to our products, either of which would have a material adverse effect on our business, results of operations and financial condition. See “Risk Factors — Risks Related to Our Intellectual Property — If we are unable to protect our intellectual property rights, our competitive position could be harmed. Our success and ability to compete depends in large part upon our ability to protect our proprietary technology.”
Copyrights, Trademarks and Trade Secrets
The software programs associated with our products are protected by U.S. copyright law.
We also filed for protection available under trademark law. As of June 30, 2019, we own 23 registered trademarks in various jurisdictions outside the United States, including for the marks “InMode” and “RFAL” and certain key product names, in particular, BodyFX , BodyTite , Diolaze , Fractora and Lumecca . We also have 8 pending foreign trademark applications. We also have 14 trademark applications in the United States pending for BodyTite , Contoura by InMode , FaceTite , InMode , Optimas by InMode , Triton by InMode , Votiva by InMode , Triton by InMode , AccuTite, Morpheus, Evolve and Evoke.
We also rely upon know-how and continuing technological innovation, and may pursue licensing opportunities in the future, to develop and maintain our competitive position. We seek to protect our proprietary rights through a variety of methods, including confidentiality agreements and proprietary information agreements with suppliers, employees, consultants and others who may have access to proprietary information, under which they are bound to assign to us inventions made during the term of their employment or term of service.
All professional employees and technical consultants are required to execute confidentiality agreements in connection with their employment and consulting relationships with us. We also require them to agree to disclose and assign to us all inventions conceived in connection with their services to us. However, there can be no assurance that these confidentiality agreements will be enforceable or that they will provide us with adequate protection.
Competition
Our industry is subject to intense competition, subject to rapid change and highly sensitive to the introduction of new products or other market activities of industry participants. We compete against products offered by public companies, including Allergan plc, Cutera Inc., Hologic Inc. and Viveve Medical, Inc., as well as by private companies, such as Sisram Medical Ltd., Syneron and Lumenis Ltd. In the past few years, several large pharmaceutical and medical device companies have also entered the aesthetic device market, including Valeant Pharmaceuticals International Inc. and Merz Pharma Group. Our products compete against conventional medical products, including Botox, hyaluronic acid injections and collagen injections, and aesthetic procedures, such as face lifts, liposuction, sclerotherapy, electrolysis, chemical peels and microdermabrasion, that are unrelated to laser, light and RF-based technologies. Our products also compete against laser and other light and radio frequency-based products.
Competition among providers of laser and other light and radio frequency-based products for the aesthetic medical market is characterized by extensive research efforts and rapid technological progress. While we attempt to protect our products through patents and other intellectual property rights, there are few barriers to entry that would prevent new entrants or existing competitors from developing products that would compete directly with ours. There are many companies, both public and private, that are developing
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innovative devices that use laser and other energy-based and alternative technologies. Many of these competitors have significantly greater financial and human resources than we do and have established reputations, greater brand name recognition, broader product lines, and larger customer bases, as well as worldwide distribution channels that are more effective than ours. Additional competitors may enter the market, and we are likely to compete with new companies in the future. Any business combinations or mergers among our competitors that result in larger competitors with greater resources or distribution networks, or the acquisition of a competitor by a major medical or technology corporation seeking to enter this business, could further result in increased competition.
To compete effectively, we have to demonstrate that our products are attractive alternatives to other devices and treatments by differentiating our products on the basis of performance, brand name, reputation and price. We have encountered and expect to continue to encounter potential customers who, due to existing relationships with our competitors, are committed to, or prefer the products offered by, these competitors. We expect that competitive pressures may over time result in price reductions and reduced margins for our products.
Other medical companies, academic and research institutions, or others, may develop new technologies or therapies, including medical devices, surgical procedures or pharmacological treatments and obtain regulatory approval for products utilizing such techniques that are more effective in treating the conditions that we target or are less expensive than our current or future products. Our technologies and products could be rendered obsolete by such developments.
Government Regulation
Our products and operations are subject to extensive and rigorous regulation by the relevant governmental authorities in the countries where we market and sell or products. These include the FDA, which enforces, among others, the Food, Drug and Cosmetic Act, or FDCA, as well as other similar laws and regulatory bodies worldwide. The Federal Trade Commission, or FTC, also regulates the advertising of our products in the United States. Further, we are subject to laws directed at preventing fraud and abuse, which subject our sales and marketing, training and other practices to government scrutiny.
In some jurisdictions, such as the United States, Canada, South Korea and Israel, we must complete an application process with the relevant regulator, which includes submitting the results of clinical trials for their review. In other jurisdictions, such as the European Union and certain countries in Asia, we are required to self-certify that our devices meet the applicable standards (which may include the completion of satisfactory clinical trials) but without the requirement of a formal application with, or review of clinical trials by, the relevant regulatory body.
In addition to the requirements regarding product clearance, many countries also impose product standards, packaging requirements, environmental requirements, labeling requirements and import and export restrictions on our devices. Each country also has its own tariff regulations, duties and tax requirements. Failure to comply with applicable regulatory requirements may result in fines, suspension or withdrawal of regulatory approvals, product recalls, seizure of products, operating restrictions, criminal prosecution, or other consequences.
In the United States, the FDCA and its implementing regulations govern the following activities that we perform and will continue to perform to help ensure that medical products distributed within the United States are safe and effective for their intended uses:
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premarket clearance or approval;
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product sales and distribution;
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import, export and shipping;
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establishment registration and device listing; and
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recalls, field safety corrective actions and post-market surveillance.
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Each of our currently marketed products has received 510(k) clearance for the uses for which they are being marketed.
FDA’s Premarket Clearance and Approval Requirements
Unless an exemption applies, each medical devise we wish to commercially distribute in the United States requires 510(k) clearance or premarket approval. The FDA classifies medical devices into one of three classes — Class I, Class II or Class III — depending on the degree of risk associated with each medical device and the extent of manufacturer and regulatory control needed to ensure safety and effectiveness. Class I includes devices with the lowest risk to the patient and are those for which safety and effectiveness can be assured by adherence to the FDA’s General Controls for medical devices, which include compliance with the applicable portions of the QSR, facility registration and product listing, reporting of adverse medical events, and truthful and non-misleading labeling, advertising, and promotional materials. Class II devices are subject to the FDA’s General Controls, and special controls as deemed necessary by the FDA to ensure the safety and effectiveness of the device. These special controls can include performance standards, post-market surveillance, patient registries and FDA guidance documents. While most Class I devices are exempt from the 510(k) premarket notification requirement, manufacturers of most Class II devices are required to submit to the FDA a premarket notification under Section 510(k) of the FDCA requesting permission to commercially distribute the device. The FDA’s permission to commercially distribute a device subject to a 510(k) premarket notification is generally known as 510(k) clearance. All of our current products are Class II devices subject to the 510(k) clearance requirements.
Devices deemed by the FDA to pose the greatest risks, such as life-sustaining, life-supporting or some implantable devices, or devices that have a new intended use, or use advanced technology that is not substantially equivalent to that of a legally marketed device, are placed in Class III, requiring approval of a premarket approval application, or PMA. Some pre-amendment devices are unclassified, but are subject to the FDA’s premarket notification and clearance process in order to be commercially distributed.
510(k) Clearance Pathway
When a 510(k) clearance is required, we must submit a premarket notification demonstrating that our proposed device is “substantially equivalent,” as defined in the statute, to a previously cleared 510(k) device or a device that was in commercial distribution in the United States before May 28, 1976, the date upon which the Medical Device Amendments of 1976 were enacted, for which the FDA has not yet called for the submission of premarket approval applications.
After a 510(k) premarket notification is submitted, the FDA determines whether to accept it for substantive review. If it lacks necessary information for substantive review, the FDA will refuse to accept the 510(k) notification. If it is accepted for filing, the FDA begins a substantive review. By statute, the FDA is required to complete its review of a 510(k) notification within 90 days of receiving the 510(k) notification. As a practical matter, if the FDA requires additional information, clearance often takes far longer, and clearance is never assured. Although most 510(k) premarket notifications are cleared without clinical data, the FDA may require further information, including clinical data, to make a determination regarding substantial equivalence, which may significantly prolong the review process. If the FDA agrees that the device is substantially equivalent, it will grant clearance to commercially market the device.
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If the FDA determines that the device is not “substantially equivalent” to a predicate device, or if the device is automatically classified into Class III, the device sponsor must then fulfill the much more rigorous premarketing requirements of the PMA approval process, or seek reclassification of the device through the de novo process. A manufacturer can also submit a petition for direct de novo review if the manufacturer is unable to identify an appropriate predicate device and the new device or new use of the device presents a moderate or low risk.
After a device receives 510(k) clearance, any modification that could significantly affect its safety or effectiveness, or that would constitute a new or major change in its intended use, will require a new 510(k) clearance or, depending on the modification, could require a PMA application or de novo classification. The FDA requires each manufacturer to determine whether the proposed change requires submission of a 510(k) or a PMA in the first instance, but the FDA can review any such decision and disagree with a manufacturer’s determination. Many minor modifications are accomplished by a letter-to-file in which the manufacture documents the change in an internal letter-to-file. The letter-to-file is in lieu of submitting a new 510(k) to obtain clearance for such change. The FDA can always review these letters to file in an inspection. If the FDA disagrees with a manufacturer’s determination regarding whether a new premarket submission is required for the modification of an existing device, the FDA can require the manufacturer to cease marketing and/or recall the modified device until 510(k) clearance or approval of a PMA is obtained. In addition, in these circumstances, the FDA can impose significant regulatory fines or penalties for failure to submit the requisite PMA(s).
Laser devices used for aesthetic procedures, such as hair removal, have generally qualified for clearance under 510(k) procedures.
The table below presents the specific FDA 510(k) clearances, dates and summary of cleared indications for our BodyTite , Optimas , Votiva , Contoura , Triton and EmbraceRF platforms.
Product Platform
​ ​
Energy Source
​ ​
Handpiece
​ ​
FDA 510(k) Clearance and Cleared Indications
​
BodyTite
​ ​
Radiofrequency
(RF)
​ ​
BodyTite 40W
​ ​
K171593 (10/10/2017)
The BodyTite product platform with the BodyTite 40W handpiece is indicated for use in dermatological and general surgical procedures for electrocoagulation and hemostasis.
​
​
BodyTite 20W
​ ​ K163190 (12/12/2016)
The BodyTite product platform with the BodyTite 20W handpiece is indicated for use in dermatological and general surgical procedures for electrocoagulation and hemostasis. 		​
​ ​ ​ ​ ​ ​
FaceTite
​ ​ K151793 (02/19/2016)
The BodyTite product platform with the FaceTite handpiece is indicated for use in dermatological and general surgical procedures for electrocoagulation and hemostasis. 		​
​ ​ ​ ​ ​ ​
Fractora
with 60 Pin Tip
​ ​ K102461 (06/02/2011)
The BodyTite product platform with the Fractora with a 60 pin tip handpiece is indicated for use in dermatological procedures requiring ablation and resurfacing of the skin. 		​
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Product Platform
​ ​
Energy Source
​ ​
Handpiece
​ ​
FDA 510(k) Clearance and Cleared Indications
​
​ ​ ​ ​ ​ ​
Fractora
with 24 Pin Tip
​ ​ K151273 (01/04/2016)
The BodyTite product platform with the Fractora with a 24 pin tip handpiece is indicated for use in dermatologic and general surgical procedures for electrocoagulation and hemostasis. 		​
​ ​ ​ ​ ​ ​
Morpheus8
​ ​ K180189 (06/01/2018)
The BodyTite product platform with the Morpheus8 handpiece is indicated for use in dermatological and general surgical procedures for electrocoagulation and homeostasis. 		​
​ ​ ​ ​ ​ ​
AccuTite
​ ​ K182325 (08/27/2018)
The BodyTite product platform with the AccuTite handpiece is indicated for use in dermatological and general surgical procedures for electrocoagulation and hemostasis. 		​
Optimas
​ ​
RF
​ ​
Fractora
with 60 Pin Tip
​ ​
K102461 (06/02/2011)
The Optimas product platform with the Fractora with a 60 pin tip handpiece is indicated for use in dermatological procedures requiring ablation and resurfacing of the skin.
​
​
Fractora
with 24 Pin Tip
​ ​ K151273 (01/04/2016)
The Optimas product platform with the Fractora with a 24 pin tip handpiece is indicated for use in dermatologic and general surgical procedures for electrocoagulation and hemostasis. 		​
​ RF ​ ​
Forma
​ ​ K172302 (12/08/2017)
The Optimas product platform with the Forma handpiece is indicated for the temporary relief of minor muscle aches and pain, temporary relief of muscle spasm, and temporary improvement of local blood circulation. 		​
​ ​ ​ Intense Pulsed
Light (IPL) 		​ ​
Lumecca 515
Lumecca 580
​ ​
K123860 (04/02/2013)
The Optimas product platform with the Lumecca 515 and Lumecca 580 handpieces are indicated for:
•
the treatment of benign pigmented epidermal lesions, including dyschrornia, hyperpigmentation, melasma, ephelides (freckles); and
​
​
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Product Platform
​ ​
Energy Source
​ ​
Handpiece
​ ​
FDA 510(k) Clearance and Cleared Indications
​
​ ​ ​ ​ ​ ​ ​ ​ ​
•
the treatment of benign cutaneous vascular lesions, including port wine stains, facial truncal and leg telangiectasias, rosacea, erythema of rosacea, angiomas and spider angiomas, poikilodenna of civatte, superficial leg veins and venous malformations.
​
​
​ ​ ​ Laser ​ ​
DiolazeXL
​ ​ K170738 (08/07/2017)
The Optimas product platform with the DiolazeXL handpiece is indicated for hair removal and permanent hair reduction. 		​
​ ​ ​ Laser ​ ​
Vasculaze
​ ​ K173677 (02/23/2018)
The Optimas product platform with the Vasculaze handpiece is indicated for the treatment of vascular lesions, including angiomas, hemangiomas, telangiectasia, port wine stains, leg veins and other benign vascular lesions. 		​
Votiva
​ ​
RF
​ ​
FractoraV
​ ​
K151273 (01/04/2016)
The Votiva product platform with the FractoraV handpiece is indicated for the use in dermatologic and general surgical procedures for electrocoagulation and hemostasis.
​
​
FormaV
​ ​ K153568 (07/12/2016)*
The Votiva product platform with the FormaV handpiece is indicated for the temporary relief of minor muscle aches and pain, temporary relief of muscle spasm, and temporary improvement of local blood circulation. 		​
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Product Platform
​ ​
Energy Source
​ ​
Handpiece
​ ​
FDA 510(k) Clearance and Cleared Indications
​
Contoura
​ ​ RF ​ ​
BodyFX
​ ​
K131362 (10/08/2013)
The Contoura product platform with the BodyFX handpiece is indicated for the treatment of:
•
relief of minor muscle aches and pains, muscle spasms, temporary improvement of blood circulation; and
​
•
temporary reduction in the appearance of cellulite.
​
​
​ ​ ​ ​ ​ ​
MiniFX
​ ​
K160329 (08/19/2016)
The Contoura product platform with the MiniFX handpiece is indicated for the treatment of:
•
relief of minor muscle aches and pain, muscle spasms, temporary improvement of local blood circulation; and
​
•
temporary reduction in the appearance of cellulite.
​
​
​ ​ ​ ​ ​ ​
Plus
​ ​ K172302 (12/08/2017)
The Contoura product platform with the Plus handpiece is indicated for the temporary relief of minor muscle aches and pain, temporary relief of muscle spasms, and temporary improvement of local blood circulation. 		​
Triton
​ ​
Laser
​ ​
Triton Duo
Light
​ ​
K180719 (06/14/2018)
The Triton product platform with the Triton Duo Light and Triton Duo Dark handpieces are indicated for hair removal and permanent hair reduction.
​
​ Triton Duo
Dark 		​
EmbraceRF
​ ​
RF
​ ​
FaceTite
​ ​
K151793 (02/19/2016)
The EmbraceRF product platform with the FaceTite handpiece is indicated for use in dermatological and general surgical procedures for electrocoagulation and hemostasis.
​
​
Morpheus8
​ ​ K180189 (06/01/2018)
The EmbraceRF product platform with the Morpheus8 handpiece is indicated for the use in dermatological and general surgical procedures for electrocoagulation and homeostasis. 		​
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Product Platform
​ ​
Energy Source
​ ​
Handpiece
​ ​
FDA 510(k) Clearance and Cleared Indications
​
​ ​ ​ ​ ​ ​
AccuTite
​ ​ K182325 (08/27/2018)
The EmbraceRF product platform with the AccuTite handpiece is indicated for the use in dermatological and general surgical procedures for electrocoagulation and homeostasis. 		​
​
*
In addition to the 510(k) clearance, we also market the FormaV for use with the Votiva platform pursuant to a classification regulation for “genital vibrators for therapeutic use” under 21 C.F.R. 884.5960, which permits “electronically operated devices intended and labeled for therapeutic use in the treatment of sexual dysfunction or as an adjunct to Kegel’s exercise (tightening of the muscles of the pelvic floor to increase muscle tone)” to be marketed without a 510(k) clearance.
​
Premarket Approval Pathway
A PMA must be submitted to the FDA if the device cannot be cleared through the 510(k) process. A PMA must be supported by extensive data, including, but not limited to, technical, preclinical, clinical trials, manufacturing and labeling, to demonstrate the safety and effectiveness of the device to the FDA’s satisfaction.
No device that we have developed has required premarket approval, nor do we currently expect that any future device or indication will require premarket approval.
Pervasive and Continuing Regulation
After the FDA permits a device to enter commercial distribution, numerous regulatory requirements apply. These include:
•
quality system regulations, or QSR, which require manufacturers, including third-party manufacturers, to follow stringent design, testing, control, documentation and other quality assurance procedures during all aspects of the manufacturing process;
​
•
clearance or approval of product modifications to 510(k)-cleared or PMA-approved devices that could affect safety or effectiveness;
​
•
labeling regulations and FDA prohibitions against the promotion of products for uncleared, unapproved or “off-label” uses;
​
•
advertising and promotion requirements;
​
•
medical device reporting regulations, which require that manufacturers report to the FDA if their devices may have caused or contributed to deaths or serious injuries or malfunctioned in ways that would likely cause or contribute to deaths or serious injuries if the malfunctions were to recur;
​
•
medical device correction and removal reporting regulations, which require the manufacturers to report to the FDA corrections and removals if undertaken to reduce a risk to health posed by the device or to remedy a violation of the FDCA that may present a risk to health; and
​
•
post-market surveillance regulations, which apply when necessary to protect the public health or to provide additional safety and effectiveness data for the devices.
​
We may be subject to similar foreign laws that may include applicable post-marketing requirements such as safety surveillance. Our manufacturing processes are required to comply with the applicable portions of the QSR, which cover the methods and the facilities and controls for the design, manufacture, testing, production, processes, controls, quality assurance, labeling, packaging, distribution, installation and servicing of finished devices intended for human use. The QSR also requires, among other things, maintenance of a device master file, device history file, and complaint files. As a manufacturer, our facilities, records and manufacturing processes are subject to periodic scheduled or unscheduled inspections by the FDA. Our failure to maintain compliance with the QSR or other applicable regulatory requirements
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could result in the shut-down of, or restrictions on, our manufacturing operations and the recall or seizure of our products. The discovery of previously unknown problems with any of our products, including unanticipated adverse events or adverse events of increasing severity or frequency, whether resulting from the use of the device within the scope of its clearance or off-label by a physician in the practice of medicine, could result in restrictions on the device, including the removal of the product from the market or voluntary or mandatory device recalls.
The FDA has broad post-market and regulatory enforcement powers. We are subject to unannounced inspections by the FDA to determine our compliance with the QSR and other regulations, and these inspections may include the facilities of our manufacturing subcontractors.
We also are regulated under the Radiation Control for Health and Safety Act, which requires laser products to comply with performance standards, including design and operation requirements, and manufacturers to certify in product labeling and in reports to the FDA that their products comply with all such standards. The law also requires laser manufacturers to file new product and annual reports, maintain manufacturing, testing and sales records, and report product defects. Various warning labels must be affixed and certain protective devices installed, depending on the class of the product.
Failure to comply with applicable regulatory requirements can result in enforcement action by the FDA, which may include any of the following sanctions:
•
warning or untitled letters, fines, injunctions, consent decrees and civil penalties;
​
•
unanticipated expenditures, repair, replacement, refunds, recalls, administrative detention or seizure of products;
​
•
operating restrictions, partial suspension or total shutdown of production;
​
•
refusing requests for 510(k) clearance or PMAs of new products or new intended uses;
​
•
withdrawing 510(k) clearance or PMAs that have already been granted; and
​
•
criminal prosecution.
​
The FDA also has the authority to require us to repair, replace or refund the cost of any medical device that we have manufactured or distributed. If any of these events were to occur, they could have a material adverse effect on our business.
We are also subject to a wide range of federal, state and local laws and regulations, including those related to the environment, health and safety, land use, and quality assurance. We believe that we are in compliance with these laws and regulations as currently in effect, and our compliance with such laws will not have a material adverse effect on our capital expenditures, earnings, and competitive and financial position.
Other Healthcare Laws
Although none of our products or procedures using our products are currently covered by any state or federal government healthcare programs, or any private commercial payor, we may be subject to a number of foreign, federal, and state laws and regulations that may restrict our business practices, including, without limitation, anti-kickback, false claims, physician payment transparency and data privacy and security laws. The government has interpreted these laws broadly as they apply to the marketing and sales activities of manufacturers and distributors. Companies targeted in such prosecutions and in civil litigation have paid substantial fines, penalties, and settlements in the hundreds of millions of dollars or more, have been forced to implement extensive corrective action plans, can be excluded from federal health care programs, and have often become subject to consent decrees, settlement agreements or corporate integrity agreements severely restricting the manner in which they conduct their business. Many U.S. states and countries outside the United States have similar fraud and abuse statutes or regulations that may be broader in scope than the U.S. federal laws, and may apply regardless of payor, in addition to items and services reimbursed under government programs.
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International Regulations
International manufacturing and sales of medical devices are subject to foreign governmental regulations, which vary substantially from country to country. The time required to obtain clearance or approval by a foreign country may be longer or shorter than that required for FDA clearance or approval, and the requirements may be different.
The primary regulatory environment in Europe is that of the European Union, which consists of 28 countries encompassing most of the major countries in Europe. The European Union has adopted numerous directives, and European Standardization Committees have promulgated voluntary standards regulating the design, manufacture, clinical trials, labeling and adverse event reporting for medical devices. Devices that comply with the essential requirements of the EU Medical Devices Directive (Directive 93/42/EEC) will be entitled to bear CE conformity marking, indicating that the device conforms with the essential requirements of the EU Medical Devices Directive and, accordingly, can be commercially distributed throughout the member states of the European Union, the member states of the European Free Trade Association and countries that have entered into a Mutual Recognition Agreement. The method of assessing conformity varies depending on the type and class of the product but normally involves a combination of self-assessment by the manufacturer and a third-party assessment by a Notified Body, an independent and neutral institution appointed by a country to conduct the conformity assessment. This third-party assessment may consist of an audit of the manufacturer’s quality system and specific testing of the manufacturer’s device. An assessment by a Notified Body in one member state of the European Union, the European Free Trade Association or one country that has entered into a Mutual Recognition Agreement is required in order for a manufacturer to commercially distribute the product throughout these countries. ISO 9001 and ISO 13845 certification are voluntary harmonized standards. Compliance establishes the presumption of conformity with the essential requirements for a CE Marking.
As a general rule, demonstration of conformity of medical devices and their manufacturers with the essential requirements must be based, among other things, on the evaluation of clinical data supporting the safety and performance of the products during normal conditions of use. Specifically, a manufacturer must demonstrate that the device achieves its intended performance during normal conditions of use, that the known and foreseeable risks, and any adverse events, are minimized and acceptable when weighed against the benefits of its intended performance, and that any claims made about the performance and safety of the device are supported by suitable evidence. All manufacturers placing medical devices into the market in the EEA must comply with the EU Medical Device Vigilance System. Under this system, incidents must be reported to the relevant authorities of the Member States of the EEA, and manufacturers are required to take Field Safety Corrective Actions, or FSCAs, to reduce a risk of death or serious deterioration in the state of health associated with the use of a medical device that is already placed on the market. An incident is defined as any malfunction or deterioration in the characteristics and/or performance of a device, as well as any inadequacy in the labeling or the instructions for use which, directly or indirectly, might lead to or might have led to the death of a patient or user or of other persons or to a serious deterioration in their state of health. An FSCA may include the recall, modification, exchange, destruction or retrofitting of the device. FSCAs must be communicated by the manufacturer or its legal representative to its customers and/or to the end users of the device through Field Safety Notices.
On April 5, 2017, the European Parliament passed the Medical Devices Regulation, which repeals and replaces the EU Medical Devices Directive. Unlike directives, which must be implemented into the national laws of the EEA member states, the regulations would be directly applicable ( i.e. , without the need for adoption of EEA member state laws implementing them) in all EEA member states and are intended to eliminate current differences in the regulation of medical devices among EEA member states. The Medical Devices Regulation, among other things, is intended to establish a uniform, transparent, predictable and sustainable regulatory framework across the EEA for medical devices and in vitro diagnostic devices and ensure a high level of safety and health while supporting innovation.
The Medical Devices Regulation will however only become applicable three years after publication. Once applicable, the new regulations will among other things:
•
strengthen the rules on placing devices on the market and reinforce surveillance once they are available;
​
​
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•
establish explicit provisions on manufacturers’ responsibilities for the follow-up of the quality, performance and safety of devices placed on the market;
​
•
improve the traceability of medical devices throughout the supply chain to the end-user or patient through a unique identification number;
​
•
set up a central database to provide patients, healthcare professionals and the public with comprehensive information on products available in the European Union; and
​
•
strengthened rules for the assessment of certain high-risk devices, such as implants, which may have to undergo an additional check by experts before they are placed on the market.
​
These modifications may have an impact on the way we design and manufacture products and the way we conduct our business in the EEA.
Several member states of the European Free Trade Association have voluntarily adopted laws and regulations that mirror those of the European Union with respect to medical devices. Other countries, such as Switzerland, have entered into Mutual Recognition Agreements and allow the marketing of medical devices that meet European Union requirements.
In Israel, the Israeli Medical Equipment Law, 2012, or the Medical Equipment Law, generally governs the regulatory process and authorizations required for the manufacture, marketing and use of medical and certain aesthetic products in Israel. Under the Medical Equipment Law, we are required to register our products with the Israeli Ministry of Health. The Medical Equipment Law offers a fast-track approval process for devices that received approval from certain non-Israeli regulatory agencies, including FDA clearance or CE marks. The registration process under this fast-track process involves submitting an application to the Israeli Ministry of Health which includes, among other things, documentation confirming receipt of the necessary regulatory approvals, such as 510(k) clearance or CE mark certification. In addition, we must provide details regarding the approval, including the period for which the applicable device was authorized for marketing in the applicable country, registration terms, any limitations, and any instructions given with respect to the labeling and packaging of such device. If approved, the registration of the device in Israel will be valid for the same period that such device was authorized to be marketed in the applicable non-Israeli country (but in any event not more than five years from the date of registration in Israel), and the device will be subject to the terms and conditions imposed by the relevant non-Israeli regulatory agency, if any. We have taken advantage of such fast-track approval in the past. All of our products that we currently sell in Israel are registered with the Israeli Ministry of Health, with registrations expiring between April 30, 2019 and February 28, 2020. We intend to apply for extensions as required to maintain active registrations.
Federal Communications Commission and other governmental agencies governing the use of radio frequency energy
Our products generate and use radio frequency energy and therefore may be subject to technical equipment authorization and other regulatory requirements in the countries and regions where they are marketed or distributed. In the United States, our products are subject to the Federal Communications Commission’s equipment verification procedures, under which the manufacturer is required to determine or verify that the equipment complies with the applicable technical standards and to keep a record of test measurements demonstrating compliance before the equipment can be marketed or sold in the United States. Any modifications to our products may require reverification before we are permitted to market and distribute the modified devices.
We obtain regulatory approvals in countries requiring advance clearance of our products before they are marketed or distributed in those countries. Our failure to comply with the technical, equipment authorization or other regulatory requirements of a specific country or region could impair our ability to commercially market and distribute our products in that country or region.
Data Protection
Our business involves the use, storage and transmission of information about our employees, our customers and, to a certain extent, clients of our customers. In the course of our operations, we may gain access to confidential customer information, including nonpublic personal data. We are bound by certain
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agreements to use and disclose this information in a manner consistent with the privacy standards under regulations applicable to our customers and are subject to numerous U.S. and foreign jurisdiction laws and regulations designed to protect this information. With the recent increase in publicity regarding data breaches resulting in improper dissemination of consumer information, many states have passed laws regulating the actions that a business must take if it experiences a data breach, such as prompt disclosure to affected customers, governmental entities, and the media. In addition to data breach notification laws, some states have enacted statutes and rules requiring businesses to protect certain types of personal information they hold or to otherwise comply with certain specified data security requirements for personal information. We intend to protect all personal information and to comply with all applicable laws regarding the protection of such information.
In the European Union, the GDPR imposes several stringent requirements for controllers and processors of personal data, including, for example, higher standards for obtaining consent from individuals to process their personal data, more robust disclosures to individuals and a strengthened individual data rights regime, shortened timelines for data breach notifications, limitations on retention and secondary use of information, increased requirements pertaining to health data and pseudonymised ( i.e. , key-coded) data and additional obligations when we contract third-party processors in connection with the processing of the personal data. The GDPR provides that EU member states may make their own further laws and regulations limiting the processing of genetic, biometric or health data, which could limit our ability to use and share personal data or could cause our costs could increase, and harm our business and financial condition. Failure to comply with the requirements of GDPR and the applicable national data protection laws of the EU member states may result in fines of up to €20,000,000 or up to 4% of the total worldwide annual turnover of the preceding financial year, whichever is higher, and other administrative penalties. To comply with the new data protection rules imposed by GDPR, we may be required to put in place additional mechanisms ensuring compliance.
European data protection law also imposes strict rules on the transfer of personal data out of the European Union, including to the United States. These obligations may be interpreted and applied in a manner that is inconsistent from one jurisdiction to another and may conflict with other requirements or our practices. In addition, these rules are constantly under scrutiny. We rely on a mixture of mechanisms to transfer personal data from the European Union to the United States, and could be impacted by changes in law as a result of a future review of these transfer mechanisms by European regulators under the GDPR, as well as current challenges to these mechanisms in the European courts.
Employees
As of June 30, 2019, we had 209 employees worldwide, across five departments, including five employees on the executive team, seven employees in finance and administration, 147 employees in sales and marketing, 15 employees in research and development and 35 employees in manufacturing and assembly and supply chain. As of June 30, 2019, 138 of our employees are located in the United States and Canada, 50 are located in Israel and the remainder are located in Europe, Asia and Latin America. We believe our employee relations are good. As of December 31, 2018 and 2017, we had 189 and 125 employees worldwide, respectively, including five employees on the executive team for both years ended, six and four employees in finance and administration, respectively, 135 and 84 employees in sales and marketing, respectively, 15 and nine employees in research and development, respectively, and 28 and 23 employees in manufacturing and assembly and supply chain, respectively.
Israeli labor laws govern the length of the workday, minimum wages for employees, procedures for hiring and dismissing employees, determination of severance pay, annual leave, sick days, advance notice of termination of employment, equal opportunity and antidiscrimination laws, and other conditions of employment. Subject to certain exceptions, Israeli law generally requires severance pay upon the retirement, death or dismissal of employees and requires us and our employees to make payments to the National Insurance Institute, which is similar to the U.S. Social Security Administration. Our Israeli employees have pension plans that comply with applicable Israeli legal requirements.
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None of our Israeli employees work under any collective bargaining agreements. Extension orders issued by the Israeli Ministry of Economy and Industry apply to us and affect such matters as length of working hours and week, recuperation pay, travel expenses, and pension rights with respect to our Israeli employees.
All of our employment and consulting agreements include employees’ and consultants’ undertakings with respect to confidentiality, noncompetition and assignment to us of intellectual property rights developed in the course of their employment or engagement with us. However, there can be no assurance that these agreements will be enforceable or that they will provide us with adequate protection.
Facilities
We lease our main office, manufacturing and research and development facilities, located in the Industrial Zone in Yokneam, Israel, pursuant to a lease that expires in December 2021. In January 2019, we signed a supplemental lease agreement, expanding our headquarters in Israel by 4,478 square feet. We lease approximately 14,768 square feet in the Israeli facility. Our current monthly rent payment is approximately $25,706.
Our U.S. subsidiary leases a 7,344-square foot facility in Lake Forest, California pursuant to a lease that expires in August 2022 in consideration for a current monthly rent payment of  $9,547.
Our Canadian subsidiary leases a 5,973-square foot facility in Richmond Hill, Ontario pursuant to a lease that expires in June 2022 in consideration for a current monthly rent payment of approximately $5,142.
We believe our current office space is sufficient to meet our anticipated needs for the foreseeable future and is suitable for the conduct of our business.
Litigation
In January 2016, Syneron filed a claim with the United States District Court in the Central District of California against our U.S. and Israeli subsidiaries, alleging that certain of our products infringed four U.S. patents owned by Syneron that purport to cover systems and methods for treating skin and arranging electrodes on skin therapy devices. In September 2018, the court granted summary judgment and ruled in our favor on all claims asserted against us related to the intellectual property in dispute. Syneron appealed.
In April 2017, Syneron-Candela filed a lawsuit in the United States District Court for the Western District of Tennessee against us and our wholly-owned subsidiaries in Israel and the United States, asserting claims for inducement to breach contract, interference with employment relationships, tortious interference with business and violation of the Tennessee Uniform Trade Secrets Act with respect to four former employees of Syneron-Candela who subsequently accepted employment with us. In January 2018, we reached a settlement whereby, in exchange for the relief of the foregoing claims, we agreed not to hire any employee of Syneron-Candela (which was defined in the settlement agreement as any person who: (i) was employed by Syneron-Candela as of April 1, 2017 or thereafter, (ii) was still employed by Syneron-Candela as of the date of the settlement agreement and (iii) was employed by Syneron-Candela in North America) during the period between the date of the settlement agreement and August 25, 2018. Subsequently, following the entry into the settlement agreement, the claim was dismissed with prejudice.
In May 2017, Cynosure filed a claim with the United States District Court for the Southern District of Texas (Houston) against us and our U.S. subsidiary, claiming that we unlawfully solicited certain former Cynosure employees, misappropriated Cynosure’s trade secrets, and aided and abetted the employees’ breach of their fiduciary duties to Cynosure. We reached a settlement in February 2018 whereby in exchange for the relief of the foregoing claims, we agreed (i) to pay Cynosure an amount of  $47,500, (ii) not to solicit, directly or indirectly, for a period of 10 months from executing the settlement agreement, any employee of Cynosure or Hologic Inc., the parent company of Cynosure, employed in North America during the said ten-month period, to accept employment with us and (iii) to apply certain search terms provided by Cynosure on the documents and materials in the email accounts of the relevant former employees of Cynosure in order to retrieve sensitive information of Cynosure and destroy such information. Subsequently, following the reaching of the settlement agreement, the claim was dismissed with prejudice.
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In April 2018, Syneron-Candela filed claims with the International Trade Commission and with MGH, in United States District Court for the District of Massachusetts against our U.S. and Israeli subsidiaries, alleging that our fractional RF products infringed two U.S. patents owned by Syneron-Candela that purport to cover systems and methods for treating skin and arranging electrodes on skin therapy devices. In January 2019, we entered into a settlement agreement with Syneron-Candela and MGH that resolved all patent claims previously in dispute in exchange for a one-time cash payment that we made to Syneron-Candela and MGH in February 2019. As part of the settlement agreement, we entered into a sublicense agreement with Syneron-Candela and MGH that granted us and our affiliates a fully paid non-exclusive, royalty-free worldwide sublicense to practice the patents and applications previously in dispute in the licensed field. The sublicense shall continue until the expiration of the last surviving patent or application granted pursuant to the sublicense agreement.
We may be party from time to time to various other lawsuits, claims and other legal proceedings that arise in the ordinary course of our business. There can be no assurance that matters that arise in the future, individually or in aggregate, will not have a material adverse effect on our financial condition or results.
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MANAGEMENT
Executive Officers, Directors and Director Nominees
The following table sets forth information regarding our executive officers, directors and director nominees as of the date of this prospectus.
Name
​ ​
Age
​ ​
Position
​
Executive Officers ​ ​ ​ ​ ​ ​ ​
Moshe Mizrahy ​ ​
66
​ ​ Chief Executive Officer and Chairman of Board of Directors ​
Yair Malca ​ ​
41
​ ​ Chief Financial Officer ​
Dr. Michael Kreindel ​ ​
52
​ ​ Chief Technology Officer and Director Nominee ​
Shakil Lakhani ​ ​
35
​ ​ President, North America ​
Dr. Spero Theodorou, M.D.
​ ​
47
​ ​ Chief Medical Officer ​
Non-Employee Directors ​ ​ ​ ​ ​ ​ ​
Dr. Hadar Ron, M.D. (1)(2) ​ ​
60
​ ​ Director Nominee ​
Bruce Mann (1)(2) ​ ​
84
​ ​ Director Nominee ​
Dr. Michael Anghel (1)(2) ​ ​
80
​ ​ Director Nominee ​
​
(1)
Member of Audit Committee
​
(2)
Member of Compensation, Nominating and Corporate Governance Committee
​
A brief biography of each person who serves as an executive officer and/or director or director nominee of our Company is set forth below:
Moshe Mizrahy .   Moshe Mizrahy co-founded the Company in 2008 and has been our Chief Executive Officer and Chairman of the board of directors since inception. Prior to that, Mr. Mizrahy was co-founder and chief executive officer of Syneron Medical Ltd., a medical aesthetic device company based in Israel. Mr. Mizrahy was also the former chief executive officer of Home Skinovations Ltd., an international medical aesthetic consumer devices company active in the home use market, and is currently the chairman of its board since 2007. In addition to Home Skinovations Ltd., Mr. Mizrahy currently sits on the board of directors of the following companies: SipNose Ltd., Pet Novations Ltd., Peri-Ness Technologies Ltd., Easy-Lap Ltd, O.B.-Tools Ltd., Urifer Ltd., Easy Notes Ltd., Escape Rescue Systems Ltd., New Forest Wood Products (2012) Ltd., M.N. Business Strategy Ltd., Silk’n Cure Ltd., Himalaya Family Office Advising Ltd. and Polimer Logistics (Israel) Ltd. Mr. Mizrahy has a B.S. in Engineering from the Tel Aviv University and an MBA from Pace University, New York.
Yair Malca .    Yair Malca has served as our Chief Financial Officer since 2017. In his previous role, Mr. Malca was the Director of Finance for Jazz Semiconductor, Inc., a developer of integrated circuits and semiconductors, from 2013 to 2017. Before that, he served as the controller of Syneron from 2008 to 2013, as assistant controller of EZchip Semiconductor, a provider of network processors, from 2007 to 2008, as subsidiary controller of Bermad, a provider of hydraulic control valves, from 2005 to 2007, and began his career in public accounting at Ernst & Young from 2002 to 2005. Mr. Malca holds a B.A. in Accounting and Economics from Haifa University and an MBA from Tel Aviv University, and is a Certified Public Accountant in Israel.
Dr. Michael Kreindel .   Dr. Michael Kreindel co-founded the Company in 2008 and has served as our Chief Technology Officer since inception. Dr. Kreindel will serve as a director upon the effectiveness of the registration statement of which this prospectus forms a part. He previously was a co-founder of, and served as CTO of, Syneron Medical Ltd. from 2001 to 2007. Dr. Kreindel has a Ph.D. in physics and mathematics, and also graduated as an engineer and physicist in experimental and theoretical nuclear physics from Ural Politechnical Institute, Russia.
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Shakil Lakhani .   Shakil Lakhani has served as the President of InMode’s North America division since 2017. Prior to becoming the President of North America for the Company in August 2017, Mr. Lakhani was previously the Executive Vice President of Sales for North America since February 2017, where he managed all sales operations and established a new distribution strategy. He graduated with a B.A. from the University of Waterloo, and in 2006 he shifted career paths and moved into the technology space by joining Cynosure. He has held multiple roles at various levels at Cynosure, including Director of Sales from September 2013 through January 2017.
Dr. Spero Theodorou, M.D.    Dr. Spero Theodorou is the Company’s Chief Medical Officer and is responsible for the development of all of the Company’s procedures, clinical studies and training. Dr. Theodorou received his training in plastic and reconstructive surgery at Rush Presbyterian St. Luke’s Medical Center at Rush University in Chicago, Illinois from 2001 to 2003. Upon completion, he underwent an additional year of training in cosmetic plastic surgery at the Manhattan Eye, Ear and Throat Hospital’s (MEETH) Aesthetic Plastic Surgery Fellowship Program affiliated with Hofstra University from 2003 to 2004. Dr. Theodorou is presently on the teaching faculty at MEETH and at the American Society of Aesthetic Plastic Surgery (ASAPS) where he instructs plastic surgeons on the latest advancements in body contouring surgery. He holds an academic appointment as Clinical Assistant Professor of Surgery at Zucker school of Medicine, Hofstra University and is the founder and Surgical Director of bodySCULPT ® since November 2007, which is an American Association for Accreditation of Ambulatory Surgery Facilities (AAAASF)-accredited plastic surgery practice in Manhattan, New York.
Dr. Hadar Ron, M.D.    Dr. Hadar Ron will serve as a director upon the effectiveness of the registration statement of which this prospectus forms a part. Since 2000, Dr. Ron has been the founding and managing partner of Israel Healthcare Ventures Ltd., or IHCV, an Israeli life science venture capital fund. Dr. Ron also sits on the board of IHCV since January 2002. Dr. Ron serves as a chairperson of SupPlant, an Israeli agri-tech company, and G.I. View Ltd., a medical device company specializing in colorectal screenings, and as a board member of the following medical companies: Home Skinovations Ltd., SipNose Ltd., Pet Novations Ltd., Peri-Ness Technologies Ltd., Easy-Lap Ltd., O.G.D.H. Ltd., OrSense Ltd., Gamida Cell Ltd. and NanoPass Technologies Ltd. In addition, Dr. Ron serves as a member of the advisory board of the Momentum Fund Tech Transfer of Tel Aviv University and is the chairperson of the scientific advisory board of Social Finance Israel’s Social Impact Bond for the prevention of diabetes and colon cancer. Dr. Ron is a physician and attorney by education. She holds MD and LLB degrees from Tel Aviv University and has studied at the School of Business Administration at Tel Aviv University.
Bruce Mann.    Mr. Bruce Mann will serve as a director upon the effectiveness of the registration statement of which this prospectus forms a part. Bruce Mann is an independent advisor and consultant on corporate governance, corporate law, and capital markets matters, primarily for emerging technology companies. He was a senior partner, partner, or senior of counsel of Morrison & Foerster LLP for 30 years prior to his retirement in 2017. Mr. Mann has been a Governor-at-Large of the National Association of Securities Dealers (NASD) and a member of the New York Stock Exchange Legal Advisory Committee. He has held numerous positions in the American Bar Association, including chairing the Senior Lawyers Division, the Federal Regulation of Securities Committee and the Venture Capital and Private Equity Committee of the ABA Business Law Section. Mr. Mann holds a BBA from the University of Wisconsin and a JD from the University of Wisconsin Law School.
Dr. Michael Anghel .   Dr. Michael Anghel will serve as a director upon the effectiveness of the registration statement of which this prospectus forms a part. Dr. Anghel has served on the board of directors of BiolineRx Ltd. (Nasdaq:BLRX) since 2010 and on Bioline’s Investment Monitoring Committee since 2010. From 1977 to 1999, he led the Discount Investment Corporation Ltd. (of the IDB Group) activities in the fields of technology and communications. In 1999, he founded CAP Ventures, an advanced technology investment company. From 2004 to 2005, Dr. Anghel served as CEO of DCM, the investment banking arm of the Israel Discount Bank (TASE:DSCT). He currently serves on the board of directors of Orbotech Ltd. (Nasdaq:ORBK, GSM:ORBK) and BiolineRx Ltd. (Nasdaq:BLRX). Until recently, he served as the chairman of the Center for Educational Technology. Prior to launching his business career, Dr. Anghel served as a full-time member of the Graduate School of Business
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Administration of the Tel Aviv University, where he taught finance and corporate strategy. He currently serves as Chairman of the Tel Aviv University’s Executive Program. Dr. Anghel holds a B.A. in Economics from the Hebrew University in Jerusalem and an MBA and Ph.D. in Finance from Columbia University, New York.
Corporate Governance Practices
Companies incorporated under the laws of the State of Israel, whose shares are publicly traded, including companies with shares listed on Nasdaq, are considered public companies under the Companies Law and are required to comply with various corporate governance requirements relating to such matters as the composition and responsibilities of the audit committee and the compensation committee (subject to certain exceptions that we intend to utilize), and a requirement to have an internal auditor. This is the case even if our ordinary shares are not listed on the Tel Aviv Stock Exchange, which our ordinary shares are not expected to be. These requirements are in addition to the corporate governance requirements imposed by Nasdaq rules and other applicable provisions of U.S. securities laws to which we will become subject (as a foreign private issuer) upon the closing of this offering and the listing of our ordinary shares on Nasdaq. Under Nasdaq rules, a foreign private issuer may generally follow its home country rules of corporate governance in lieu of the comparable requirements of Nasdaq rules, except for certain matters including the composition and responsibilities of the audit committee and the independence of its members within the meaning of the rules and regulations of the SEC.
We intend to rely on this “home country practice exemption” with respect to the following Nasdaq requirements:
Quorum .   As permitted under the Companies Law and pursuant to our amended and restated articles of association, which will be effective upon the effectiveness of the registration statement of which this prospectus forms a part, the quorum required for an ordinary meeting of shareholders will consist of at least two shareholders present in person, by proxy or by other voting instrument in accordance with the Companies Law, who hold at least 25% of the voting rights in the Company (and in an adjourned meeting, with some exceptions, at least two shareholders holding any number of the voting rights in the Company), instead of 33 1 ∕ 3 % of the issued share capital required under Nasdaq rules.
Nomination of Directors .   Our directors are elected through a staggered board mechanism. See “— Board Practices — Board of Directors.” The nominations for directors, which are presented to our shareholders by our board of directors, are generally made by the board of directors itself or a duly authorized committee thereof, in accordance with the provisions of our amended and restated articles of association and the Companies Law. Nominations need not be made by a nominating committee of our board of directors consisting solely of independent directors, as required under Nasdaq rules.
Proxy Statements .   We will not be required to and, in reliance on home country practice, we do not intend to, comply with certain Nasdaq rules regarding the provision of proxy statements for general meetings of shareholders. Israeli corporate law does not have a regulatory regime for the solicitation of proxies. We intend to provide notice convening an annual general meeting, including an agenda and other relevant documents.
Shareholder Approval .   We will not be required to and, in reliance on home country practice, we do not intend to, comply with certain Nasdaq rules regarding shareholder approval for certain issuances of securities under Nasdaq Rule 5635. In accordance with the provisions of our amended and restated articles of association and the Companies Law, our board of directors is authorized to issue securities, including ordinary shares, warrants and convertible notes.
Executive Sessions .   We will not be required to and, in reliance on home country practice, we do not intend to, comply with certain Nasdaq rules regarding regularly scheduled meetings at which only independent directors are present.
Other than as stated above, we currently intend to take all actions necessary for us to maintain compliance as a foreign private issuer under the applicable corporate governance requirements of the Sarbanes-Oxley Act, the rules adopted by the SEC and Nasdaq’s listing standards.
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We may in the future elect to follow home country corporate governance practices in Israel with regard to other matters.
Board Practices
Board of Directors
Under the Companies Law, our board of directors is responsible for setting our general policies and supervising the performance of management. Our board of directors may exercise all powers and may take all actions that are not specifically granted to our shareholders or to management. Our executive officers are responsible for our day-to-day management and have individual responsibilities established by our board of directors. Our Chief Executive Officer is appointed by, and serves at the discretion of, our board of directors, subject to the terms of the consultancy agreement that we have entered into with him. All other executive officers who are not directors are appointed by our Chief Executive Officer, and are subject to the terms of any applicable employment or consultancy agreements that we may enter into with each of them.
Under our amended and restated articles of association, our board of directors must consist of at least three directors and not more than seven directors. Our board of directors will consist of five directors upon the effectiveness of the registration statement of which this prospectus forms a part. Our directors will be elected in three staggered classes by the vote of a majority of the ordinary shares present, in person or by proxy, at a shareholders’ meeting (excluding abstentions). Each class of directors is to consist, as nearly as possible, of one-third of the total number of directors constituting the entire board of directors (other than the external directors, if applicable). At each annual general meeting of our shareholders, the election or re-election of directors following the expiration of the term of office of the directors of that class of directors will be for a term of office that expires on the third annual general meeting following such election or re-election, such that from 2020 and after, at each annual general meeting the term of office of only one class of directors will expire. Each director holds office until the third annual general meeting of our shareholders, unless the tenure of such director expires earlier pursuant to the Companies Law or unless removed from office as described below.
Our directors will be divided among three classes as follows: the Class I director, consisting of Dr. Hadar Ron, will hold office until our annual general meeting of shareholders to be held in 2020; the Class II directors, consisting of Dr. Michael Anghel and Mr. Bruce Mann, will hold office until our annual general meeting of shareholders to be held in 2021; and the Class III directors, consisting of Mr. Moshe Mizrahy and Dr. Michael Kreindel, will hold office until our annual general meeting of shareholders to be held in 2022.
The provisions of our amended and restated articles of association relating to the number of directors, staggered board and election and removal of a director from office prior to the lapse of their tenure may be changed only by a resolution adopted by two-thirds of our ordinary shares voting on the proposed change.
Under the Companies Law, our board of directors is required to employ independent judgment and discretion when voting, and is prohibited from entering into any voting arrangements with respect to actions taken at meetings of the board. Further, the Companies Law provides that in the event a director learns about an alleged breach of law or improper conduct of business relating to a company matter, said director must promptly take action to summon a meeting of the board of directors to address any such breach.
In accordance with the exemptions available to foreign private issuers under Nasdaq rules, we do not intend to follow the requirements of Nasdaq rules with regard to the process of nominating directors. Instead, we intend to follow Israeli law and practice, in accordance with which our board of directors (or a committee thereof) is authorized to recommend to our shareholders director nominees for election.
In addition, our amended and restated articles of association allow our board of directors to appoint directors to fill vacancies on our board of directors, including filling empty board seats up to the maximum number of directors permitted under our amended and restated articles of association, for a term of office equal to the remaining period of the term of office of each director whose office has been vacated. Vacancies on our board of directors may be filled by a vote of a simple majority of the directors then in
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office even if they do not constitute a quorum (subject to the limitation on the number of directors and their qualifications). A director so appointed will hold office until the next applicable annual general meeting of our shareholders in which such director’s class is to be replaced.
Directors may be removed from office by a resolution at a general meeting of shareholders adopted by holders of two-thirds of our ordinary shares voting on the proposed removal, provided that the director being removed from office is given a reasonable opportunity to state his or her case before the general meeting, or under other circumstances set forth in our amended and restated articles of association. If a director is removed from office as set forth above, the general meeting will be entitled, in the same session, to elect another director in his or her place subject to the maximum number of directors permitted as stated above. Should it fail to do so, the board of directors will be entitled to do so. Any director who is appointed in this manner will serve in office for the remainder of the removed director’s term in office, and will be eligible for re-election.
Under the Companies Law, we would be required to include on our board of directors at least two members, each of whom qualifies as an external director, and as to whom special qualifications, voting requirements and other provisions would be applicable. We would also be required to include one such external director on each of our board committees.
However, under regulations promulgated under the Companies Law, Israeli companies whose shares are traded on stock exchanges such as Nasdaq that do not have a controlling shareholder (as defined therein) and which comply with the requirements of the jurisdiction where the company’s shares are traded with respect to the appointment of independent directors and the composition of an audit committee and compensation committee, may elect not to follow the Companies Law requirements with respect to the composition of its audit committee and compensation committee and the appointment of external directors (provided that in the event that upon the appointment of a certain director all members of the board of directors of the company are from one and the same gender only, a director from the opposite gender will be appointed). As we do not have a controlling shareholder, we intend to comply with the requirements of Nasdaq with respect to the composition of our board and such committees, and therefore we will be exempt from the Companies Law requirements with respect thereto, including the appointment of external directors.
Leadership Structure of the Board
In accordance with the Companies Law and our amended and restated articles of association, our board of directors is required to appoint one of its members to serve as chairman of the board of directors. Mr. Moshe Mizrahy currently serves as the Chairman of our board of directors.
Under the Companies Law, the chairman of the board of directors or his relatives cannot be vested with the authority of the chief executive officer of a company, without the approval of a special majority of such company’s shareholders. The shareholders’ approval can be provided for a period of five years following an initial public offering, and subsequently, for additional periods of up to three years. The shareholders’ special majority consists of a majority vote of the shares present and voting at a shareholders meeting, provided that either:
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such majority includes at least a majority of the shares held by all shareholders who are not controlling shareholders and do not have a personal interest in approving such resolution that are voted at the meeting, excluding abstentions; or
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the total number of shares voted by non-controlling shareholders and by shareholders who do not have a personal interest against approving such resolution does not exceed 2% of the aggregate voting rights in the company.
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Our shareholders have duly approved Mr. Moshe Mizrahy serving as both our Chief Executive Officer and Chairman of our board of directors and such approval will be valid for a period of five years following the effectiveness of the registration statement of which this prospectus forms a part. The Companies Law also prohibits a direct or indirect subordinate to the chief executive officer of a company from serving as the chairman of such company’s board of directors.
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Committees of the Board of Directors
Under the Companies Law and our amended and restated articles of association, our board of directors is permitted to form committees, and to delegate to any such committee powers allotted to the board of directors, subject to certain exceptions. In general, the board of directors may overturn a resolution adopted by a committee it has formed;, however, the board’s decision shall not affect the ability of third parties, who were not aware of such decision, to rely on the committee’s resolution prior to the time it is overturned. Only members of the board of directors can be members of a board committee, unless the committee is solely advisory.
Audit Committee
Upon the effectiveness of the registration statement of which this prospectus forms a part, our audit committee will consist of Dr. Michael Anghel, Dr. Hadar Ron and Mr. Bruce Mann. Dr. Anghel will serve as chairperson of the audit committee.
Israeli Companies Law Requirements
Under the Companies Law, we will be required to appoint an audit committee following the closing of this offering.
Nasdaq Listing Requirements
Under Nasdaq rules, we are required to maintain an audit committee consisting of at least three independent directors, each of whom is financially literate and one of whom has accounting or related financial management expertise.
All members of our audit committee meet the requirements for financial literacy under the applicable rules and regulations of the SEC and Nasdaq. Our board of directors has determined that Dr. Michael Anghel is an audit committee financial expert as such term is defined by the SEC rules and has the requisite financial experience as defined by Nasdaq rules. Each of the members of our audit committee is “independent” as such term is defined in Rule 10A-3(b)(1) under the Exchange Act and satisfies the independent director requirements under Nasdaq rules.
Audit Committee Role
Our audit committee charter, to be effective upon the effectiveness of the registration statement of which this prospectus forms a part, sets forth the responsibilities of the audit committee consistent with the rules and regulations of the SEC and Nasdaq rules, as well as the requirements for such committee under the Companies Law, including the following:
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oversight of our independent registered public accounting firm and recommending the engagement, compensation or termination of engagement of our independent registered public accounting firm to the board of directors in accordance with Israeli law;
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recommending the engagement or termination of the person filling the office of our internal auditor; and
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recommending the terms of audit and non-audit services provided by the independent registered public accounting firm for pre-approval by our board of directors.
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Our audit committee provides assistance to our board of directors in fulfilling its legal and fiduciary obligations in matters involving our accounting, auditing, financial reporting, internal control and legal compliance functions by pre-approving the services performed by our independent accountants and reviewing their reports regarding our accounting practices and systems of internal control over financial reporting. Our audit committee also oversees the audit efforts of our independent accountants and takes those actions that it deems necessary to satisfy itself that the auditors are independent of management.
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Under the Companies Law, our audit committee is responsible for:
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determining whether there are deficiencies in the business management practices of our company, including in consultation with our internal auditor or the independent auditor, and making recommendations to the board of directors to improve such practices;
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determining whether to approve certain related party transactions (including transactions in which an office holder has a personal interest and whether such transaction is extraordinary or material under the Companies Law) (see “— Approval of Related Party Transactions under Israeli Law —  Office Holders”);
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establishing the approval process for certain transactions with a controlling shareholder or in which a controlling shareholder has a personal interest;
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where the board of directors approves the working plan of the internal auditor, examining such working plan before its submission to the board of directors and proposing amendments thereto;
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examining our internal audit controls and internal auditor’s performance, including whether the internal auditor has sufficient resources and tools to fulfill his responsibilities;
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examining the scope of our auditor’s work and compensation and submitting a recommendation with respect thereto to our board of directors or shareholders, depending on which of them is considering the appointment of our auditor; and
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establishing procedures for the handling of employees’ complaints as to deficiencies in the management of our business and the protection to be provided to such employees.
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Compensation, Nominating and Governance Committee and Compensation Policy
Upon the effectiveness of the registration statement of which this prospectus forms a part, we will establish a compensation, nominating and corporate governance committee. The members of this committee will be Mr. Bruce Mann, Dr. Michael Anghel and Dr. Hadar Ron. Mr. Mann will serve as chairperson of the committee.
Israeli Companies Law Requirements
Under the Companies Law, the board of directors of a public company must appoint a compensation committee. The duties of the compensation, nominating and corporate governance committee include the recommendation to our board of directors of a policy regarding the terms of engagement of office holders (as defined in the Companies Law), to which we refer as a compensation policy. The term “office holder” is defined under the Companies Law as a chief executive officer (referred to in the Companies Law as the general manager), chief business manager, deputy general manager, vice general manager, any other person assuming the responsibilities of any of these positions regardless of that person’s title, a director and any other manager directly subordinate to the general manager. That policy must be adopted by our board of directors, after considering the recommendations of the compensation, nominating and corporate governance committee, and will need to be approved by our shareholders, which approval requires what we refer to as a Special Majority Approval for Compensation. A Special Majority Approval for Compensation requires shareholder approval by a majority vote of the ordinary shares present and voting at a meeting of shareholders called for such purpose, provided that either: (i) such majority includes at least a majority of the ordinary shares held by all shareholders who are not controlling shareholders and do not have a personal interest in such compensation arrangement, excluding abstentions; or (ii) the total number of ordinary shares of non-controlling shareholders and shareholders who do not have a personal interest in the compensation arrangement and who vote against the arrangement does not exceed 2% of the company’s aggregate voting rights.
Even if our shareholders do not approve the compensation policy, the board of directors may resolve to approve the compensation policy if and to the extent the compensation committee and the board determine, in its judgment following internal discussions and after reconsidering the compensation policy, that approval of the compensation policy is in the best interests of the company.
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Pursuant to regulations promulgated under the Companies Law, if a company adopts a compensation policy in advance of its initial public offering and describes it in its prospectus, then the compensation policy shall be deemed a validly adopted policy and will remain in effect for a term of five years from the date the company becomes a public company. Our compensation policy will be approved by our shareholders prior to the effectiveness of the registration statement of which this prospectus forms a part and, in accordance with the regulations promulgated under the Companies Law, will be in effect for a period of five years from the effectiveness of the registration statement of which this prospectus forms a part. The compensation policy will be reviewed from time to time by our compensation committee and our board of directors, according to the requirements of the Companies Law.
The compensation policy must serve as the basis for decisions concerning the financial terms of employment or engagement of office holders, including exculpation, insurance, indemnification or any monetary payment or obligation of payment in respect of employment or engagement. The compensation policy must relate to certain factors, including advancement of the company’s long-term objectives, business plan and policies, and creation of appropriate incentives for office holders. It must also consider, among other things, the company’s risk management, size and the nature of its operations. The compensation policy must furthermore consider the following additional factors:
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the education, skills, expertise and accomplishments of the relevant office holder;
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the office holder’s roles and responsibilities and prior compensation agreements with him or her;
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the relationship between the terms offered and the average compensation of the company’s personnel, including those employed through outsourcing firms;
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the impact of disparities in salary upon work relationships in the company;
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the possibility of reducing variable compensation at the discretion of the board of directors;
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the possibility of setting a limit on the exercise value of non-cash variable equity-based compensation; and
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as to severance compensation, the period of service of the office holder, the terms of his or her compensation during such service period, the company’s performance during that period of service, the person’s contribution towards the company’s achievement of its goals and the maximization of its profits, and the circumstances under which the person is leaving the company.
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The compensation policy must also include the following principles:
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the link between variable compensation and long-term performance and measurable criteria;
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the relationship between variable and fixed compensation, and the ceiling for the value of variable compensation;
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the conditions under which an office holder would be required to repay compensation paid to him or her if it was later shown that the data upon which such compensation was based was inaccurate and was restated in the company’s financial statements;
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the minimum holding or vesting period for variable, equity-based compensation while referring to an appropriate long-term perspective based incentives; and
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maximum limits for retirement payments.
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Our compensation policy, which will become effective upon the effectiveness of the registration statement of which this prospectus forms a part, is designed to promote retention and motivation of directors and executive officers. Additionally, our compensation policy is designed to align the interests of our directors and executive officers with our long-term performance and will serve as a risk management tool. Under our compensation policy, a portion of an executive officer’s compensation package is targeted to reflect our short- and long-term goals, as well as the executive officer’s individual performance. Our compensation policy also includes measures designed to reduce an executive officer’s incentives to take
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excessive risks that may harm us in the long term. Such measures include limits on the value of cash bonuses and equity-based compensation for executive officers, limits on the ratio between an executive officer’s variable and total compensation, and minimum vesting periods for equity-based compensation.
Our compensation policy takes into account an executive officer’s individual characteristics, such as his or her respective position, educational background, scope of responsibilities and contributions to the attainment of our goals, as the basis for compensation variation among our executive officers and considers the internal ratios between compensation of our executive officers and directors and other employees.
Pursuant to our compensation policy, compensation that may be granted to an executive officer may include base salary, an annual bonus, other cash bonuses (such as a signing bonus or special bonus for special achievements, such as an outstanding personal achievement, outstanding personal effort or outstanding company performance), equity-based compensation, benefits and retirement compensation and termination of service arrangements. All cash bonuses are limited to a maximum amount linked to the executive officer’s base salary. In addition, the total variable compensation components (cash bonuses and equity-based compensation) may not exceed 85% of each executive officer’s total compensation package with respect to any given calendar year.
An annual cash bonus may be awarded to executive officers upon the attainment of pre-set periodic objectives and individual targets. The annual cash bonus that may be granted to our executive officers (excluding our chief executive officer) will be based on performance objectives and a discretionary evaluation of the executive officer’s overall performance by our chief executive officer and is subject to minimum thresholds. The annual cash bonus that may be granted to executive officers (excluding our chief executive officer) may be based entirely on a discretionary evaluation. Furthermore, our chief executive officer will be entitled to recommend performance objectives, and such performance objectives will be approved by our compensation committee and, if required by law, by our board of directors.
The performance-measurable objectives of our chief executive officer will be determined annually by our compensation committee and board of directors. Such objectives will include the weight assigned to each achievement in the overall evaluation. A less significant portion of the chief executive officer’s annual cash bonus may be based on a discretionary evaluation of the chief executive officer’s overall performance by the compensation committee and the board of directors based on quantitative and qualitative criteria.
Under our compensation policy, equity-based compensation for executive officers (including members of our board of directors) is designed in a manner consistent with the underlying objectives in determining such person’s annual cash bonus; namely, to enhance the alignment between such person’s interests with the company’s long-term interests and those of our shareholders and to strengthen the retention and motivation of such persons in the medium to long term.
Our compensation policy provides for executive officer’s compensation to be in the form of share options or other equity-based awards, such as restricted shares and restricted share units, in accordance with our share incentive plan then in place. All equity-based incentives granted to executive officers shall be subject to vesting periods in order to promote long-term retention of the awarded executive officers. Equity-based compensation shall be granted from time to time and will be individually determined and awarded based on the performance, educational background, prior business experience, qualifications, role and the personal responsibilities of the executive officer.
In addition, our compensation policy contains compensation recovery provisions that allow the company, under certain conditions, to recover bonuses paid in excess. Moreover, the compensation policy enables our chief executive officer to approve immaterial changes to the terms of an executive officer’s employment (provided that the changes of the terms of employment are in accordance our compensation policy) and allows the company to exculpate, indemnify and insure our executive officers and directors subject to certain limitations.
Our compensation policy also provides for compensation for the members of our board of directors to be determined either (i) in accordance with the amounts set forth in the Companies Regulations (Rules Regarding the Compensation and Expenses of an External Director) of 2000, as amended by the Companies Regulations (Relief for Public Companies Traded in Stock Exchange Outside of Israel) of 2000, as such regulations may be amended from time to time, or (ii) in accordance with the amounts determined in our compensation policy.
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Compensation, Nominating and Corporate Governance Committee Roles
The compensation, nominating and corporate governance committee is responsible for (i) recommending the compensation policy to our board of directors for its approval (and subsequent approval by our shareholders) and (ii) undertaking duties related to the compensation policy and to the compensation of our office holders, including:
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recommending whether a compensation policy should continue in effect, if the then-current policy has a term of greater than five years from the company’s initial public offering, or otherwise three years (approval of either a new compensation policy or the continuation of an existing compensation policy must in any case occur five years from the company’s initial public offering, or otherwise every three years);
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recommending to the board of directors periodic updates to the compensation policy;
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assessing implementation of the compensation policy;
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determining whether to approve the terms of compensation of certain office holders which, according to the Companies Law, require the committee’s approval; and
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determining whether the compensation terms of a candidate for the position of the chief executive officer of the company needs to be brought to approval of the shareholders according to the Companies Law.
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Our compensation, nominating and corporate governance charter, to be effective upon the effectiveness of the registration statement of which this prospectus forms a part, sets forth the responsibilities of the compensation, nominating and corporate governance committee, which include:
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the responsibilities set forth in the compensation policy;
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reviewing and approving the granting of options and other incentive awards to the extent such authority is delegated by our board of directors; and
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reviewing, evaluating and making recommendations regarding the compensation and benefits for our non-employee directors.
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In addition, our compensation, nominating and corporate governance committee is responsible for:
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overseeing our corporate governance functions on behalf of the board;
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making recommendations to the board regarding corporate governance issues;
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identifying and evaluating candidates to serve as our directors consistent with the criteria approved by the board;
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reviewing and evaluating the performance of the board;
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serving as a focal point for communication between director candidates, non-committee directors and our management;
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selecting or recommending to the board for selection candidates to the board; and
​
•
making other recommendations to the board regarding affairs relating to our directors.
​
Disclosure of Compensation of Executive Officers and Directors
For so long as we qualify as a foreign private issuer, we are not required to comply with the proxy rules applicable to U.S. domestic companies, including the requirement applicable to emerging growth companies to disclose the compensation of our Chief Executive Officer, Chief Financial Officer and other three most highly compensated executive officers on an individual, rather than on an aggregate, basis. Nevertheless, regulations promulgated under the Companies Law will require us, once we are a public company, to disclose the annual compensation of our five most highly compensated office holders on an individual basis, rather than on an aggregate basis. This disclosure will not be as extensive as that required of a U.S. domestic issuer. In accordance with such regulations, we intend to commence providing such disclosure, at
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the latest, in the proxy statement for our first annual general meeting of shareholders following this offering, which will be furnished under cover of a Form 6-K and we may elect to provide such information at an earlier date. This disclosure will not be as extensive as that required of a U.S. domestic issuer.
For the three months ended March 31, 2019 and for the year ended December 31, 2018, we paid an aggregate of approximately $0.8 million and $2.8 million, respectively, in cash and benefits to our executive officers. We do not pay our non-executive directors. For share incentive grants to our officers and directors, see “— Employee Benefit Plans.” We have not set aside or accrued any amount to provide pension, retirement or other similar benefits to our executive officers and directors.
Internal Auditor
Under the Companies Law, the board of directors of an Israeli public company must appoint an internal auditor recommended by the audit committee. An internal auditor may not be:
•
a person (or a relative of a person) who holds more than 5% of the company’s outstanding shares or voting rights;
​
•
a person (or a relative of a person) who has the power to appoint a director or the general manager of the company;
​
•
an office holder (including a director) of the company (or a relative thereof); or
​
•
a member of the company’s independent accounting firm, or anyone on its behalf.
​
The role of the internal auditor is to examine, among other things, our compliance with applicable law and orderly business procedures, and to report to the chief executive officer, the chairman of the board and the chairman of the audit committee. The internal auditor is entitled to receive notice of audit committee meetings and to participate in them. In addition, the internal auditor may request that the chairman of the audit committee convene a meeting within a reasonable time to discuss an issue raised by the internal auditor. The internal auditor is responsible for preparing a proposal for an annual or periodical audit plan and submit such plan to the board of directors or the audit committee for their approval. We intend to appoint an internal auditor following the closing of this offering.
Code of Business Conduct and Ethics
We intend to adopt a Code of Business Conduct and Ethics applicable to all of our directors and employees, including our Chief Executive Officer, Chief Financial Officer, controller or principal accounting officer, or other persons performing similar functions, which is a “code of ethics” as defined in Item 16B of Form 20-F promulgated by the SEC. Upon the effectiveness of the registration statement of which this prospectus forms a part, the full text of the Code of Business Conduct and Ethics will be posted on our website at www.inmodemd.com. Information contained on, or that can be accessed through, our website does not constitute a part of this prospectus and is not incorporated by reference herein. If we make any amendment to the Code of Business Conduct and Ethics or grant any waivers, including any implicit waiver, from a provision of the code of ethics, we will disclose the nature of such amendment or waiver on our website to the extent required by the rules and regulations of the SEC. Under Item 16B of Form 20-F, if a waiver or amendment of the Code of Business Conduct and Ethics applies to our principal executive officer, principal financial officer, principal accounting officer or controller and relates to standards promoting any of the values described in Item 16B(b) of Form 20-F, we are required to disclose such waiver or amendment on our website in accordance with the requirements of Instruction 4 to such Item 16B.
Employment and Consulting Agreements
We have entered into employment or consulting agreements with all of our executive officers and key employees. These agreements contain standard provisions for a company in our industry regarding non-solicitation, confidentiality of information, non-competition and assignment of inventions. Our executive officers will not receive benefits upon the termination of their respective employment with us,
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other than mandatory severance payments and payment of salary and benefits (and limited accrual of vacation days) during the required notice period for termination of their employment, which varies for each individual. The agreements are terminable by us at will, subject to prior notice, which varies for each individual.
Employee Benefit Plans
2008 Plans
On January 30, 2008, our board of directors adopted the 2008 Israeli Option Plan, or 2008 Israeli Plan, pursuant to the Companies Law and Section 102 of the Israeli Income Tax Ordinance, 1961, or the Tax Ordinance, allowing us to grant options to purchase our ordinary shares to our and our current and future affiliates’ Israeli employees, officers, directors, consultants and service providers. Under Israeli law, no shareholder approval was required to approve the 2008 Israeli Plan.
On January 30, 2008, concurrently with the adoption of the 2008 Israeli Plan, our board of directors also adopted the 2008 Rest of the World Options Plan, or 2008 ROW Plan, allowing us to grant options to purchase our ordinary shares to our and our current and future affiliates’ non-Israeli employees, consultants and service providers. The 2008 ROW Plan was approved by our shareholders on March 16, 2008.
Options granted under the 2008 Israeli Plan and 2008 ROW Plan generally vest over a period of three years, but shorter or longer vesting schedules have been set. Any option that is canceled or forfeited before expiration of its vesting period was available for future grants until the expiration of these plans in January 2018. Since that date, shares underlying any option that is canceled or forfeited under these plans return to the authorized and un-issued share capital of the company. Additionally, options under the 2008 Israeli Plan and 2008 ROW Plan generally expire seven years after the initial grant date, unless extended by the board of directors. Our board of directors has previously extended the expiration period of certain options prior to their original expiration date. Under the 2008 Israeli Plan, as of June 30, 2019, we have granted options to purchase a total of 1,045,000 ordinary shares, of which 14,000 ordinary shares have been issued upon the exercise of such options. Under the 2008 ROW Plan, as of June 30, 2019, we have granted options to purchase a total of 4,281,992 ordinary shares, of which 481,367 ordinary shares have been issued upon the exercise of such options. For more information, see Note 10 to our consolidated financial statements included elsewhere in this prospectus.
The following table sets forth, as of June 30, 2019, the total number of ordinary shares issuable upon exercise of the options granted to each of our executive officers under the 2008 Israeli Plan and 2008 ROW Plan, the exercise price of such options, the date of grant and the date of expiration.
Name
​ ​
Number of
Options
​ ​
Exercise
Price
​ ​
Date of
Grant
​ ​
Expiration
Date
​
Yair Malca
​ ​ ​ ​ 70,000 ​ ​ ​ ​ $ 1.00 ​ ​ ​
6/1/2017
​ ​
6/1/2024
​
Shakil Lakhani
​ ​ ​ ​ 500,000 ​ ​ ​ ​ $ 1.00 ​ ​ ​
2/16/2017
​ ​
2/16/2024
​
​ ​ ​ ​ ​ 109,500 ​ ​ ​ ​ $ 1.00 ​ ​ ​
6/1/2017
​ ​
6/1/2024
​
Dr. Spero Theodorou
​ ​ ​ ​ 2,500 ​ ​ ​ ​ $ 1.00 ​ ​ ​
4/15/2010
​ ​
3/31/2022
​
​ ​ ​ ​ ​ 70,000 ​ ​ ​ ​ $ 1.00 ​ ​ ​
1/26/2011
​ ​
3/31/2022
​
​ ​ ​ ​ ​ 15,000 ​ ​ ​ ​ $ 1.00 ​ ​ ​
4/4/2012
​ ​
4/4/2024
​
​ ​ ​ ​ ​ 177,000 ​ ​ ​ ​ $ 1.00 ​ ​ ​
6/1/2017
​ ​
6/1/2024
​
Develia Limited, a company controlled by Dr. Spero Theodorou
​ ​ ​ ​ 50,000 ​ ​ ​ ​ $ 1.00 ​ ​ ​
8/29/2016
​ ​
8/29/2023
​
​ ​ ​ ​ ​ 15,500 ​ ​ ​ ​ $ 1.00 ​ ​ ​
2/16/2017
​ ​
2/16/2024
​
​ ​ ​ ​ ​ 53,500 ​ ​ ​ ​ $ 1.00 ​ ​ ​
6/1/2017
​ ​
6/1/2024
​
The options above are fully vested as of June 30, 2019.
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Israeli tax law allows us to choose from among three alternative sets of tax treatment for our 2008 Israeli Plan and for future plans. In approving the 2008 Israeli Plan, our board of directors selected the capital gains tax treatment under Section 102 of the Tax Ordinance described below for grants to Israeli employees and other office holders, including directors. In accordance with the capital gains tax treatment under Section 102 of the Tax Ordinance, the 2008 Israeli Plan allowed for beneficial tax treatment for options issued through a trustee to Israeli employees and other office holders, including directors, provided that options granted thereunder or, upon their exercise, the underlying ordinary shares, are held by a trustee for at least two years following the date of the option grant. Under Section 102 of the Tax Ordinance, Israeli employees and other office holders, including directors, are (i) entitled to defer any taxable event with respect to the options until the underlying ordinary shares are sold or withdrawn from the trust, and (ii) subject to capital gains tax of 25% on the sale of the underlying ordinary shares. In addition, we may not recognize expenses pertaining to the options for Israeli tax purposes.
Under the 2008 ROW Plan, we were able to grant our non-Israeli employees, officers, directors, consultants and service providers options to purchase our ordinary shares. The 2008 ROW Plan did not allow favorable tax treatment for our U.S., Canadian and other non-Israeli directors, officers, employees and consultants.
The 2008 Israeli Plan and the 2008 ROW Plan expired in January 2018 and additional grants may not be made thereunder; however, options granted under such plans prior to their expiration remain valid following such expiration.
2018 Incentive Plan
Our board of directors has adopted on June 17, 2018, a new Incentive Plan, or the 2018 Incentive Plan, allowing us to grant options to purchase our ordinary shares, restricted shares or other awards to our and our current and future affiliates’ Israeli and other non-U.S. employees, officers, directors, consultants and service providers. In approving the 2018 Incentive Plan, our board of directors selected the capital gains tax treatment described above for grants to Israeli employees and other office holders, including directors, under the 2018 Incentive Plan. The 2018 Incentive Plan also includes as an appendix a sub-plan, or the U.S. Sub-Plan, allowing us to grant options to purchase our ordinary shares, restricted shares or other incentive awards to our and our current and future affiliates’ U.S. employees, officers, directors, consultants and service providers.
Under the 2018 Incentive Plan, as of June 30, 2019, we have granted options to purchase a total of 502,100 ordinary shares, of which no ordinary shares have been issued upon exercise of such options.
The following table sets forth, as of June 30, 2019, the total number of ordinary shares issuable upon exercise of the options granted to each of our executive officers under the 2018 Incentive Plan, the exercise price of such options, the grant date and the expiration date.
Name
​ ​
Number of
Options
​ ​
Exercise
Price
​ ​
Date of
Grant
​ ​
Expiration
Date
​
Yair Malca ​ ​ ​ ​ 20,000 ​ ​ ​ ​ $ 11.30 ​ ​ ​
9/17/2018
​ ​
9/17/2025
​
​ ​ ​ ​ ​ 20,000 ​ ​ ​ ​ $ 13.40 ​ ​ ​
1/07/2019
​ ​
9/17/2026
​
Dr. Spero Theodorou ​ ​ ​ ​ 30,000 ​ ​ ​ ​ $ 11.30 ​ ​ ​
9/17/2018
​ ​
9/17/2025
​
​ ​ ​ ​ ​ 50,000 ​ ​ ​ ​ $ 13.40 ​ ​ ​
1/07/2019
​ ​
1/07/2026
​
Shakil Lakhani ​ ​ ​ ​ 50,000 ​ ​ ​ ​ $ 13.40 ​ ​ ​
1/07/2019
​ ​
1/07/2026
​
As of June 30, 2019, 97,500 options have vested.
Up to 1,000,000 of our authorized and unissued ordinary shares may be issued pursuant to awards under the 2018 Incentive Plan. Upon adoption of the 2018 Incentive Plan, our board of directors has resolved that the number of reserved authorized and unissued ordinary shares of the company for issuance of awards pursuant to the 2018 Incentive Plan, shall automatically increase on an annual basis in such manner that on the first business day of each calendar year beginning in 2019 such number of reserved ordinary shares equal to the lesser of  (i) 800,000 ordinary shares, (ii) three percent (3%) of the number of ordinary shares outstanding as of such date, or (iii) a lesser number of ordinary shares determined by the
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board of directors, will be added to the reserved authorized and unissued ordinary shares of the company for issuance of awards pursuant to the 2018 Incentive Plan. Awards will be made pursuant to agreements and may be subject to vesting and other restrictions as determined by the board of directors or the compensation committee.
The following paragraphs summarize the terms of the 2018 Incentive Plan:
Plan Administration.    Our board of directors or the compensation committee acts as the plan administrator.
Types of Awards.    The 2018 Incentive Plan permits grants of options, ordinary shares, restricted stock or restricted stock units.
Exercise Period .   Options granted under the 2018 Incentive Plan are exercisable for a period of seven years following the date of grant, unless otherwise determined by our board of directors or our compensation committee.
Exercise Price .   Our board of directors or compensation committee has discretion in determining the exercise price of awards, subject to certain limitations. The 2018 Incentive Plan provides procedures for the cashless exercise of options.
Transactions .   The 2018 Incentive Plan provides that in the event of a “Transaction” (which is defined as (i) a merger, acquisition or consolidation of the Company with one or more other entities in which the Company is not the surviving entity; or (ii) a sale or other disposition of all or substantially all, as determined by our board of directors in its discretion, of the outstanding ordinary shares of the Company; or (iii) a sale or other disposition of all or substantially all, as determined by our board of directors in its discretion, of the consolidated assets of the Company and its affiliates), if the unexercised awards then outstanding under the 2018 Incentive Plan are assumed or substituted for securities of the successor company pursuant to the Transaction, then the board of directors or compensation committee, in their sole discretion and subject to applicable laws, may adjust the exercise price and number and type of shares of such unexercised awards to reflect such assumption and/or substitution. All other terms and conditions of the award agreements shall remain unchanged, including but not limited to the vesting period. The 2018 Incentive Plan further provides that our board of directors shall have full power and authority to determine that all outstanding awards shall terminate and cease to be outstanding, except to the extent assumed or substituted as aforesaid. In the event that awards are not assumed or substituted by the successor company, our board of directors may provide the participant the right to exercise the vested awards under such terms and conditions as our board of directors shall determine prior to the Transaction. In addition, our 2018 Incentive Plan further provides that, subject to any applicable law, our board of directors or our compensation committee shall have full power and authority to determine that in certain option awards there shall be a clause providing different provisions with respect to the vesting period of awards underlying such award agreement or any portion thereof in the event of a Transaction.
Termination .   The 2018 Incentive Plan provides that in the event of a participant’s termination of services as an employee, director, consultant or contractor of the Company and/or its subsidiaries, other than by reason of such participant’s death or disability or due to termination for cause, all awards which are vested upon the date of termination shall be exercisable during a period of 90 days from the date of termination, unless otherwise determined by our board of directors or our compensation committee. All awards that are not vested upon the date of termination shall terminate immediately. The participant shall forfeit any ordinary shares acquired pursuant to an award of restricted stock that remains unvested as of the date of termination.
Plan Term .   Unless terminated earlier, the 2018 Incentive Plan will continue in effect for a term of ten years from the date of its adoption.
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Approval of Related Party Transactions under Israeli Law
Office Holders
The Companies Law codifies the fiduciary duties that office holders owe to a company. Each person listed in the table above under “— Executive Officers, Directors and Director Nominees” who is engaged by us is, or upon the effectiveness of the registration statement of which this prospectus forms a part will be, an office holder under the Companies Law.
Fiduciary duties .   An office holder’s fiduciary duties consist of a duty of loyalty and a duty of care. The duty of loyalty requires the office holder to act in good faith and for the benefit of the company, and includes, among other things, the duty to avoid any conflict of interest between the office holder’s position in the company and personal affairs, and proscribes any competition with the company or the exploitation of any business opportunity of the company in order to receive personal advantage for himself or herself or others. This duty also requires him or her to reveal to the company any information or documents relating to the company’s affairs that the office holder has received due to his or her position as an office holder. The duty of care requires an office holder, among other things, to act with a level of care that a reasonable office holder in the same position would employ under the same circumstances. This includes the duty to use reasonable means to obtain information regarding the advisability of a given action submitted for his or her approval or performed by virtue of his or her position and all other relevant information pertaining to these actions. We may approve an act specified above which would otherwise constitute a breach of an office holder’s duty of loyalty, provided that the office holder acted in good faith, the act or its approval does not harm the Company, and the office holder discloses his or her personal interest in a timely manner before the date for discussion of approval of such act.
Disclosure of personal interest .   The Companies Law requires that an office holder promptly disclose to the company any personal interest that he or she may have and all related documents and material information known to him or her, in connection with any existing or proposed transaction by the company. “Personal interest,” as defined by the Companies Law, includes a personal interest of any person in an act or transaction of the company, including a personal interest of his or her relative or of a corporate body in which that person or a relative of that person is a 5% or greater shareholder, a holder of 5% or more of the voting rights, a director or general manager, or in which he or she has the right to appoint at least one director or the chief executive officer. “Personal interest” does not apply to a personal interest stemming merely from one’s ownership of shares in the company. A personal interest also includes (1) a personal interest of a person who votes according to a proxy of another person, including in the event that the other person has no personal interest, and (2) a personal interest of a person who gave a proxy to another person to vote on his or her behalf regardless of whether or not the discretion of how to vote lies with the person voting.
The office holder must make the disclosure of his personal interest promptly and no later than the first meeting of the company’s board of directors that discusses the particular transaction. This duty to disclose such information does not apply if the personal interest of the office holder derives solely from the personal interest of a relative of the office holder in a transaction unless it is an “extraordinary transaction.” The Companies Law defines an extraordinary transaction as a transaction not in the ordinary course of business, not on market terms or that is likely to have a material impact on the company’s profitability, assets or liabilities, and defines a relative as a spouse, sibling, parent, grandparent, descendent, spouse’s descendant, sibling or parent, and the spouse of any of the foregoing.
Approvals of related party transactions .   The Companies Law provides that a transaction with an office holder or a transaction in which an office holder has a personal interest may not be approved if it is adverse to the company’s interest. In addition, such a transaction generally requires board approval, unless the transaction is an extraordinary transaction or the articles of association provide otherwise and provided that the transaction is in the company’s interest and is performed by the office holder in good faith. If the transaction is an extraordinary transaction, first the audit committee and then the board of directors, in that order, must approve the transaction. Under certain circumstances, shareholder approval may also be required. Generally, a director (and any person in general) who has a personal interest in an extraordinary transaction that is considered at a meeting of the board of directors or the audit committee may not attend that meeting or vote on that matter, unless a majority of the board of directors or the audit committee, as
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the case may be, also has a personal interest in the matter then, in such event, all directors may participate in discussions of the audit committee or the board of directors (as applicable) on such transaction and the voting on approval thereof. If a majority of the board of directors or the audit committee has a personal interest in the transaction, shareholder approval also would be required for the approval of such transaction. See “Approval of Related Party Transactions under Israeli Law — Office Holders — Approval of office holders’ compensation.”
Approval of office holders’ compensation.    The compensation of, or an undertaking to indemnify or insure, an office holder who is not a director generally requires approval first by our compensation committee, then by our board of directors. If the compensation arrangement or undertaking to indemnify or insure is inconsistent with our compensation policy, or if the office holder is the chief executive officer (apart from a number of specific exceptions), then the arrangement is further subject to a Special Majority Approval for Compensation. If the shareholders of a company do not approve the compensation terms of office holders at a meeting of the shareholders, other than directors, the compensation committee and board of directors may override the shareholders’ decision, subject to certain conditions. Arrangements regarding the compensation, indemnification or insurance of a director require the approval of the compensation committee, board of directors and shareholders by simple majority, in that order, and under certain circumstances, a Special Majority Approval for Compensation.
Controlling Shareholders
The Companies Law imposes the same disclosure requirements, as described above, on a controlling shareholder of a public company that it imposes on an office holder. For these purposes, a controlling shareholder is any shareholder that has the ability to direct the company’s actions, including any shareholder holding 25% or more of the voting rights if no other shareholder owns more than 50% of the voting rights in the company. Two or more shareholders with a personal interest in the approval of the same transaction are deemed to be one shareholder.
Approval of the audit committee or the compensation committee (with respect to compensation arrangements) as the case may be, the board of directors and our shareholders is required for:
•
extraordinary transactions with a controlling shareholder or in which a controlling shareholder has a personal interest, including a private placement in which a controlling shareholder has a personal interest; and
​
•
transactions for the provision of services, whether directly or indirectly, by a controlling shareholder or his or her relative, or a company such controlling shareholder controls, and transactions concerning the terms of engagement of a controlling shareholder or a controlling shareholder’s relative, whether as an office holder or an employee.
​
The shareholder approval must include the majority of shares voted at the meeting. In addition, either:
•
at least a majority of the shares held by the shareholders who have no personal interest in the transaction and are present and voting at the meeting must be voted in favor of approving the transaction, excluding abstentions; or
​
•
the total shareholdings of those who have no personal interest in the transaction and who vote against the transaction must not represent more than 2% of the aggregate voting rights in the company.
​
In addition, any extraordinary transaction with a controlling shareholder or in which a controlling shareholder has a personal interest with a term of more than three years, and under certain conditions, five years from a company’s initial public offering, requires the abovementioned approval at the end of such period; however, such transactions not involving the receipt of services or compensation can be approved for a longer term, provided that the audit committee determines that such longer term is reasonable under the circumstances.
Pursuant to regulations promulgated under the Companies Law, certain transactions with a controlling shareholder or his or her relative, or with directors or other office holders, that would otherwise require approval of a company’s shareholders may be exempt from shareholder approval upon certain conditions.
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Shareholder Duties
Under the Companies Law, a shareholder has a duty to act in good faith and in a customary manner towards the company and other shareholders and to refrain from abusing his or her power in the company including, among other things, when voting in a general meeting of shareholders or in a class meeting on the following matters:
•
an amendment to the articles of association;
​
•
an increase in the company’s authorized share capital;
​
•
a merger; or
​
•
approval of related party transactions and acts of office holders that require shareholder approval.
​
A shareholder also has a general duty to refrain from discriminating against other shareholders. In addition, any controlling shareholder, any shareholder who knows that it possesses the power to determine the outcome of a shareholder vote and any shareholder who, under the company’s articles of association, has the power to appoint or prevent the appointment of an office holder in the company, or has another power with respect to the company, is under a duty to act with fairness towards the company. The Companies Law does not describe the substance of this duty of fairness except to state that the remedies generally available upon a breach of contract will also apply in the event of a breach of the duty to act with fairness, taking the shareholder’s position in the company into account. There is limited case law available to assist in understanding the nature of these duties or the implications of these provisions.
Exculpation, Indemnification and Insurance of Directors and Officers
Our amended and restated articles of association allow us to indemnify, exculpate and insure our office holders, either pursuant to an undertaking made in advance of an event or following an event, to the fullest extent permitted by the Companies Law, the Israeli Securities Law, 1968, or the Securities Law, and the Economic Competition Law, 1988, or the Economic Competition Law, in respect of liabilities, payments and expenses incurred for acts performed and omissions committed as an office holder. Our articles of association also allow us to exculpate, insure or indemnify any person who is not an office holder, including any employee, agent, consultant or contractor who is not an office holder.
Under the Companies Law, the Securities Law and the Economic Competition Law, a company may indemnify an office holder against the following liabilities, payments and expenses incurred in his or her capacity as an office holder, either in advance of the act or following the act, provided its articles of association authorize such indemnification:
•
a monetary liability incurred by or imposed on him or her in favor of another person pursuant to a judgment, including a settlement or arbitration award approved by a court. However, if an undertaking to indemnify an office holder with respect to such liability is provided in advance, then such an undertaking must be limited to events which, in the opinion of the board of directors, can be foreseen based on the company’s activities when the undertaking to indemnify is given, and to an amount, or according to criteria, determined by the board of directors as reasonable under the circumstances. Such undertaking shall detail the foreseen events and amount or criteria mentioned above;
​
•
reasonable litigation expenses, including reasonable attorneys’ fees, incurred by the office holder (i) as a result of an investigation or proceeding instituted against him or her by an authority authorized to conduct such investigation or proceeding, provided that (a) no indictment was filed against such office holder as a result of such investigation or proceeding, and (b) no financial liability was imposed upon him or her as a substitute for a criminal proceeding against them as a result of such investigation or proceeding or, if such financial liability was imposed, it was imposed with respect to an offense that did not require proof of criminal intent; and (ii) in connection with a monetary sanction;
​
•
reasonable litigation expenses, including attorneys’ fees, incurred by the office holder or imposed by a court in proceedings instituted against him or her by the company, on its behalf, or by a third party, or in connection with criminal proceedings in which the office holder was acquitted, or as a result of a conviction for an offense that does not require proof of criminal intent;
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•
expenses incurred by the office holder with respect to proceedings held pursuant to certain provisions of the Economic Competition Law;
​
•
a monetary liability imposed on the office holder in favor of a payment for a breach offended at an Administrative Procedure (as defined below) as set forth in Section 52(54)(a)(1)(a) of the Securities Law;
​
•
expenses expended by the office holder with respect to an Administrative Procedure under the Securities Law, including reasonable litigation expenses and reasonable attorneys’ fees; and
​
•
any other obligation or expense in respect of which it is permitted or will be permitted under applicable law to indemnify an office holder, including, without limitation, matters referenced in Section 56H(b)(1) of the Securities Law.
​
An “Administrative Procedure” is defined as a procedure pursuant to Chapters H3 (Monetary Sanction by the Israeli Securities Authority), H4 (Administrative Enforcement Procedures of the Administrative Enforcement Committee) or I1 (Arrangement to Prevent Procedures or Interruption of Procedures Subject to Conditions) of the Securities Law.
Under the Companies Law, the Securities Law and the Economic Competition Law, a company may obtain insurance for an office holder against the following liabilities incurred in his or her capacity as an office holder, to the extent provided in the company’s articles of association:
•
a breach of the duty of loyalty to the company, provided that the office holder acted in good faith and had a reasonable basis to believe that the act would not harm the company;
​
•
a breach of the duty of care to the company or to a third party, to the extent such a breach arises out of the negligent conduct of the office holder;
​
•
a financial liability imposed on the office holder in favor of a third party;
​
•
expenses incurred by the office holder with respect to proceedings held pursuant to certain provisions of the Economic Competition Law;
​
•
a monetary liability imposed on the office holder in favor of an injured party at an Administrative Procedure pursuant to Section 52(54)(a)(1)(a) of the Securities Law; and
​
•
expenses incurred by an office holder in connection with an Administrative Procedure, including reasonable litigation expenses and reasonable attorneys’ fees.
​
Under the Companies Law, a company may not exculpate an office holder from liability for a breach of the duty of loyalty. A company may exculpate an office holder in advance from liability to the company, in whole or part, for damages caused to the company as a result of a breach of the duty of care, but only if a provision authorizing such exculpation is included in its articles of association. A company may not exculpate in advance a director from liability arising out of a breach of a duty of care with respect to a distribution.
Under the Companies Law, however, a company may not indemnify, exculpate or insure an office holder against any of the following:
•
a breach of the duty of loyalty, except for indemnification and insurance for a breach of the duty of loyalty to the company to the extent that the office holder acted in good faith and had a reasonable basis to believe that the act would not harm the company;
​
•
a breach of the duty of care committed intentionally or recklessly, excluding a breach arising out of the negligent conduct of the office holder;
​
•
an act or omission committed with intent to derive illegal personal benefit; or
​
•
a fine, civil fine, monetary sanction or forfeit levied against the office holder.
​
The Securities Law and the Economic Competition Law also provide certain limitations on the ability of a company to indemnify, exculpate and insure office holders.
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Prior to the effectiveness of the registration statement of which this prospectus forms a part, we intend to obtain directors’ and officers’ liability insurance for the benefit of our office holders and intend to continue to maintain such coverage and pay all premiums thereunder to the fullest extent permitted by applicable law. In addition, prior to the effectiveness of the registration statement of which this prospectus forms a part, we intend to enter into agreements with each of our directors (including our director nominees) and executive officers, exculpating them from a breach of their duty of care to us to the fullest extent permitted by law, and undertaking to indemnify them to the fullest extent permitted by law, including with respect to liabilities resulting from this offering, to the extent that these liabilities are not covered by insurance. Such indemnification will be in addition to any amounts available under our directors’ and office holders’ liability insurance policy. Each office holder who agrees to receive this letter of indemnification will also give his or her approval to terminate all previous letters of indemnification that we have provided to him or her, if any. Upon effectiveness of the registration statement of which this prospectus forms a part, the maximum and aggregate indemnification amount for all current and future indemnified persons under such agreements is the greater of  (i) an amount equal to 25% of our shareholders’ equity on a consolidated basis, based on our most recent financial statements made publicly available before the date on which the indemnity payment is made and (ii) $40 million.
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CERTAIN RELATIONSHIPS AND RELATED PARTY TRANSACTIONS
Relationship with Home Skinovations Ltd.
Certain of our shareholders (some of whom also serve as our directors and executive officers), including Moshe Mizrahy, Yoram Sadeh, Michael Bank, Ben Zion Levi, Eli Raveh and a significant beneficial holder, IHCV, hold in the aggregate approximately 56% and     % of our issued and outstanding share capital immediately prior to and immediately following the completion of this offering, respectively, also are the record holders of approximately 51% of the issued and outstanding shares of Home Skinovations Ltd., or Home Skinovations, an Israeli corporation headquartered in Sha’ar Yokneam, Yokneam, Israel.
Mr. Moshe Mizrahy, our Chief Executive Officer and Chairman of our board of directors, serves as the chairman of the board of directors of Home Skinovations and was the Chief Executive Officer of Home Skinovations until June 2018, and Dr. Hadar Ron, our director nominee, serves on the board of directors of Home Skinovations.
Home Skinovations is involved in the development, manufacture and distribution of home-use light-based devices for aesthetic applications, which include hair removal, anti-aging, microdermabrasion, cellulite and acne treatments. Except as detailed below, we have no commitments to or agreements with Home Skinovations or any of its subsidiaries, including with respect to any mutual research and development, indebtedness, financing, debt or credit lines, or any jointly-owned intellectual property or like arrangements, and we do not share tangible or intangible assets with Home Skinovations or any of its subsidiaries. Any future agreements with Home Skinovations must be reviewed and approved by our audit committee and board of directors. See “Management — Approval of Related Party Transactions under Israeli Law.”
Service Agreements
The Company receives certain services from, and provides certain services to, Home Skinovations. We do not consider these services to be material. The services include mobile phone services, use of certain computer hardware and switchboard infrastructure, certain software licenses and limited personnel services. In relation to these services, Home Skinovations invoiced us approximately $82,000, $240,000 and $175,000 for the years ended December 31, 2018, 2017 and 2016, respectively, which includes amounts invoiced under the Israel office sublease described below, and the Canadian subsidiary of Home Skinovations invoiced our Canadian subsidiary approximately $140,000, $128,000 and $116,000 for the years ended December 31, 2018, 2017 and 2016, respectively, for these services.
Israel Office Sublease
Until May 2018, we subleased our offices in Yokneam, Israel from Home Skinovations (approximately 1,000 square feet in 2016 and our entire lease of 10,290 square feet in 2017). For the years ended December 31, 2018, 2017 and 2016, Home Skinovations invoiced us for an aggregate of approximately $56,000, $140,000 and $17,000, respectively, for the office sublease. Since May 2018, we lease our offices in Israel directly from an unaffiliated lessor.
Joint Venture Equity Interest Conversion, Liquidation Preference and Notice Rights
Guangzhou Sino-Israel Bio-Industry Investment Fund (LLP), a non-controlling partner in our Chinese joint venture (Guangzhou InMode Medical Technology Ltd.), had the right to convert its non-controlling equity interest in such joint venture into our ordinary shares prior to the consummation of our initial public offering at a conversion rate based on the capital contributed by Guangzhou Sino-Israel Bio-Industry Investment Fund (LLP), with interest, and our valuation in such offering. Due to this conversion right, the non-controlling partner rights are presented in our financial statements as a redeemable non-controlling interest as the conversion does not meet permanent equity classification. However, on September 12, 2018, as extended on February 21, 2019 and again on May 5, 2019, Guangzhou Sino-Israel Bio-Industry Investment Fund (LLP) waived any and all rights, privileges and interests with regard to such conversion right conditioned on the completion of this offering on or before August 31,
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2019. In addition, under the joint venture agreement, prior to the consummation of this offering, we cannot effect a change of control transaction without Guangzhou Sino-Israel Bio-Industry Investment Fund (LLP)’s prior written consent. Guangzhou Sino-Israel Bio-Industry Investment Fund (LLP) also has a liquidation preference in the event of any liquidation, dissolution or winding up of the Chinese joint venture, whereby it has the right to be paid out of assets legally available for distribution, before any other shareholder of the Chinese joint venture, an amount in cash equal to its contribution to the Chinese joint venture.
In addition, Wigmore Medical Limited, a non-controlling partner in our U.K. joint venture (Invasix UK Ltd.), had the right to convert its non-controlling equity interest in such joint venture into our ordinary shares prior to the consummation of our initial public offering. Such joint venture is governed by a memorandum of understanding dated March 4, 2014 which we treat as a binding commitment. The number of ordinary shares that Wigmore Medical Limited would have been entitled to receive was based on the product of Wigmore Medical Limited’s share percentage in Invasix UK Ltd. multiplied by Invasix UK Ltd.’s sales as a percentage of our total sales. However, on August 30, 2018, Wigmore Medical Limited waived any and all rights, privileges and interests with regards to such conversion right. Following receipt of the waiver, the redeemable non-controlling interest in Invasix UK Ltd. was reclassified as a non-controlling interest.
Indemnification Agreements
Prior to the effectiveness of the registration statement of which this prospectus forms a part, we intend to enter into separate indemnification agreements with each of our current office holders and other executives exculpating them from a breach of their duty of care to us to the fullest extent permitted by law and undertaking to indemnify them to the fullest extent permitted by law, including with respect to liabilities resulting from this offering to the extent such liabilities are not covered by insurance. See “Management — Exculpation, Indemnification and Insurance of Directors and Officers” for additional information.
Employment and Consulting Agreements
We have entered into employment or consulting agreements with all of our executive officers and key employees. These agreements contain standard provisions for a company in our industry regarding non-solicitation, confidentiality of information, non-competition and assignment of inventions. Our executive officers will not receive benefits upon the termination of their respective employment with us, other than payment of mandatory severance payments salary and benefits (including accrued pension and limited accrual of vacation days) during the required notice period for termination of their employment, which varies for each individual. The agreements are terminable by us at will, subject to prior notice, which varies for each individual.
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PRINCIPAL SHAREHOLDERS
The following table sets forth information regarding the beneficial ownership of our ordinary shares as of June 30, 2019 and as adjusted to reflect the sale of our ordinary shares in this offering by:
•
each person or group of affiliated persons that we know beneficially owns 5% or more of our outstanding ordinary shares;
​
•
each of our named executive officers;
​
•
each of our directors and director nominees; and
​
•
all of our directors, director nominees and executive officers as a group.
​
Beneficial ownership of ordinary shares is determined in accordance with the rules of the SEC and generally includes any ordinary shares over which a person exercises sole or shared voting or investment power. Ordinary shares that are subject to warrants or stock options that are presently exercisable or exercisable within 60 days of June 30, 2019 are deemed to be outstanding and beneficially owned by the person holding the warrant or stock options for the purpose of computing the percentage ownership of that person, but are not treated as outstanding for the purpose of computing the percentage ownership of any other person.
Except as indicated in the footnotes to this table, each shareholder in the table has sole voting and investment power for the ordinary shares shown as beneficially owned by them. Percentage ownership is based on 16,467,952 ordinary shares outstanding and stock options that are presently exercisable or exercisable within 60 days, as of June 30, 2019, and      ordinary shares outstanding following the closing of the offering, excluding      ordinary shares that may be issued as part of the underwriters’ option to purchase additional ordinary shares from us, unless otherwise stated. To our knowledge, we have           holders of record of our equity securities who is a U.S. person. These shareholders hold     % of our outstanding share capital. Unless otherwise noted below, each shareholder’s address is c/o InMode Ltd., Tavor Building, Sha’ar Yokneam, P.O. Box 533, Yokneam 2069200, Israel.
​ ​ ​
Beneficial Ownership
​
Name of Beneficial Owner:
​ ​
Number of
Ordinary
Shares
​ ​
Percent of
Ordinary Shares
Before the Offering
​ ​
Percent of Ordinary
Shares After the
Offering
​
5% or more Beneficial Owners ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​
Israel Healthcare Ventures 2 LP Incorporated (1)
​ ​ ​ ​ 2,609,141 ​ ​ ​ ​ ​ 15.84 % ​ ​ ​
    ​
​
SpaMedica International SRL (2)
​ ​ ​ ​ 2,480,000 ​ ​ ​ ​ ​ 15.06 % ​ ​ ​ ​ ​
Directors, Director Nominees and Named Executive Officers
​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​
Moshe Mizrahy (3)
​ ​ ​ ​ 3,392,553 ​ ​ ​ ​ ​ 20.60 % ​ ​ ​ ​ ​
Dr. Michael Kreindel (3)
​ ​ ​ ​ 2,900,000 ​ ​ ​ ​ ​ 17.61 % ​ ​ ​ ​ ​
Dr. Hadar Ron (4)
​ ​ ​ ​ 50,000 ​ ​ ​ ​ ​ * ​ ​ ​ ​ ​
Bruce Mann (3)
​ ​ ​ ​ 15,000 ​ ​ ​ ​ ​ * ​ ​ ​ ​ ​
Dr. Michael Anghel
​ ​ ​ ​ — ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​
Yair Malca (5)
​ ​ ​ ​ 95,000 ​ ​ ​ ​ ​ * ​ ​ ​ ​ ​
Shakil Lakhani (5)
​ ​ ​ ​ 634,500 ​ ​ ​ ​ ​ 3.85 % ​ ​ ​ ​ ​
Dr. Spero Theodorou (6)
​ ​ ​ ​ 431,000 ​ ​ ​ ​ ​ 2.62 % ​ ​ ​ ​ ​
Total for all directors, director nominees and executive officers as a group (8 persons)
​ ​ ​ ​ 7,518,053 ​ ​ ​ ​ ​ 45.65 % ​ ​ ​ ​ ​
​
*
Represents less than one (1%) percent.
​
​
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(1)
Israel Healthcare Ventures 2 LP Incorporated, or IHCV2, is a limited partnership incorporated under the laws of the Island of Guernsey. Dr. Hadar Ron, our director nominee, holds an indirect beneficial ownership entitlement of less than 10% in IHCV2 and is the chief executive officer of its management company. IHCV2 General Partner Limited, a company incorporated under the laws of the Island of Guernsey, is the sole general partner of IHCV2, and has voting control and investment power over the ordinary shares beneficially owned by IHCV2, but disclaims beneficial ownership of such shares except to the extent of its pecuniary interest therein. The general partner of IHCV2 is IHCV2 General Partner Limited, which is controlled by its directors Fort Limited and Elton Limited. The controlling shareholder of Fort Limited and Elton Limited is Fort Management Services Limited. The controlling shareholder of Fort Management Services Limited is Mr. Jos Ensink. The address of each of the foregoing is Bordage House, Le Bordage, St Peter Port, Guernsey, GY1 1BU.
​
(2)
SpaMedica International SRL is wholly-owned by The SMFT Trust (The Stephen Mulholland Family Trust), a Barbados trust that is wholly owned by Stephen Mulholland and controlled and managed by its independent trustee. Stephen Mulholland has voting and dispositive rights over the ordinary shares beneficially owned by SpaMedica International SRL and therefore may be deemed to beneficially own such ordinary shares. The shareholder’s registered business address is Suite 203, Building No. 8, Harbour Road, Bridgetown, St. Michael, Barbados W.I. BB11145. The beneficial ownership includes 230,000 options to purchase our ordinary shares within 60 days of June 30, 2019.
​
(3)
The beneficial ownership in its entirety is owned as ordinary shares.
​
(4)
The beneficial ownership in its entirety is owned as ordinary shares by Dr. Hadar Ron. Dr. Hadar Ron is the chief executive officer of the management company for IHCV2 (see note 1) and Israel Health Care Ventures LP Incorporated, a life science venture capital fund. Dr. Hadar Ron also holds an indirect beneficial ownership entitlement of less than 10% in each of IHCV2 (see note 1) and Israel Health Care Ventures LP Incorporated. Israel Health Care Ventures LP Incorporated directly holds 80,000 of our ordinary shares.
​
(5)
The beneficial ownership in its entirety is owned as options to purchase our ordinary shares within 60 days of June 30, 2019.
​
(6)
Out of these options, 119,000 options are held by Develia Limited, a company controlled by Dr. Spero Thedorou. The beneficial ownership in its entirety is owned as options to purchase our ordinary shares within 60 days of June 30, 2019.
​
​
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DESCRIPTION OF SHARE CAPITAL
The following descriptions of our share capital and provisions of our amended and restated articles of association are summaries and do not purport to be complete. Our amended and restated articles of incorporation are filed with the SEC as an exhibit to our registration statement of which this prospectus forms a part.
Share Capital
Upon the effectiveness of the registration statement of which this prospectus forms a part, our authorized share capital will consist of 100 million ordinary shares, par value NIS 0.01 per ordinary share, of       which      ordinary shares will be issued and outstanding. All of our ordinary shares have identical voting and other rights in all respects.
All of our issued and outstanding ordinary shares are duly authorized, validly issued, fully paid and non-assessable. Our amended and restated articles of association and the laws of the State of Israel do not restrict the ownership or voting of ordinary shares by non-residents of Israel, except with respect to citizens of countries that are, or have been, in a state of war with Israel.
Establishment and Purposes and Objectives of the Company
We were incorporated under the laws of the State of Israel on January 2, 2008 under the name Invasix Ltd. and we subsequently changed our name on November 2, 2017 to our current name, InMode Ltd. Our purpose as set forth in our amended and restated articles of association is to engage in any lawful activity.
The Powers of the Directors
Our board of directors shall direct our policy and shall supervise the performance of our Chief Executive Officer and his actions. Pursuant to the Companies Law and our amended and restated articles of association, our board of directors may exercise all powers and take all actions that are not required under the Companies Law or our amended and restated articles of association to be exercised or taken by our shareholders, including the power to borrow money for Company purposes.
Rights Attached to Our Ordinary Shares
Our ordinary shares shall confer upon the holders thereof:
•
equal rights to attend and to vote at all of our general meetings, whether annual or special, with each ordinary share entitling the holder thereof, which attend the meeting and participate in the voting, either in person or by a proxy or by a written ballot, to one vote;
​
•
equal rights to participate in a distribution of dividends on our ordinary shares, if any, whether payable in cash or in bonus shares, in a distribution of assets or in any other distribution, on a per share pro rata basis; and
​
•
equal rights to participate, upon our dissolution, in the distribution of our assets legally available for distribution, on a per share pro rata basis.
​
Dividend and Liquidation Rights
The holders of the ordinary shares to be sold in this offering will be entitled to their proportionate share of any cash dividend, share dividend or dividend in kind declared with respect to our ordinary shares on or after the date of this prospectus. Under the Companies Law, a company may distribute a dividend only if, upon the determination of our board of directors, the distribution does not create a reasonably foreseeable risk that the company will be unable to meet its existing and anticipated obligations as they become due. A company may only distribute a dividend out of the company’s profits, as defined under the Companies Law. The distribution amount is limited to the greater of the retained earnings or earnings generated over the previous two years, according to our then last reviewed or audited financial statements, provided that the date of the financial statements is not more than six months prior to the date of the
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distribution. If the company does not meet the profit requirement, a court may allow us to distribute a dividend, as long as the court is convinced that there is no reasonable risk that a distribution might prevent the company from being able to meet its existing and anticipated obligations as they become due.
Under the Companies Law, the declaration of a dividend is determined by the board of directors and does not require the approval of the shareholders of a company unless the company’s articles of association provide otherwise. Our amended and restated articles of association provide that the board of directors may declare and distribute dividends without the approval of the shareholders. For more information, see “Dividend Policy.” In the event of our liquidation, holders of our ordinary shares have the right to share ratably in any assets remaining after payment of liabilities, in proportion to the paid-up par value of their respective holdings. This right, as well as the right to receive dividends, may be affected by the grant of preferential dividend or distribution rights to the holders of a class of shares with preferential rights that may be authorized in the future.
Voting, Shareholder Meetings and Resolutions
Holders of ordinary shares have one vote for each ordinary share held on all matters submitted to a vote of shareholders. This right may be changed if shares with special voting rights are authorized in the future. Our amended and restated articles of association provide that all resolutions of our shareholders require a simple majority vote, unless otherwise required under the Companies Law or our articles of association. A shareholder may vote in general meetings in person, by proxy or by a written ballot.
Under the Companies Law, an annual general meeting of our shareholders should be held once every calendar year, but no later than 15 months from the date of the previous annual general meeting. The quorum required for a general meeting of shareholders consists of at least two shareholders present in person or by proxy holding at least 25% of the voting power in the Company. A meeting adjourned for lack of a quorum generally is adjourned to the same day in the following week at the same time and place (without requirement of additional notification to the shareholders) or any time and place as the directors designate in a notice to the shareholders. Under our amended and restated articles of association, the required quorum for the reconvened adjourned meeting will be, with some exceptions, at least two shareholders holding any number of the voting rights in the Company.
Our board of directors may, in its discretion, convene additional meetings as “special general meetings” whenever it sees fit, at such time and place, within or outside of Israel, as it may determine. In addition, the Companies Law provides that the board of directors must convene a special general meeting upon the written demand of: (i) two or more of the directors or such number of directors equal to one fourth of the serving directors, (ii) one or more shareholders having, in the aggregate, (a) at least 5% of the outstanding share capital and at least 1% of the voting power in the company, or (b) at least 5% of the voting power in the company. The Companies Law further provides that one or more shareholders holding 1% or more of the outstanding voting power may ask the board to add an item to the agenda of the prospective shareholders’ meeting if the proposal merits discussion at the general meeting, as determined by the board of directors. The chairman of the board of directors presides at each of our general meetings. The chairman of the meeting is not entitled to a vote at a general meeting in his capacity as chairman.
Subject to the provisions of the Companies Law and the regulations promulgated thereunder, shareholders entitled to participate and vote at general meetings are the shareholders of record on a date to be decided by the board of directors, which may be between four days and 40 days prior to the date of the meeting.
Most shareholders’ resolutions, including resolutions to:
•
amend our articles of association (except for amendments relating to the election of directors and the powers, composition and size of the board of directors);
​
•
make changes in our capital structure such as a reduction of capital, increase of capital or share split, merger or consolidation;
​
•
authorize a new class of shares;
​
•
elect directors, other than external directors (if applicable);
​
​
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•
appoint auditors; or
​
•
approve transactions with office holders (subject to certain exceptions);
​
will be deemed adopted if approved by the holders of a majority of the voting power represented at a shareholders’ meeting, in person or by proxy, and voting on that resolution (excluding abstentions).
Transfer of Shares and Notices
Under the Companies Law, shareholders’ meetings require prior notice of at least 21 days, and if the agenda of the meeting includes certain matters prescribed under the Companies Law and the regulations promulgated thereunder, among others, the appointment or removal of directors, the approval of related party transactions, or an approval of a merger, notice must be provided at least 35 days prior to the meeting. Our fully paid ordinary shares are issued in registered form and are freely transferable under our amended and restated articles of association, unless the transfer is restricted or prohibited by another instrument, applicable law, or the rules of a stock exchange on which the ordinary shares are listed for trade.
Modification of Class Rights
The Companies Law provides that the rights attached to a particular class of shares, such as voting, liquidation and dividend rights, may not be modified without the vote, at a separate meeting of such class, of a majority of the shares of the affected class actually participating in such class meeting, excluding abstentions. The enlargement of an existing class of shares or the issuance of additional shares thereof, shall not be deemed to modify the rights attached to the previously issued shares of such class or of any other class, unless otherwise provided by the terms of the shares.
Election of Directors
Our ordinary shares do not have cumulative voting rights in the election of directors. Therefore, the holders of ordinary shares representing more than 50% of the voting power represented at the general meeting of the shareholders, in person or by proxy, and voting thereon, excluding abstentions, have the power to elect all of the directors whose positions are being filled at that meeting, to the exclusion of the remaining shareholders. In addition, our board of directors is a classified board of directors pursuant to which our directors (other than external directors, if applicable) are elected for staggered terms, which means that shareholders can only elect a limited number of directors in any given year. For additional terms concerning our board of directors and election of directors see “Management — Board Practices — Board of Directors.”
Access to Corporate Records
Under the Companies Law, shareholders have the right to review minutes of our general meetings, our shareholder register and register of significant shareholders (as defined in the Companies Law), our articles of association, our financial statements and any document we are required by law to file publicly with the Israeli Companies Registrar or with the Israel Securities Authority. Any shareholder who specifies the purpose of its request may request to review any document in our possession that relates to any action or transaction with a related party which requires shareholder approval under the Companies Law. We may deny such a request if we determine that the request was not made in good faith, that the document contains a trade secret or patent or that the document’s disclosure may otherwise impair our interests.
Anti-Takeover Provisions; Mergers and Acquisitions
Merger
The Companies Law permits merger transactions with the approval of each party’s board of directors and shareholders (unless certain requirements described under the Companies Law are met). In accordance with the Companies Law, a merger may be approved at a shareholders meeting by a majority of the voting power represented at the meeting, in person or by proxy, and voting on that resolution and, in the case of the target company, a majority vote of each class of its shares, voted on the proposed merger at a
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shareholders meeting. For purposes of the shareholder vote, unless a court rules otherwise, the merger will not be deemed approved if a majority of the votes of shares represented at the meeting of shareholders that are held by parties other than the other party to the merger, or by any person (or group of persons acting in concert) who holds (or hold, as the case may be) 25% or more of the voting rights or the rights to appoint 25% or more of the directors of the other party, vote against the merger. If, however, the merger involves a merger with a company’s own controlling shareholder or if the controlling shareholder has a personal interest in the merger, then the merger is instead subject to the same special majority approval that governs all extraordinary transactions with controlling shareholders (as described under “Management — Approval of Related Party Transactions Under Israeli Law”).
If the transaction would have been approved by the shareholders of a merging company but for the separate approval of each class or the exclusion of the votes of certain shareholders as provided above, a court may still approve the merger upon the petition of holders of at least 25% of the voting rights of a company. For such petition to be granted, the court must find that the merger is fair and reasonable, taking into account the respective values assigned to each of the parties to the merger and the consideration offered to the shareholders of the target company.
Upon the request of a creditor of either party to the proposed merger, the court may delay or prevent the merger if it concludes that there exists a reasonable concern that, as a result of the merger, the surviving company will be unable to satisfy the obligations of the merging entities, and may further give instructions in order to secure the rights of creditors. Moreover, a merger may not be completed until at least 50 days have passed from the time that the merger proposals were filed with the Israeli Registrar of Companies and 30 days have passed since the merger was approved by the shareholders of each merging company.
Special Tender Offer
The Companies Law requires a purchaser to conduct a special tender offer in order to purchase shares in publicly held companies, if as a result of the purchase the purchaser would (i) become a holder of 25% or more of the voting rights in a company in which no other shareholder holds at least 25% of the voting rights, or (ii) become a holder of more than 45% of the voting rights in a company, if there is no other shareholder who holds more than 45% of the voting rights in the company, in each case, subject to certain exceptions.
A special tender offer must be extended to all shareholders, but the offeror is not required to purchase shares representing more than 5% of the voting power attached to the company’s outstanding shares, regardless of how many shares are tendered by shareholders. In general, a special tender offer may be consummated only if  (i) at least 5% of the voting power of the company’s outstanding shares will be acquired by the offeror and (ii) the number of shares tendered in the offer exceeds the number of shares whose holders objected to the offer (excluding the purchaser, controlling shareholders, holders of 25% or more of the voting rights in the company or any person having a personal interest in the acceptance of the tender offer or any other person acting on their behalf, including relatives and entities under such person’s control). If a special tender offer is accepted, then the purchaser or any person or entity controlling it or under common control with the purchaser or such controlling person or entity may not make a subsequent tender offer for the purchase of shares of the target company and may not enter into a merger with the target company for a period of one year from the date of the offer, unless the purchaser or such person or entity undertook to effect such an offer or merger in the initial special tender offer.
Full Tender Offer
Under the Companies Law, a person may not purchase shares of an Israeli public company if, following the purchase of shares, the purchaser would hold more than 90% of the company’s shares or of any class of shares, unless the purchaser makes a tender offer to purchase all of the company’s shares or all the shares of the particular class, as applicable. If the shareholders who do not accept the offer hold less than 5% of the issued and outstanding share capital of the company or of the applicable class, and more than half of the shareholders who do not have a personal interest in the offer accept the offer, all of the shares that the acquirer offered to purchase will be transferred to the acquirer by operation of law.
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However, a tender offer will also be accepted if the shareholders who do not accept the offer hold less than 2% of the issued and outstanding share capital of the company or of the applicable class of shares. The foregoing also applies to the acquisition of voting rights.
Upon a successful completion of such a full tender offer, any shareholder that was an offeree in such tender offer, whether such shareholder accepted the tender offer or not, may, within six months from the date of acceptance of the tender offer, petition an Israeli court to determine whether the tender offer was for less than fair value and that the fair value should be paid as determined by the court. However, under certain conditions, the offeror may include in the terms of the tender offer that an offeree who accepted the offer will not be entitled to petition the Israeli court as described above.
If  (a) the shareholders who did not respond or accept the tender offer hold at least 5% of the issued and outstanding share capital of the company or of the applicable class or the shareholders who accept the offer constitute less than a majority of the offerees that do not have a personal interest in the acceptance of the tender offer, or (b) the shareholders who did not accept the tender offer hold 2% or more of the issued and outstanding share capital of the company (or of the applicable class), the acquirer may not acquire shares of the company that will increase its holdings to more than 90% of the company’s issued and outstanding share capital or of the applicable class from shareholders who accepted the tender offer.
Shares purchased in contradiction to the tender offer rules under the Companies Law will have no rights and will become dormant shares.
Anti-Takeover Measures
The Companies Law allows us to create and issue shares having rights different from those attached to our ordinary shares, including shares providing certain preferred or additional rights to voting, distributions or other matters and shares having preemptive rights. Following the closing of this offering, we will not have any authorized or issued shares other than ordinary shares. In the future, if we do create and issue a class of shares other than ordinary shares, such class of shares, depending on the specific rights that may be attached to them, may delay or prevent a takeover or otherwise prevent our shareholders from realizing a potential premium over the market value of their ordinary shares. The authorization of a new class of shares will require an amendment to our articles of association which requires the prior approval of a majority of our ordinary shares represented and voting at a general meeting. Shareholders voting at such a meeting will be subject to the restrictions under the Companies Law as described in “— Voting, Shareholder Meetings and Resolutions.”
Tax Law
Israeli tax considerations may make potential transactions unappealing to us or to our shareholders whose country of residence does not have a tax treaty with Israel exempting such shareholders from Israeli tax. For example, Israeli tax law does not recognize tax-free share exchanges to the same extent as U.S. tax law. With respect to mergers, Israeli tax law allows for tax deferral in certain circumstances but makes the deferral contingent on the fulfillment of a number of conditions, including, in some cases, a holding period of two years from the date of the transaction during which sales and dispositions of shares of the participating companies are subject to certain restrictions. Moreover, with respect to certain share swap transactions, the tax deferral is limited in time, and when such time expires, the tax becomes payable even if no disposition of the shares has occurred. These provisions could delay, prevent or impede an acquisition of us or our merger with another company, even if such an acquisition or merger would be beneficial to us or to our shareholders.
Changes in Our Capital
Our amended and restated articles of association enable us to increase or reduce our share capital. Any such changes are subject to the provisions of the Companies Law and must be approved by a resolution duly passed by our shareholders at a general meeting. In addition, transactions that have the effect of reducing capital, such as the distribution of dividends in the absence of sufficient retained earnings or profits require the approval of both our board of directors and an Israeli court.
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Transfer Agent and Registrar
We have engaged American Stock Transfer & Trust Company to act as the transfer agent and registrar for our ordinary shares.
Listing
We have applied to list our ordinary shares on Nasdaq under the symbol “INMD.”
Registration Number
Our registration number with the Israeli Companies Registrar is 514073618. Upon the closing of this offering, our registration number may be changed by the Israeli Companies Registrar to indicate that we are a public company.
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SHARES ELIGIBLE FOR FUTURE SALE
Prior to this offering, there has been no public market for our ordinary shares. We cannot predict the effect, if any, that market sales of ordinary shares or the availability of ordinary shares for sale will have on the market price prevailing from time to time. As we describe below, only a limited number of ordinary shares will be available for sale shortly after this offering due to contractual and legal restrictions on resale. Nevertheless, sales of our ordinary shares in the public market after the restrictions lapse, or the perception that those sales may occur, could cause the prevailing market price to decrease or to be lower than it might be in the absence of those sales or perceptions.
Sale of Restricted Shares
Upon the closing of this offering, we will have      ordinary shares outstanding. The ordinary shares sold in this offering will be freely tradable without restriction or further registration under the Securities Act. However, if ordinary shares are purchased by “affiliates,” as that term is defined in Rule 144 under the Securities Act, their sales of ordinary shares would be subject to volume limitations and other restrictions that are described below other than the holding period requirement.
Other than ordinary shares to be sold in this offering, the remaining ordinary shares outstanding upon completion of this offering were issued and sold in reliance on exemptions from the registration requirements of the Securities Act or in transactions outside of the United States and not subject to the Securities Act. These securities may be sold in the public market only if they are registered under the Securities Act, or if they qualify for an exemption from registration under Section 4(a)(1) of the Securities Act or Rule 144 thereunder. These rules are summarized below.
Our ordinary shares outstanding upon closing of this offering will be eligible for sale into the public market as follows:
Approximate Number of Ordinary Shares
​ ​
Description
​
​ ​ ​ After the date of this prospectus, freely tradeable ordinary shares sold in this offering. ​
​ ​ ​ After 180 days from the date of this prospectus, except as otherwise discussed below, the lock-up period will expire, and these additional ordinary shares will be saleable, subject, in some cases, to holding periods and volume limitations. ​
Rule 144
In general, under Rule 144 under the Securities Act as in effect on the date hereof, beginning 90 days after the date hereof, a person who holds restricted ordinary shares (assuming there are any restricted shares) and is not one of our affiliates at any time during the three months preceding a sale, and who has beneficially owned these restricted ordinary shares for at least six months, would be entitled to sell an unlimited number of our ordinary shares, provided current public information about us is available. In addition, under Rule 144, a person who holds restricted ordinary shares in us and is not one of our affiliates at any time during the three months preceding a sale, and who has beneficially owned these restricted ordinary shares for at least one year, would be entitled to sell an unlimited number of ordinary shares immediately upon the closing of this offering without regard to whether current public information about us is available. Beginning 90 days after the date hereof, our affiliates who have beneficially owned our ordinary shares for at least six months will be entitled to sell within any three month period a number of ordinary shares that does not exceed the greater of:
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1% of the number of ordinary shares then outstanding; or
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•
the average weekly trading volume of our ordinary shares on Nasdaq during the four calendar weeks preceding the filing of a notice on Form 144 with respect to the sale; provided that current public information about us is available and the affiliate complies with the manner of sale requirements imposed by Rule 144.
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Affiliates are also subject to additional restrictions on the manner of sales under Rule 144 and notice filing requirements.
Regulation S
Regulation S under the Securities Act provides that securities owned by any person may be sold without registration in the United States, provided that the sale is effected in an offshore transaction and no directed selling efforts are made in the United States (as these terms are defined in Regulation S), subject to certain other conditions. In general, this means that our ordinary shares may be sold in some manner outside the United States without requiring registration in the United States.
Rule 701
In general, under Rule 701 of the Securities Act as currently in effect, each of our employees, consultants or advisors who purchases our ordinary shares from us in connection with a compensatory share plan or other written agreement executed prior to the completion of this offering is eligible to resell such ordinary shares in reliance on Rule 144, but without compliance with some of the restrictions, including the holding period, contained in Rule 144.
Form S-8
Following completion of this offering, we intend to file a registration statement on Form S-8 under the Securities Act to register      ordinary shares issued or issuable under our share option plans. The registration statement on Form S-8 is expected to become effective automatically upon filing. As of the date of this prospectus, options to purchase      ordinary shares were issued and outstanding, of which options to purchase      ordinary shares had vested and had not been exercised. Ordinary shares issued upon exercise of a share option and registered under the Form S-8 registration statement will, subject to vesting provisions and Rule 144 volume limitations applicable to our affiliates, be available for sale in the public market, immediately following the expiration of or release from the lock-up agreements.
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TAXATION
The following description is not intended to constitute a complete analysis of all the tax consequences relating to the acquisition, ownership and disposition of our ordinary shares. You should consult your own tax advisor concerning the tax consequences in your particular situation, as well as any tax consequences that may arise under the laws of any state, local, foreign or other taxing jurisdiction.
Material Israeli Tax Considerations
The following is a summary of the material Israeli tax laws applicable to us, and some Israeli Government programs benefiting us. This section also contains a discussion of some Israeli tax consequences to persons acquiring ordinary shares in this offering. This summary does not discuss all the acts of Israeli tax law that may be relevant to a particular investor in light of his or her personal investment circumstances or to some types of investors subject to special treatment under Israeli law. Examples of this kind of investor include residents of Israel, traders in securities or persons that own, directly or indirectly, 10% or more of our outstanding voting capital, all of whom are subject to special tax regimes not covered in this discussion. Some parts of this discussion are based on new tax legislation which has not been subject to judicial or administrative interpretation, and we cannot assure you that Israeli governmental and tax authorities or the Israeli courts will accept the views expressed below. The discussion below is subject to amendment under Israeli law or changes to the applicable judicial or administrative interpretations of Israeli law, which could affect the tax consequences described below. The discussion should not be construed as legal or professional tax advice and does not cover all possible tax considerations.
Potential investors are urged to consult their own tax advisors as to the Israeli or other tax consequences of the purchase, ownership and disposition of our ordinary shares, including, in particular, the effect of any foreign, state or local taxes. No stamp taxes will be payable to the State of Israel in connection with the sale of our ordinary shares in this offering.
General Corporate Tax Structure in Israel
Israeli companies are generally subject to tax on their taxable income at the corporate tax rate of 23% in 2018 and thereafter (which was reduced from 24% and 25% in 2017 and 2016, respectively). However, the effective tax rate payable by a company that derives income from a Benefited Enterprise (as discussed below) may be considerably less. Capital gains derived by an Israeli resident company are subject to tax at the regular corporate tax rate.
Tax Benefits under the Law for the Encouragement of Capital Investments, 1959
The Law for the Encouragement of Capital Investments, 1959, or the Investment Law, provides certain incentives for capital investments in production facilities (or other eligible assets) by “Industrial Enterprises” (as defined under the Investment Law).
Tax Benefits Under the 2005 Amendment
An amendment to the Investment Law, which became effective as of April 1, 2005, or the 2005 Amendment, changed certain provisions of the Investment Law. An eligible investment program under the 2005 Amendment qualifies for benefits as a “Benefited Enterprise.” Prior to the 2005 Amendment, investment programs under the Investment Law were called “Approved Enterprises.” According to the 2005 Amendment, only Approved Enterprises receiving cash grants require the prior approval of the Investment Center. Rather, a company may claim the tax benefits offered by the Investment Law directly in its tax returns, provided that its facilities meet the criteria for tax benefits set forth in the 2005 Amendment. A company that has a Benefited Enterprise may, in its discretion, approach the Israel Tax Authority for a pre-ruling confirming that it is in compliance with the provisions of the Investment Law.
The duration of the tax benefits for a Benefited Enterprise is limited to the earlier of seven or ten years (depending on the geographic location of the Benefited Enterprise within Israel) from the Commencement Year (as described below) or 12 years from the first day of the year of election. Commencement Year is defined as the later of the first tax year in which a company had derived taxable income for tax purposes
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from the Benefited Enterprise, or the year of election, which is the year in which a company requested to have the tax benefits apply to the Benefited Enterprise. The tax benefits granted to a Benefited Enterprise are determined, depending on the geographic location of the Benefited Enterprise within Israel, according to one of the following:
(i) Exemption from corporate tax may be available on undistributed income for a period of two to ten years, depending on the geographic location of the Benefited Enterprise within Israel, and a reduced corporate tax rate of 10% to 25% for the remainder of the benefits period, depending on the level of foreign investment in each year.
In addition, a company that has a Benefited Enterprise program is eligible for further tax benefits if it qualifies as a Foreign Investors’ Company, or FIC. The level of foreign investment is measured as the percentage of rights in the company (in the terms of shares, rights to profits, voting and appointment of directors) and of combined share capital and shareholder loans that are owned, directly or indirectly, by persons who are not residents of Israel. The determination as to whether a company qualifies as an FIC is made on an annual basis.
The 2011 Amendment as described below has eliminated the definition of a FIC. However, according to the 2011 Amendment’s transitional provisions, the tax benefits of companies with Benefited Enterprise plans that opt to remain under the Benefited Enterprise regime in accordance with the Investment Law prior to the 2011 Amendment will be preserved.
If the company pays a dividend out of income derived from the Benefited Enterprise during the tax exemption period, such income will be subject to deferred corporate tax with respect to the amount distributed (grossed up to reflect such pre-tax income that it would have had to earn in order to distribute the dividend) at the corporate tax rate which would have otherwise been applied. The company is required to withhold tax on such distribution at a rate of 15%, or such lower rate may be provided in an applicable tax treaty (subject to the receipt in advance of a valid certificate from the Israel Tax Authority allowing for a reduced tax rate); or
(ii) Reduced corporate tax rates for companies with facilities in certain geographical locations in Israel.
Our facilities in Israel were granted Benefited Enterprise status and thereunder we enjoy a ten-year tax exemption from corporate tax on our undistributed income derived from the Benefited Enterprise. The first year in which we were exempted from tax was 2012 and the ten-year eligibility period of tax exemption ends in 2021. In order to remain eligible for the tax benefits of a Benefited Enterprise, we must continue to meet certain conditions stipulated in the Investment Law and its regulations, as amended, and with the conditions set forth in a tax ruling we received in connection therewith. If we do not meet these requirements, the tax benefits could be reduced or canceled and we could be required to refund any tax benefits we might already have enjoyed.
Tax Benefits Under the 2011 Amendment
In December 2010, the Israeli Parliament approved amendment 68 to the Investment Law, or the 2011 Amendment. The 2011 Amendment significantly revised the tax incentive regime in Israel and it commenced on January 1, 2011.
The 2011 Amendment provided for a new and additional status of a “Preferred Enterprise,” which introduced new benefits for income generated by a “Preferred Company” through its Preferred Enterprise. The definition of a Preferred Company, includes, inter alia , a company incorporated in Israel that (1) is not wholly owned by a government entity, (2) owns a Preferred Enterprise and (3) is controlled and managed from Israel and is subject to further conditions set forth in the Investment Law. Moreover, a Preferred Company needs to meet certain condition stipulated in the Investment Law such as being an industrial company (including a minimum threshold of 25% export).
A Preferred Company is entitled to a reduced corporate tax rate of 16% in 2018 with respect to income attributable to its Preferred Enterprise, unless the Preferred Enterprise is located in a specified development zone, known as Development Zone “A,” in which case the rate is currently 7.5% in 2018.
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Dividends paid out of income attributed to a Preferred Enterprise are generally subject to tax at the rate of 20% or such lower rate as may be provided in an applicable tax treaty. However, if such dividends are paid to an Israeli company, no tax is required to be withheld (although, if the funds are subsequently distributed to individuals or non-Israeli residents (individuals and corporations), withholding tax would apply when distributing the dividend to such individuals or non-Israeli residents).
We have examined the possible effect, if any, of the provisions of the 2011 Amendment on our financial statements and have decided, at this time, not to apply for the new benefits under the 2011 Amendment.
New Tax Benefits Under the 2017 Amendment
Additional amendments to the Investment Law became effective in January 2017, or the 2017 Amendment. Under the 2017 Amendment, and provided the conditions stipulated therein are met, income derived by Preferred Companies from “Preferred Technological Enterprises,” or PTE (as defined in the 2017 Amendment), would be subject to reduced corporate tax rates of 7.5% in Development Zone “A” and 12% elsewhere in Israel, or 6% in the case of a “Special Preferred Technological Enterprise,” or SPTE (as defined in the 2017 Amendment) regardless of the company’s geographical location within Israel. A Preferred Company distributing dividends from income derived from its PTE or SPTE, would subject the recipient to a 20% tax (or lower, if so provided under an applicable tax treaty). The 2017 Amendment further provides that, in certain circumstances, a dividend distributed to a corporate shareholder who is not an Israeli resident for tax purposes would be subject to a 4% tax ( inter alia , if the amount of foreign investors in the distributing company exceeds 90%). Such taxes would generally be withheld at source by the distributing company.
On June 14, 2017, the Encouragement of Capital Investments Regulations (Preferred Technology Income and Capital Profits for a Technological Enterprise), 2017, or the Regulations, were published, which adopted Action 5 under the base erosion and profit shifting, or BEPS, regulations. The Regulations describe, inter alia , the mechanism used to determine the calculation of the benefits under the PTE and under the SPTE regimes and determine certain requirements relating to documentation of intellectual property for the purpose of a PTE. According to these provisions, a company that complies with the terms under the PTE regime may be entitled to certain tax benefits with respect to income generated during the company’s regular course of business and derived from the preferred intangible asset (as determined in the Investment Law), excluding income derived from intangible assets used for marketing and income attributed to production activity. In the event that intangible assets used for marketing purposes generate over 10% of the PTE’s income, the relevant portion, calculated using a transfer pricing study, would be subject to regular corporate income tax. If such income does not exceed 10%, the PTE will not be required to exclude the marketing income from the PTE’s total income. The Regulations set a presumption of direct production expenses plus 10% with respect to income related to production, which can be countered by the results of a supporting transfer pricing study. Tax rates applicable to such production income expenses will be similar to the tax rates under the Preferred Enterprise regime, to the extent such income would be considered as eligible. In order to calculate the preferred income, the PTE is required to take into account the income and the research and development expenses that are attributed to each single preferred intangible asset. However, the transitional provisions allow companies to take into account the income and research and development expenses attributed to all of the preferred intangible assets they have.
Under the transitional provisions of the 2017 Amendment, a company is allowed to continue to enjoy the tax benefits available under the Investment Law prior to the 2017 Amendment until the end of the period of benefits, as defined in the Investment Law. In each year during the period of benefit under its Benefited Enterprise status, the Company will be able to opt-in for application of the 2017 Amendment, thereby making itself available to the tax rates described above. A company’s decision to opt-in for application of the 2017 Amendment is irrecoverable.
As of December 31, 2018, we decided not to adopt the application of the 2017 Amendment.
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Law for the Encouragement of Industry (Taxes), 1969
We believe that we currently qualify as an “Industrial Company” within the meaning of the Law for the Encouragement of Industry (Taxes), 1969, or the Industry Encouragement Law. The Industry Encouragement Law defines an “Industrial Company” as an Israeli-resident company, incorporated in Israel, of which 90% or more of its income in any tax year, other than of income from defense loans, capital gains, interest and dividends, is derived from an “Industrial Enterprise” owned by it and located in Israel or in the “Area,” in accordance with the definition in the section 3a of the Tax Ordinance. An “Industrial Enterprise” is defined as an enterprise which is held by an Industrial Company whose principal activity in a given tax year is industrial production.
The following tax benefits, among others, are available to Industrial Companies:
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amortization of the cost of purchased know-how, patents and certain other intangible property rights (other than goodwill), which are used for the development or promotion of the Industrial Enterprise, over an eight-year period for tax purposes, commencing in the year where the Industrial Company began to utilize them;
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accelerated depreciation rates on equipment and buildings;
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under specified conditions, an election to file consolidated tax returns with additional related Israeli Industrial Companies; and
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expenses related to a public offering are deductible in equal amounts over three years, beginning from the year of the offering.
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Eligibility for the benefits under the Industry Encouragement Law is not subject to receipt of prior approval from any governmental authority. We cannot assure that we will continue to qualify as an “Industrial Company” or that the benefits described above will be available to us in the future.
Capital Gains Taxes Applicable to Israeli Resident and Non-Israeli Resident Shareholders
Capital gains tax is imposed on the sale of capital assets by an Israeli resident and on the sale of such assets by non-Israeli residents if those assets are either: (i) located in Israel, (ii) shares or rights to shares in Israeli resident companies, or (iii) represent, directly or indirectly, rights to assets located in Israel, unless a specific exemption is available under Israeli tax law or unless a treaty between Israel and the country of the non-resident provides otherwise. The Tax Ordinance distinguishes between “Real Capital Gain” and the “Inflationary Surplus.” Real Capital Gain is the excess of the total capital gain over Inflationary Surplus. You should consult with your own tax advisor as to the method you should use to determine the Inflationary Surplus. Inflationary Surplus is not subject to tax in Israel.
Generally, the tax rate applicable to real capital gains derived by individuals on the sale of our ordinary shares acquired in this offering will be taxed at the rate of 25%, unless such shareholder claims a deduction for interest and linkage differences expenses in connection with such shares, in which case the gain will generally be taxed at a rate of 30%. If the individual shareholder is a Controlling Shareholder at the time of the sale or at any time during the 12-month period preceding such sale, such gain will be taxed at the rate of 30%. A “Controlling Shareholder” is defined as a person who holds, directly or indirectly, including together with others, at least 10% of any means of control in the company (including, among other things, the right to receive profits of the company, voting rights, the right to receive the proceeds upon the company’s liquidation and the right to appoint a director).
Real capital gains derived by corporations will be generally subject to the regular corporate tax rate (23% in 2018 and thereafter). Individual and corporate shareholders dealing in securities are taxed at the tax rates applicable to business income: 23% for corporations in 2018 and thereafter and a marginal tax rate of up to 47% in 2018 and thereafter for individuals plus an additional excess tax of 3% as described below.
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Non-Israeli Resident Shareholders
Non-Israeli residents (individuals and corporations) are generally exempt from Israeli capital gains tax on any gains derived from the sale, exchange or disposition of shares of Israeli companies publicly traded on a recognized stock exchange outside of Israel, provided, among other things, that such shareholders did not acquire their shares prior to the company’s initial public offering and the gains were not derived from a permanent establishment of such shareholders in Israel. However, shareholders that are non-Israeli entities will not be entitled to such exemption if Israeli residents: (1) have directly or indirectly, alone or together with another, a controlling interest of more than 25% of any of the means of control in such non-Israeli corporation or (2) are the beneficiaries of or are entitled to 25% or more of the revenues or profits of such non-Israeli entity, whether directly or indirectly. This exemption is not applicable to a person whose gains from selling or otherwise disposing of the shares are deemed to be business income.
In addition, a sale of shares may be exempt from Israeli capital gains tax under the provisions of an applicable tax treaty and subject to the receipt in advance of a valid certificate from the Israeli tax authorities allowing of such exemption.
For example, pursuant to the Convention Between the Governments of the United States and Israel with respect to Taxes of Income, as amended, or the U.S.-Israel Tax Treaty, the sale, exchange or disposition of ordinary shares by a person who qualifies as a resident of the United States within the meaning of the U.S.-Israel Tax Treaty and who holds the shares as a capital asset and is entitled to claim the benefits afforded to such person by the U.S.-Israel Tax Treaty generally will not be subject to the Israeli capital gains tax unless: (i) such person holds, directly or indirectly, shares representing 10% or more of our voting power during any part of the 12-month period preceding such sale, exchange or disposition, subject to certain conditions; (ii) the capital gains from such sale, exchange or disposition can be allocated to a permanent establishment of the shareholder in Israel or (iii) such person is an individual and was present in Israel for a period or periods of 183 days or more in the aggregate during the relevant tax year. In any such case, the sale, exchange or disposition of such shares would be subject to Israeli tax, to the extent applicable. Eligibility to benefit from tax treaties is conditioned upon the shareholder presenting a withholding certificate issued by the Israel Tax Authority prior to the applicable payment.
Withholding and Reporting
Either the purchaser, the Israeli stockbrokers or financial institutions through which the shares are held is obliged to withhold tax on the amount of consideration paid upon the sale of our ordinary shares (or on the capital gain realized on the sale, if known), at the Israeli corporate tax rate for Israeli companies (23% in 2018 and thereafter). In case the seller is an individual, the applicable withholding tax rate would be 25% of the amount of consideration paid upon the sale of shares (or on the capital gain realized on the sale, if known).
In some instances where our shareholders may be liable for Israeli tax on the sale of our ordinary shares, the payment of the consideration may be subject to the withholding of Israeli tax at source. Shareholders, including non-Israeli resident shareholders, may be required to demonstrate that they are exempt from tax on their capital gains in order to avoid withholding at source at the time of sale. In transactions involving a sale of all of the securities of an Israeli resident company, in the form of a merger or otherwise, the Israel Tax Authority may require non-Israeli resident shareholders who are not liable for Israeli tax to sign a declaration in a form specified by the Israel Tax Authority or obtain a specific exemption from the Israel Tax Authority to confirm their status as a non-resident of Israel, and, in the absence of such declarations or exemptions, may require the purchaser of the securities to withhold taxes at source.
The sale of securities traded on a stock exchange, requires that a detailed return, including a computation of the tax due, be filed and an advanced payment must be paid on January 31 and July 31 of every tax year in respect of sales of securities made within the previous six months. However, if all tax due was withheld at source according to applicable provisions of the Tax Ordinance and the regulations promulgated thereunder, then the aforementioned return need not be filed and no advance payment must be made.
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Taxation of Dividend Distributions
A distribution of dividends from income, which is not attributed to an Approved Enterprise/Benefited Enterprise/Preferred Enterprise/Technology Enterprises to an Israeli resident individual, will generally be subject to income tax at a rate of 25%. However, a 30% tax rate will apply if the dividend recipient is a “Controlling Shareholder” (as defined above) at the time of the distribution or at any time during the preceding 12-month period.
The Tax Ordinance generally provides that a non-Israeli resident (either individual or corporation) is subject to Israeli income tax on the receipt of dividends at the rate of 25% (30% if the dividends recipient is a “Controlling Shareholder” (as defined above), at the time of the distribution or at any time during the preceding 12 months).
Generally, Israeli resident corporations are not subject to Israeli tax on the receipt of dividends paid on shares of Israeli corporations, other than with respect to dividends distributed from income that has accrued during the benefits period and attributed to a Benefited Enterprise as described above.
Payers of dividends on our shares, including the Israeli stockbrokers or the financial institutions through which the shares are held, are generally required, subject to reduced tax rates and the demonstration of a shareholder of his, her or its foreign residency, to withhold taxes upon the distribution of dividends at a rate of 25% (whether or not the recipient is a “Controlling Shareholder”) provided that the shares are registered with a nominee company in Israel (for corporations and individuals), unless a reduced tax rate under the provisions of an applicable double tax treaty (subject to the receipt in advance of a valid certificate from the Israel Tax Authority allowing for a reduced tax rate) is available.
Dividends paid out of income attributed to a Benefited Enterprise are generally subject to withholding tax at source at the rate of 15% or such lower rate as may be provided in an applicable tax treaty.
For example, under the U.S.-Israel Tax Treaty, the following rates will apply in respect of dividends distributed by an Israeli resident company to a U.S. resident (for purposes of the U.S.-Israel Treaty): (i) with regard to a dividend distributed from income which is not attributed to an Approved Enterprise/Benefited Enterprise/Preferred Enterprise/Preferred Technology Enterprise or Special Preferred Technology Enterprise, if the U.S. resident is a corporation which holds during that portion of the taxable year which precedes the date of payment of the dividend and during the whole of its prior taxable year (if any), at least 10% of the outstanding shares of the voting stock of the Israeli resident paying corporation and not more than 25% of the gross income of the Israeli resident paying corporation for such prior taxable year (if any) consists of certain types of interest or dividends — the maximum tax rate of withholding is 12.5% if a certificate for a reduced withholding tax rate would be provided in advance from the Israel Tax Authority, (ii) with regard to a dividend distributed from income derived from an Approved Enterprise/Benefited Enterprise/Preferred Enterprise under the Investment Law, if the U.S. resident is a corporation which holds during that portion of the taxable year which precedes the date of payment of the dividend and during the whole of its prior taxable year (if any), at least 10% of the outstanding shares of the voting stock of the Israeli resident paying corporation and not more than 25% of the gross income of the Israeli resident paying corporation for such prior taxable year (if any) consists of certain types of interest or dividends, the tax rate of withholding 15% will be applicable if a certificate for a reduced withholding tax rate would be provided in advance from the Israel Tax Authority, and (iii) in all other cases, the tax rate is 25%, or the domestic rate (if such is lower). The aforementioned rates under the U.S.-Israel Tax Treaty will not apply if the dividend income was derived through a permanent establishment of the U.S. resident in Israel.
If the dividend is attributable partly to income derived from an Approved Enterprise, Benefited Enterprise or Preferred Enterprise, and partly from other sources of income, the income tax rate will be a blended rate reflecting the relative portions of the types of income.
A non-Israeli resident who receives dividend income derived from or accrued from Israel, from which the full amount of tax was withheld at source, is generally exempt from the obligation to file tax returns in Israel with respect to such income, provided that (i) such income was not generated from a business conducted in Israel by the taxpayer, and (ii) the taxpayer has no other taxable sources of income in Israel with respect to which a tax return is required to be filed.
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We have never declared or paid cash dividends to our shareholders and currently we do not intend to distribute cash or other dividends in the foreseeable future. We cannot assure you that, in the event we declare a dividend, we will designate the profits that are being distributed in a way that will reduce shareholders’ tax liability.
Foreign Exchange Regulations
Non-residents of Israel who hold our ordinary shares are able to receive any dividends, and any amounts payable upon the dissolution, liquidation and winding up of our affairs, freely repayable in non-Israeli currency at the rate of exchange prevailing at the time of conversion. However, Israeli income tax is generally required to have been paid or withheld on these amounts. In addition, the statutory framework for the potential imposition of currency exchange controls has not been eliminated, and may be restored at any time by administrative action.
Excess Tax
Individuals who are subject to tax in Israel are also subject to an additional tax at a rate of 3% on annual income exceeding a certain threshold (NIS 649,560 for 2019), which amount is linked to the annual change in the Israeli consumer price index, including, but not limited to income derived from dividends, interest and capital gains, subject to the provisions of an applicable tax treaty.
Estate and Gift Tax
Israeli law presently does not impose estate or gift taxes.
Material U.S. Federal Income Tax Considerations to U.S. Holders
The following discussion is a description of the material U.S. federal income tax considerations applicable to an investment in the ordinary shares by U.S. Holders who acquire their ordinary shares pursuant to this offering and who hold the ordinary shares as capital assets for U.S. federal income tax purposes, generally, for investment. As used in this section, the term “U.S. Holder” means a beneficial owner of an ordinary share who, for U.S. federal income tax purposes, is or is treated as any of the following:
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a citizen or resident of the United States;
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a corporation created or organized in or under the laws of the United States or any political subdivision thereof, including the District of Columbia;
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an estate, the income of which is subject to U.S. federal income taxation regardless of its source; or
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a trust if the trust has elected validly to be treated as a United States person for U.S. federal income tax purposes or if a U.S. court is able to exercise primary supervision over the trust’s administration and one or more United States persons have the authority to control all of the trust’s substantial decisions.
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This description is based on provisions of the U.S. Internal Revenue Code of 1986, as amended, referred to in this discussion as the Code, existing and proposed U.S. Treasury regulations and administrative and judicial interpretations, each as available and in effect as of the date of this prospectus. These sources may change and are open to differing interpretations, possibly with retroactive effect in a manner that could adversely affect a U.S. Holder of our ordinary shares. This description does not discuss all aspects of U.S. federal income taxation that may be applicable to investors in light of their particular circumstances or to investors who are subject to special treatment under U.S. federal income tax law, including:
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insurance companies;
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dealers in stocks, securities or currencies;
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financial institutions and financial services entities;
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real estate investment trusts;
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regulated investment companies;
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partnerships and other pass-through entities, and investors in such entities;
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persons that receive ordinary shares as compensation for the performance of services;
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tax-exempt organizations;
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persons that hold ordinary shares as a position in a straddle or as part of a hedging, conversion or other integrated instrument or persons entering into a constructive sale with respect to the ordinary shares;
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persons subject to special tax accounting rules under Section 451(b) of the Code;
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individual retirement and other tax-deferred accounts;
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expatriates of the United States;
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persons having a functional currency other than the U.S. dollar; and
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direct, indirect or constructive owners of 10% or more of our ordinary shares and/or other equity by vote or value.
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This discussion does not address any U.S. state or local or non-U.S. tax consequences or any U.S. federal gift or estate tax or alternative minimum tax considerations.
If an entity or arrangement treated as a partnership for U.S. federal income tax purposes holds ordinary shares, the U.S. federal income tax consequences relating to an investment in the ordinary shares will depend in part upon the status and activities of such entity or arrangement and the particular partner and certain determinations made at the partner level. Any such entity or arrangement should consult its own tax advisor regarding the U.S. federal income tax consequences applicable to it and its partners of the purchase, ownership and disposition of ordinary shares.
We urge you to consult with your own tax advisor regarding the tax consequences of investing in the ordinary shares, including the effects of federal, state, local, foreign and other tax laws.
Distributions Paid on the Ordinary Shares
As described under the section entitled “Dividend Policy” in this prospectus, we have never paid cash dividends and we currently do not intend to pay cash dividends in the foreseeable future. Subject to the discussion below under “— Passive Foreign Investment Company Considerations,” a U.S. Holder generally will be required to include in gross income as ordinary dividend income the amount of any distributions paid on the ordinary shares, including the amount of any Israeli taxes withheld, to the extent that those distributions are paid out of our current or accumulated earnings and profits as determined for U.S. federal income tax purposes. Subject to the discussion below under “— Passive Foreign Investment Company Considerations,” distributions in excess of our earnings and profits will be applied against and will reduce the U.S. Holder’s tax basis in its ordinary shares and, to the extent they exceed that tax basis, will be treated as gain from a sale or exchange of those ordinary shares. Our dividends will not qualify for the dividends-received deduction applicable in some cases to U.S. corporations. Dividends paid in NIS, including the amount of any Israeli taxes withheld, will be includible in the income of a U.S. Holder in a U.S. dollar amount calculated by reference to the exchange rate in effect on the day they are received by the U.S. Holder. Any gain or loss resulting from currency exchange fluctuations during the period from the date the dividend is includible in the income of the U.S. Holder to the date that payment is converted into U.S. dollars generally will be treated as ordinary income or loss. Because we may not account for our earnings and profits in accordance with U.S. federal income tax principles, U.S. Holders should expect all distributions to be reported to them as dividends.
Distributions on ordinary shares that are treated as dividends generally will constitute income from sources outside the United States for foreign tax credit purposes and generally will constitute passive category income. Subject to certain complex conditions and limitations, Israeli taxes withheld on any distributions on ordinary shares may be eligible for credit against a U.S. Holder’s federal income tax
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liability. The rules relating to the determination of the U.S. foreign tax credit are complex, and U.S. Holders should consult their tax advisors regarding the availability of a foreign tax credit in their particular circumstances and the possibility of claiming an itemized deduction (in lieu of the foreign tax credit) for any foreign taxes paid or withheld.
Dividends paid by a “qualified foreign corporation” to non-corporate U.S. Holders are eligible for taxation at a reduced capital gains rate rather than the marginal tax rates generally applicable to ordinary income provided that certain requirements are met. Each U.S. Holder is advised to consult its tax advisors regarding the availability of the reduced tax rate on dividends with regard to its particular circumstances. Distributions on ordinary shares that are treated as dividends generally will not be eligible for the “dividends received” deduction generally allowed to corporate shareholders with respect to dividends received from U.S. corporations.
A corporation organized outside of the United States, or a non-U.S. corporation (other than a corporation that is classified as a PFIC for the taxable year in which the dividend is paid or the preceding taxable year) generally will be considered to be a qualified foreign corporation (a) if it is eligible for the benefits of a comprehensive tax treaty with the United States which the Secretary of Treasury of the United States determines is satisfactory for purposes of this provision and which includes an exchange of information provision, or (b) with respect to any dividend it pays on ordinary shares that are readily tradable on an established securities market in the United States. We believe that we qualify as a resident of Israel for purposes of, and are eligible for the benefits of, the U.S.-Israel Treaty, although there can be no assurance in this regard. Further, the Internal Revenue Service, or IRS, has determined that the U.S.-Israel Treaty is satisfactory for purposes of the qualified dividend rules and that it includes an exchange of information provision. Therefore, subject to the discussion below under “— Passive Foreign Investment Company Considerations,” if the U.S.-Israel Treaty is applicable, such dividends will generally be “qualified dividend income” in the hands of individual U.S. Holders, provided that certain conditions are met, including holding period and the absence of certain risk reduction transaction requirements. Each U.S. Holder is advised to consult its tax advisors regarding the availability of the reduced tax rate on dividends with regard to its particular circumstances.
Disposition of Ordinary Shares
Subject to the discussion below under “— Passive Foreign Investment Company Considerations,” a U.S. Holder generally will recognize capital gain or loss for U.S. federal income tax purposes upon the sale, exchange or other disposition of ordinary shares in an amount equal to the difference, if any, between the amount realized (i.e., the amount of cash plus the fair market value of any property received) on the sale, exchange or other disposition and such U.S. Holder’s adjusted tax basis in the ordinary shares. Such capital gain or loss generally will be long-term capital gain taxable at a reduced rate for non-corporate U.S. Holders or long-term capital loss if, on the date of sale, exchange or other disposition, the ordinary shares were held by the U.S. Holder for more than one year. Any capital gain of a non-corporate U.S. Holder that is not long-term capital gain is taxed at ordinary income rates. The deductibility of capital losses is subject to limitations. Any gain or loss recognized from the sale or other disposition of ordinary shares will generally be gain or loss from sources within the United States for U.S. foreign tax credit purposes.
Passive Foreign Investment Company Considerations
We believe that we were not a PFIC for our taxable year ended December 31, 2018, and we do not expect to be classified as a PFIC for U.S. federal income tax purposes for the current year ending December 31, 2019 or the foreseeable future. However, the relevant rules for determining whether or not we are a PFIC as applied to our business are not entirely clear and certain aspects of the relevant tests will be outside our control. Therefore, no assurance can be given that we will not be a PFIC for any taxable year.
In general, a non-U.S. corporation will be treated as a PFIC, for any taxable year in which either (1) at least 75% of its gross income is “passive income,” referred to as the PFIC income test, or (2) on average at least 50% of its assets, determined on a quarterly basis, are assets that produce passive income or are held for the production of passive income, referred to as the PFIC asset test. Passive income for this purpose generally includes, among other things, dividends, interest, royalties, rents, and gains from the sale or exchange of property that gives rise to passive income. Assets that produce or are held for the production of
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passive income generally include cash, even if held as working capital or raised in a public offering, marketable securities, and other assets that may produce passive income. Generally, in determining whether a non-U.S. corporation is a PFIC, a proportionate share of the income and assets of each corporation in which it owns, directly or indirectly, at least a 25% interest (by value) is taken into account.
If we are a PFIC in any taxable year during which a U.S. Holder owns ordinary shares, the U.S. Holder could be liable for additional taxes and interest charges under the “PFIC excess distribution regime” upon (1) a distribution paid during a taxable year that is greater than 125% of the average annual distributions paid in the three preceding taxable years, or, if shorter, the U.S. Holder’s holding period for the ordinary shares, and (2) any gain recognized on a sale, exchange or other disposition, including, under certain circumstances, a pledge, of the ordinary shares, whether or not we continue to be a PFIC. Under the PFIC excess distribution regime, the tax on such distribution or gain would be determined by allocating the distribution or gain ratably over the U.S. Holder’s holding period for ordinary shares. The amount allocated to the current taxable year (i.e., the year in which the distribution occurs or the gain is recognized) and any year prior to the first taxable year in which we are a PFIC will be taxed as ordinary income earned in the current taxable year. The amount allocated to other taxable years will be taxed at the highest marginal rates in effect for individuals or corporations, as applicable, to ordinary income for each such taxable year, and an interest charge, generally applicable to underpayments of tax, will be added to the tax.
If we are a PFIC for any year during which a U.S. Holder holds ordinary shares, we must generally continue to be treated as a PFIC by that holder for all succeeding years during which the U.S. Holder holds the ordinary shares, unless we cease to meet the requirements for PFIC status and the U.S. Holder makes a “deemed sale” election with respect to the ordinary shares. If the election is made, the U.S. Holder will be deemed to sell the ordinary shares it holds at their fair market value on the last day of the last taxable year in which we qualified as a PFIC, and any gain recognized from such deemed sale would be taxed under the PFIC excess distribution regime. After the deemed sale election, the U.S. Holder’s ordinary shares would not be treated as shares of a PFIC unless we subsequently become a PFIC.
If we are a PFIC for any taxable year during which a U.S. Holder holds ordinary shares and one of our non-U.S. corporate subsidiaries is also a PFIC (i.e., a lower-tier PFIC), such U.S. Holder would be treated as owning a proportionate amount (by value) of the shares of the lower-tier PFIC and would be taxed under the PFIC excess distribution regime on distributions by the lower-tier PFIC and on gain from the disposition of shares of the lower-tier PFIC even though such U.S. Holder would not receive the proceeds of those distributions or dispositions. Each U.S. Holder is advised to consult its tax advisors regarding the application of the PFIC rules to our non-U.S. subsidiaries.
If we are a PFIC, a U.S. Holder will not be subject to tax under the PFIC excess distribution regime on distributions or gain recognized on ordinary shares if such U.S. Holder makes a valid “mark-to-market” election for our ordinary shares. A mark-to-market election is available to a U.S. Holder only for “marketable stock.” Our ordinary shares will be marketable stock as long as they remain listed on Nasdaq and are regularly traded, other than in de minimis quantities, on at least 15 days during each calendar quarter. If a mark-to-market election is in effect, a U.S. Holder generally would take into account, as ordinary income for each taxable year of the U.S. Holder, the excess of the fair market value of ordinary shares held at the end of such taxable year over the adjusted tax basis of such ordinary shares. The U.S. Holder would also take into account, as an ordinary loss each year, the excess of the adjusted tax basis of such ordinary shares over their fair market value at the end of the taxable year, but only to the extent of the excess of amounts previously included in income over ordinary losses deducted as a result of the mark-to-market election. The U.S. Holder’s tax basis in ordinary shares would be adjusted to reflect any income or loss recognized as a result of the mark-to-market election. Any gain from a sale, exchange or other disposition of ordinary shares in any taxable year in which we are a PFIC would be treated as ordinary income and any loss from such sale, exchange or other disposition would be treated first as ordinary loss (to the extent of any net mark-to-market gains previously included in income) and thereafter as capital loss.
A mark-to-market election will not apply to ordinary shares for any taxable year during which we are not a PFIC, but will remain in effect with respect to any subsequent taxable year in which we become a PFIC. Such election will not apply to any non-U.S. subsidiaries that we may organize or acquire in the
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future. Accordingly, a U.S. Holder may continue to be subject to tax under the PFIC excess distribution regime with respect to any lower-tier PFICs that we may organize or acquire in the future notwithstanding the U.S. Holder’s mark-to-market election for the ordinary shares.
The tax consequences that would apply if we are a PFIC would also be different from those described above if a U.S. Holder were able to make a valid qualified electing fund, or QEF, election. At this time, we do not expect to provide U.S. Holders with the information necessary for a U.S. Holder to make a QEF election. Prospective investors should assume that a QEF election will not be available.
Each U.S. person that is an investor of a PFIC is generally required to file an annual information return on IRS Form 8621 containing such information as the U.S. Treasury Department may require. The failure to file IRS Form 8621 could result in the imposition of penalties and the extension of the statute of limitations with respect to U.S. federal income tax.
The U.S. federal income tax rules relating to PFICs are very complex. Prospective U.S. investors are strongly urged to consult their own tax advisors with respect to the impact of PFIC status on the purchase, ownership and disposition of ordinary shares, the consequences to them of an investment in a PFIC, any elections available with respect to the ordinary shares and the IRS information reporting obligations with respect to the purchase, ownership and disposition of ordinary shares of a PFIC.
Medicare Tax
Certain U.S. Holders that are individuals, estates or trusts and whose income exceeds certain thresholds generally are subject to a 3.8% tax on all or a portion of their net investment income, which may include their gross dividend income and net gains from the disposition of ordinary shares. If you are a U.S. person that is an individual, estate or trust, you are encouraged to consult your tax advisors regarding the applicability of this Medicare tax to your income and gains in respect of your investment in ordinary shares.
Information Reporting and Back-up Withholding
U.S. Holders may be required to file certain U.S. information reporting returns with the IRS with respect to an investment in ordinary shares, including, among others, IRS Form 8938 (Statement of Specified Foreign Financial Assets). As described above under “— Passive Foreign Investment Company Considerations,” each U.S. Holder who is a shareholder of a PFIC must file an annual report containing certain information. U.S. Holders paying more than $100,000 for ordinary shares may be required to file IRS Form 926 (Return by a U.S. Transferor of Property to a Foreign Corporation) reporting this payment. Substantial penalties may be imposed upon a U.S. Holder that fails to comply with the required information reporting.
Dividends on and proceeds from the sale or other disposition of ordinary shares may be reported to the IRS unless the U.S. Holder establishes a basis for exemption. Backup withholding may apply to amounts subject to reporting if the holder (1) fails to provide an accurate United States taxpayer identification number or otherwise establish a basis for exemption (usually on IRS Form W-9), or (2) is described in certain other categories of persons. However, U.S. Holders that are corporations generally are excluded from these information reporting and backup withholding tax rules. Backup withholding is not an additional tax. Any amounts withheld under the backup withholding rules generally will be allowed as a refund or a credit against a U.S. Holder’s U.S. federal income tax liability if the required information is furnished by the U.S. Holder on a timely basis to the IRS.
U.S. Holders should consult their own tax advisors regarding the backup withholding tax and information reporting rules.
EACH PROSPECTIVE INVESTOR IS URGED TO CONSULT ITS OWN TAX ADVISOR ABOUT THE TAX CONSEQUENCES TO IT OF AN INVESTMENT IN ORDINARY SHARES IN LIGHT OF THE INVESTOR’S OWN CIRCUMSTANCES.
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UNDERWRITING
Barclays Capital Inc. and UBS Securities LLC are acting as the representatives of the underwriters and joint book-running managers of this offering. Under the terms of an underwriting agreement, which will be filed as an exhibit to the registration statement, each of the underwriters named below has severally agreed to purchase from us the respective number of ordinary shares shown opposite its name below:
Underwriters
​ ​
Number of
Ordinary
Shares
​
Barclays Capital Inc.
​ ​
       ​
​
UBS Securities LLC
​ ​ ​ ​
Canaccord Genuity LLC
​ ​ ​ ​
Robert W. Baird & Co. Incorporated
​ ​ ​ ​
Total
​ ​ ​ ​
The underwriting agreement provides that the underwriters’ obligation to purchase ordinary shares depends on the satisfaction of the conditions contained in the underwriting agreement including:
•
the obligation to purchase all of the ordinary shares offered hereby (other than those ordinary shares covered by their option to purchase additional ordinary shares as described below), if any of the ordinary shares are purchased;
​
•
the representations and warranties made by us to the underwriters are true;
​
•
there is no material change in our business or the financial markets; and
​
•
we deliver customary closing documents to the underwriters.
​
Commissions and Expenses
The following table summarizes the underwriting discounts and commissions we will pay to the underwriters. These amounts are shown assuming both no exercise and full exercise of the underwriters’ option to purchase additional ordinary shares. The underwriting fee is the difference between the initial price to the public and the amount the underwriters pay to us for the ordinary shares.
​ ​ ​
No
Exercise
​ ​
Full
Exercise
​
Per ordinary share
​ ​ ​ $      ​ ​ ​ ​ $      ​ ​
Total
​ ​ ​ $ ​ ​ ​ ​ ​ $ ​ ​ ​
The representatives have advised us that the underwriters propose to offer the ordinary shares directly to the public at the public offering price on the cover page of this prospectus and to selected dealers, which may include the underwriters, at such offering price less a selling concession not in excess of  $      per ordinary share. If all the ordinary shares are not sold at the initial offering price following the initial offering, the representatives may change the offering price and other selling terms.
The expenses of the offering that are payable by us are estimated to be approximately $      (excluding underwriting discounts and commissions). We have also agreed to reimburse the underwriters for certain of their expenses, in an amount up to $25,000, incurred in connection with review by the Financial Industry Regulatory Authority, Inc. of the terms of this offering, as set forth in the underwriting agreement.
Option to Purchase Additional Ordinary Shares
We have granted the underwriters an option exercisable for 30 days after the date of this prospectus to purchase, from time to time, in whole or in part, up to an aggregate of       ordinary shares from us at the public offering price less underwriting discounts and commissions. To the extent that this option is exercised, each underwriter will be obligated, subject to certain conditions, to purchase its pro rata portion of these additional ordinary shares based on the underwriter’s percentage underwriting commitment in the offering as indicated in the table at the beginning of this Underwriting section.
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Lock-Up Agreements
We, all of our directors and executive officers, and substantially all of the holders of our outstanding ordinary shares have agreed that, for a period of 180 days after the date of this prospectus subject to certain limited exceptions, we will not directly or indirectly, without the prior written consent of Barclays Capital Inc. (1) offer for sale, sell, pledge, or otherwise dispose of  (or enter into any transaction or device that is designed to, or could be expected to, result in the disposition by any person at any time in the future of) any ordinary shares (including, without limitation, ordinary shares that may be deemed to be beneficially owned by us in accordance with the rules and regulations of the SEC and ordinary shares that may be issued upon exercise of any options or warrants) or securities convertible into or exercisable or exchangeable for ordinary shares (other than shares issued pursuant to employee benefit plans, qualified stock option plans, or other employee compensation plans existing on the date of this prospectus or pursuant to currently outstanding options, warrants or rights not issued under one of those plans), or sell or grant options, rights or warrants with respect to any ordinary shares or securities convertible into or exchangeable for ordinary shares (other than the grant of options pursuant to option plans existing on the date of this prospectus), (2) enter into any swap or other derivatives transaction that transfers to another, in whole or in part, any of the economic benefits or risks of ownership of ordinary shares, whether any such transaction described in clause (1) or (2) above is to be settled by delivery of ordinary shares or other securities, in cash or otherwise, (3) make any demand for or exercise any right or file or cause to be filed a registration statement, including any amendments thereto, with respect to the registration of any ordinary shares or securities convertible, exercisable or exchangeable into ordinary shares or any of our other securities (other than any registration statement on Form S-8), or (4) publicly disclose the intention to do any of the foregoing.
The foregoing paragraph will not apply to a transfer that (a) is a bona fide gift or gifts; (b) is to a trust for the direct or indirect benefit of such officers, directors or holders or the immediate family of such officers, directors or holders; (c) if not an individual, is a transfer or pledge to its subsidiaries, affiliates or any investment fund or other entity controlled or managed by, or under common control or management with, it; (d) is the exercise of ordinary share options granted pursuant to our existing incentive plans; (e) is a disposition solely to satisfy tax withholding obligations in connection with outstanding ordinary share options; (f) involves ordinary shares acquired in open market purchases after the completion of this offering; (g) involves the establishment of a written trading plan designed to comply with Rule 10b5-1 of the Exchange Act; (h) is by will or intestacy to a legal representative, heir or legatee; (i) if not an individual, distributions of ordinary shares to members, affiliates, limited partners or stockholders; or (j) is with the prior written consent of Barclays Capital Inc.
Barclays Capital Inc., in its sole discretion, may release the ordinary shares and other securities subject to the lock-up agreements described above in whole or in part at any time. When determining whether or not to release ordinary shares and other securities from lock-up agreements, Barclays Capital Inc. will consider, among other factors, the holder’s reasons for requesting the release, the number of ordinary shares and other securities for which the release is being requested and market conditions at the time.
Offering Price Determination
Prior to this offering, there has been no public market for our ordinary shares. The initial public offering price was negotiated between the representatives and us. In determining the initial public offering price of our ordinary shares, the representatives considered:
•
the history and prospects for the industry in which we compete;
​
•
our financial information;
​
•
the ability of our management and our business potential and earning prospects;
​
•
the prevailing securities markets at the time of this offering; and
​
•
the recent market prices of, and the demand for, publicly traded shares of generally comparable companies.
​
​
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Indemnification
We have agreed to indemnify the underwriters against certain liabilities, including liabilities under the Securities Act, and to contribute to payments that the underwriters may be required to make for these liabilities.
Stabilization, Short Positions and Penalty Bids
The representatives may engage in stabilizing transactions, short sales and purchases to cover positions created by short sales, and penalty bids or purchases for the purpose of pegging, fixing or maintaining the price of the ordinary shares, in accordance with Regulation M under the Exchange Act:
•
Stabilizing transactions permit bids to purchase the underlying security so long as the stabilizing bids do not exceed a specified maximum.
​
•
A short position involves a sale by the underwriters of shares in excess of the number of shares the underwriters are obligated to purchase in the offering, which creates the syndicate short position. This short position may be either a covered short position or a naked short position. In a covered short position, the number of shares involved in the sales made by the underwriters in excess of the number of shares they are obligated to purchase is not greater than the number of shares that they may purchase by exercising their option to purchase additional shares. In a naked short position, the number of shares involved is greater than the number of shares in their option to purchase additional shares. The underwriters may close out any short position by either exercising their option to purchase additional shares and/or purchasing shares in the open market. In determining the source of shares to close out the short position, the underwriters will consider, among other things, the price of shares available for purchase in the open market as compared to the price at which they may purchase shares through their option to purchase additional shares. A naked short position is more likely to be created if the underwriters are concerned that there could be downward pressure on the price of the shares in the open market after pricing that could adversely affect investors who purchase in the offering.
​
•
Syndicate covering transactions involve purchases of the ordinary shares in the open market after the distribution has been completed in order to cover syndicate short positions.
​
•
Penalty bids permit the representatives to reclaim a selling concession from a syndicate member when the ordinary shares originally sold by the syndicate member is purchased in a stabilizing or syndicate covering transaction to cover syndicate short positions.
​
These stabilizing transactions, syndicate covering transactions and penalty bids may have the effect of raising or maintaining the market price of our ordinary shares or preventing or retarding a decline in the market price of the ordinary shares. As a result, the price of the ordinary shares may be higher than the price that might otherwise exist in the open market. These transactions may be effected on Nasdaq or otherwise and, if commenced, may be discontinued at any time.
Neither we nor any of the underwriters make any representation or prediction as to the direction or magnitude of any effect that the transactions described above may have on the price of the ordinary shares. In addition, neither we nor any of the underwriters make any representation that the representatives will engage in these stabilizing transactions or that any transaction, once commenced, will not be discontinued without notice.
Electronic Distribution
A prospectus in electronic format may be made available on the Internet sites or through other online services maintained by one or more of the underwriters and/or selling group members participating in this offering, or by their affiliates. In those cases, prospective investors may view offering terms online and, depending upon the particular underwriter or selling group member, prospective investors may be allowed to place orders online. The underwriters may agree with us to allocate a specific number of ordinary shares for sale to online brokerage account holders. Any such allocation for online distributions will be made by the representatives on the same basis as other allocations.
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Other than the prospectus in electronic format, the information on any underwriter’s or selling group member’s web site and any information contained in any other web site maintained by an underwriter or selling group member is not part of the prospectus or the registration statement of which this prospectus forms a part, has not been approved and/or endorsed by us or any underwriter or selling group member in its capacity as underwriter or selling group member and should not be relied upon by investors.
Listing on Nasdaq
We have applied to list our ordinary shares on Nasdaq under the symbol “INMD.”
Discretionary Sales
The underwriters have informed us that they do not expect to sell more than 5% of the ordinary shares in the aggregate to accounts over which they exercise discretionary authority.
Stamp Taxes
If you purchase ordinary shares offered in this prospectus outside the United States, you may be required to pay stamp taxes and other charges under the laws and practices of the country of purchase, in addition to the offering price listed on the cover page of this prospectus.
Other Relationships
The underwriters and certain of their affiliates are full service financial institutions engaged in various activities, which may include securities trading, commercial and investment banking, financial advisory, investment management, investment research, principal investment, hedging, financing and brokerage activities. While no prior relationship existed, the underwriters and certain of their affiliates may in the future perform various commercial and investment banking and financial advisory services for the issuer and its affiliates, for which they may in the future receive customary fees and expenses.
In the ordinary course of their various business activities, the underwriters and certain of their affiliates may make or hold a broad array of investments and actively trade debt and equity securities (or related derivative securities) and financial instruments (including bank loans) for their own account and for the accounts of their customers, and such investment and securities activities may involve securities and/or instruments of the issuer or its affiliates. If the underwriters or their affiliates have a lending relationship with us, certain of those underwriters or their affiliates routinely hedge, and the underwriters or their affiliates may hedge, their credit exposure to us consistent with their customary risk management policies. Typically, the underwriters and their affiliates would hedge such exposure by entering into transactions which consist of either the purchase of credit default swaps or the creation of short positions in our securities or the securities of our affiliates, including potentially the ordinary shares offered hereby. Any such credit default swaps or short positions could adversely affect future trading prices of the ordinary shares offered hereby. The underwriters and certain of their affiliates may also communicate independent investment recommendations, market color or trading ideas and/or publish or express independent research views in respect of such securities or instruments and may at any time hold, or recommend to clients that they acquire, long and/or short positions in such securities and instruments.
Selling Restrictions
This prospectus does not constitute an offer to sell to, or a solicitation of an offer to buy from, anyone in any country or jurisdiction (i) in which such an offer or solicitation is not authorized, (ii) in which any person making such offer or solicitation is not qualified to do so or (iii) in which any such offer or solicitation would otherwise be unlawful. No action has been taken that would, or is intended to, permit a public offer of the ordinary shares or possession or distribution of this prospectus or any other offering or publicity material relating to the ordinary shares in any country or jurisdiction (other than the United States) where any such action for that purpose is required. Accordingly, each underwriter has undertaken that it will not, directly or indirectly, offer or sell any ordinary shares or have in its possession, distribute or publish any prospectus, form of application, advertisement or other document or information in any country or jurisdiction except under circumstances that will, to the best of its knowledge and belief, result in compliance with any applicable laws and regulations and all offers and sales of ordinary shares by it will be made on the same terms.
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European Economic Area
In relation to each Member State of the European Economic Area which has implemented the Prospectus Directive (each, a “Relevant Member State”) an offer to the public of any ordinary shares which are the subject of the offering contemplated herein may not be made in that Relevant Member State, except that an offer to the public in that Relevant Member State of any ordinary shares may be made at any time under the following exemptions under the Prospectus Directive, if they have been implemented in that Relevant Member State:
•
to legal entities which are qualified investors as defined under the Prospectus Directive;
​
•
by the underwriters to fewer than 100, or, if the Relevant Member State has implemented the relevant provisions of the 2010 PD Amending Directive, 150, natural or legal persons (other than qualified investors as defined in the Prospectus Directive), as permitted under the Prospectus Directive, subject to obtaining the prior consent of the representatives of the underwriters for any such offer; or
​
•
in any other circumstances falling within Article 3(2) of the Prospectus Directive,
​
provided that no such offer of ordinary shares shall result in a requirement for us or any underwriter to publish a prospectus pursuant to Article 3 of the Prospectus Directive or supplement a prospectus pursuant to Article 16 of the Prospectus Directive.
Each person in a Relevant Member State who receives any communication in respect of, or who acquires any ordinary shares under, the offers contemplated here in this prospectus will be deemed to have represented, warranted and agreed to and with each underwriter and us that:
•
it is a qualified investor as defined under the Prospectus Directive; and
​
•
in the case of any ordinary shares acquired by it as a financial intermediary, as that term is used in Article 3(2) of the Prospectus Directive, (i) the ordinary shares acquired by it in the offering have not been acquired on behalf of, nor have they been acquired with a view to their offer or resale to, persons in any Relevant Member State other than qualified investors, as that term is defined in the Prospectus Directive, or in the circumstances in which the prior consent of the representatives of the underwriters has been given to the offer or resale or (ii) where ordinary shares have been acquired by it on behalf of persons in any Relevant Member State other than qualified investors, the offer of such ordinary shares to it is not treated under the Prospectus Directive as having been made to such persons.
​
For the purposes of this representation and the provision above, the expression an “offer of ordinary shares to the public” in relation to any ordinary shares in any Relevant Member State means the communication in any form and by any means of sufficient information on the terms of the offer and any ordinary shares to be offered so as to enable an investor to decide to purchase or subscribe for the ordinary shares, as the same may be varied in that Relevant Member State by any measure implementing the Prospectus Directive in that Relevant Member State, the expression “Prospectus Directive” means Directive 2003/71/EC (and amendments thereto, including the 2010 PD Amending Directive, to the extent implemented in the Relevant Member State), and includes any relevant implementing measure in each Relevant Member State and the expression “2010 PD Amending Directive” means Directive 2010/73/EU.
United Kingdom
This prospectus has only been communicated or caused to have been communicated and will only be communicated or caused to be communicated as an invitation or inducement to engage in investment activity (within the meaning of Section 21 of the Financial Services and Markets Act of 2000 (the “FSMA”)) as received in connection with the issue or sale of the ordinary shares in circumstances in which Section 21(1) of the FSMA does not apply to us. All applicable provisions of the FSMA will be complied with in respect to anything done in relation to the ordinary shares in, from or otherwise involving the United Kingdom.
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Canada
The ordinary shares may be sold only to purchasers purchasing, or deemed to be purchasing, as principal that are accredited investors, as defined in National Instrument 45-106 Prospectus Exemptions or subsection 73.3(1) of the Securities Act (Ontario), and are permitted clients, as defined in National Instrument 31-103 Registration Requirements, Exemptions and Ongoing Registrant Obligations. Any resale of the ordinary shares must be made in accordance with an exemption from, or in a transaction not subject to, the prospectus requirements of applicable securities laws.
Securities legislation in certain provinces or territories of Canada may provide a purchaser with remedies for rescission or damages if this prospectus (including any amendment thereto) contains a misrepresentation, provided that the remedies for rescission or damages are exercised by the purchaser within the time limit prescribed by the securities legislation of the purchaser’s province or territory. The purchaser should refer to any applicable provisions of the securities legislation of the purchaser’s province or territory for particulars of these rights or consult with a legal advisor.
Pursuant to section 3A.3 of National Instrument 33-105 Underwriting Conflicts (“NI 33-105”), the underwriters are not required to comply with the disclosure requirements of NI 33-105 regarding underwriter conflicts of interest in connection with this offering.
Switzerland
The ordinary shares may not be publicly offered in Switzerland and will not be listed on the SIX Swiss Exchange, or SIX, or on any other stock exchange or regulated trading facility in Switzerland. This document has been prepared without regard to the disclosure standards for issuance prospectuses under Article 652a or Article 1156 of the Swiss Code of Obligations or the disclosure standards for listing prospectuses under Article 27 ff. of the SIX Listing Rules or the listing rules of any other stock exchange or regulated trading facility in Switzerland. Neither this document nor any other offering or marketing material relating to the shares or the offering may be publicly distributed or otherwise made publicly available in Switzerland.
Neither this document nor any other offering or marketing material relating to the offering, the Company or the ordinary shares have been or will be filed with or approved by any Swiss regulatory authority. In particular, this document will not be filed with, and the offer of ordinary shares will not be supervised by, the Swiss Financial Market Supervisory Authority, FINMA, and the offer of ordinary shares has not been and will not be authorized under the Swiss Federal Act on Collective Investment Schemes, or CISA. The investor protection afforded to acquirers of interests in collective investment schemes under the CISA does not extend to acquirers of ordinary shares.
Australia
No placement document, prospectus, product disclosure statement or other disclosure document has been lodged with the Australian Securities and Investments Commission in relation to the offering. This prospectus does not constitute a prospectus, product disclosure statement or other disclosure document under the Corporations Act 2001, or the Corporations Act, and does not purport to include the information required for a prospectus, product disclosure statement or other disclosure document under the Corporations Act.
Any offer in Australia of the ordinary shares may only be made to persons, which we refer to as Exempt Investors, who are “sophisticated investors” (within the meaning of Section 708(8) of the Corporations Act), “professional investors” (within the meaning of Section 708(11) of the Corporations Act) or otherwise pursuant to one or more exemptions contained in Section 708 of the Corporations Act so that it is lawful to offer the ordinary shares without disclosure to investors under Chapter 6D of the Corporations Act.
The ordinary shares applied for by Exempt Investors in Australia must not be offered for sale in Australia in the period of 12 months after the date of allotment under the offering, except in circumstances where disclosure to investors under Chapter 6D of the Corporations Act would not be required pursuant to
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an exemption under Section 708 of the Corporations Act or otherwise or where the offer is pursuant to a disclosure document which complies with Chapter 6D of the Corporations Act. Any person acquiring ordinary shares must observe such Australian on-sale restrictions.
This prospectus contains general information only and does not take account of the investment objectives, financial situation or particular needs of any particular person. It does not contain any securities recommendations or financial product advice. Before making an investment decision, investors need to consider whether the information in this prospectus is appropriate to their needs, objectives and circumstances and, if necessary, seek expert advice on those matters.
Hong Kong
The ordinary shares may not be offered or sold in Hong Kong by means of any document other than (i) in circumstances which do not constitute an offer to the public within the meaning of the Companies (Winding Up and Miscellaneous Provisions) Ordinance (Cap. 32 of the Laws of Hong Kong), or Companies (Winding Up and Miscellaneous Provisions) Ordinance, or which do not constitute an invitation to the public within the meaning of the Securities and Futures Ordinance (Cap. 571 of the Laws of Hong Kong), or Securities and Futures Ordinance, or (ii) to “professional investors” as defined in the Securities and Futures Ordinance and any rules made thereunder, or (iii) in other circumstances which do not result in the document being a “prospectus” as defined in the Companies (Winding Up and Miscellaneous Provisions) Ordinance, and no advertisement, invitation or document relating to the shares may be issued or may be in the possession of any person for the purpose of issue (in each case whether in Hong Kong or elsewhere), which is directed at, or the contents of which are likely to be accessed or read by, the public in Hong Kong (except if permitted to do so under the securities laws of Hong Kong) other than with respect to the ordinary shares which are or are intended to be disposed of only to persons outside Hong Kong or only to “professional investors” in Hong Kong as defined in the Securities and Futures Ordinance and any rules made thereunder.
Singapore
This prospectus has not been registered as a prospectus with the Monetary Authority of Singapore. Accordingly, this prospectus and any other document or material in connection with the offer or sale, or invitation for subscription or purchase, of the ordinary share may not be circulated or distributed, nor may the ordinary shares be offered or sold, or be made the subject of an invitation for subscription or purchase, whether directly or indirectly, to persons in Singapore other than (i) to an institutional investor under Section 274 of the Securities and Futures Act, Chapter 289 of Singapore (the “SFA”) (ii) to a relevant person pursuant to Section 275(1), or any person pursuant to Section 275(1A), and in accordance with the conditions specified in Section 275, of the SFA, or (iii) otherwise pursuant to, and in accordance with the conditions of, any other applicable provision of the SFA.
Where the ordinary shares are subscribed or purchased under Section 275 of the SFA by a relevant person which is a corporation (which is not an accredited investor (as defined in Section 4A of the SFA)) the sole business of which is to hold investments and the entire share capital of which is owned by one or more individuals, each of whom is an accredited investor, the securities (as defined in Section 239(1) of the SFA) of that corporation shall not be transferable for 6 months after that corporation has acquired the ordinary shares under Section 275 of the SFA except: (1) to an institutional investor under Section 274 of the SFA or to a relevant person (as defined in Section 275(2) of the SFA), (2) where such transfer arises from an offer in that corporation’s securities pursuant to Section 275(1A) of the SFA, (3) where no consideration is or will be given for the transfer, (4) where the transfer is by operation of law, (5) as specified in Section 276(7) of the SFA, or (6) as specified in Regulation 32 of the Securities and Futures (Offers of Investments) (Shares and Debentures) Regulations 2005 of Singapore, or Regulation 32.
Where the ordinary shares are subscribed or purchased under Section 275 of the SFA by a relevant person which is a trust (where the trustee is not an accredited investor (as defined in Section 4A of the SFA)) whose sole purpose is to hold investments and each beneficiary of the trust is an accredited investor, the beneficiaries’ rights and interest (howsoever described) in that trust shall not be transferable for 6 months after that trust has acquired the or under Section 275 of the SFA except: (1) to an institutional investor under Section 274 of the SFA or to a relevant person (as defined in Section 275(2) of the SFA),
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(2) where such transfer arises from an offer that is made on terms that such rights or interest are acquired at a consideration of not less than $200,000 (or its equivalent in a foreign currency) for each transaction (whether such amount is to be paid for in cash or by exchange of securities or other assets), (3) where no consideration is or will be given for the transfer, (4) where the transfer is by operation of law, (5) as specified in Section 276(7) of the SFA, or (6) as specified in Regulation 32.
Japan
No registration pursuant to Article 4, paragraph 1 of the Financial Instruments and Exchange Law of Japan (Law No. 25 of 1948, as amended) (the “FIEL”) has been made or will be made with respect to the solicitation of the application for the acquisition of the ordinary shares.
Accordingly, the ordinary shares have not been, directly or indirectly, offered or sold and will not be, directly or indirectly, offered or sold in Japan or to, or for the benefit of, any resident of Japan (which term as used herein means any person resident in Japan, including any corporation or other entity organized under the laws of Japan) or to others for re-offering or re-sale, directly or indirectly, in Japan or to, or for the benefit of, any resident of Japan except pursuant to an exemption from the registration requirements, and otherwise in compliance with, the FIEL and the other applicable laws and regulations of Japan.
For Qualified Institutional Investors, or QII
Please note that the solicitation for newly-issued or secondary securities (each as described in Paragraph 2, Article 4 of the FIEL) in relation to the ordinary shares constitutes either a “QII only private placement” or a “QII only secondary distribution” (each as described in Paragraph 1, Article 23-13 of the FIEL). Disclosure regarding any such solicitation, as is otherwise prescribed in Paragraph 1, Article 4 of the FIEL, has not been made in relation to the ordinary shares. The ordinary shares may only be transferred to QIIs.
For Non-QII Investors
Please note that the solicitation for newly-issued or secondary securities (each as described in Paragraph 2, Article 4 of the FIEL) in relation to the ordinary shares constitutes either a “small number private placement” or a “small number private secondary distribution” (each as is described in Paragraph 4, Article 23-13 of the FIEL). Disclosure regarding any such solicitation, as is otherwise prescribed in Paragraph 1, Article 4 of the FIEL, has not been made in relation to the ordinary shares. The ordinary shares may only be transferred en bloc without subdivision to a single investor.
Israel
This document does not constitute a prospectus under the Israeli Securities Law, 5728-1968, or the Securities Law, and has not been filed with or approved by the Israel Securities Authority. In the State of Israel, this document is being distributed only to, and is directed only at, and any offer of the securities offered hereby is directed only at, (i) a limited number of persons in accordance with the Securities Law and (ii) investors listed in the first addendum, or the Addendum, to the Israeli Securities Law, consisting primarily of joint investment in trust funds, provident funds, insurance companies, banks, portfolio managers, investment advisors, members of the Tel Aviv Stock Exchange, underwriters, venture capital funds, entities with equity in excess of NIS 50 million and “qualified individuals,” each as defined in the Addendum (as it may be amended from time to time), collectively referred to as qualified investors (in each case purchasing for their own account or, where permitted under the Addendum, for the accounts of their clients who are investors listed in the Addendum). Qualified investors will be required to submit written confirmation that they fall within the scope of the Addendum, are aware of the meaning of same and agree to it.
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LEGAL MATTERS
The validity of the ordinary shares and other legal matters in connection with this offering with respect to Israeli law will be passed upon for us by Primes, Shiloh, Givon, Meir law firm, Haifa, Israel. Legal matters with respect to U.S. federal law will be passed upon for us by Mayer Brown LLP, New York, New York. Certain legal matters in connection with this offering will be passed upon for the underwriters by Gornitzky & Co., Tel Aviv, Israel, with respect to Israeli law, and by Latham & Watkins LLP, New York, New York, with respect to U.S. federal law.
EXPERTS
The financial statements as of December 31, 2018 and 2017 and for each of the two years in the period ended December 31, 2018 included in this prospectus have been so included in reliance on the report of Kesselman & Kesselman, Certified Public Accountants (Israel), an independent registered public accounting firm and a member firm of PricewaterhouseCoopers International Limited, given on the authority of said firm as experts in auditing and accounting.
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ENFORCEABILITY OF CIVIL LIABILITIES
We are incorporated in Israel and some of our directors and officers and the Israeli experts named in this prospectus reside outside the United States. Service of process upon them may be difficult to effect within the United States. Furthermore, because substantially all of our assets, and those of our non-United States directors and officers and the Israeli experts named herein, are located outside the United States, any judgment obtained in the United States against us or any of these persons may not be collectible within the United States.
We have been informed by our legal counsel in Israel that there is doubt as to the enforceability of civil liabilities under the Securities Act or the Exchange Act, pursuant to original actions instituted in Israel. Israeli courts may refuse to hear a claim based on an alleged violation of U.S. securities laws reasoning that Israel is not the most appropriate forum to hear such a claim. In addition, even if an Israeli court agrees to hear a claim, it may determine that Israeli law and not U.S. law is applicable to the claim. If U.S. law is found to be applicable, the content of applicable U.S. law must be proved as a fact by expert witnesses which can be a time-consuming and costly process. Certain matters of procedure may also be governed by Israeli law. However, subject to particular time limitations and legal procedures, executory judgments of a U.S. court for monetary damages in civil matters may be enforced by an Israeli court, provided that:
•
the judgment was obtained after due process before a court of competent jurisdiction, that recognizes and enforces similar judgments of Israeli courts, and the court had authority according to the rules of private international law currently prevailing in Israel;
​
•
adequate service of process was effected and the defendant had a reasonable opportunity to be heard and to present his or her evidence;
​
•
the judgment is not contrary to the law, public policy, security or sovereignty of the State of Israel and its enforcement is not contrary to the laws governing enforcement of judgments;
​
•
the judgment was not obtained by fraud and does not conflict with any other valid judgment in the same matter between the same parties;
​
•
the judgment is no longer appealable; and
​
•
an action between the same parties in the same matter is not pending in any Israeli court at the time the lawsuit is instituted in the foreign court.
​
We have irrevocably appointed Invasix Inc. as our agent to receive service of process in any action against us in any United States federal court or the courts of the State of New York arising out of this offering or any purchase or sale of ordinary shares in connection therewith.
Foreign judgments enforced by Israeli courts generally will be payable in Israeli currency, which can then be converted into non-Israeli currency and transferred out of Israel. Under existing Israeli law, a foreign judgment payable in foreign currency may be paid in Israeli currency at the rate of exchange in force on the date of the payment. Current Israeli exchange control regulations also permit a judgment debtor to make payment in foreign currency. Pending collection, the amount of the judgment of an Israeli court stated in Israeli currency ordinarily will be linked to Israel’s consumer price index plus interest at the annual statutory rate set by Israeli regulations prevailing at that time. Judgment creditors must bear the risk of unfavorable exchange rates.
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OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
The following table sets forth the costs and expenses, other than underwriting discounts and commissions, payable by our company in connection with the sale of ordinary shares in this offering. All amounts are estimates except the SEC registration fee and the FINRA fee.
​ ​ ​
Amount
​
SEC registration fee
​ ​ ​ $ 9,090.00 ​ ​
FINRA filing fees
​ ​ ​ ​ * ​ ​
Nasdaq Global Market listing fee
​ ​ ​ ​ * ​ ​
Printing and engraving expenses
​ ​ ​ ​ * ​ ​
Legal fees and expenses
​ ​ ​ ​ * ​ ​
Accounting fees and expenses
​ ​ ​ ​ * ​ ​
Transfer agent and registrar fees
​ ​ ​ ​ * ​ ​
Miscellaneous
​ ​ ​ ​ * ​ ​
Total
​ ​ ​ $ * ​ ​
​
*
To be filed by amendment.
​
​
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WHERE YOU CAN FIND ADDITIONAL INFORMATION
We have filed with the SEC a registration statement on Form F-1 under the Securities Act with respect to the ordinary shares that are being offered by this prospectus. This prospectus, which is a part of the registration statement, does not contain all of the information set forth in the registration statement and the exhibits and schedules to the registration statement. Refer to the registration statement, exhibits and schedules for further information with respect to the ordinary shares offered by this prospectus. Statements contained in this prospectus regarding the contents of any contract or other documents are only summaries. With respect to any contract or document filed as an exhibit to the registration statement, you should refer to the exhibit for a copy of the contract or document, and each statement in this prospectus regarding that contract or document is qualified by reference to the exhibit. Our SEC filings are available to the public from the SEC’s website at www.sec.gov.
Upon completion of this offering, we will be subject to the information reporting requirements of the Exchange Act applicable to foreign private issuers and will fulfill the obligations with respect to those requirements by filing reports with the SEC. Those other reports or other information may be inspected without charge at the locations described above. As a foreign private issuer, we will be exempt from the rules under the Exchange Act related to the furnishing and content of proxy statements, and our officers, directors and principal shareholders will be exempt from the reporting and short-swing profit recovery provisions contained in Section 16 of the Exchange Act. In addition, we will not be required under the Exchange Act to file annual, quarterly and current reports and financial statements with the SEC as frequently or as promptly as United States companies whose securities are registered under the Exchange Act. However, we will file with the SEC, within 120 days after the end of each fiscal year, an annual report on Form 20-F containing financial statements audited by an independent public accounting firm.
We maintain a corporate website at www.inmodemd.com. Information contained on, or that can be accessed through, our website does not constitute a part of this prospectus. We have included our website address in this prospectus solely as an inactive textual reference.
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INMODE LTD.
 
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS:
​ ​ ​
Page
​
CONSOLIDATED FINANCIAL STATEMENTS: ​ ​ ​ ​ ​ ​ ​
​ ​ ​ ​ F-2 ​ ​
​ ​ ​ ​ F-3 ​ ​
​ ​ ​ ​ F-4 ​ ​
​ ​ ​ ​ F-5 ​ ​
​ ​ ​ ​ F-6 ​ ​
​ ​ ​ ​ F-7 ​ ​
​ ​ ​ ​ F-8 ​ ​
Unaudited Condensed Consolidated Financial Statements: ​ ​ ​ ​ ​ ​ ​
​ ​ ​ ​ F-34 ​ ​
​ ​ ​ ​ F-35 ​ ​
​ ​ ​ ​ F-36 ​ ​
​ ​ ​ ​ F-37 ​ ​
​ ​ ​ ​ F-38 ​ ​
​ ​ ​ ​ F-39 ​ ​
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[MISSING IMAGE: LG_PWC.JPG]
Report of Independent Registered Public Accounting Firm
To the board of directors and shareholders of InMode Ltd.
Opinion on the Financial Statements
We have audited the accompanying consolidated balance sheets of InMode Ltd. and its subsidiaries (the “Company”) as of December 31, 2018 and 2017 and the related consolidated statements of income, comprehensive income, changes in shareholders’ equity and cash flows for the years then ended, including the related notes (collectively referred to as the “consolidated financial statements”). In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2018 and 2017, and the results of its operations and its cash flows for the years then ended in conformity with accounting principles generally accepted in the United States of America.
Basis for Opinion
These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s consolidated financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits of these consolidated financial statements in accordance with the standards of the PCAOB and in accordance with auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud.
Our audits included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. We believe that our audits provide a reasonable basis for our opinion.
​ Tel-Aviv, Israel
March 13, 2019 		​ ​ /s/ Kesselman & Kesselman
Certified Public Accountants (lsr.)
A member firm of PricewaterhouseCoopers International Limited 		​
We have served as the Company’s auditor since 2008.
Kesselman & Kesselman, Trade Tower, 25 Hamered Street, Tel-Aviv 6812508, Israel,
P.O Box 50005 Tel-Aviv 6150001 Telephone: +972 -3- 7954555, Fax:+972 -3- 7954556, www.pwc.com/il
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INMODE LTD.
CONSOLIDATED BALANCE SHEETS
(U.S. dollars in thousands, except for per share data)
​ ​ ​
December 31,
​
​ ​ ​
2018
​ ​
2017
​
Assets ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​
CURRENT ASSETS: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​
Cash and cash equivalents
​ ​ ​ $ 24,721 ​ ​ ​ ​ $ 17,593 ​ ​
Marketable securities
​ ​ ​ ​ 26,532 ​ ​ ​ ​ ​ 7,447 ​ ​
Short-term bank deposits
​ ​ ​ ​ 10,045 ​ ​ ​ ​ ​ — ​ ​
Accounts receivable, net of allowance for doubtful accounts
​ ​ ​ ​ 7,008 ​ ​ ​ ​ ​ 5,763 ​ ​
Other receivables
​ ​ ​ ​ 2,495 ​ ​ ​ ​ ​ 1,311 ​ ​
Inventories
​ ​ ​ ​ 6,963 ​ ​ ​ ​ ​ 5,035 ​ ​
TOTAL CURRENT ASSETS
​ ​ ​ $ 77,764 ​ ​ ​ ​ $ 37,149 ​ ​
NON-CURRENT ASSETS: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​
Accounts receivable
​ ​ ​ $ 544 ​ ​ ​ ​ $ 1,137 ​ ​
Deferred offering costs
​ ​ ​ ​ 895 ​ ​ ​ ​ ​ — ​ ​
Deferred income taxes, net
​ ​ ​ ​ 1,309 ​ ​ ​ ​ ​ 810 ​ ​
Property and equipment, net
​ ​ ​ ​ 544 ​ ​ ​ ​ ​ 346 ​ ​
TOTAL NON-CURRENT ASSETS
​ ​ ​ ​ 3,292 ​ ​ ​ ​ ​ 2,293 ​ ​
TOTAL ASSETS
​ ​ ​ $ 81,056 ​ ​ ​ ​ $ 39,442 ​ ​
Liabilities and shareholders’ equity ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​
CURRENT LIABILITIES: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​
Accounts payable
​ ​ ​ $ 4,509 ​ ​ ​ ​ $ 3,064 ​ ​
Contract liabilities
​ ​ ​ ​ 5,755 ​ ​ ​ ​ ​ 1,134 ​ ​
Other liabilities
​ ​ ​ ​ 9,165 ​ ​ ​ ​ ​ 7,257 ​ ​
Accrued contingencies
​ ​ ​ ​ 10,000 ​ ​ ​ ​ ​ 2,000 ​ ​
TOTAL CURRENT LIABILITIES
​ ​ ​ $ 29,429 ​ ​ ​ ​ $ 13,455 ​ ​
NON-CURRENT LIABILITIES: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​
Contract liabilities
​ ​ ​ $ 3,982 ​ ​ ​ ​ $ 3,362 ​ ​
Other liabilities
​ ​ ​ ​ 771 ​ ​ ​ ​ ​ — ​ ​
Deferred income taxes, net
​ ​ ​ ​ 11 ​ ​ ​ ​ ​ 106 ​ ​
TOTAL NON-CURRENT LIABILITIES
​ ​ ​ ​ 4,764 ​ ​ ​ ​ ​ 3,468 ​ ​
TOTAL LIABILITIES
​ ​ ​ $ 34,193 ​ ​ ​ ​ $ 16,923 ​ ​
COMMITMENTS AND CONTINGENCIES (Note 9)
​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​
REDEEMABLE NON-CONTROLLING INTEREST
​ ​ ​ $ 2,187 ​ ​ ​ ​ $ 3,066 ​ ​
SHAREHOLDERS’ EQUITY: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​
Ordinary shares, NIS 0.01 par value, – authorized: 20,000,000 shares; issued and outstanding: 14,914,701 and 14,729,165 shares at December 31, 2018 and 2017, respectively
​ ​ ​ $ 42 ​ ​ ​ ​ $ 41 ​ ​
Additional paid-in capital
​ ​ ​ ​ 10,184 ​ ​ ​ ​ ​ 8,052 ​ ​
Retained earnings
​ ​ ​ ​ 32,971 ​ ​ ​ ​ ​ 10,819 ​ ​
Accumulated other comprehensive income
​ ​ ​ ​ 66 ​ ​ ​ ​ ​ 541 ​ ​
InMode Ltd. shareholders’ equity
​ ​ ​ ​ 43,263 ​ ​ ​ ​ ​ 19,453 ​ ​
Non-controlling interests
​ ​ ​ ​ 1,413 ​ ​ ​ ​ ​ — ​ ​
TOTAL SHAREHOLDERS’ EQUITY
​ ​ ​ ​ 44,676 ​ ​ ​ ​ ​ 19,453 ​ ​
TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY
​ ​ ​ $ 81,056 ​ ​ ​ ​ $ 39,442 ​ ​
​
The accompanying notes are an integral part of these consolidated financial statements.
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INMODE LTD.
CONSOLIDATED STATEMENTS OF INCOME
(U.S. dollars in thousands, except for per share data)
​ ​ ​
Year ended December 31,
​
​ ​ ​
2018
​ ​
2017
​
REVENUES
​ ​ ​ $ 100,162 ​ ​ ​ ​ $ 53,456 ​ ​
COST OF REVENUES
​ ​ ​ ​ 15,057 ​ ​ ​ ​ ​ 9,053 ​ ​
GROSS PROFIT
​ ​ ​ ​ 85,105 ​ ​ ​ ​ ​ 44,403 ​ ​
OPERATING EXPENSES: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​
Research and development
​ ​ ​ ​ 4,180 ​ ​ ​ ​ ​ 2,575 ​ ​
Sales and marketing
​ ​ ​ ​ 44,622 ​ ​ ​ ​ ​ 28,514 ​ ​
General and administrative
​ ​ ​ ​ 4,814 ​ ​ ​ ​ ​ 4,364 ​ ​
Legal settlements and loss contingencies
​ ​ ​ ​ 8,000 ​ ​ ​ ​ ​ — ​ ​
TOTAL OPERATING EXPENSES
​ ​ ​ ​ 61,616 ​ ​ ​ ​ ​ 35,453 ​ ​
INCOME FROM OPERATIONS
​ ​ ​ ​ 23,489 ​ ​ ​ ​ ​ 8,950 ​ ​
Finance income, net
​ ​ ​ ​ 136 ​ ​ ​ ​ ​ 849 ​ ​
INCOME BEFORE TAXES
​ ​ ​ ​ 23,625 ​ ​ ​ ​ ​ 9,799 ​ ​
INCOME TAX
​ ​ ​ ​ 1,260 ​ ​ ​ ​ ​ 980 ​ ​
NET INCOME
​ ​ ​ ​ 22,365 ​ ​ ​ ​ ​ 8,819 ​ ​
Net loss attributable to non-controlling interests
​ ​ ​ ​ 6 ​ ​ ​ ​ ​ — ​ ​
NET INCOME ATTRIBUTABLE TO CONTROLLING INTEREST
​ ​ ​ $ 22,371 ​ ​ ​ ​ $ 8,819 ​ ​
NET INCOME PER SHARE: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​
Basic
​ ​ ​ $ 1.47 ​ ​ ​ ​ $ 0.52 ​ ​
Diluted
​ ​ ​ $ 1.12 ​ ​ ​ ​ $ 0.46 ​ ​
WEIGHTED AVERAGE NUMBER OF SHARES OUTSTANDING USED
IN COMPUTATION OF NET INCOME PER SHARE
​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​
Basic
​ ​ ​ ​ 14,876,426 ​ ​ ​ ​ ​ 14,691,750 ​ ​
Diluted
​ ​ ​ ​ 19,563,722 ​ ​ ​ ​ ​ 16,584,637 ​ ​
The accompanying notes are an integral part of these consolidated financial statements.
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INMODE LTD.
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(U.S. dollars in thousands, except for per share data)
​ ​ ​
Year ended December 31,
​
​ ​ ​
2018
​ ​
2017
​
NET INCOME
​ ​ ​ $ 22,365 ​ ​ ​ ​ $ 8,819 ​ ​
OTHER COMPREHENSIVE INCOME: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​
Change in foreign currency translation adjustment
​ ​ ​ ​ (153 ) ​ ​ ​ ​ ​ 73 ​ ​
Change in net unrealized gains of marketable securities, net of tax
​ ​ ​ ​ (1 ) ​ ​ ​ ​ ​ 302 ​ ​
TOTAL COMPREHENSIVE INCOME, net
​ ​ ​ ​ 22,211 ​ ​ ​ ​ ​ 9,194 ​ ​
Comprehensive loss attributable to non-controlling interests
​ ​ ​ ​ 1 ​ ​ ​ ​ ​ — ​ ​
TOTAL COMPREHENSIVE INCOME ATTRIBUTABLE TO CONTROLLING INTEREST
​ ​ ​ $ 22,212 ​ ​ ​ ​ $ 9,194 ​ ​
The accompanying notes are an integral part of these consolidated financial statements.
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INMODE LTD.
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY
(U.S. dollars in thousands, except for per share data)
​ ​ ​
InMode Ltd. Shareholders’ Equity
​ ​
Non-controlling
Interests
​ ​
Total
​
​ ​ ​
Ordinary Shares
​ ​
Additional
paid-in
capital
​ ​
Retained
earnings
​ ​
Accumulated
other
comprehensive
income
​
​ ​ ​
Number of
shares issued
​ ​
Amount
​
BALANCE AT JANUARY 1,
2017
​ ​ ​ ​ 14,673,218 ​ ​ ​ ​ ​ 41 ​ ​ ​ ​ $ 5,560 ​ ​ ​ ​ $ 3,154 ​ ​ ​ ​ $ 166 ​ ​ ​ ​ ​ — ​ ​ ​ ​ $ 8,921 ​ ​
CHANGES DURING 2017: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​
Net income
​ ​ ​ ​ — ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ 8,819 ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ 8,819 ​ ​
Other comprehensive income, net
​ ​ ​ ​ — ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ 375 ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ 375 ​ ​
Share-based compensation
​ ​ ​ ​ — ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ 2,436 ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ 2,436 ​ ​
Adjustment to redemption value of redeemable non-controlling interest
​ ​ ​ ​ — ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ (1,154 ) ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ (1,154 ) ​ ​
Exercise of options
​ ​ ​ ​ 55,947 ​ ​ ​ ​ ​ * ​ ​ ​ ​ ​ 56 ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ 56 ​ ​
BALANCE AT DECEMBER 31,
2017
​ ​ ​ ​ 14,729,165 ​ ​ ​ ​ ​ 41 ​ ​ ​ ​ $ 8,052 ​ ​ ​ ​ $ 10,819 ​ ​ ​ ​ $ 541 ​ ​ ​ ​ ​ — ​ ​ ​ ​ $ 19,453 ​ ​
BALANCE AS OF JANUARY 1,
2018, as previously reported
​ ​ ​ ​ 14,729,165 ​ ​ ​ ​ ​ 41 ​ ​ ​ ​ $ 8,052 ​ ​ ​ ​ $ 10,819 ​ ​ ​ ​ $ 541 ​ ​ ​ ​ ​ — ​ ​ ​ ​ $ 19,453 ​ ​
Impact of adoption of ASU 2016-01 (see note 2w(1))
​ ​ ​ ​ — ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ 316 ​ ​ ​ ​ ​ (316 ) ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ — ​ ​
BALANCE AS OF JANUARY 1,
2018, as adjusted
​ ​ ​ ​ 14,729,165 ​ ​ ​ ​ ​ 41 ​ ​ ​ ​ $ 8,052 ​ ​ ​ ​ $ 11,135 ​ ​ ​ ​ $ 225 ​ ​ ​ ​ ​ — ​ ​ ​ ​ $ 19,453 ​ ​
CHANGES DURING 2018: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​
Net income
​ ​ ​ ​ — ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ 22,371 ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ (6 ) ​ ​ ​ ​ ​ 22,365 ​ ​
Other comprehensive income, net
​ ​ ​ ​ — ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ (159 ) ​ ​ ​ ​ ​ 5 ​ ​ ​ ​ ​ (154 ) ​ ​
Share-based compensation
​ ​ ​ ​ — ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ 1,947 ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ 1,947 ​ ​
Adjustment to redemption value of redeemable non-controlling interest
​ ​ ​ ​ — ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ (535 ) ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ (535 ) ​ ​
Waiver of redeemable non-controlling interests (see note 10b)
​ ​ ​ ​ — ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ 1,414 ​ ​ ​ ​ ​ 1,414 ​ ​
Exercise of options
​ ​ ​ ​ 185,536 ​ ​ ​ ​ ​ 1 ​ ​ ​ ​ ​ 185 ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ 186 ​ ​
BALANCE AT DECEMBER 31,
2018
​ ​ ​ ​ 14,914,701 ​ ​ ​ ​ ​ 42 ​ ​ ​ ​ $ 10,184 ​ ​ ​ ​ $ 32,971 ​ ​ ​ ​ $ 66 ​ ​ ​ ​ ​ 1,413 ​ ​ ​ ​ $ 44,676 ​ ​
​
*
Representing an amount less than one thousand.
​
​
The accompanying notes are an integral part of these consolidated financial statements.
F-6
TABLE OF CONTENTS ​
INMODE LTD.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(U.S. dollars in thousands, except per share data)
​ ​ ​
Year ended December 31,
​
​ ​ ​
2018
​ ​
2017
​
CASH FLOWS FROM OPERATING ACTIVITIES: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​
Net income
​ ​ ​ $ 22,365 ​ ​ ​ ​ $ 8,819 ​ ​
Adjustments required to reconcile net income to net cash provided by operating activities:
​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​
Depreciation and amortization
​ ​ ​ ​ 184 ​ ​ ​ ​ ​ 204 ​ ​
Share-based compensation
​ ​ ​ ​ 1,947 ​ ​ ​ ​ ​ 2,436 ​ ​
Allowance for doubtful accounts expenses
​ ​ ​ ​ (33 ) ​ ​ ​ ​ ​ 186 ​ ​
Gains on marketable securities, net
​ ​ ​ ​ (21 ) ​ ​ ​ ​ ​ (1 ) ​ ​
Changes in fair value of marketable securities, net
​ ​ ​ ​ 291 ​ ​ ​ ​ ​ 29 ​ ​
Finance income
​ ​ ​ ​ (45 ) ​ ​ ​ ​ ​ — ​ ​
Provision for deferred income taxes, net
​ ​ ​ ​ (592 ) ​ ​ ​ ​ ​ (580 ) ​ ​
Change in accrued contingencies
​ ​ ​ ​ 8,000 ​ ​ ​ ​ ​ — ​ ​
Changes in operating assets and liabilities:
​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​
Increase in accounts receivable
​ ​ ​ ​ (571 ) ​ ​ ​ ​ ​ (2,699 ) ​ ​
Increase in other receivables
​ ​ ​ ​ (1,171 ) ​ ​ ​ ​ ​ (1,021 ) ​ ​
Increase in inventories
​ ​ ​ ​ (1,891 ) ​ ​ ​ ​ ​ (2,342 ) ​ ​
Increase in accounts payable
​ ​ ​ ​ 541 ​ ​ ​ ​ ​ 1,506 ​ ​
Increase in other liabilities
​ ​ ​ ​ 2,631 ​ ​ ​ ​ ​ 3,982 ​ ​
Increase in contract liabilities
​ ​ ​ ​ 5,251 ​ ​ ​ ​ ​ 4,090 ​ ​
Net cash provided by operating activities
​ ​ ​ $ 36,886 ​ ​ ​ ​ $ 14,609 ​ ​
CASH FLOWS FROM INVESTING ACTIVITIES: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​
Investment in short-term deposit
​ ​ ​ $ (10,000 ) ​ ​ ​ ​ $ — ​ ​
Purchase of fixed assets
​ ​ ​ ​ (381 ) ​ ​ ​ ​ ​ (189 ) ​ ​
Purchase of marketable securities
​ ​ ​ ​ (38,346 ) ​ ​ ​ ​ ​ (5,697 ) ​ ​
Proceeds from sale of marketable securities
​ ​ ​ ​ 18,988 ​ ​ ​ ​ ​ 202 ​ ​
Net cash used in investing activities
​ ​ ​ $ (29,739 ) ​ ​ ​ ​ $ (5,684 ) ​ ​
CASH FLOWS FROM FINANCING ACTIVITIES: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​
Transaction with redeemable non-controlling interest
​ ​ ​ $ — ​ ​ ​ ​ $ 1,729 ​ ​
Exercise of options
​ ​ ​ ​ 186 ​ ​ ​ ​ ​ 56 ​ ​
Net cash provided by financing activities
​ ​ ​ ​ 186 ​ ​ ​ ​ ​ 1,785 ​ ​
EFFECT OF EXCHANGE RATE CHANGES ON CASH
​ ​ ​ ​ (205 ) ​ ​ ​ ​ ​ 187 ​ ​
NET INCREASE IN CASH AND CASH EQUIVALENTS
​ ​ ​ ​ 7,128 ​ ​ ​ ​ ​ 10,897 ​ ​
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD
​ ​ ​ ​ 17,593 ​ ​ ​ ​ ​ 6,696 ​ ​
CASH AND CASH EQUIVALENTS AT END OF PERIOD
​ ​ ​ $ 24,721 ​ ​ ​ ​ $ 17,593 ​ ​
SUPPLEMENTAL DISCLOSURES OF CASH FLOWS INFORMATION: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​
Income taxes paid
​ ​ ​ $ 1,800 ​ ​ ​ ​ $ 737 ​ ​
Interest received
​ ​ ​ $ 662 ​ ​ ​ ​ $ 605 ​ ​
NON CASH FINANCING ACTIVITIES ​ ​ ​
Deferred offering costs in accounts payable
​ ​ ​ $ 895 ​ ​ ​ ​ $ — ​ ​
The accompanying notes are an integral part of these consolidated financial statements.
F-7
TABLE OF CONTENTS ​
INMODE LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(U.S. dollars in thousands, except per share amounts)
NOTE 1 — GENERAL
InMode Ltd. (separately and together with its subsidiaries, the “Company”) was incorporated on January 2, 2008 and commenced operations shortly thereafter. The Company’s headquarters are located in Israel.
The Company designs, develops, manufactures and markets innovative minimally-invasive aesthetic medical products based on its proprietary radio frequency assisted lipolysis and deep subdermal fractional radio frequency technologies. These technologies are used to remodel subdermal adipose, or fatty, tissue in a variety of procedures including liposuction with simultaneous skin tightening, body and face contouring and ablative skin rejuvenation treatments. In addition to the minimally-invasive technologies, the Company designs, develops, manufactures and markets non-invasive medical aesthetic products that target a wide array of procedures including permanent hair reduction, facial skin rejuvenation, wrinkle reduction, cellulite treatment, skin appearance and texture and superficial benign vascular and pigmented lesions.
The Company has six wholly-owned subsidiaries located in the United States, Canada, Hong Kong, Japan, Spain and Israel. In addition, the Company has two subsidiaries located in the United Kingdom and China and holds a 51% interest in each of those subsidiaries. The Company’s eight subsidiaries are referred to collectively herein as the “Subsidiaries.” The Company sells its products primarily through its Subsidiaries. The wholly-owned subsidiary located in Hong Kong (the “HK Subsidiary”) was established by the Company in February 2018. As of the signing date of the consolidated financial statements, the HK Subsidiary is still inactive.
NOTE 2 — SIGNIFICANT ACCOUNTING POLICIES:
a. Basis of presentation
The Company’s consolidated financial statements have been prepared in accordance with generally accepted accounting principles in the United States (“U.S. GAAP”).
b. Use of estimates
The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenue and expenses during the reporting period. Actual results may differ from those estimates. As applicable to these consolidated financial statements, the most significant estimates and assumptions include those relating to revenue recognition (especially in relation to price concession), provision for doubtful accounts, warranty provision, deferred tax assets and fair value of options to purchase the Company’s securities.
c. Functional currency
The U.S. dollar (“U.S. dollar” or “$”) is the currency of the primary economic environment in which the operations of the Company is conducted. Revenues and a substantial portion of the operational costs are denominated in U.S. dollars. Accordingly, the functional currency of the Company is the U.S. dollar (“primary currency”).
Transactions and balances originally denominated in U.S. dollars are presented at their original amounts. Balances in non-dollar currencies are translated into U.S. dollars using historical and current exchange rates for non-monetary and monetary balances, respectively. For non-U.S. dollar transactions and other items in the statements of operations (indicated below), the following exchange rates are used: (i) for transactions exchange rates at transaction dates or average rates and (ii) for other items (derived from non-monetary balance sheet items such as depreciation and amortization) historical exchange rates. Currency transaction gains and losses are presented in financial income or expenses, as appropriate.
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TABLE OF CONTENTS
INMODE LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(U.S. dollars in thousands, except per share amounts)
 
NOTE 2 — SIGNIFICANT ACCOUNTING POLICIES: (continued):
 
The functional currencies of the Company’s subsidiaries are their respective local currencies or the primary currency. For purposes of consolidation, the financial statements of the Company’s subsidiaries are translated into U.S. dollars in accordance with ASC 830, “Foreign Currency Matters” (“ASC 830”). Assets and liabilities are translated at period-end exchange rates, while revenues and expenses are translated at exchange rates for each transaction. All gains and losses resulting from translation are presented in other comprehensive income within the consolidated statements of comprehensive income.
d. Principles of consolidation and presentation
The consolidated financial statements include the accounts of the Company and its subsidiaries. Intercompany transactions and balances are eliminated in consolidation.
Non-controlling interests in subsidiaries represent the equity in subsidiaries not attributable, directly or indirectly, to the Company. Non-controlling interests are presented in equity separately from the equity attributable to the equity holders of the Company. Profit or loss and components of other comprehensive income are attributed to the Company and to non-controlling interests. Losses are attributed to non-controlling interests even if they result in a negative balance of non-controlling interests in the consolidated statements of income.
The carrying amount of the redeemable non-controlling interests are based on the higher of: a) the non-controlling interests based on the initial fair value with the addition of its share in the operating results of the relevant subsidiary net of dividend paid or b) the redemption value of the put option. Adjustment of the carrying amount of the redeemable non-controlling interests is charged to retained earnings.
The Company and its subsidiaries treat transactions with non-controlling interests as transactions with its equity owners. Accordingly, for purchases of shares from non-controlling interests, the difference between any consideration paid and the portion acquired of the carrying value of the net assets of the subsidiary is recorded in equity.
Gains or losses on disposals of shares to non-controlling interests are also recorded in equity.
e. Cash and cash equivalents
The Company considers cash equivalents to be all short-term, highly liquid investments, which include short-term bank deposits with original maturities of three months or less from the date of purchase that are not restricted as to withdrawal or use and are readily convertible to known amounts of cash.
f. Short-term bank deposits
Bank deposits with maturities of more than three months but less than one year are included in short-term deposits. Such short-term deposits bear interest at an average annual rate of approximately 2.63%-3.08% in 2018.
g. Marketable securities
Marketable securities consist of marketable equity securities, debt securities and mutual fund securities measured at fair value in each reporting period. The fair value of quoted securities is based on current market value.
Debt securities are classified as available-for-sale, with changes in fair value, net of taxes (if applicable), are reflected in other comprehensive income or loss. Realized gains and losses on sales of marketable debt securities as well as premium or discount amortization are included in the consolidated statements of income as finance income or expense. Unrealized losses are recorded in consolidated statements of income as finance income or expense when a decline in fair value is determined to be other than temporary.
F-9
TABLE OF CONTENTS
INMODE LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(U.S. dollars in thousands, except per share amounts)
 
NOTE 2 — SIGNIFICANT ACCOUNTING POLICIES: (continued):
 
Commencing January 2018, changes in fair value of marketable equity securities and mutual funds, net of taxes (if applicable), are reflected in the consolidated statements of income as finance income or expense. Prior to January 2018, these investments were classified as available-for-sale with changes in fair value, net of taxes, reflected in other comprehensive income. When such investments were sold or impaired, the accumulated fair value adjustments recognized in other comprehensive income were reclassified and included in the statement of income as finance income or expense (see also note 2w(l)).
h. Inventories
Inventories include raw materials and finished products and are valued at the lower of cost or net realizable value.
Cost is determined as follows:
•
Raw materials: first in, first out (“FIFO”) method.
​
•
Finished products: using the “moving average” basis. The moving average is calculated as each additional inventory unit is purchased.
​
The Company regularly evaluates its ability to realize the value of inventory based on a combination of factors including the following: historical usage rates, forecasted sales or usage, estimated current and future market values and new product introductions.
i. Property and equipment
Property and equipment is stated at cost, net of accumulated depreciation and amortization. Depreciation is calculated on a straight-line basis over the following estimated useful lives:
​ Computers ​ ​
3 – 4 years
​
​ Molds ​ ​
4 – 10 years
​
​ Equipment and furniture ​ ​
10 – 17 years
​
Leasehold improvements are amortized on a straight-line basis over the expected lease term, which is typically shorter than the estimated useful life of the improvements.
j. Impairment of long-lived assets
The Company tests long-lived assets for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may no longer be recoverable. Recoverability of long-lived assets is measured by comparing the carrying amount of the long-lived asset to the estimated undiscounted future cash flows expected to be generated by the asset. If the sum of the expected undiscounted cash flow is less than the carrying amount of the asset, the Company recognizes an impairment loss, which is the excess of the carrying amount over the fair value of the asset, using the expected future discounted cash flows.
As of December 31, 2018 and 2017, the Company did not recognize an impairment loss on its long-lived assets.
k. Legal and other contingencies
Certain conditions may exist as of the date of the consolidated financial statements, which may result in a loss to the Company but which will only be resolved when one or more future events occur or fail to occur. The Company’s management assesses such contingent liabilities and estimated legal fees, if any, and such assessment inherently involves an exercise of judgment. In assessing loss contingencies related to legal
F-10
TABLE OF CONTENTS
INMODE LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(U.S. dollars in thousands, except per share amounts)
 
NOTE 2 — SIGNIFICANT ACCOUNTING POLICIES: (continued):
 
proceedings that are pending against the Company or unasserted claims that may result in such proceedings, the Company’s management evaluates the perceived merits of any legal proceedings or unasserted claims as well as the perceived merits of the amount of relief sought or expected to be sought.
Management applies the guidance in ASC 450-20, “Loss Contingencies” when assessing losses resulting from contingencies. If the assessment of a contingency indicates that it is probable that a material loss has been incurred and the amount of the liability can be estimated, then the estimated liability is recorded as accrued expenses in the Company’s consolidated financial statements.
Legal costs incurred in connection with loss contingencies are expensed as incurred.
As of December 31, 2018 and 2017, the Company has recorded a provision of  $10,000 and $2,000, respectively, in relation to litigation resolved in January 2019 (see also note 9c (1)).
l. Income taxes
1)
The Company accounts for income taxes in accordance with ASC 740, “Income Taxes” (“ASC 740”). ASC 740 prescribes the use of the liability method whereby deferred tax asset and liability account balances are determined based on differences between the financial reporting and tax bases of assets and liabilities and are measured using the enacted tax rates and laws that will be in effect when the differences are expected to reverse. The Company provides a valuation allowance, if necessary, to reduce deferred tax assets to their estimated realizable value if it is more likely than not that a portion or all of the deferred tax assets will not be realized, based on the weight of available positive and negative evidence. Deferred tax liabilities and assets are classified as non-current in accordance with ASU 2015-17.
​
2)
Upon the distribution of dividends from the tax-exempt income of a Benefited Enterprise (see also note 11(a)(2)), the amount distributed is subject to tax at the rate that would have been applicable had the Company not been exempted from payment thereof. The tax amount will be recorded as an income tax expense in the period in which the Company declares the dividend. As to the amount of tax that would be owed if the Company distributed all of the retained earnings that would be subject to the tax exemption, see note 11a.
​
3)
The Company may incur an additional tax liability in the event of an inter-company dividend distribution from Foreign Subsidiaries; no additional deferred income taxes have been provided, since the Company does not expect to distribute inter-company dividends in the foreseeable future that may result in additional tax liability.
​
4)
Taxes that would apply in the event of disposal of investments in Subsidiaries have not been taken into account in computing the deferred income taxes, as it is the Company’s intent and ability to hold these investments.
​
5)
The Company accounts for uncertain tax positions in accordance with ASC 740-10. ASC 740-10 contains a two-step approach to recognizing and measuring uncertain tax positions. The first step is to evaluate the tax position taken or expected to be taken in a tax return by determining if the weight of available evidence indicates that it is more likely than not that, on an evaluation of the technical merits, the tax position will be sustained on audit, including resolution of any related appeals or litigation processes. The second step is to measure the tax benefit as the largest amount that is more than 50% (cumulative probability) likely to be realized upon ultimate settlement. The Company accrues interest and penalties related to unrecognized tax benefits under taxes on income (tax benefit).
​
​
F-11
TABLE OF CONTENTS
INMODE LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(U.S. dollars in thousands, except per share amounts)
 
NOTE 2 — SIGNIFICANT ACCOUNTING POLICIES: (continued):
 
m. Share-based compensation
The Company grants share options to its employees, directors and non-employees in consideration for services rendered. See note 10(1)(b) for details on outstanding share capital.
The Company accounts for share-based payment awards classified as equity awards using the grant date fair value method. The fair value at grant date of the issued equity award is recognized as an expense on a straight-line basis over the requisite service period, net of estimated forfeitures. The Company estimates forfeitures based on historical experience and anticipated future conditions at the time of grant and revises such estimates in subsequent periods if actual forfeitures differ from those estimates.
The Company elected to recognize share-based compensation cost for awards with only service conditions that have a graded vesting schedule using the straight-line method based on the multiple-option award approach.
When options are granted as consideration for services provided by consultants and other non-employees, the grant is accounted for based on the fair value of the consideration received or the fair value of the options issued, whichever is more reliably measurable. Prior to January 1, 2018, the fair value of the options granted was measured on a final basis at the end of the related service period and is recognized over the related service period using the straight-line method. Starting January 1, 2018, the fair value of the options granted is measured according to fair value as of the grant date and is recognized over the related service period using the straight-line method. See also note 2w(2).
n. Revenue recognition
In 2017, the Company early adopted ASC 606, “Revenue from Contracts with Customers” (“ASC 606”), using the full retrospective transition method, commencing as of January 1, 2016. Under ASC 606, an entity recognizes revenue when its customer obtains control of promised goods or services, in an amount that reflects the consideration that the entity expects to receive in exchange for those goods or services. To determine revenue recognition for arrangements that an entity determines are within the scope of ASC 606, the entity performs the following five steps:
(i) Identify the contract(s) with a customer.
(ii) Identify the performance obligations in the contract. The Company determined that its arrangements are generally comprised of the following elements that are recognized as separate performance obligations: products, consumables and extended warranties.
(iii) Determine the transaction price.
(iv) Allocate the transaction price to the performance obligations in the contract the Company estimates the standalone selling prices of the services to be provided based on expected pricing of service contract purchased on a standalone basis and used the residual approach to estimate the selling price of the products.
(v) Recognize revenue when (or as) the performance obligation is satisfied. The Company only applies the five-step model to contracts when it is probable that the entity will collect the consideration it is entitled to in exchange for the goods or services it transfers to the customer, after considering any price concession expected to be provided to the customer, when applicable. At contract inception, the Company assesses the goods or services promised within each contract and determines those that are performance obligations, and assesses whether each promised good or service is distinct. The Company then recognizes as revenue the amount of the transaction price that is allocated to the respective performance obligation when (or as) the performance obligation is satisfied.
F-12
TABLE OF CONTENTS
INMODE LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(U.S. dollars in thousands, except per share amounts)
 
NOTE 2 — SIGNIFICANT ACCOUNTING POLICIES: (continued):
 
The Company elected to use the following practical expedients that are permitted under the rules of the adoption, which have been applied consistently to all contracts within all reporting periods presented:
 — 
Applying the practical expedient in paragraph 340-40-25-4, the Company recognizes the incremental costs of obtaining contracts as an expense when incurred if the amortization period of the assets that the Company otherwise would have recognized is one year or less. These costs are included in selling, general, and administrative expenses.
​
 — 
The Company does not disclose the value of unsatisfied performance obligations for contracts with an original expected length of one year or less.
​
The following is a description of the principal activities from which the Company generates its revenue.
Product Revenue, Net
Revenues from product sales are recognized when the customer obtains control of the Company’s product, typically upon shipment to the customer. Taxes collected from customers relating to product sales and remitted to governmental authorities are excluded from revenues.
Payment terms and conditions vary by customer. The Company’s standard terms for end users usually require payment upon delivery and for distributors require 50% down payment and 50% payment within 30 days from the invoice date.
The Company may enter into installment sales contracts with end users in North America that provide them with long-term (generally up to 60 months) financing for the purchase of the Company’s products. The interest rate used in these contracts reflects the credit characteristics of the party receiving financing in the contract, as well as any collateral or security provided by the customer. Interest income on these receivables is recognized as finance income and earned over the terms of the contract.
Variable consideration mainly includes price concessions related to installment sales contracts. The Company recognizes any variable consideration at the time that it is probable that a significant reversal in the amount of cumulative revenue recognized will not occur when the uncertainty associated with the variable consideration is subsequently resolved.
The Company does not grant a right of return, refund, cancelation or termination.
Service Revenue
The Company also generates revenues from long-term maintenance contracts (“Extended Warranty”). Revenue from Extended Warranty is recognized ratably, on a straight-line basis, over the period of the applicable service contract. Contract liabilities include deferred revenues derived from these maintenance agreements.
Revenue from repairs performed in the absence of Extended Warranty is recognized when the related services are performed and it is probable that the entity will collect the consideration it is entitled to. The Company classifies the portion of contract liabilities not expected to be earned in the subsequent 12 months as long-term.
o. Allowance for doubtful accounts
The Company maintains an allowance for doubtful accounts for estimated losses resulting from the inability of customers to make required payments. The Company reviews the accounts receivable on a periodic basis and records an allowance when there is doubt as to the collectability of individual balances during the period in which such loss is determined to be probable based on an assessment of specific
F-13
TABLE OF CONTENTS
INMODE LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(U.S. dollars in thousands, except per share amounts)
 
NOTE 2 — SIGNIFICANT ACCOUNTING POLICIES: (continued):
 
evidence indicating doubtful collection, historical experience, account balance aging and prevailing economic conditions. Doubtful account balances are written off and deducted from the allowance when the receivable is deemed uncollectible, after all collection efforts have been exhausted and the potential for recovery is considered remote.
p. Warranty reserve
The Company provides a one-year standard warranty for its products. The Company records a provision for the estimated cost to repair or replace products under warranty at the time of sale. Factors that affect the Company’s warranty reserve include the number of units sold, historical and anticipated rates of warranty repairs and the cost per repair. The Company periodically assesses the adequacy of its recorded warranty liabilities and adjusts the amounts as necessary.
The following table sets forth activity in the Company’s accrued warranty account for each of the years ended December 31, 2018 and 2017:
​ ​ ​
December 31,
​
​ ​ ​
2018
​ ​
2017
​
Balance at beginning of year
​ ​ ​ $ 380 ​ ​ ​ ​ $ 355 ​ ​
Charged to expense
​ ​ ​ ​ (1,009 ) ​ ​ ​ ​ ​ (547 ) ​ ​
Costs incurred
​ ​ ​ ​ 1,335 ​ ​ ​ ​ ​ 572 ​ ​
Balance at end of year
​ ​ ​ $ 706 ​ ​ ​ ​ $ 380 ​ ​
q. Cost of revenues
Cost of revenue consists of products purchased from turnkey sub-contractors that are responsible for the production of most of the Company’s products under the Company’s directions and supervision, raw materials for in-house assembly line, shipping and handling costs to customers and to subsidiaries, salary, employee-related expenses and overhead expenses of internal assembly line and service cost associate with warranty.
r. Research and development costs
Research and development costs are expensed as incurred and includes salaries and employee-related expenses, overhead expenses, material and third-party contractor’s charges related to product development, regulatory affairs and clinical studies.
s. Net income per share
Basic earnings per share are computed by dividing net income attributed to InMode Ltd. shareholders by the weighted average number of the Company’s ordinary shares, par value NIS 0.01 per ordinary share, outstanding for each period.
For the diluted earnings per share calculation, the weighted average number of shares outstanding during the year is adjusted for the average number of shares that are potentially issuable in connection with employee share-based payment, using the treasury stock method.
The Company deducts the accretion of the redeemable non-controlling interest in computing the basic and diluted earnings per share.
t. Fair value measurement
The Company measures fair value and discloses fair value measurements for financial assets and liabilities. Fair value is based on the price that would be received to sell an asset or paid to transfer a liability
F-14
TABLE OF CONTENTS
INMODE LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(U.S. dollars in thousands, except per share amounts)
 
NOTE 2 — SIGNIFICANT ACCOUNTING POLICIES: (continued):
 
in an orderly transaction between market participants at the measurement date. In the absence of active markets for identical assets or liabilities, such measurements involve developing assumptions based on market observable data and, in the absence of such data, internal information that is consistent with what market participants would use in a hypothetical transaction that occurs at the measurement date. Observable inputs reflect market data obtained from independent sources, while unobservable inputs reflect the Company’s market assumptions.
The fair value of the financial instruments included in the working capital of the Company is usually identical or close to their carrying value.
The three levels of inputs that may be used to measure fair value are as follows:
Level 1 — Quoted prices (unadjusted) in active markets that are accessible at the measurement date for identical assets or liabilities. The fair value hierarchy gives the highest priority to Level 1 inputs.
Level 2 — Observable prices that are based on identical or similar instruments not quoted on active markets, but corroborated by observable market data, or quoted prices for similar instruments in active markets.
Level 3 — Unobservable inputs are used when little or no market data is available. The fair value hierarchy gives the lowest priority to Level 3 inputs.
The Company maintains policies and procedures to determine the fair value of financial assets and liabilities using what it considers to be the most relevant and reliable market data available. In 2018, the Company reclassified marketable debt securities from Level 1 to Level 2 within the fair value hierarchy as these securities are priced based on a combination of quoted prices for identical or similar instruments in active markets and models with significant observable market inputs. Prior period amounts have been reclassified to conform with current period presentation.
u. Segments
The Company operates in one segment. Management uses one measurement of profitability and does not segregate its business for internal reporting. The Company’s chief operating decision-maker evaluates the performance of its business based on financial data consistent with the presentation in the accompanying financial statements. The Company concluded that its unified business is conducted globally and accordingly represents one operating segment. As of December 31, 2018 and 2017, most of the Company’s long-lived assets were maintained in Israel. See note 12 for details relating to revenue by geography.
v. Deferred offering costs
Deferred offering costs relating to anticipated equity offerings, are capitalized and will be offset against proceeds upon the consummation of the offerings within shareholders’ equity. In the event an anticipated offering is terminated, deferred offering costs will be expensed. As of December 31, 2017, there were no capitalized deferred offering costs in the consolidated balance sheet. As of December 31, 2018, there were $895 of deferred offering costs capitalized in the consolidated balance sheet.
w. Newly issued and recently adopted accounting pronouncements
Recently adopted accounting pronouncements:
1)
As of January 1, 2018, the Company adopted ASU 2016-01, “Financial Instruments — Overall (Subtopic 825-10): Recognition and Measurement of Financial Assets and Liabilities” (“ASU 2016-01”), which relates to certain aspects of recognition, measurement, presentation, and
​
​
F-15
TABLE OF CONTENTS
INMODE LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(U.S. dollars in thousands, except per share amounts)
 
NOTE 2 — SIGNIFICANT ACCOUNTING POLICIES: (continued):
 
disclosure of financial instruments. Most prominent among the changes in the standard is the requirement for changes in the fair value of the Company’s equity investments, with certain exceptions, to be recognized through net income rather than other comprehensive income. Prior to the adoption the Company’s equity investments were accounted for as available-for-sale with changes in fair value recognized in other comprehensive income. At the time of adoption, the Company reclassified an unrealized gain net of tax of  $316 related to company’s equity investments from accumulated other comprehensive income (“AOCI”) to retained earnings. The amount of  $38, remaining in the AOCI at the time of adoption, relate to investments in debt securities.
2)
As of January 1, 2018, the Company adopted ASU 2018-07 (Topic 718) “Improvements to Nonemployee Share-Based Payment Accounting” that expands the scope of Topic 718 to include share-based payment transactions for acquiring goods and services from nonemployees. An entity should apply the requirements of Topic 718 to nonemployee awards except for certain exemptions specified in the amendment. The guidance is effective for fiscal years beginning after December 15, 2018, including interim reporting periods within that fiscal year. Under the provision of the amendment, the Company measures share-based compensation to non-employees in the same manner (except for certain exceptions) as share-based compensation to employees.
​
Accounting pronouncements issued but not yet adopted:
3)
In February 2016, the Financial Accounting Standards Board (“FASB”) issued ASU No. 2016-02, Leases (Topic 842), which supersedes the existing guidance for lease accounting, Leases (Topic 840). The guidance requires entities to record lease assets and lease liabilities on the balance sheet and disclose key information about leasing arrangements. In September 2017, the FASB issued additional amendments providing clarification and implementation guidance. The guidance will become effective for interim and annual periods beginning after December 15, 2018 (early adoption is permitted) and is required to be adopted at the earliest period presented using a modified retrospective approach. In January 2018, the FASB issued an update that permits an entity to elect an optional transition practical expedient to not evaluate land easements that existed or expired before the entity’s adoption of the new standard and that were not previously accounted for as leases. In July 2018, the FASB issued codification improvements, which clarify how to apply certain aspects of the new lease standard. In July 2018, the FASB issued targeted improvements, which provides with an additional (and optional) transition method to adopt the new lease requirements by allowing entities to initially apply the requirements by recognizing a cumulative-effect adjustment to the opening balance of retained earnings in the period of adoption. The Company will adopt this standard as of January 1, 2019, which will result in an increase of  $1,585 in assets and liabilities on the Company’s consolidated balance sheet. The new standard will not have a material impact on the Company’s consolidated statement of income or consolidated statement of cash flows.
​
F-16
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INMODE LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(U.S. dollars in thousands, except per share amounts)
 
NOTE 3 — MARKETABLE SECURITIES AND FAIR VALUE MEASUREMENTS
Marketable securities as of December 31, 2018 and December 31, 2017 consisted of marketable equity securities, debt securities and mutual fund securities. These marketable securities are recorded at fair value.
The following table sets forth the Company’s marketable securities for the periods indicated:
​ ​ ​
December 31,
​
​ ​ ​
2018
​ ​
2017
​
Marketable equity securities
​ ​ ​ $ — ​ ​ ​ ​ $ 4,234 ​ ​
Government securities*
​ ​ ​ ​ 21,932 ​ ​ ​ ​ ​ — ​ ​
Corporate debt securities
​ ​ ​ ​ 4,600 ​ ​ ​ ​ ​ 2,655 ​ ​
Mutual funds
​ ​ ​ ​ — ​ ​ ​ ​ ​ 558 ​ ​
Total
​ ​ ​ $ 26,532 ​ ​ ​ ​ $ 7,447 ​ ​
​
*
As of December 31, 2018, consists of  $2,054 of non-U.S government securities.
​
The Company classifies marketable securities within Level 1 or Level 2 because it uses quoted market prices or alternative pricing sources and models utilizing market observable inputs to determine their fair value. See also note 2(t).
The following table sets forth the Company’s financial assets as of December 31, 2018 and 2017 that are measured at fair value on a recurring basis during the period:
​ ​ ​
December 31, 2018
​
​ ​ ​
Fair
value
​ ​
Cost or
amortized
cost
​ ​
Gross
unrealized
holding loss
​ ​
Gross
unrealized
holding gains
​
Level 2 securities: ​ ​ ​ ​ ​
Government securities
​ ​ ​ $ 21,932 ​ ​ ​ ​ $ 21,878 ​ ​ ​ ​ $ (3 ) ​ ​ ​ ​ $ 57 ​ ​
Corporate debt securities
​ ​ ​ ​ 4,600 ​ ​ ​ ​ ​ 4,606 ​ ​ ​ ​ ​ (15 ) ​ ​ ​ ​ ​ 9 ​ ​
Total
​ ​ ​ $ 26,532 ​ ​ ​ ​ $ 26,484 ​ ​ ​ ​ $ (18 ) ​ ​ ​ ​ $ 66 ​ ​
​
​ ​ ​
December 31, 2017
​
​ ​ ​
Fair
value
​ ​
Cost or
amortized
cost
​ ​
Gross
unrealized
holding loss
​ ​
Gross
unrealized
holding gains
​
Level 1 securities: ​ ​ ​ ​ ​
Marketable equity securities
​ ​ ​ $ 4,234 ​ ​ ​ ​ $ 3,832 ​ ​ ​ ​ $ (45 ) ​ ​ ​ ​ $ 447 ​ ​
Mutual funds
​ ​ ​ ​ 558 ​ ​ ​ ​ ​ 550 ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ 8 ​ ​
Level 2 securities: ​ ​ ​ ​ ​
Corporate debt securities
​ ​ ​ ​ 2,655 ​ ​ ​ ​ ​ 2,604 ​ ​ ​ ​ ​ (17 ) ​ ​ ​ ​ ​ 68 ​ ​
Total
​ ​ ​ $ 7,447 ​ ​ ​ ​ $ 6,986 ​ ​ ​ ​ $ (62 ) ​ ​ ​ ​ $ 523 ​ ​
As of December 31, 2018 and 2017, the Company considered the decreases in market value on its marketable securities to be temporary in nature and did not consider any of the Company’s investments to be other-than-temporarily impaired.
As of December 31, 2018, the majority of the Company’s government bond holdings for the amount of  $19,878, are highly liquid U.S. government securities.
F-17
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INMODE LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(U.S. dollars in thousands, except per share amounts)
 
NOTE 3 — MARKETABLE SECURITIES AND FAIR VALUE MEASUREMENTS (continued):
 
As of December 31, 2018 and 2017, the Company’s debt securities had the following maturity dates:
​ ​ ​
Market value
​
​ ​ ​
December 31,
​
​ ​ ​
2018
​ ​
2017
​
Due within one year
​ ​ ​ $ 12,801 ​ ​ ​ ​ $ 200 ​ ​
1 to 2 years
​ ​ ​ ​ 9,068 ​ ​ ​ ​ ​ — ​ ​
2 to 3 years
​ ​ ​ ​ 2,609 ​ ​ ​ ​ ​ — ​ ​
3 to 4 years
​ ​ ​ ​ 2,054 ​ ​ ​ ​ ​ 169 ​ ​
4 to 5 years
​ ​ ​ ​ — ​ ​ ​ ​ ​ 820 ​ ​
More than 5 years
​ ​ ​ ​ — ​ ​ ​ ​ ​ 1,466 ​ ​
Total
​ ​ ​ $ 26,532 ​ ​ ​ ​ $ 2,655 ​ ​
NOTE 4 — ACCOUNTS RECEIVABLE:
Accounts receivable consist of the following:
​ ​ ​
December 31,
​
​ ​ ​
2018
​ ​
2017
​
Trade
​ ​ ​ $ 6,768 ​ ​ ​ ​ $ 6,759 ​ ​
Notes receivable
​ ​ ​ ​ 1,138 ​ ​ ​ ​ ​ 528 ​ ​
Less – allowance for doubtful debt
​ ​ ​ ​ (354 ) ​ ​ ​ ​ ​ (387 ) ​ ​
​ ​ ​ ​ ​ 7,552 ​ ​ ​ ​ ​ 6,900 ​ ​
Less – non-current accounts receivable
​ ​ ​ ​ (544 ) ​ ​ ​ ​ ​ (1,137 ) ​ ​
Total accounts receivable
​ ​ ​ $ 7,008 ​ ​ ​ ​ $ 5,763 ​ ​
NOTE 5 — INVENTORIES:
Inventories consist of the following:
​ ​ ​
December 31,
​
​ ​ ​
2018
​ ​
2017
​
Raw materials
​ ​ ​ $ 2,508 ​ ​ ​ ​ $ 2,407 ​ ​
Finished products
​ ​ ​ ​ 4,455 ​ ​ ​ ​ ​ 2,628 ​ ​
Total inventories
​ ​ ​ $ 6,963 ​ ​ ​ ​ $ 5,035 ​ ​
F-18
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INMODE LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(U.S. dollars in thousands, except per share amounts)
 
NOTE 6 — PROPERTY AND EQUIPMENT, NET:
Composition of property and equipment grouped by major classifications is as follows:
​ ​ ​
December 31,
​
​ ​ ​
2018
​ ​
2017
​
Computers
​ ​ ​ $ 282 ​ ​ ​ ​ $ 128 ​ ​
Office furniture and equipment
​ ​ ​ ​ 118 ​ ​ ​ ​ ​ 96 ​ ​
Molds
​ ​ ​ ​ 914 ​ ​ ​ ​ ​ 737 ​ ​
Leasehold improvements
​ ​ ​ ​ 149 ​ ​ ​ ​ ​ 120 ​ ​
​ ​ ​ ​ ​ 1,463 ​ ​ ​ ​ ​ 1,081 ​ ​
Less: accumulated depreciation
​ ​ ​ ​ (919 ) ​ ​ ​ ​ ​ (735 ) ​ ​
Total property and equipment, net
​ ​ ​ $ 544 ​ ​ ​ ​ $ 346 ​ ​
Total depreciation and amortization in respect of property and equipment were $184 and $204 for the years ended December 31, 2018 and 2017, respectively.
NOTE 7 — OTHER LIABILITIES:
Other liabilities consist of the following:
​ ​ ​
December 31,
​
​ ​ ​
2018
​ ​
2017
​
Employees and related expenses
​ ​ ​ $ 5,473 ​ ​ ​ ​ $ 4,014 ​ ​
Government institutions
​ ​ ​ ​ 1,232 ​ ​ ​ ​ ​ 1,070 ​ ​
Income tax
​ ​ ​ ​ 324 ​ ​ ​ ​ ​ 1,024 ​ ​
Other
​ ​ ​ ​ 2,136 ​ ​ ​ ​ ​ 1,149 ​ ​
Total other liabilities
​ ​ ​ $ 9,165 ​ ​ ​ ​ $ 7,257 ​ ​
NOTE 8 — EMPLOYEE SEVERANCE BENEFITS
The Company is required to make severance payments upon dismissal of an employee or upon termination of employment in certain circumstances.
In accordance with the current employment terms with all of its employees (Section 14 of the Israeli Severance Pay Law, 1963) located in Israel, the Company makes regular deposits with certain insurance companies for accounts controlled by each applicable employee in order to secure the employee’s full retirement benefit obligation. The Company is fully relieved from any severance pay liability with respect to each such employee after it makes the payments on behalf of the employee. The liability accrued in respect of these employees and the amounts funded, as of the respective agreement dates, are not reflected on the Company’s Consolidated balance sheet, as the amounts funded are not under the control and management of the Company and the pension or severance pay risks have been irrevocably transferred to the applicable insurance companies.
The amounts of severance payment expenses were $174 and $154 for the years ended December 31, 2018 and 2017, respectively.
The Company expects to contribute approximately $193 in the year ending December 31, 2019 to insurance companies in connection with its expected severance liabilities for the year.
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INMODE LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(U.S. dollars in thousands, except per share amounts)
 
NOTE 9 — COMMITMENTS AND CONTINGENT LIABILITIES:
a. Leases
In May 2018, the Company signed a new lease agreement for its headquarters in Israel which expires on December 2021. The cost under the new lease agreement is linked to the Israeli Consumer Price Index. For the purpose of ensuring the Company’s obligation towards the lessor, the Company has provided the lessor with a bank guarantee of 231 thousand New Israeli Shekels (NIS), approximately $62. Prior to that, the Company had a lease agreement, for its headquarters in Israel, with a related party regarding a supplemental lease agreement in 2019, see note 14.
The Company’s U.S. subsidiary has a lease agreement for its offices that expires in August 2022.
The Company’s Canadian subsidiary has a lease agreement for its offices that expires in June 2022. The lease is with related parties.
The minimum lease payments of the Company for the next years, at rates in effect at December 31, 2018, are as follows:
​ Year ending December 31: ​ ​ ​ ​ ​ ​ ​
​
2019
​ ​ ​ $ 392 ​ ​
​
2020
​ ​ ​ ​ 399 ​ ​
​
2021
​ ​ ​ ​ 405 ​ ​
​
2022
​ ​ ​ ​ 119 ​ ​
​
Total future minimum lease payments
​ ​ ​ $ 1,315 ​ ​
Rent expense amounted to approximately $403 and $287 for the years ended December 31, 2018 and 2017, respectively.
b. Subcontracting agreement
The Company has entered into a turnkey manufacturing agreement with its major subcontractor provider in Israel in connection with manufacturing and assembling the Company’s products. The agreement is renewed automatically every year, unless either the Company or the turnkey manufacturer gives written notice three months prior to the expiration of the term. Additionally, the Company or the turnkey manufacturer has the ability to terminate the contract at any time and for any reason with a prior written notice of four months.
According to the agreement, the Company does not have a minimum order obligation but the Company provides the subcontractor a six-month rolling forecast with the projected demand for products. In case of termination of the agreement, the Company has to compensate the subcontractor for non-returnable inventory, materials in orders that cannot be cancelled and finished products inventory. As of December 31, 2018, the subcontractor’s finished goods inventory, raw material and open orders amounted to approximately $2.4 million.
F-20
TABLE OF CONTENTS
INMODE LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(U.S. dollars in thousands, except per share amounts)
 
NOTE 9 — COMMITMENTS AND CONTINGENT LIABILITIES: (continued):
 
c. Litigation and contingencies
The Company is involved in various claims, legal proceedings and investigations, including those described below. While it is not feasible to predict the outcome of such pending claims, proceedings and investigations with certainty, management is of the opinion that their ultimate resolution should not have a material adverse effect on the Company’s financial position, cash flows, or results of operations, except where noted below:
1)
Syneron-Candela:
​
a)
In January 2016, Syneron Medical Ltd. (“Syneron”) filed a claim against the Company’s U.S. subsidiary and its Israeli subsidiary in the United States District Court in the Central District of California, claiming alleged infringement of four U.S. patents of Syneron. In the framework of the claim, Syneron requested the court a permanent injunction enjoining the named subsidiaries, officers and others on its behalf from infringing the patents, and to enter a judgment and order requiring defendants to compensate Syneron for the alleged infringement of the patents. In September 2018, the court granted summary judgment and ruled in the Company’s favor on all claims asserted against the Company related to the intellectual property in dispute. Syneron appealed.
​
b)
In April 2017, Syneron and Candela Corporation (“Syneron-Candela”) filed a claim against the Company’s U.S. subsidiary, its Israeli subsidiary and the Company in the United States District Court in Tennessee, claiming that the defendants interfered with the plaintiffs’ business, misappropriated plaintiffs’ trade secrets, interfered with plaintiffs’ employment relationships, and induced the breach of plaintiffs’ employment agreements with four former employees. The plaintiffs filed a motion for expedited discovery. The Company filed a motion to dismiss the action on procedural grounds. The parties reported the case as settled in September 2017. The full and final settlement agreement was signed by all parties in February 2018 for an immaterial amount.
​
c)
In April 2018, Syneron-Candela filed claims with the International Trade Commission and with Massachusetts General Hospital (“MGH”), in the United States District Court for the District of Massachusetts against the Company’s U.S. and Israeli subsidiaries, alleging that the Company’s fractional RF products infringed two U.S. patents owned by Syneron-Candela and MGH that purport to cover systems and methods for treating skin and arranging electrodes on skin therapy devices.
​
In January 2019, the Company entered into a settlement agreement with Syneron-Candela and MGH that resolved all patent claims previously in dispute in exchange for a one-time cash payment that the Company made to Syneron-Candela and MGH in February 2019. As part of such settlement agreement, the Company entered into a sublicense agreement with Syneron-Candela and MGH that granted the Company and its subsidiaries a fully paid non exclusive, royalty-free worldwide sublicense to practice the patents and applications previously in dispute in the licensed field. The sublicense shall continue until the expiration of the last surviving patent or application granted pursuant to the sublicense agreement. See also note 2k.
2)
In May 2017, Cynosure, Inc. (“Cynosure”) filed a claim against the Company’s U.S. subsidiary in the United States District Court for the Southern District of Texas (Houston). The case was transferred to the District of Massachusetts. Cynosure claimed that the Company’s U.S. subsidiary unlawfully solicited certain former Cynosure employees, misappropriated Cynosure’s trade secrets, and aided and abetted the employees’ breaches of their fiduciary duties to Cynosure. A full and final settlement agreement was executed in February 2018 for an immaterial amount.
​
​
F-21
TABLE OF CONTENTS
INMODE LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(U.S. dollars in thousands, except per share amounts)
 
NOTE 9 — COMMITMENTS AND CONTINGENT LIABILITIES: (continued):
 
As of December 31, 2018, the Company has accrued a provision of  $10,000 in connection with its legal proceedings and settlements.
NOTE 10 — SHAREHOLDERS’ EQUITY:
a. Share Capital
1) Ordinary shares
Each holder of the Company’s ordinary shares is entitled to one vote. The holders of ordinary shares are also entitled to receive dividends whenever funds are legally available, when and if declared by the Company’s Board of Directors. Since inception, the Company has not declared any dividends.
2) Share-based compensation
On January 30, 2008, the Company’s board of directors adopted two share option plans as follows (collectively, the “2008 Plans”):
a)
2008 Israeli Option Plan (the “2008 Israeli Plan”) allowing the Company to grant options to purchase ordinary shares to Israeli employees, officers, directors, consultants and service providers.
​
b)
2008 ROW Option Plan (the “2008 ROW Plan”) allowing the Company to grant options to purchase ordinary shares to non-Israeli employees, officers, directors, consultants and service providers.
​
In June 2018, the Company’s board of directors adopted a new incentive plan (“2018 Incentive Plan”), allowing the Company to grant options to purchase ordinary shares, restricted shares or other awards to Israeli and other non-U.S. employees, officers, directors, consultants and service providers of the Company. The 2018 Incentive Plan also includes as an appendix a sub-plan allowing the Company to grant options to purchase ordinary shares, restricted shares or other incentive awards to U.S. employees, officers, directors, consultants and service providers of the Company.
The grant of options to Israeli employees, officers and directors under the 2008 Israeli Plan and the 2018 Incentive Plan is subject to the terms stipulated by Sections 102 and 102A of the Israeli Income Tax Ordinance. Each option grant is subject to the track chosen by the Company, either Section 102 or Section 102A of the Israeli Income Tax Ordinance, and pursuant to the terms thereof, the Company is not allowed to claim as an expense for tax purposes the amounts credited to employees as benefits, including amounts recorded as salary benefits in the Company’s accounts, in respect of options granted to employees under the 2008 Israeli Plan, with the exception of the work-income benefit component, if any, determined on grant date. For consultants and service providers, the 2008 Israeli Plan and the 2018 Incentive Plan is subject to Section 3(i) of the Israeli Income Tax Ordinance.
Upon the adoption of the 2018 Incentive Plan, the then current pool of options available for future grants under the 2008 Plans was canceled and returned to the Company’s authorized and un-issued share capital.
Upon adoption of the 2018 Incentive Plan, up to 1,000,000 of the Company’s authorized and unissued ordinary shares may be issued pursuant to awards under the 2018 Incentive Plan. The number of reserved, authorized and unissued ordinary shares of the Company available for issuance of awards pursuant to the 2018 Incentive Plan shall automatically increase on an annual basis as follows: on the first business day of each calendar year beginning in 2019, the number of options equal to the lesser of  (i) 800,000 ordinary shares, (ii) three percent of the number of shares outstanding as of such date or (iii) a lesser number of ordinary shares as shall be determined by the board of directors.
F-22
TABLE OF CONTENTS
INMODE LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(U.S. dollars in thousands, except per share amounts)
 
NOTE 10 — SHAREHOLDERS’ EQUITY: (continued):
 
During 2018, the Company granted options to employees and to consultants as following: in February the Company granted 2,000 options to employees and in September 2018, the Company granted 198,100 options to employees and consultants.
As of December 31, 2018, 811,900 options were available for grant under the 2018 Incentive Plan.
For options granted after the consolidated balance sheet date, see note 14.
a) Options granted to employees
​ ​ ​
Year ended December 31,
​
​ ​ ​
2018
​ ​
2017
​
​ ​ ​
Number
of
Options
​ ​
Weighted
average
exercise
price*
​ ​
Number
of
options
​ ​
Weighted
Average
Exercise
price*
​
Outstanding at beginning of year
​ ​ ​ ​ 3,760,977 ​ ​ ​ ​ $ 0.94 ​ ​ ​ ​ ​ 1,430,450 ​ ​ ​ ​ $ 0.84 ​ ​
Changes during the year: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​
Granted
​ ​ ​ ​ 118,600 ​ ​ ​ ​ ​ 11.13 ​ ​ ​ ​ ​ 3,128,300 ​ ​ ​ ​ ​ 1.00 ​ ​
Exercised
​ ​ ​ ​ (160,536 ) ​ ​ ​ ​ ​ 1.00 ​ ​ ​ ​ ​ (44,447 ) ​ ​ ​ ​ ​ 1.00 ​ ​
Forfeited
​ ​ ​ ​ (24,997 ) ​ ​ ​ ​ ​ 5.12 ​ ​ ​ ​ ​ (598,318 ) ​ ​ ​ ​ ​ 1.00 ​ ​
Expired
​ ​ ​ ​ (24,069 ) ​ ​ ​ ​ ​ 1.00 ​ ​ ​ ​ ​ (155,008 ) ​ ​ ​ ​ ​ 1.00 ​ ​
Outstanding at end of year
​ ​ ​ ​ 3,669,975 ​ ​ ​ ​ $ 1.24 ​ ​ ​ ​ ​ 3,760,977 ​ ​ ​ ​ $ 0.94 ​ ​
Exercisable at end of year
​ ​ ​ ​ 3,554,716 ​ ​ ​ ​ $ 1.00 ​ ​ ​ ​ ​ 2,073,644 ​ ​ ​ ​ $ 0.89 ​ ​
​
*
In dollars per ordinary share.
​
As of December 31, 2018, the weighted-average remaining contractual life of exercisable options was 4.43 years. The total intrinsic value of options exercised during 2018 and 2017 was approximately $1,247 and $199, respectively.
The fair value of each option granted is estimated on the date of grant using the binomial option-pricing model, with the following assumptions:
​ ​ ​
2018
​ ​
2017
​
Fair value of one ordinary share
​ ​
$8.70 – $11.30
​ ​
$0.86 – $5.58
​
Dividend yield
​ ​
0%
​ ​
0%
​
Expected volatility
​ ​
51.2%
​ ​
39% –50%
​
Risk-free interest rate
​ ​
2.96%
​ ​
0.82% – 2.26%
​
Early exercise multiple (“EEM”)
​ ​
150% – 250%
​ ​
150%  – 250%
​
Contractual term
​ ​
7 years
​ ​
7 years
​
The expected volatility is based on the historical volatility of comparable companies.
The risk-free interest rate assumption is based on observed interest rates appropriate for the expected term of the options granted in dollar terms.
Since the Company’s ordinary shares are not publicly traded, the early exercise multiple (“EEM”) was based on academic empirical findings. The EEM of grantees in private companies is expected to be higher due to the lack of marketability that leads to a longer exercise period for options.
F-23
TABLE OF CONTENTS
INMODE LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(U.S. dollars in thousands, except per share amounts)
 
NOTE 10 — SHAREHOLDERS’ EQUITY: (continued):
 
The weighted average fair value of employee options granted during the years ended December 31, 2018 and 2017 was $408 and $1,301, respectively. As of December 31, 2018, the Company had 115,259 unvested options. The total unrecognized compensation cost of employee options at December 31, 2018 is $267, which is expected to be recognized over a weighted average period of 0.58 years.
b) Options granted to consultants and other service providers:
​ ​ ​
Year ended December 31,
​
​ ​ ​
2018
​ ​
2017
​
​ ​ ​
Number
of
options
​ ​
Weighted
average
exercise
price*
​ ​
Number
of
options
​ ​
Weighted
average
exercise
price*
​
Outstanding at beginning of year
​ ​ ​ ​ 1,523,500 ​ ​ ​ ​ $ 0.96 ​ ​ ​ ​ ​ 964,500 ​ ​ ​ ​ $ 0.94 ​ ​
Changes during the year –  ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​
Granted
​ ​ ​ ​ 81,500 ​ ​ ​ ​ ​ 11.30 ​ ​ ​ ​ ​ 677,500 ​ ​ ​ ​ ​ 1.00 ​ ​
Exercised
​ ​ ​ ​ (25,000 ) ​ ​ ​ ​ ​ 1.00 ​ ​ ​ ​ ​ (11,500 ) ​ ​ ​ ​ ​ 1.00 ​ ​
Forfeited
​ ​ ​ ​ — ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ (100,000 ) ​ ​ ​ ​ ​ 1.00 ​ ​
Expired
​ ​ ​ ​ — ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ (7,000 ) ​ ​ ​ ​ ​ 1.00 ​ ​
Outstanding at end of year
​ ​ ​ ​ 1,580,000 ​ ​ ​ ​ $ 1.49 ​ ​ ​ ​ ​ 1,523,500 ​ ​ ​ ​ $ 0.96 ​ ​
Exercisable at end of year
​ ​ ​ ​ 1,517,625 ​ ​ ​ ​ $ 1.09 ​ ​ ​ ​ ​ 999,583 ​ ​ ​ ​ $ 0.94 ​ ​
​
*
In dollars per ordinary share.
​
The fair value of each option granted is estimated on the date of grant using the binomial option-pricing model, with the following assumptions:
​ ​ ​
2018
​ ​
2017
​
Fair value of one ordinary share
​ ​
$11.30
​ ​
$0.80 – $7.35
​
Dividend yield
​ ​
0%
​ ​
0%
​
Expected volatility
​ ​
51.2%
​ ​
39% –50%
​
Risk-free interest rate
​ ​
2.96%
​ ​
0.82% – 2.26%
​
Early exercise multiple
​ ​
150% – 250%
​ ​
150% – 250%
​
Contractual term
​ ​
7 years
​ ​
7 years
​
The expected volatility is based on the historical volatility of comparable companies.
The risk-free interest rate assumption is based on observed interest rates appropriate for the expected term of the options granted in dollar terms.
Since the Company’s ordinary shares are not publicly traded, the early exercise multiple (“EEM”) was based on academic empirical findings. The EEM of grantees in private companies is expected to be higher due to the lack of marketability that leads to a longer exercise period for options.
The weighted average fair value of non-employee options granted during the years ended December 31, 2018 and 2017 was $508 and $417, respectively. As of December 31, 2018, the Company had 62,375 unvested options. The total unrecognized compensation cost of non-employee options at December 31, 2018 is $375 which is expected to be recognized over a weighted average period of 0.97 years.
F-24
TABLE OF CONTENTS
INMODE LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(U.S. dollars in thousands, except per share amounts)
 
NOTE 10 — SHAREHOLDERS’ EQUITY: (continued):
 
c) The following tables summarize information concerning outstanding and exercisable options as of December 31, 2018:
​
December 31, 2018
​
​
Options outstanding
​ ​
Options exercisable
​
​
Exercise
prices*
​ ​
Number of
options
outstanding
at end of
year
​ ​
Weighted
average
remaining
contractual
life
​ ​
Number of
options
exercisable
at end of
year
​ ​
Weighted
average
remaining
contractual
life
​
​
$0.35
​ ​ ​ ​ 405,000 ​ ​ ​ ​ ​ 1.86 ​ ​ ​ ​ ​ 405,000 ​ ​ ​ ​ ​ 1.86 ​ ​
​
$0.78
​ ​ ​ ​ 111,000 ​ ​ ​ ​ ​ 3.87 ​ ​ ​ ​ ​ 111,000 ​ ​ ​ ​ ​ 3.87 ​ ​
​
$1.00
​ ​ ​ ​ 4,545,875 ​ ​ ​ ​ ​ 4.51 ​ ​ ​ ​ ​ 4,515,375 ​ ​ ​ ​ ​ 4.51 ​ ​
​
$11.30
​ ​ ​ ​ 188,100 ​ ​ ​ ​ ​ 6.72 ​ ​ ​ ​ ​ 40,966 ​ ​ ​ ​ ​ 6.72 ​ ​
​
*
In dollars per ordinary share.
​
The aggregate intrinsic value of total vested and exercisable options as of December 31, 2018 is $62,111.
d) The following table illustrates the effect of share-based compensation on the statements of operations:
​ ​ ​
Year ended December 31,
​
​ ​ ​
2018
​ ​
2017
​
Cost of sales
​ ​ ​ $ 25 ​ ​ ​ ​ $ 36 ​ ​
Research and development expenses
​ ​ ​ ​ 63 ​ ​ ​ ​ ​ 21 ​ ​
Selling and marketing expenses
​ ​ ​ ​ 1,817 ​ ​ ​ ​ ​ 2,277 ​ ​
General and administrative expenses
​ ​ ​ ​ 42 ​ ​ ​ ​ ​ 102 ​ ​
​ ​ ​ ​ $ 1,947 ​ ​ ​ ​ $ 2,436 ​ ​
b.
Non-Controlling Interests
​
1) In December 2016, the Company signed a joint venture agreement with Guangzhou Sino-Israel Bio-Industry Investment Fund (LLP) (“GIBF”), an investment fund established by the Guangzhou government, to invest in Israeli companies, pursuant to which an Equity Joint Venture Company (“JVC”) was established. According to the agreement, the Company provides to the JVC a license to use the Company’s knowledge in exchange for a 51% interest, and GIBF will invest (in a Chinese local currency “RMB”) an amount of RMB 50 million (approximately $7.2 million), in exchange for a 49% interest of the JVC. The investment is to be made in three installments following the achievement of specified milestones: (i) 25% of the investment was made 30 days following the investment’s closing, (ii) 35% of the investment is to be made following the initiation of a production and manufacturing line, and (iii) 40% of the investment is to be made following the sale of 10 platforms in China. The JVC will distribute the Company’s products in China and develop and manufacture new products for the Chinese market under the Company’s license. In 2017, the JVC satisfied the first milestone and GIBF invested approximately $1.7 million.
The non-controlling partner in JVC has the right to convert its equity interest in the JVC in connection with an initial public offering of the Company into shares of the Company, based upon the aggregate investment made in the JVC and the price range established as part of the initial public offering process. On February 21, 2019, the non-controlling partner in the JVC signed an agreement in which the
F-25
TABLE OF CONTENTS
INMODE LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(U.S. dollars in thousands, except per share amounts)
 
NOTE 10 — SHAREHOLDERS’ EQUITY: (continued):
 
non-controlling partner in the JVC waived any and all rights, privileges and interests with regards to such conversion right (“JVC Waiver”). However, the JVC Waiver will be effective only upon a completion of an IPO process on or before June 15, 2019. Additionally, the non-controlling partner in the Company’s subsidiary located in the United Kingdom (“Invasix UK”) had the right to convert its equity interest in Invasix UK in connection with an initial public offering of the Company into shares of the Company. The number of the Company’s ordinary shares that would have been issued to the non-controlling partner upon the conversion of its equity interest in Invasix UK would have been based on the percentage of Invasix UK’s sales in relation to the total sales of the Company. On August 30, 2018, the non-controlling partner waived any and all rights, privileges and interests with regards to such conversion right (“UK Waiver”).
The non-controlling partners’ conversion rights are presented in the Company’s consolidated financial statements as part of the redeemable non-controlling interest which is classified as “mezzanine”. The Company adjusts the carrying amount of its redeemable non-controlling interest to its redemption value to retained earnings. As, a result of the UK Waiver, the Company reclassified into non-controlling interests the balance of UK redeemable non-controlling interest in an amount of  $1,414. The remaining “mezzanine” balance represents the JVC’s partner right to convert. Starting from August 30, 2018, the non-controlling partner in Invasix UK has been considered and treated as a non-controlling interest.
2) The changes in redeemable non-controlling interest are as follow:
​ ​ ​
2018
​ ​
2017
​
Balance as of January 1
​ ​ ​ $ 3,066 ​ ​ ​ ​ $ 183 ​ ​
Adjustment to redemption value of redeemable non-controlling interest
​ ​ ​ ​ 535 ​ ​ ​ ​ ​ 1,154 ​ ​
Increases due to additional investment of redeemable non-controlling interest
​ ​ ​ ​ — ​ ​ ​ ​ ​ 1,729 ​ ​
Waiver of redeemable non-controlling interest
​ ​ ​ ​ (1,414 ) ​ ​ ​ ​ ​ — ​ ​
Balance as of December 31
​ ​ ​ $ 2,187 ​ ​ ​ ​ $ 3,066 ​ ​
NOTE 11 — TAXES ON INCOME:
a. InMode Ltd.
The Company is taxed according to Israeli tax laws:
1) Measurement of results for tax purposes
Since 2008, the Company has measured the results of the Israeli Company for tax purposes in nominal terms in NIS.
These consolidated financial statements are presented in U.S. dollars. The changes in the exchange rate of the dollar, both on an annual and a cumulative basis cause a difference between taxable income and income reflected in these consolidated financial statements. ASC 740-10-25 prohibits the recognition of deferred tax liabilities or assets that arise from differences between the financial reporting and tax bases of assets and liabilities that are re-measured from the local currency into dollars using historical exchange rates, and that result from changes in exchange rates or indexing for tax purposes. Consequently, the above-mentioned differences were not reflected in the computation of deferred tax assets and liabilities.
2) Tax benefits under the Law for the Encouragement of Capital Investments, 1959 (hereinafter — the law)
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(U.S. dollars in thousands, except per share amounts)
 
NOTE 11 — TAXES ON INCOME: (continued):
 
Under the Encouragement of Capital Investments Law, including Amendment No. 60 thereof as published in April 2005, by virtue of the “Approved Enterprise” or “Benefited Enterprise” status, the Israeli Company is entitled to various tax benefits as follows:
a) Reduced tax rates
Income derived from the Benefited Enterprise during a 10-year period commencing upon the year in which the enterprise first realizes taxable income is tax exempt, provided that the maximum period to which it is restricted by the Encouragement of Capital Investments Law has not elapsed.
On 2009, the Israeli company received a tax ruling (the “Ruling”) approving its activity as a Benefited Enterprise, provided that the Israeli company meets the requirements under the Ruling. The Israeli company’s facility obtained the status of a Benefited Enterprise, which made it eligible for tax benefits for a period of up to ten years.
The period of benefits of the Benefited Enterprise of the Company commenced in 2012. As of December 31, 2018, the Company’s retained earnings primarily derived from the benefits of its Benefited Enterprise status.
In the event of a distribution of dividends (or deemed dividends) from income that was tax exempt as discussed above, the Company will be required to pay the applicable corporate tax that would otherwise have been payable on such income (25%). In addition, upon distribution of dividends from tax-exempt income, the recipient shall be subject to tax at the rate of 15% (or lower, if so provided under an applicable tax treaty), which would generally be withheld at source by the distributing company.
b) Conditions for entitlement to the benefits
The Israeli company entitlement to the benefits described above is subject to its fulfilling the conditions stipulated by the law, rules and regulations published thereunder, in its Benefited Enterprise as determined on the ruling received. These conditions include, among other things, that the production, directly or through subcontractors, of all the Company’s products should be performed in certain areas of Israel. If there is any failure by the Israeli company to comply with these conditions, the benefits may be cancelled and the Israeli company may be required to refund the amount of the benefits, in whole or in part, with interest.
c) Amendments of the Law for the Encouragement of Capital Investments, 1959
Additional amendments to the Investment Law became effective in January 2011 and were further amended in August 2013 (the “2011 Amendment”). Under the 2011 Amendment, income derived by “Preferred Companies” from “Preferred Enterprises” (both as defined in the 2011 Amendment) would be subject to a uniform rate of corporate tax for an unlimited period as opposed to the incentives prior to the 2011 Amendment that were limited to income from Approved or Benefited Enterprises during their benefits period. According to the 2011 Amendment, the tax rate applicable to such income, referred to as ‘Preferred Income,’ would be 10% in areas in Israel that are designated as Development Zone “A” and 15% elsewhere in Israel in 2011 and 2012, 7% and 12.5%, respectively, in 2013, 9% and 16% respectively, in 2014, 2015 and 2016, and 7.5% and 16%, respectively, from 2017 and thereafter. Income derived by a Preferred Company from a ‘Special Preferred Enterprise’ (as defined in the Investment Law) would enjoy further reduced income tax rates for a period of ten years of 5% in Development Zone A and 8% elsewhere. As of January 1, 2014, dividends distributed from Preferred Income would subject the recipient to a 20% tax (or lower, if so provided under an applicable tax treaty), which would generally be withheld at source by the distributing company; provided, however, that dividends distributed from ‘Preferred Income’ from one Israeli corporation to another would not be subject to tax. Under the transitional provisions of the 2011 Amendment, companies may elect to irrevocably implement the 2011 Amendment with respect to their existing Approved and Benefited Enterprises while waiving benefits provided under the legislation prior to the 2011 Amendment or keep implementing the legislation prior to the 2011 Amendment.
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(U.S. dollars in thousands, except per share amounts)
 
NOTE 11 — TAXES ON INCOME: (continued):
 
While the Company may incur additional tax liability in the event of distribution of dividends from tax exempt income generated from its Approved and Benefited Enterprises as previously described, no additional tax liability will be incurred by the Company in the event of distribution of dividends from Preferred Income.
Additional amendments to the Investment Law became effective in January 2017 (the “2017 Amendment”). Under the 2017 Amendment, and provided the conditions stipulated therein are met, income derived by Preferred Companies from “Preferred Technological Enterprises” (“PTE”) (as defined in the 2017 Amendment), would be subject to reduced corporate tax rates of 7.5% in Development Zone “A” and 12% elsewhere, or 6% in case of a ‘Special Preferred Technological Enterprise’ (“SPTE”) as defined in the 2017 Amendment) regardless of the company’s geographical location within Israel. A Preferred Company distributing dividends from income derived from its PTE or SPTE, would subject the recipient to a 20% tax (or lower, if so provided under an applicable tax treaty). The 2017 Amendment further provides that, in certain circumstances, a dividend distributed to a corporate shareholder who is not an Israeli resident for tax purposes would be subject to a 4% tax (inter alia, if the amount of foreign investors in the distributing company exceeds 90%). Such taxes would generally be withheld at source by the distributing company.
On June 14, 2017, the Encouragement of Capital Investments Regulations (Preferred Technology Income and Capital Profits for a Technological Enterprise), 2017 (the “Regulations”) were published, which adopted Action 5 under the base erosion and profit shifting (“BEPS”) regulations. The Regulations describe, inter alia, the mechanism used to determine the calculation of the benefits under the PTE and under the SPTE Regime and determine certain requirements relating to documentation of intellectual property for the purpose of the PTE. According to these provisions, a company that complies with the terms under the PTE regime may be entitled to certain tax benefits with respect to income generated during the company’s regular course of business and derived from the preferred intangible asset (as determined in the Investments Law), excluding income derived from intangible assets used for marketing and income attributed to production activity. In the event that intangible assets used for marketing purposes generate over 10% of the PTE’s income, the relevant portion, calculated using a transfer pricing study, would be subject to regular corporate income tax. If such income does not exceed 10%, the PTE will not be required to exclude the marketing income from the PTE’s total income. The Regulations set a presumption of direct production expenses plus 10% with respect to income related to production, which can be countered by the results of a supporting transfer pricing study. Tax rates applicable to such production income expenses will be similar to the tax rates under the Preferred Enterprise regime, to the extent such income would be considered as eligible. In order to calculate the preferred income, the PTE is required to take into account the income and the research and development expenses that are attributed to each single preferred intangible asset. Nevertheless, it should be noted that the transitional provisions allow companies to take into account the income and research and development expenses attributed to all of the preferred intangible assets they have.
Under the transitional provisions of the law, a company is allowed to continue to enjoy the tax benefits available under the law prior to its amendment until the end of the period of benefits, as defined in the law. In each year during the period of benefits as a Benefited Enterprise, the Company will be able to opt for application of the amendment, thereby making available the tax rates discussed above. The Company’s election to apply the amendment is irrecoverable.
As of December 31, 2018, the Company’s management decided not to adopt the application of the amendment.
3) Corporate tax rate in Israel
In January 2016, the Law for the Amendment of the Income Tax Ordinance (No. 216) was published, enacting a reduction of corporate tax rate beginning in 2016 and thereafter, from 26.5% to 25%. In
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(U.S. dollars in thousands, except per share amounts)
 
NOTE 11 — TAXES ON INCOME: (continued):
 
December 2016, additional legislation was enacted, reducing the corporate tax rate to 24% for 2017 and to 23% for 2018 and thereafter. There is no impact on the financial statements of the Company as a result of the changes in the Israeli corporate tax rate.
Capital gain is subject to capital gain tax according to the corporate tax rate in the year which the assets are sold.
b. Subsidiaries outside of Israel
Subsidiaries that are incorporated outside of Israel are assessed for taxes under the tax laws in their countries of residence.
On December 22, 2017, the “Tax Cuts and Jobs Act” (the “U.S. Tax Legislation”) was enacted in the United States. Except for certain provisions, the U.S. Tax Legislation is effective for tax years beginning on or after January 1, 2018. The U.S. Tax Legislation significantly revises several sections of the US Internal Revenue Code including, among other things, lowering the corporate income tax rate from 35% to 21% effective January 1, 2018, limiting deductibility of interest expense and implementing a territorial tax system that imposes a repatriation tax on deemed repatriated earnings of foreign subsidiaries. The Company has made a reasonable estimate of the effect on the Company’s U.S. subsidiary’s deferred tax balances and reduced the deferred tax assets by $406 for the year ended December 31, 2017 due to the change in the statutory tax rate.
c. Deferred income taxes
Deferred income taxes reflect the net tax effects of loss and credit carryforwards and temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes. The components of the Company’s net deferred tax assets (liabilities) at December 31, 2018 and 2017 were as follows:
​ ​ ​
December 31,
​
​ ​ ​
2018
​ ​
2017
​
Deferred tax assets in respect of: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​
Subsidiary net operating loss
​ ​ ​ $ 291 ​ ​ ​ ​ $ 253 ​ ​
Other temporary differences
​ ​ ​ ​ 353 ​ ​ ​ ​ ​ 256 ​ ​
Share-based compensation
​ ​ ​ ​ 956 ​ ​ ​ ​ ​ 554 ​ ​
Total deferred tax asset before valuation allowance
​ ​ ​ ​ 1,600 ​ ​ ​ ​ ​ 1,063 ​ ​
Valuation allowance
​ ​ ​ ​ (291 ) ​ ​ ​ ​ ​ (253 ) ​ ​
Total deferred tax asset
​ ​ ​ ​ 1,309 ​ ​ ​ ​ ​ 810 ​ ​
Deferred tax lability in respect to other comprehensive income
​ ​ ​ ​ (11 ) ​ ​ ​ ​ ​ (106 ) ​ ​
Total deferred tax liability
​ ​ ​ ​ (11 ) ​ ​ ​ ​ ​ (106 ) ​ ​
Deferred tax asset, net
​ ​ ​ $ 1,298 ​ ​ ​ ​ $ 704 ​ ​
Deferred taxes are computed using the tax rates expected to be in effect when those differences reverse. Since the Israeli company is entitled to a tax exemption for a period of ten years, the tax rate used in computation of deferred taxes on its timing differences is zero (except for deferred taxes on unrealized gains from marketable securities); therefore, deferred taxes are recognized mainly from the Company’s U.S. subsidiary.
The Company records net deferred tax assets to the extent it believes these assets will more likely than not be realized. As of each reporting date, management considers new evidence, both positive and negative, that could impact management’s view with regard to the future realization of deferred tax assets for each jurisdiction.
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(U.S. dollars in thousands, except per share amounts)
 
NOTE 11 — TAXES ON INCOME: (continued):
 
d. Reconciliation of theoretical tax expense to actual tax expense
Following is a reconciliation of the theoretical provision for income tax, assuming all income is taxed at the statutory corporate tax rate applicable to Israeli corporations, and the actual tax on income:
​ ​ ​
Year ended December 31,
​
​ ​ ​
2018
​ ​
2017
​
Income before taxes on income
​ ​ ​ $ 23,625 ​ ​ ​ ​ $ 9,799 ​ ​
Theoretical tax expenses at the statutory rate
​ ​ ​ ​ 23 % ​ ​ ​ ​ ​ 24 % ​ ​
​ ​ ​ ​ ​ 5,434 ​ ​ ​ ​ ​ 2,352 ​ ​
Increase (decrease) in taxes on income due to:
​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​
Benefits to the Benefited Enterprise
​ ​ ​ $ (5,162 ) ​ ​ ​ ​ $ (2,256 ) ​ ​
Different effective tax rates applicable to the subsidiaries
​ ​ ​ ​ 53 ​ ​ ​ ​ ​ 87 ​ ​
Changes in tax rate in the United States
​ ​ ​ ​ — ​ ​ ​ ​ ​ 406 ​ ​
Valuation allowance
​ ​ ​ ​ 91 ​ ​ ​ ​ ​ 119 ​ ​
Uncertain tax position
​ ​ ​ ​ 771 ​ ​ ​ ​ ​ — ​ ​
Non-deductible expenses
​ ​ ​ ​ 73 ​ ​ ​ ​ ​ 247 ​ ​
Previous year
​ ​ ​ ​ — ​ ​ ​ ​ ​ 25 ​ ​
​ ​ ​ ​ $ 1,260 ​ ​ ​ ​ $ 980 ​ ​
e. Tax assessments
In accordance with the Israel Income Tax Ordinance, as of December 31, 2018, all tax assessments on the Company and the Company’s subsidiary in Israel through tax year 2013 are considered final.
A summary of open tax years by jurisdictions is presented below:
Jurisdiction
​ ​
Years
​
Israel ​ ​
2014 – 2018
​
The United States ​ ​
2015 – 2018
​
Japan ​ ​
2014 – 2018
​
United Kingdom ​ ​
2014 – 2018
​
Canada ​ ​
2014 – 2018
​
China ​ ​
2016 – 2018
​
Spain ​ ​
        2018
​
f. Income before income taxes is composed of the following:
​ ​ ​
Year ended December 31,
​
​ ​ ​
2018
​ ​
2017
​
The Company
​ ​ ​ $ 22,049 ​ ​ ​ ​ $ 9,400 ​ ​
Subsidiaries outside Israel
​ ​ ​ ​ 1,576 ​ ​ ​ ​ ​ 399 ​ ​
​ ​ ​ ​ $ 23,625 ​ ​ ​ ​ $ 9,799 ​ ​
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(U.S. dollars in thousands, except per share amounts)
 
NOTE 11 — TAXES ON INCOME: (continued):
 
g. Tax expenses:
​ ​ ​
Year ended December 31,
​
​ ​ ​
2018
​ ​
2017
​
Current: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​
In Israel
​ ​ ​ $ 3 ​ ​ ​ ​ $ — ​ ​
Subsidiaries
​ ​ ​ ​ 1,850 ​ ​ ​ ​ ​ 1,535 ​ ​
​ ​ ​ ​ $ 1,853 ​ ​ ​ ​ $ 1,535 ​ ​
Previous year: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​
In Israel
​ ​ ​ ​ — ​ ​ ​ ​ ​ 25 ​ ​
​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ 25 ​ ​
Deferred: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​
In Israel
​ ​ ​ ​ (94 ) ​ ​ ​ ​ ​ — ​ ​
Subsidiaries
​ ​ ​ ​ (499 ) ​ ​ ​ ​ ​ (580 ) ​ ​
​ ​ ​ ​ ​ (593 ) ​ ​ ​ ​ ​ (580 ) ​ ​
Total taxes on incomes
​ ​ ​ $ 1,260 ​ ​ ​ ​ $ 980 ​ ​
h. Uncertain tax positions:
ASC No. 740, Income Taxes, requires significant judgment in determining what constitutes an individual tax position as well as assessing the outcome of each tax position. Changes in judgment as to recognition or measurement of tax positions can materially affect the estimate of the effective tax rate and consequently, affect the operating results of the Company.
The following table summarizes the activity of the Company’s unrecognized tax benefits:
​ ​ ​
Year ended December 31, 2018
​
Balance at January 1, 2018
​ ​ ​ $ — ​ ​
Increase in uncertain tax positions for the current year
​ ​ ​ ​ 771 ​ ​
Balance at December 31, 2018
​ ​ ​ $ 771 ​ ​
NOTE 12 — REVENUE:
a. Net sales by geographic area were as follows:
​ ​ ​
Year ended December 31,
​
​ ​ ​
2018
​ ​
2017
​
North America
​ ​ ​ $ 89,350 ​ ​ ​ ​ $ 44,592 ​ ​
Europe
​ ​ ​ ​ 5,692 ​ ​ ​ ​ ​ 4,598 ​ ​
Asia-Pacific
​ ​ ​ ​ 2,785 ​ ​ ​ ​ ​ 3,136 ​ ​
Other
​ ​ ​ ​ 2,335 ​ ​ ​ ​ ​ 1,130 ​ ​
Total sales:
​ ​ ​ $ 100,162 ​ ​ ​ ​ $ 53,456 ​ ​
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(U.S. dollars in thousands, except per share amounts)
 
NOTE 12 — REVENUE: (continued):
 
b. The changes in contract liabilities are as follows:
​ ​ ​
December 31,
​
​ ​ ​
2018
​ ​
2017
​
Balance as of January 1
​ ​ ​ $ 4,496 ​ ​ ​ ​ $ 406 ​ ​
Increases due to issuance of new contracts, excluding amounts recognized as revenue during the period
​ ​ ​ ​ 6,302 ​ ​ ​ ​ ​ 4,418 ​ ​
Revenue recognized that was included in the contract liability balance at the beginning of the period
​ ​ ​ ​ (1,061 ) ​ ​ ​ ​ ​ (328 ) ​ ​
Balance as of December 31
​ ​ ​ $ 9,737 ​ ​ ​ ​ $ 4,496 ​ ​
Contract liability presented in non-current liabilities (1)
​ ​ ​ $ 3,982 ​ ​ ​ ​ $ 3,362 ​ ​
Contract liability presented in current liabilities
​ ​ ​ $ 5,755 ​ ​ ​ ​ $ 1,134 ​ ​
​
(1)
As of December 31, 2018, non-current deferred revenue is estimated to be recognized as follows: 62% in year 2020, 29% in year 2021 and the rest in years 2022 – 2023.
​
NOTE 13 — RELATED PARTIES
The Company receives certain services from Home Skinnovations Ltd., a related party. The services include an office sublease, use of certain computer hardware and switchboard infrastructure, certain software licenses and limited personnel services. The chief executive officer of the Company is a board member of Home Skinnovations Ltd. and was the chief executive officer of Home Skinnovations Ltd. until June 2018. The Company recorded expenses related to services received from Home Skinnovations Ltd. of $82 and $240 for the years ended December 31, 2018 and 2017, respectively.
Commencing on May 2018, the Company ceased to receive office sublease services from Home Skinnovations Ltd. as a result of the Company’s new lease agreement (see note 9a).
The Company’s subsidiary in Canada receives certain services from a subsidiary of Home Skinnovations Ltd. in Canada as part of a service agreement. The services include mobile phone services, an office sublease, use of certain computer hardware and switchboard infrastructure, certain software licenses and limited personnel services. In relation to these services, the Company recorded expenses in the amount of  $140 and $128 for the years ended December 31, 2018 and 2017, respectively.
The Company’s subsidiaries in Canada and the United States receive certain marketing services from one of the Company’s shareholders and its related party. The Company’s subsidiaries in Canada and the United States recorded expenses related to those services in the amount of  $30 and $458, respectively, for the year ended December 31, 2018.
NOTE 14 — SUBSEQUENT EVENTS
The Company has concluded the following events require disclosure in the accompanying consolidated financial statements:
1)
In January 2019, the Company granted 266,000 options to its employees and consultants.
​
2)
On January 13, 2019, the Company signed a supplement lease agreement, expanding its headquarters in Israel, which expires in December 2021 (the “Supplement Lease Agreement”). The cost under the Supplement Lease Agreement is linked to the Israeli Consumer Price Index. For the purpose of ensuring the Company’s obligation towards the lessor, the Company has provided the lessor of its headquarters with an additional bank guarantee of 90 thousand NIS (approximately $24).
​
​
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(U.S. dollars in thousands, except per share amounts)
 
NOTE 14 — SUBSEQUENT EVENTS (continued):
 
3)
In January 2019, the Company signed a settlement agreement. See note 9c(1).
​
The Company has evaluated subsequent events from December 31, 2018 through March 13, 2019, the date at which the consolidated financial statements were available to be issued and determined there are no other items requiring disclosure beyond those already disclosed, and there were no material subsequent events that required recognition in these consolidated financial statements.
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CONDENSED CONSOLIDATED BALANCE SHEETS
(U.S. dollars in thousands, except for per share data)
(Unaudited)
​ ​ ​
March 31,
2019
​ ​
December 31,
2018
​
Assets ​ ​ ​
CURRENT ASSETS: ​ ​ ​
Cash and cash equivalents
​ ​ ​ $ 18,951 ​ ​ ​ ​ $ 24,721 ​ ​
Marketable securities
​ ​ ​ ​ 29,045 ​ ​ ​ ​ ​ 26,532 ​ ​
Short-term bank deposits
​ ​ ​ ​ 16,087 ​ ​ ​ ​ ​ 10,045 ​ ​
Accounts receivable, net of allowance for doubtful accounts
​ ​ ​ ​ 6,746 ​ ​ ​ ​ ​ 7,008 ​ ​
Other receivables
​ ​ ​ ​ 1,625 ​ ​ ​ ​ ​ 2,495 ​ ​
Inventories
​ ​ ​ ​ 7,092 ​ ​ ​ ​ ​ 6,963 ​ ​
TOTAL CURRENT ASSETS
​ ​ ​ $ 79,546 ​ ​ ​ ​ $ 77,764 ​ ​
NON-CURRENT ASSETS: ​ ​ ​
Accounts receivable
​ ​ ​ $ 600 ​ ​ ​ ​ $ 544 ​ ​
Deferred offering costs
​ ​ ​ ​ 990 ​ ​ ​ ​ ​ 895 ​ ​
Deferred income taxes, net
​ ​ ​ ​ 1,375 ​ ​ ​ ​ ​ 1,309 ​ ​
Property and equipment, net
​ ​ ​ ​ 859 ​ ​ ​ ​ ​ 544 ​ ​
Operating lease right-of-use assets
​ ​ ​ ​ 1,697 ​ ​ ​ ​ ​ — ​ ​
TOTAL NON-CURRENT ASSETS
​ ​ ​ ​ 5,521 ​ ​ ​ ​ ​ 3,292 ​ ​
TOTAL ASSETS
​ ​ ​ $ 85,067 ​ ​ ​ ​ $ 81,056 ​ ​
Liabilities and Shareholders’ Equity ​ ​ ​
CURRENT LIABILITIES: ​ ​ ​
Accounts payable
​ ​ ​ $ 3,589 ​ ​ ​ ​ $ 4,509 ​ ​
Contract liabilities
​ ​ ​ ​ 8,557 ​ ​ ​ ​ ​ 5,755 ​ ​
Other liabilities
​ ​ ​ ​ 9,343 ​ ​ ​ ​ ​ 9,165 ​ ​
Accrued contingencies
​ ​ ​ ​ — ​ ​ ​ ​ ​ 10,000 ​ ​
TOTAL CURRENT LIABILITIES
​ ​ ​ $ 21,489 ​ ​ ​ ​ $ 29,429 ​ ​
NON-CURRENT LIABILITIES: ​ ​ ​
Contract liabilities
​ ​ ​ $ 4,091 ​ ​ ​ ​ $ 3,982 ​ ​
Other liabilities
​ ​ ​ ​ 771 ​ ​ ​ ​ ​ 771 ​ ​
Operating lease liabilities
​ ​ ​ ​ 1,109 ​ ​ ​ ​ ​ — ​ ​
Deferred income taxes, net
​ ​ ​ ​ 31 ​ ​ ​ ​ ​ 11 ​ ​
TOTAL NON-CURRENT LIABILITIES
​ ​ ​ ​ 6,002 ​ ​ ​ ​ ​ 4,764 ​ ​
TOTAL LIABILITIES
​ ​ ​ $ 27,491 ​ ​ ​ ​ $ 34,193 ​ ​
COMMITMENTS AND CONTINGENCIES (Note 4)
​ ​ ​
REDEEMABLE NON-CONTROLLING INTEREST
​ ​ ​ $ 2,252 ​ ​ ​ ​ $ 2,187 ​ ​
SHAREHOLDERS’ EQUITY: ​ ​ ​
Ordinary shares, NIS 0.01 par value, – authorized: 20,000,000 at March 31, 2019 and December 31, 2018; issued and outstanding: 15,062,452 and 14,914,701 shares at March 31, 2019 and December 31, 2018, respectively
​ ​ ​ $ 42 ​ ​ ​ ​ $ 42 ​ ​
Additional paid-in capital
​ ​ ​ ​ 10,708 ​ ​ ​ ​ ​ 10,184 ​ ​
Retained earnings
​ ​ ​ ​ 43,030 ​ ​ ​ ​ ​ 32,971 ​ ​
Accumulated other comprehensive income
​ ​ ​ ​ 103 ​ ​ ​ ​ ​ 66 ​ ​
InMode Ltd. shareholders’ equity
​ ​ ​ ​ 53,883 ​ ​ ​ ​ ​ 43,263 ​ ​
Non-controlling interests
​ ​ ​ ​ 1,441 ​ ​ ​ ​ ​ 1,413 ​ ​
TOTAL SHAREHOLDERS’ EQUITY
​ ​ ​ ​ 55,324 ​ ​ ​ ​ ​ 44,676 ​ ​
TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY
​ ​ ​ $ 85,067 ​ ​ ​ ​ $ 81,056 ​ ​
​
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
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CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(U.S. dollars in thousands, except for per share data)
(Unaudited)
​ ​ ​
Three months ended March 31,
​
​ ​ ​
2019
​ ​
2018
​
REVENUES
​ ​ ​ $ 30,552 ​ ​ ​ ​ $ 20,911 ​ ​
COST OF REVENUES
​ ​ ​ ​ 4,271 ​ ​ ​ ​ ​ 3,532 ​ ​
GROSS PROFIT
​ ​ ​ ​ 26,281 ​ ​ ​ ​ ​ 17,379 ​ ​
OPERATING EXPENSES: ​ ​ ​
Research and development
​ ​ ​ ​ 1,199 ​ ​ ​ ​ ​ 880 ​ ​
Sales and marketing
​ ​ ​ ​ 14,097 ​ ​ ​ ​ ​ 9,665 ​ ​
General and administrative
​ ​ ​ ​ 1,053 ​ ​ ​ ​ ​ 895 ​ ​
TOTAL OPERATING EXPENSES
​ ​ ​ ​ 16,349 ​ ​ ​ ​ ​ 11,440 ​ ​
INCOME FROM OPERATIONS
​ ​ ​ ​ 9,932 ​ ​ ​ ​ ​ 5,939 ​ ​
Finance income, net
​ ​ ​ ​ 403 ​ ​ ​ ​ ​ 278 ​ ​
INCOME BEFORE TAXES
​ ​ ​ ​ 10,335 ​ ​ ​ ​ ​ 6,217 ​ ​
INCOME TAX (TAX BENEFIT)
​ ​ ​ ​ 177 ​ ​ ​ ​ ​ (149 ) ​ ​
NET INCOME
​ ​ ​ ​ 10,158 ​ ​ ​ ​ ​ 6,366 ​ ​
Less: Net income attributable to non-controlling interests
​ ​ ​ ​ (34 ) ​ ​ ​ ​ ​ — ​ ​
NET INCOME ATTRIBUTABLE TO CONTROLLING INTEREST
​ ​ ​ $ 10,124 ​ ​ ​ ​ $ 6,366 ​ ​
NET INCOME PER SHARE : ​ ​ ​
Basic
​ ​ ​ $ 0.67 ​ ​ ​ ​ $ 0.40 ​ ​
Diluted
​ ​ ​ $ 0.51 ​ ​ ​ ​ $ 0.31 ​ ​
WEIGHTED AVERAGE NUMBER OF SHARES OUTSTANDING USED
IN COMPUTATION OF NET INCOME PER SHARE
​ ​ ​
Basic
​ ​ ​ ​ 14,990,591 ​ ​ ​ ​ ​ 14,811,090 ​ ​
Diluted
​ ​ ​ ​ 19,728,929 ​ ​ ​ ​ ​ 19,398,499 ​ ​
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
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CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(U.S. dollars in thousands, except for per share data)
(Unaudited)
​ ​ ​
Three months ended March 31,
​
​ ​ ​
2019
​ ​
2018
​
NET INCOME
​ ​ ​ $ 10,158 ​ ​ ​ ​ $ 6,366 ​ ​
OTHER COMPREHENSIVE INCOME: ​ ​ ​
Change in foreign currency translation adjustment
​ ​ ​ ​ (34 ) ​ ​ ​ ​ ​ (2 ) ​ ​
Change in net unrealized gains of marketable securities, net of tax
​ ​ ​ ​ 65 ​ ​ ​ ​ ​ (45 ) ​ ​
TOTAL COMPREHENSIVE INCOME, net
​ ​ ​ ​ 10,189 ​ ​ ​ ​ ​ 6,319 ​ ​
Less: Comprehensive income attributable to non-controlling interests
​ ​ ​ ​ (28 ) ​ ​ ​ ​ ​ — ​ ​
TOTAL COMPREHENSIVE INCOME ATTRIBUTABLE TO CONTROLLING INTEREST
​ ​ ​ $ 10,161 ​ ​ ​ ​ $ 6,319 ​ ​
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
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INMODE LTD.
CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY
(U.S. dollars in thousands, except for per share data)
(Unaudited)
​ ​ ​
InMode Ltd. Shareholders’ Equity
​ ​
Non-controlling
Interests
​ ​
Total
​
​ ​ ​
Ordinary Shares
​ ​
Additional
paid-in
capital
​ ​
Retained
earnings
​ ​
Accumulated
other
comprehensive
income
​
​ ​ ​
Number of
shares issued
​ ​
Amount
​
BALANCE AS OF JANUARY 1,
2018, as previously reported
​ ​ ​ ​ 14,729,165 ​ ​ ​ ​ ​ 41 ​ ​ ​ ​ $ 8,052 ​ ​ ​ ​ $ 10,819 ​ ​ ​ ​ $ 541 ​ ​ ​ ​ ​ — ​ ​ ​ ​ $ 19,453 ​ ​
Impact of adoption of ASU 2016-01
​ ​ ​ ​ — ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ 316 ​ ​ ​ ​ ​ (316 ) ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ — ​ ​
BALANCE AS OF JANUARY 1,
2018, as adjusted
​ ​ ​ ​ 14,729,165 ​ ​ ​ ​ ​ 41 ​ ​ ​ ​ ​ 8,052 ​ ​ ​ ​ ​ 11,135 ​ ​ ​ ​ ​ 225 ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ 19,453 ​ ​
CHANGES DURING THE THREE MONTHS ENDED MARCH 31, 2018:
​ ​ ​ ​ ​ ​ ​ ​
Net income
​ ​ ​ ​ — ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ 6,366 ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ 6,366 ​ ​
Other comprehensive income, net
​ ​ ​ ​ — ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ (47 ) ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ (47 ) ​ ​
Share-based compensation
​ ​ ​ ​ — ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ 833 ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ 833 ​ ​
Adjustment to redemption value of redeemable non-controlling interest
​ ​ ​ ​ — ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ (431 ) ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ (431 ) ​ ​
Exercise of options
​ ​ ​ ​ 149,350 ​ ​ ​ ​ ​ 1 ​ ​ ​ ​ ​ 149 ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ 150 ​ ​
BALANCE AT MARCH 31, 2018
​ ​ ​ ​ 14,878,515 ​ ​ ​ ​ ​ 42 ​ ​ ​ ​ $ 9,034 ​ ​ ​ ​ $ 17,070 ​ ​ ​ ​ $ 178 ​ ​ ​ ​ ​ — ​ ​ ​ ​ $ 26,324 ​ ​
BALANCE AS OF JANUARY 1,
2019
​ ​ ​ ​ 14,914,701 ​ ​ ​ ​ ​ 42 ​ ​ ​ ​ $ 10,184 ​ ​ ​ ​ $ 32,971 ​ ​ ​ ​ $ 66 ​ ​ ​ ​ ​ 1,413 ​ ​ ​ ​ $ 44,676 ​ ​
CHANGES DURING THE THREE MONTHS ENDED MARCH 31, 2019:
​ ​ ​ ​ ​ ​ ​ ​
Net income
​ ​ ​ ​ — ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ 10,124 ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ 34 ​ ​ ​ ​ ​ 10,158 ​ ​
Other comprehensive income, net
​ ​ ​ ​ — ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ 37 ​ ​ ​ ​ ​ (6 ) ​ ​ ​ ​ ​ 31 ​ ​
Share-based compensation
​ ​ ​ ​ — ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ 402 ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ 402 ​ ​
Adjustment to redemption value of redeemable non-controlling interest
​ ​ ​ ​ — ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ (65 ) ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ (65 ) ​ ​
Exercise of options
​ ​ ​ ​ 147,751 ​ ​ ​ ​ ​ * ​ ​ ​ ​ ​ 122 ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ 122 ​ ​
BALANCE AT MARCH 31, 2019
​ ​ ​ ​ 15,062,452 ​ ​ ​ ​ ​ 42 ​ ​ ​ ​ $ 10,708 ​ ​ ​ ​ $ 43,030 ​ ​ ​ ​ $ 103 ​ ​ ​ ​ ​ 1,441 ​ ​ ​ ​ $ 55,324 ​ ​
​
*
Representing an amount less than one thousand.
​
​
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
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INMODE LTD.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(U.S. dollars in thousands, except for per share data)
(Unaudited)
​ ​ ​
Three months ended March 31,
​
​ ​ ​
2019
​ ​
2018
​
CASH FLOWS FROM OPERATING ACTIVITIES: ​ ​ ​
Net income
​ ​ ​ $ 10,158 ​ ​ ​ ​ $ 6,366 ​ ​
Adjustments required to reconcile net income to net cash provided by operating activities:
​ ​ ​
Depreciation and amortization
​ ​ ​ ​ 63 ​ ​ ​ ​ ​ 35 ​ ​
Share-based compensation
​ ​ ​ ​ 402 ​ ​ ​ ​ ​ 833 ​ ​
Allowance for doubtful accounts expenses
​ ​ ​ ​ 59 ​ ​ ​ ​ ​ (73 ) ​ ​
Gains on marketable securities, net
​ ​ ​ ​ — ​ ​ ​ ​ ​ (33 ) ​ ​
Changes in fair value of marketable securities, net
​ ​ ​ ​ — ​ ​ ​ ​ ​ (6 ) ​ ​
Finance income, net
​ ​ ​ ​ (183 ) ​ ​ ​ ​ ​ — ​ ​
Provision for deferred income taxes, net
​ ​ ​ ​ (66 ) ​ ​ ​ ​ ​ (4 ) ​ ​
Changes in operating assets and liabilities:
​ ​ ​
Decrease (increase) in accounts receivable
​ ​ ​ ​ 147 ​ ​ ​ ​ ​ (564 ) ​ ​
Decrease in other receivables
​ ​ ​ ​ 873 ​ ​ ​ ​ ​ 251 ​ ​
Increase in inventories
​ ​ ​ ​ (129 ) ​ ​ ​ ​ ​ (824 ) ​ ​
Increase (decrease) in accounts payable
​ ​ ​ ​ (1,015 ) ​ ​ ​ ​ ​ 487 ​ ​
Increase (decrease) in other liabilities
​ ​ ​ ​ (449 ) ​ ​ ​ ​ ​ 183 ​ ​
Increase in contract liabilities
​ ​ ​ ​ 2,911 ​ ​ ​ ​ ​ 746 ​ ​
Decrease in accrued contingencies
​ ​ ​ ​ (10,000 ) ​ ​ ​ ​ ​ — ​ ​
Net cash provided by operating activities
​ ​ ​ $ 2,771 ​ ​ ​ ​ $ 7,397 ​ ​
CASH FLOWS FROM INVESTING ACTIVITIES: ​ ​ ​
Investment in short-term deposit
​ ​ ​ ​ (11,000 ) ​ ​ ​ ​ ​ — ​ ​
Proceeds from short-term deposit
​ ​ ​ ​ 5,000 ​ ​ ​ ​ ​ — ​ ​
Purchase of fixed assets
​ ​ ​ ​ (378 ) ​ ​ ​ ​ ​ (45 ) ​ ​
Purchase of marketable securities
​ ​ ​ ​ (4,918 ) ​ ​ ​ ​ ​ (2,444 ) ​ ​
Proceeds from sale of marketable securities
​ ​ ​ ​ 2,603 ​ ​ ​ ​ ​ 496 ​ ​
Net cash used in investing activities
​ ​ ​ $ (8,693 ) ​ ​ ​ ​ $ (1,993 ) ​ ​
CASH FLOWS FROM FINANCING ACTIVITIES: ​ ​ ​
Exercise of options
​ ​ ​ $ 122 ​ ​ ​ ​ $ 150 ​ ​
Net cash provided by financing activities
​ ​ ​ ​ 122 ​ ​ ​ ​ ​ 150 ​ ​
EFFECT OF EXCHANGE RATE CHANGES ON CASH
​ ​ ​ ​ 30 ​ ​ ​ ​ ​ (11 ) ​ ​
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS
​ ​ ​ ​ (5,770 ) ​ ​ ​ ​ ​ 5,543 ​ ​
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD
​ ​ ​ ​ 24,721 ​ ​ ​ ​ ​ 17,593 ​ ​
CASH AND CASH EQUIVALENTS AT END OF PERIOD
​ ​ ​ $ 18,951 ​ ​ ​ ​ $ 23,136 ​ ​
SUPPLEMENTAL DISCLOSURES OF CASH FLOWS INFORMATION: ​ ​ ​
Income taxes paid
​ ​ ​ $ — ​ ​ ​ ​ $ 42 ​ ​
Interest received
​ ​ ​ $ 213 ​ ​ ​ ​ $ 136 ​ ​
NON CASH FINANCING ACTIVITIES ​ ​ ​
Deferred offering costs in accounts payable
​ ​ ​ $ 95 ​ ​ ​ ​ $ — ​ ​
Operating lease right-of-use assets
​ ​ ​ $ 245 ​ ​ ​ ​ $ — ​ ​
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
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INMODE LTD.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(U.S. dollars in thousands, except for per share data)
NOTE 1 — GENERAL
InMode Ltd. (separately and together with its subsidiaries, the “Company”) was incorporated on January 2, 2008 and commenced operations shortly thereafter. The Company’s headquarters are located in Israel.
The Company designs, develops, manufactures and markets innovative surgical aesthetic and medical treatment solutions based on its proprietary radio frequency assisted lipolysis and deep subdermal fractional radio frequency technologies. These technologies are used to remodel subdermal adipose, or fatty, tissue in a variety of procedures including liposuction with simultaneous skin tightening, body and face contouring and ablative skin rejuvenation treatments. In addition to the minimally-invasive technologies, the Company designs, develops, manufactures and markets non-invasive medical aesthetic products that target a wide array of procedures including permanent hair reduction, facial skin rejuvenation, wrinkle reduction, cellulite treatment, skin appearance and texture and superficial benign vascular and pigmented lesions.
The Company has seven wholly-owned subsidiaries located in the United States, Canada, Hong Kong, Japan, Spain, Israel and India. In addition, the Company has two subsidiaries located in the United Kingdom and China and holds a 51% interest in each of those subsidiaries. The Company’s nine subsidiaries are referred to collectively herein as the “Subsidiaries.” The Company sells its products primarily through its Subsidiaries. Regarding the establishment of InMode India Ltd., see note 11.
NOTE 2 — SIGNIFICANT ACCOUNTING POLICIES
a. Basis of presentation
The unaudited condensed consolidated financial statements of the Company have been prepared in accordance with accounting principles generally accepted in the United States (“U.S. GAAP”) for interim financial statements. Accordingly, they do not include all of the information and notes required by U.S. GAAP for annual financial statements. In the opinion of management, these unaudited condensed consolidated financial statements reflect all adjustments, which include normal recurring adjustments, necessary for a fair statement of the Company’s financial position as of March 31, 2019 and the results of operations and cash flows for the three month periods ended March 31, 2019 and 2018.
The results for the three-month period ended March 31, 2019 are not necessarily indicative of the results to be expected for the year ending December 31, 2019.
These unaudited condensed consolidated financial statements should be read in conjunction with the audited consolidated financial statements of the Company for the year ended December 31, 2018. The comparative balance sheet at December 31, 2018 has been derived from the audited consolidated financial statements at that date.
b. Leases
The Company adopted ASU No. 2016-02, Leases (Topic 842), on January 1, 2019 using the modified retrospective transition approach by applying the new standard to all leases existing at the date of initial application. Results and disclosure requirements for reporting periods beginning after January 1, 2019 are presented under Topic 842, while prior period amounts have not been adjusted and continue to be reported in accordance with our historical accounting under Topic 840.
The Company elected the package of practical expedients permitted under the transition guidance, which allowed the Company to carryforward the Company’s historical lease classification, the Company’s assessment on whether a contract was or contains a lease, and the Company’s initial direct costs for any leases that existed prior to January 1, 2019. The Company also elected to combine lease and non-lease components and to keep leases with an initial term of 12 months or less off the balance sheet and recognize the associated lease payments in the consolidated statements of income on a straight-line basis over the lease term.
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INMODE LTD.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(U.S. dollars in thousands, except for per share data)
 
NOTE 2 — SIGNIFICANT ACCOUNTING POLICIES (continued):
 
Upon adoption, the new standard resulted in an increase of  $1,585 in operating lease right-of-use (“ROU”) assets and corresponding liabilities on the Company’s consolidated balance sheet and did not have a material impact on the Company’s consolidated statement of income or consolidated statement of cash flows and did not have an impact on the comparative figures (see also note 7).
The Company determines if an arrangement is a lease at inception. Operating leases are included in ROU assets, other current liabilities, and operating lease liabilities in the consolidated balance sheets.
ROU assets represent the Company’s right to use an underlying asset for the lease term and lease liabilities represent the Company’s obligation to make lease payments arising from the lease. Operating lease ROU assets and liabilities are recognized at commencement date based on the present value of lease payments over the lease term. The Company’s lease terms may include options to extend or terminate the lease when it is reasonably certain that the Company will exercise that option. The Company uses the implicit rate when readily determinable. As the Company’s leases do not provide an implicit rate, the Company’s uses its estimated incremental borrowing rate based on the information available at commencement date in determining the present value of lease payments. Lease expense for lease payments is recognized on a straight-line basis over the lease term.
NOTE 3 — MARKETABLE SECURITIES AND FAIR VALUE MEASUREMENTS
Marketable securities as of March 31, 2019 and December 31, 2018 consisted of marketable debt securities. These marketable securities are recorded at fair value.
The following table sets forth the Company’s marketable securities for the periods indicated:
​ ​ ​
March 31,
2019
​ ​
December 31,
2018
​
Government securities*
​ ​ ​ $ 24,022 ​ ​ ​ ​ $ 21,932 ​ ​
Corporate debt securities
​ ​ ​ ​ 5,023 ​ ​ ​ ​ ​ 4,600 ​ ​
Total
​ ​ ​ $ 29,045 ​ ​ ​ ​ $ 26,532 ​ ​
​
*
As of March 31, 2019 and December 31, 2018, consists of  $2,103 and $2,054 non-U.S government securities, respectively.
​
The Company classifies marketable securities within Level 2 because it uses alternative pricing sources and models utilizing market observable inputs to determine their fair value.
The following table sets forth the Company’s financial assets as of March 31, 2019 and December 31, 2018 that are measured at fair value on a recurring basis during the respective period:
​ ​ ​
March 31, 2019
​
​ ​ ​
Fair
value
​ ​
Cost or
amortized
cost
​ ​
Gross
unrealized
holding gains
​ ​
Gross
unrealized
holding loss
​
Level 2 securities: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​
Government securities
​ ​ ​ $ 24,022 ​ ​ ​ ​ $ 23,913 ​ ​ ​ ​ $     — ​ ​ ​ ​ $     109 ​ ​
Corporate debt securities
​ ​ ​ ​ 5,023 ​ ​ ​ ​ ​ 4,998 ​ ​ ​ ​ ​ (6 ) ​ ​ ​ ​ ​ 31 ​ ​
Total
​ ​ ​ $ 29,045 ​ ​ ​ ​ $ 28,911 ​ ​ ​ ​ $ (6 ) ​ ​ ​ ​ $ 140 ​ ​
​
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INMODE LTD.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(U.S. dollars in thousands, except for per share data)
 
NOTE 3 — MARKETABLE SECURITIES AND FAIR VALUE MEASUREMENTS (continued):
 
​ ​ ​
December 31, 2018
​
​ ​ ​
Fair
value
​ ​
Cost or
amortized
cost
​ ​
Gross
unrealized
holding gains
​ ​
Gross
unrealized
holding loss
​
Level 2 securities: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​
Government securities
​ ​ ​ $ 21,932 ​ ​ ​ ​ $ 21,878 ​ ​ ​ ​ $      (3 ) ​ ​ ​ ​ $      57 ​ ​
Corporate debt securities
​ ​ ​ ​ 4,600 ​ ​ ​ ​ ​ 4,606 ​ ​ ​ ​ ​ (15 ) ​ ​ ​ ​ ​ 9 ​ ​
Total
​ ​ ​ $ 26,532 ​ ​ ​ ​ $ 26,484 ​ ​ ​ ​ $ (18 ) ​ ​ ​ ​ $ 66 ​ ​
As of March 31, 2019 and December 31, 2018, the Company considered the decreases in market value on its marketable securities to be temporary in nature and did not consider any of the Company’s investments to be other-than-temporarily impaired.
As of March 31, 2019 and December 31, 2018, the majority of the Company’s government bond holdings in the amount of  $21,919 and $19,878, respectively, were U.S. government securities.
As of March 31, 2019 and December 31, 2018, the Company’s debt securities had the following maturity dates:
​ ​ ​
Market value
​
​ ​ ​
March 31,
2019
​ ​
December 31,
2018
​
Due within one year
​ ​ ​ $ 14,826 ​ ​ ​ ​ $ 12,801 ​ ​
1 to 2 years
​ ​ ​ ​ 10,094 ​ ​ ​ ​ ​ 9,068 ​ ​
2 to 3 years
​ ​ ​ ​ 2,022 ​ ​ ​ ​ ​ 2,609 ​ ​
3 to 4 years
​ ​ ​ ​ 2,103 ​ ​ ​ ​ ​ 2,054 ​ ​
Total
​ ​ ​ $ 29,045 ​ ​ ​ ​ $ 26,532 ​ ​
NOTE 4 — COMMITMENTS AND CONTINGENT LIABILITIES
a. Subcontracting agreement
The Company has entered into a turnkey manufacturing agreement with its major subcontractor provider in Israel in connection with manufacturing and assembling the Company’s products. The agreement is renewed automatically every year, unless either the Company or the turnkey manufacturer gives written notice three months prior to the expiration of the term. Additionally, the Company or the turnkey manufacturer has the ability to terminate the contract at any time and for any reason with a prior written notice of four months.
According to the agreement, the Company does not have a minimum order obligation but the Company provides the subcontractor a six-month rolling forecast with the projected demand for products. In case of termination of the agreement, the Company has to compensate the subcontractor for non-returnable inventory, materials in orders that cannot be cancelled and finished products inventory. As of March 31, 2019, the subcontractor’s finished goods inventory, raw material and open orders amounted to approximately $2,400.
b. Litigation and contingencies
In January 2019, the Company entered into a settlement agreement with Syneron Medical Ltd. and Candela Corporation (“Syneron-Candela”) and Massachusetts General Hospital (“MGH”) that resolved all patent claims previously in dispute in exchange for a one-time cash payment that the Company made to
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INMODE LTD.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(U.S. dollars in thousands, except for per share data)
 
NOTE 4 — COMMITMENTS AND CONTINGENT LIABILITIES (continued):
 
Syneron-Candela and MGH in February 2019. As part of such settlement agreement, the Company entered into a sublicense agreement with Syneron-Candela and MGH that granted the Company and its subsidiaries a fully paid non-exclusive, royalty-free worldwide sublicense to practice the patents and applications previously in dispute in the licensed field. The sublicense shall continue until the expiration of the last surviving patent or application granted pursuant to the sublicense agreement.
As of December 31, 2018, the Company has accrued a provision of  $10,000 in connection with its legal proceedings and settlements, which was paid in February 2019.
NOTE 5 — INVENTORIES
Inventories consisted of the following:
​ ​ ​
March 31,
2019
​ ​
December 31,
2018
​
Raw materials
​ ​ ​ $ 2,501 ​ ​ ​ ​ $ 2,508 ​ ​
Finished products
​ ​ ​ ​ 4,591 ​ ​ ​ ​ ​ 4,455 ​ ​
Total inventories
​ ​ ​ $ 7,092 ​ ​ ​ ​ $ 6,963 ​ ​
NOTE 6 — SHARE CAPITAL
Share-based compensation
In January 2019, the Company granted 266,000 options to its employees and consultants.
1)
Options granted to employees:
​
​ ​ ​
Three months ended
March 31, 2019
​
​ ​ ​
Number
of
options
​ ​
Weighted
average
exercise
price*
​
Outstanding at beginning of period
​ ​ ​ ​ 3,669,975 ​ ​ ​ ​ $ 1.24 ​ ​
Changes during the period: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​
Granted
​ ​ ​ ​ 216,000 ​ ​ ​ ​ ​ 13.40 ​ ​
Exercised
​ ​ ​ ​ (22,750 ) ​ ​ ​ ​ ​ 0.66 ​ ​
Expired
​ ​ ​ ​ (2,500 ) ​ ​ ​ ​ ​ 1 ​ ​
Outstanding at end of period
​ ​ ​ ​ 3,860,725 ​ ​ ​ ​ $ 1.92 ​ ​
Exercisable at end of period
​ ​ ​ ​ 3,627,246 ​ ​ ​ ​ $ 1.22 ​ ​
​
*
In dollars per ordinary share.
​
​
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INMODE LTD.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(U.S. dollars in thousands, except for per share data)
 
NOTE 6 — SHARE CAPITAL (continued):
 
As of March 31, 2019, the weighted-average remaining contractual life of exercisable options was 4.30 years. The total intrinsic value of options exercised during the three months ended March 31, 2019 was approximately $318.
The fair value of each option granted is estimated on the date of grant using the binomial option-pricing model, with the following assumptions:
​ ​ ​
2019
​
Fair value of one ordinary share
​ ​
$13.40
​
Dividend yield
​ ​
0%
​
Expected volatility
​ ​
51.91%
​
Risk-free interest rate
​ ​
2.56% – 2.60%
​
Early exercise multiple (EEM)
​ ​
150% – 250%
​
Contractual term
​ ​
7 years
​
The expected volatility is based on the historical volatility of comparable companies.
The risk-free interest rate assumption is based on observed interest rates appropriate for the expected term of the options granted in dollar terms.
Since the Company’s ordinary shares are not publicly traded, the early exercise multiple (“EEM”) was based on academic empirical findings. The EEM of grantees in private companies is expected to be higher due to the lack of marketability that leads to a longer exercise period for options.
The weighted average fair value of employee options granted during the three months ended March 31, 2019 was $809. As of March 31, 2019, the Company had 233,479 unvested options. The total unrecognized compensation cost of employee options at March 31, 2019 is $842 which is expected to be recognized over a weighted average period of 1.41 years.
2)
Options granted to consultants and other service providers:
​
​ ​ ​
Three months ended
March 31, 2019
​
​ ​ ​
Number
of
options
​ ​
Weighted
average
exercise
price*
​
Outstanding at beginning of period
​ ​ ​ ​ 1,580,000 ​ ​ ​ ​ $ 1.49 ​ ​
Changes during the period: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​
Granted
​ ​ ​ ​ 50,000 ​ ​ ​ ​ ​ 13.40 ​ ​
Exercised
​ ​ ​ ​ (125,000 ) ​ ​ ​ ​ ​ 0.86 ​ ​
Outstanding at end of period
​ ​ ​ ​ 1,505,000 ​ ​ ​ ​ $ 1.94 ​ ​
Exercisable at end of period
​ ​ ​ ​ 1,424,250 ​ ​ ​ ​ $ 1.35 ​ ​
​
*
In dollars per ordinary share.
​
​
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INMODE LTD.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(U.S. dollars in thousands, except for per share data)
 
NOTE 6 — SHARE CAPITAL (continued):
 
The fair value of each option granted is estimated on the date of grant using the binomial option-pricing model, with the following assumptions:
​ ​ ​
2019
​
Fair value of one ordinary share
​ ​
$13.40
​
Dividend yield
​ ​
0%
​
Expected volatility
​ ​
51.91%
​
Risk-free interest rate
​ ​
2.60%
​
Early exercise multiple
​ ​
150% – 250%
​
Contractual term
​ ​
7 years
​
The expected volatility is based on the historical volatility of comparable companies.
The risk-free interest rate assumption is based on observed interest rates appropriate for the expected term of the options granted in dollar terms.
Since the Company’s ordinary shares are not publicly traded, the EEM was based on academic empirical findings. The EEM of grantees in private companies is expected to be higher due to the lack of marketability that leads to a longer exercise period for options.
The weighted average fair value of non-employee options granted during the three month ended March 31, 2019 was $187. As of March 31, 2019, the Company had 80,750 unvested options. The total unrecognized compensation cost of non-employee options at March 31, 2019 is $405, which is expected to be recognized over a weighted average period of 0.67 years.
3)
The following tables summarize information concerning outstanding and exercisable options as of March 31, 2019:
​
​
March 31, 2019
​
​
Options outstanding
​ ​
Options exercisable
​
​
Exercise
prices*
​ ​
Number of
options
outstanding
at end of
period
​ ​
Weighted
average
remaining
contractual
life
​ ​
Number of
options
exercisable
at end of
period
​ ​
Weighted
average
remaining
contractual
life
​
​
$0.35
​ ​ ​ ​ 393,000 ​ ​ ​ ​ ​ 1.66 ​ ​ ​ ​ ​ 393,000 ​ ​ ​ ​ ​ 1.66 ​ ​
​
$0.78
​ ​ ​ ​ 31,000 ​ ​ ​ ​ ​ 3.28 ​ ​ ​ ​ ​ 31,000 ​ ​ ​ ​ ​ 3.28 ​ ​
​
$1.00
​ ​ ​ ​ 4,487,625 ​ ​ ​ ​ ​ 4.37 ​ ​ ​ ​ ​ 4,487,625 ​ ​ ​ ​ ​ 4.37 ​ ​
​
$11.30
​ ​ ​ ​ 188,100 ​ ​ ​ ​ ​ 6.47 ​ ​ ​ ​ ​ 78,628 ​ ​ ​ ​ ​ 6.47 ​ ​
​
$13.40
​ ​ ​ ​ 266,000 ​ ​ ​ ​ ​ 6.77 ​ ​ ​ ​ ​ 61,250 ​ ​ ​ ​ ​ 6.77 ​ ​
​
*
In dollars per ordinary share.
​
The aggregate intrinsic value of total vested and exercisable options as of March 31, 2019, is $86,084.
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INMODE LTD.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(U.S. dollars in thousands, except for per share data)
 
NOTE 6 — SHARE CAPITAL (continued):
 
4)
The following table illustrates the effect of share-based compensation on the statements of income:
​
​ ​ ​
Three months ended
March 31,
​
​ ​ ​
2019
​ ​
2018
​
Cost of revenues
​ ​ ​ $ 19 ​ ​ ​ ​ $ 11 ​ ​
Research and development expenses
​ ​ ​ ​ 52 ​ ​ ​ ​ ​ 6 ​ ​
Sales and marketing expenses
​ ​ ​ ​ 308 ​ ​ ​ ​ ​ 803 ​ ​
General and administrative expenses
​ ​ ​ ​ 23 ​ ​ ​ ​ ​ 13 ​ ​
Total
​ ​ ​ $ 402 ​ ​ ​ ​ $ 833 ​ ​
NOTE 7 — LEASES
In May 2018, the Company signed a new lease agreement for its headquarters in Israel which expires in December 2021. The cost under the new lease agreement is linked to the Israeli Consumer Price Index. For purposes of ensuring the Company’s obligation towards the lessor, the Company has provided the lessor of its headquarters with a bank guarantee of 231 thousand NIS (approximately $63). On January 13, 2019, the Company signed a supplemental lease agreement, expanding its headquarters in Israel which expires in December 2021 (“Supplemental Lease Agreement”). The cost under the Supplemental Lease Agreement is linked to the Israeli Consumer Price Index. For the purpose of ensuring the Company’s obligation towards the lessor, the Company has provided the lessor of its headquarters with an additional bank guarantee of 90 thousand NIS (approximately $25).
The Company also leases vehicles for several employees in Israel for a period of three years for each employee.
The Company’s U.S. subsidiary has a lease agreement for its offices that expires in August 2022.
The Company’s Canadian subsidiary has a lease agreement for its offices that expires in June 2022. The lease is with a related party.
The lease expense was as follows:
​ ​ ​
Three months
ended
March 31, 2019
​
Operating lease cost
​ ​ ​ $ 177 ​ ​
Supplemental cash flow information related to leases was as follows:
​ ​ ​
Three months
ended
March 31, 2019
​
Operating cash flows from operating leases
​ ​ ​ $ 181 ​ ​
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INMODE LTD.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(U.S. dollars in thousands, except for per share data)
 
NOTE 7 — LEASES (continued):
 
Supplemental balance sheet information related to leases was as follows:
​ ​ ​
March 31,
2019
​
Operating Leases ​ ​ ​ ​ ​ ​ ​
Operating lease right-of-use assets
​ ​ ​ $ 1,697 ​ ​
Other current liabilities
​ ​ ​ ​ 627 ​ ​
Operating lease liabilities
​ ​ ​ ​ 1,109 ​ ​
Total operating lease liabilities
​ ​ ​ $ 1,736 ​ ​
Weighted Average Remaining Lease Term ​ ​ ​ ​ ​ ​ ​
Operating leases
​ ​
2.77  years
​
Weighted Average Discount Rate ​ ​ ​ ​ ​ ​ ​
Operating leases
​ ​ ​ ​ 2.75 % ​ ​
As of March 31, 2019, the maturities of lease liabilities were as follows:
​ ​ ​
Operating
Leases
​
Year Ending March 31, ​ ​ ​ ​ ​ ​ ​
2020
​ ​ ​ $ 508 ​ ​
2021
​ ​ ​ ​ 603 ​ ​
2022
​ ​ ​ ​ 618 ​ ​
Thereafter
​ ​ ​ ​ 71 ​ ​
Total lease payments
​ ​ ​ ​ 1,800 ​ ​
Less imputed interests
​ ​ ​ ​ (64 ) ​ ​
Total
​ ​ ​ $ 1,736 ​ ​
As of December 31, 2018, the minimum lease payments of the Company, were as follows:
​ Year ending December 31: ​ ​ ​ ​ ​ ​ ​
​
2019
​ ​ ​ $ 392 ​ ​
​
2020
​ ​ ​ ​ 399 ​ ​
​
2021
​ ​ ​ ​ 405 ​ ​
​
2022
​ ​ ​ ​ 119 ​ ​
​
Total future minimum lease payments
​ ​ ​ $ 1,315 ​ ​
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INMODE LTD.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(U.S. dollars in thousands, except for per share data)
 
NOTE 8 — TAXES ON INCOME
Effective tax rate
The Company’s effective tax rate for the three months ended March 31, 2019 was lower than the Israeli statutory corporate tax rate, primarily due to tax benefits that the Company receives as Benefited Enterprise. Upon the distribution of dividends from the tax-exempt income of a Benefited Enterprise, the amount distributed is subject to tax at the rate that would have been applicable had the Company not been exempted from payment thereof  (see also note 11 on consolidated financial statements of the Company for the year ended December 31, 2018).
The Company’s effective tax rate (tax benefit) was 1.71% and (2.40%) for the three months ended March 31, 2019 and 2018, respectively. The increase in the Company’s effective tax rate was primarily due to a cumulative impact from exercise of non-qualifying stock options by several U.S. employees during the first quarter of 2018 which resulted in a tax benefit.
NOTE 9 — REVENUE
The changes in contract liabilities are as follows:
​ ​ ​
Three months
ended
March 31, 2019
​
Balance at December 31, 2018
​ ​ ​ $ 9,737 ​ ​
Increases due to issuance of new contracts, excluding amounts recognized as revenue during the period
​ ​ ​ ​ 6,195 ​ ​
Revenue recognized that was included in the contract liability balance at the beginning of the period
​ ​ ​ ​ (3,284 ) ​ ​
Balance at March 31, 2019
​ ​ ​ $ 12,648 ​ ​
Contract liability presented in non-current liabilities ( 1 )
​ ​ ​
​
4,091
​ ​
Contract liability presented in current liabilities
​ ​ ​ $ 8,557 ​ ​
​
(1)
As of March 31, 2019, non-current deferred revenue is estimated to be recognized as following: 66% in year 2020, 24% in year 2021 and the rest in years 2022 – 2023.
​
NOTE 10 — RELATED PARTIES
The Company receives certain services from Home Skinnovations Ltd., a related party. The services include an office sublease, use of certain computer hardware and switchboard infrastructure, certain software licenses and limited personnel services. The chief executive officer of the Company is a board member of Home Skinnovations Ltd. and was the chief executive officer of Home Skinnovations Ltd. until June 2018. The Company recorded expenses related to services received from Home Skinnovations Ltd. of $16 and $60 for the three months ended March 31, 2019 and 2018, respectively.
Commencing in May 2018, the Company ceased to receive office sublease services from Home Skinnovations Ltd. as a result of the Company’s new lease agreement.
The Company’s subsidiary in Canada receives certain services from a subsidiary of Home Skinnovations Ltd. in Canada as part of a service agreement. The services include mobile phone services, an office sublease, use of certain computer hardware and switchboard infrastructure, certain software licenses and limited personnel services. In relation to these services, the Company recorded expenses in the amount of  $32 and $37 for the three months ended March 31, 2019 and 2018, respectively.
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INMODE LTD.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(U.S. dollars in thousands, except for per share data)
 
NOTE 10 — RELATED PARTIES (continued):
 
The Company’s subsidiaries in Canada and the United States receive certain marketing services from one of the Company’s shareholders and its related party and recorded expenses related to those services in the amounts of  $157 and $68, for the three months ended March 31, 2019 and 2018, respectively.
NOTE 11 — SUBSEQUENT EVENTS
The Company has concluded the following events require disclosure in the accompanying condensed consolidated finanical statements:
1.
In April 2019, the Company established a wholly owned subsidiary located in India.
​
2.
In April 2019, the Company granted 63,000 options to its employees and consultants.
​
3.
On May 5, 2019, the non-controlling partner in the Company’s subsidiary in China (“JVC”) signed an agreement in which the non-controlling partner in the JVC extended the waiver from prior agreements on any and all rights, privileges and interests with regards to its conversion right (“JVC Waiver”). The updated JVC Waiver will be effective only upon a completion of an IPO on or before August 31, 2019.
​
4.
In June 2019, the Company’s shareholders decided to increase the authorized share capital of the Company to 100,000,000 ordinary shares, par value NIS 0.01 per ordinary share.
​
The Company has evaluated subsequent events from March 31, 2019 through June 27, 2019, the date at which the condensed consolidated financial statements were available to be issued and determined there are no other items requiring disclosure beyond those already disclosed, and there were no material subsequent events that required recognition in these condensed consolidated financial statements.
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        Shares 
[MISSING IMAGE: LG_INMODE.JPG]
InMode Ltd.
Ordinary Shares
​
Prospectus
           , 2019
​
Joint Book-Running Managers
Barclays
UBS Investment Bank
​
Lead Manager
Canaccord Genuity
​
Co-Manager
Baird
Until            , 2019 (25 days after the date of this prospectus), all dealers that effect transactions in these securities, whether or not participating in this offering, may be required to deliver a prospectus. This delivery requirement is in addition to the dealers’ obligation to deliver a prospectus when acting as an underwriter and with respect to their unsold allotments or subscriptions.
   
TABLE OF CONTENTS
PART II
 
Information Not Required in Prospectus
Item 6.   Indemnification of Directors and Officers
Under the Israeli Companies Law, 1999, as amended, or the Companies Law, a company may not exculpate an office holder from liability for a breach of the duty of loyalty. A company may exculpate an office holder in advance from liability to the company, in whole or in part, for damages caused to the company as a result of a breach of duty of care, but only if a provision authorizing such exculpation is included in its articles of association. Our amended and restated articles of association are to be effective upon the effectiveness of the registration statement. A company may not exculpate in advance a director from liability arising out of a breach of the duty of care with respect to a distribution.
Under the Companies Law, the Israeli Securities Law, 1968, or the Securities Law, and the Israeli Economic Competition Law, 1988, or the Economic Competition Law, a company may indemnify an office holder with respect to the following liabilities, payments and expenses incurred for acts performed by him or her as an office holder, either pursuant to an undertaking made in advance of an event or following an event, provided its articles of association include a provision authorizing such indemnification:
•
financial liability imposed on him or her in favor of another person pursuant to a judgment, including a settlement or arbitrator’s award approved by a court. However, if an undertaking to indemnify an office holder with respect to such liability is provided in advance, then such an undertaking must be limited to events which, in the opinion of the board of directors, can be foreseen based on the company’s activities when the undertaking to indemnify is given, and to an amount or according to criteria determined by the board of directors as reasonable under the circumstances, and such undertaking shall detail the abovementioned foreseen events and amount or criteria;
​
•
reasonable litigation expenses, including attorneys’ fees, incurred by the office holder (1) as a result of an investigation or proceeding instituted against him or her by an authority authorized to conduct such investigation or proceeding, provided that (i) no indictment was filed against such office holder as a result of such investigation or proceeding; and (ii) no financial liability was imposed upon him or her as a substitute for the criminal proceeding as a result of such investigation or proceeding or, if such financial liability was imposed, it was imposed with respect to an offense that does not require proof of criminal intent; and (2) in connection with a monetary sanction;
​
•
reasonable litigation expenses, including attorneys’ fees, incurred by the office holder or imposed by a court in proceedings instituted against him or her by the company, on its behalf, or by a third party, or in connection with criminal proceedings in which the office holder was acquitted, or as a result of a conviction for an offense that does not require proof of criminal intent;
​
•
expenses incurred by the office holder with respect to proceedings held pursuant to certain provisions of the Economic Competition Law;
​
•
a monetary liability imposed on the office holder in favor of a payment for a breach offended at an Administrative Procedure (as defined below) as set forth in Section 52(54)(a)(1)(a) of the Securities Law;
​
•
expenses expended by the office holder with respect to an Administrative Procedure under the Securities Law, including reasonable litigation expenses and reasonable attorneys’ fees; and
​
•
any other obligation or expense in respect of which it is permitted or will be permitted under applicable law to indemnify an office holder, including, without limitation, matters referenced in Section 56H(b)(1) of the Securities Law.
​
​
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An “Administrative Procedure” is defined as a procedure pursuant to Chapters H3 (Monetary Sanction by the Israeli Securities Authority), H4 (Administrative Enforcement Procedures of the Administrative Enforcement Committee) or I1 (Arrangement to Prevent Procedures or Interruption of Procedures Subject to Conditions) of the Securities Law.
Under the Companies Law, the Securities Law, and the Economic Competition Law, a company may insure an office holder against the following liabilities incurred for acts performed by him or her as an office holder, if and to the extent provided in the company’s articles of association:
•
a breach of the duty of loyalty to the company, provided that the office holder acted in good faith and had a reasonable basis to believe that the act would not harm the company;
​
•
a breach of the duty of care to the company or to a third party, to the extent such a breach arises out of the negligent conduct of the office holder;
​
•
a financial liability imposed on the office holder in favor of a third party;
​
•
expenses incurred by the office holder with respect to proceedings held pursuant to certain provisions of the Economic Competition Law;
​
•
a monetary liability imposed on the office holder in favor of an injured party at an Administrative Procedure pursuant to Section 52(54)(a)(1)(a) of the Securities Law; and
​
•
expenses incurred by an office holder in connection with an Administrative Procedure, including reasonable litigation expenses and reasonable attorneys’ fees.
​
Under the Companies Law, a company may not indemnify, exculpate or insure an office holder against any of the following:
•
a breach of the duty of loyalty, except for indemnification and insurance for a breach of the duty of loyalty to the company to the extent that the office holder acted in good faith and had a reasonable basis to believe that the act would not harm the company;
​
•
a breach of the duty of care committed intentionally or recklessly, excluding a breach arising out of the negligent conduct of the office holder;
​
•
an act or omission committed with intent to derive illegal personal benefit; or
​
•
a fine, civil fine, monetary sanction or forfeit levied against the office holder.
​
The Securities Law and the Economic Competition Law also provide certain limitations on the ability of a company to indemnify, exculpate and insure office holders.
Under the Companies Law, exculpation, indemnification and insurance of office holders in a public company, subject to certain exceptions, must be approved by the compensation committee and the board of directors and, with respect to certain office holders or controlling shareholders, their relatives and third parties in which such controlling shareholders have a personal interest, also by the shareholders. See “Management — Approval of Related Party Transactions under Israeli Law — Office Holders.”
Our amended and restated articles of association to be effective upon the effectiveness of the registration statement will permit us to exculpate, indemnify and insure our office holders to the fullest extent permitted or to be permitted by the Companies Law, the Securities Law and the Economic Competition Law, in respect of liabilities, payments and expenses incurred for acts performed and omissions committed as an office holder, either pursuant to an undertaking made in advance of an event or following an event.
Prior to the effectiveness of the registration statement, we intend to obtain directors and officers liability insurance for the benefit of our office holders and intend to continue to maintain such coverage and pay all premiums thereunder to the fullest extent permitted by applicable law. In addition, prior to the effectiveness of the registration statement, we intend to enter into agreements with each of our directors (including our director nominees) and executive officers exculpating them from liability to us for damages caused to us as a result of a breach of duty of care and undertaking to indemnify them, in each case, to the fullest extent permitted by our amended and restated articles of association to be effective upon the
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effectiveness of the registration statement and applicable law, including with respect to liabilities resulting from this offering to the extent that these liabilities are not covered by insurance. Such indemnification amounts will be in addition to any amounts available under our directors’ and office holders’ liability insurance policy. Each office holder who agrees to receive this letter of indemnification will also give his or her approval to terminate all previous letters of indemnification that we have provided to him or her, if any. Upon of the effectiveness of the registration statement, the maximum and aggregate indemnification amount to all current and future indemnified persons under such agreements is the greater of  (i) an amount equal to 25% of our shareholders’ equity on a consolidated basis, based on our most recent financial statements made publicly available before the date on which the indemnity payment is made and (ii) $40 million.
Insofar as the indemnification for liabilities arising under the Securities Act of 1933, as amended, or the Securities Act, may be permitted to directors, officers or persons controlling us, we have been informed that in the opinion of the Securities and Exchange Commission, or the SEC, such indemnification is against public policy as expressed in the Securities Act and is therefore unenforceable.
Item 7.   Recent Sales of Unregistered Securities
During the past three years, we have issued the following securities pursuant to the exercise of stock options under our equity compensation plans at exercise prices ranging from $0.35 to $1.00 per ordinary share:
​ ​ ​
No. of
Options Exercised
​ ​
Date of
Issuance
​
​ ​ ​ ​ ​ 50,000 ​ ​ ​
May 2, 2016
​
​ ​ ​ ​ ​ 112,682 ​ ​ ​
February 20, 2018
​
​ ​ ​ ​ ​ 5,417 ​ ​ ​
April 11, 2018
​
​ ​ ​ ​ ​ 36,668 ​ ​ ​
January 11, 2018
​
​ ​ ​ ​ ​ 833 ​ ​ ​
July 23, 2018
​
​ ​ ​ ​ ​ 21,133 ​ ​ ​
June 16, 2016
​
​ ​ ​ ​ ​ 37,775 ​ ​ ​
October 18, 2017
​
​ ​ ​ ​ ​ 11,500 ​ ​ ​
January 29, 2017
​
​ ​ ​ ​ ​ 1,600 ​ ​ ​
June 10, 2018
​
​ ​ ​ ​ ​ 6,672 ​ ​ ​
December 18, 2017
​
​ ​ ​ ​ ​ 15,000 ​ ​ ​
August 12, 2018
​
​ ​ ​ ​ ​ 3,336 ​ ​ ​
August 26, 2018
​
​ ​ ​ ​ ​ 10,000 ​ ​ ​
October 4, 2018
​
​ ​ ​ ​ ​ 8,751 ​ ​ ​
January 3, 2019
​
​ ​ ​ ​ ​ 14,000 ​ ​ ​
January 28, 2019
​
​ ​ ​ ​ ​ 125,000 ​ ​ ​
February 12, 2019
​
​ ​ ​ ​ ​ 15,000 ​ ​ ​
May 6, 2019
​
TOTAL
​ ​ ​ ​ 475,367 ​ ​ ​ ​ ​
None of the foregoing transactions involved any underwriters, underwriting discounts or commissions, or any public offering. We believe these transactions were exempt from registration under the Securities Act in reliance upon Section 4(a)(2) of the Securities Act, Regulation S under the Securities Act, or Rule 701 promulgated under Section 3(b) of the Securities Act as transactions by an issuer not involving any public offering, sales by an issuer in an offshore transaction, or pursuant to benefit plans and contracts relating to compensation as provided under Rule 701. The sales of these securities were made without any general solicitation or advertising.
Item 8.   Exhibits and Financial Statement Schedules
(a)
The Exhibit Index is hereby incorporated by reference herein.
​
​
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(b)
Financial Statement Schedules.
​
Schedules not listed above have been omitted because the information required to be set forth therein is not applicable or is shown in the financial statements or notes thereto.
Item 9.   Undertakings
The undersigned Registrant hereby undertakes to provide to the underwriters at the closing specified in the underwriting agreement certificates in such denominations and registered in such names as required by the underwriters to permit prompt delivery to each purchaser.
Insofar as indemnification for liabilities arising under the Securities Act may be permitted to directors, officers and controlling persons of the Registrant pursuant to the foregoing provisions, or otherwise, the Registrant has been advised that in the opinion of the SEC such indemnification is against public policy as expressed in the Securities Act, and is, therefore, unenforceable. In the event that a claim for indemnification against such liabilities (other than the payment by the Registrant of expenses incurred or paid by a director, officer, or controlling person of the Registrant in the successful defense of any action, suit or proceeding) is asserted by such director, officer or controlling person in connection with the securities being registered, the Registrant will, unless in the opinion of its counsel the matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction the question of whether such indemnification by it is against public policy as expressed in the Securities Act and will be governed by the final adjudication of such issue.
The undersigned Registrant hereby undertakes that:
(1)
for purposes of determining any liability under the Securities Act, the information omitted from the form of prospectus filed as part of this Registration Statement in reliance upon Rule 430A and contained in a form of prospectus filed by the Registrant pursuant to Rule 424(b)(1) or (4) or 497(h) under the Securities Act shall be deemed to be part of this Registration Statement as of the time it was declared effective; and
​
(2)
for the purpose of determining any liability under the Securities Act, each post-effective amendment that contains a form of prospectus shall be deemed to be a new registration statement relating to the securities offered therein, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof.
​
​
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EXHIBIT INDEX
Exhibit 
No. 		​ ​
Description
​
1.1 ​ ​ Form of Underwriting Agreement ​
3.1 ​ ​ Articles of Association, as amended, as currently in effect ​
3.2 ​ ​ Form of Articles of Association to be effective upon the effectiveness of the registration statement ​
4.1 ​ ​ Form of Share Certificate ​
5.1 * ​ ​ Opinion of Primes, Shiloh, Givon, Meir Law Firm ​
8.1 * ​ ​ Opinion of Mayer Brown LLP ​
10.1 ​ ​ Invasix Ltd. 2008 ROW Option Plan ​
10.2 ​ ​ Invasix Ltd. 2008 Israeli Option Plan (English translation) ​
10.3 ​ ​ InMode Ltd. 2018 Incentive Plan ​
10.4 ​ ​ Form of Indemnification Agreement ​
10.5 ​ ​ Consultancy Agreement, dated August 1, 2018, by and between InMode Ltd. and Mr. Moshe Mizrahy ​
10.6 ​ ​ Employment Agreement, dated July 1, 2017, by and between Invasix Corp. and Dr. Michael Kreindel ​
10.7 ​ ​ Form of Option Award for Israeli Employees, Officers and Directors and Form of Option Award for Consultants, Service Providers and Non-Israeli Employees, Officers and Directors ​
10.8 ​ ​ Equity Joint Venture Agreement, dated January 11, 2017, by and between Guangzhou Sino-Israel Bio-Industry Investment Fund (LLP) and Invasix Ltd. ​
10.9 ​ ​ Turn-Key Manufacturing Agreement, dated April 1, 2011, by and between Invasix Ltd. and Flextronics Israel Ltd. ​
10.10 ​ ​ Turn-Key Manufacturing Agreement, dated November 7, 2013, by and between Invasix Ltd. and STI Laser Industries Ltd. ​
10.11 ​ ​ Lease Agreement, dated April 16, 2018, by and between Sha’ar Yokneam Limited Partnership and InMode Ltd. (English translation). Supplemental Lease Agreement, dated January 13, 2019, by and between Sha’ar Yokneam Limited Partnership and InMode Ltd. (English translation) ​
10.12 ​ ​ Founders Memorandum of Understanding dated March 4, 2014, by and between Invasix Ltd. and Wigmore Medical Limited ​
10.13 ​ ​ Compensation Policy ​
21.1 ​ ​ List of Subsidiaries ​
23.1* ​ ​ Consent of Primes, Shiloh, Givon, Meir Law Firm (included in Exhibit 5.1) ​
23.2 ​ ​ Consent of Kesselman & Kesselman, Certified Public Accountants (Israel), independent registered public accounting firm and member firm of PricewaterhouseCoopers International Limited ​
23.3 ​ ​ Consent of Director Nominee (Dr. Hadar Ron) ​
23.4 ​ ​ Consent of Director Nominee (Bruce Mann) ​
23.5 ​ ​ Consent of Director Nominee (Dr. Michael Anghel) ​
23.6 ​ ​ Consent of Director Nominee (Dr. Michael Kreindel) ​
24.1 ​ ​ Power of Attorney (included in signature page hereto) ​
​
*
To be filed by amendment.
​
​
TABLE OF CONTENTS ​
Signatures
Pursuant to the requirements of the Securities Act of 1933, as amended, the Registrant certifies that it has reasonable grounds to believe that it meets all of the requirements for filing on Form F-1 and has duly caused this registration statement to be signed on its behalf by the undersigned, thereunto duly authorized, in Yokneam, Israel on this 11 th day of July, 2019.
​ INMODE LTD. ​
​ By: ​ ​ /s/ Moshe Mizrahy ​
​ ​ ​ ​ Name: ​ ​ Moshe Mizrahy ​
​ ​ ​ ​ Title: ​ ​ Chief Executive Officer and Chairman of the Board of Directors ​
Power of Attorney
Each of the undersigned officers and directors of InMode Ltd. hereby constitutes and appoints Moshe Mizrahy, with full power to act alone, the individual’s true and lawful attorney-in-fact and agent, with full power of substitution and resubstitution, for the person and in his or her name, place and stead, in any and all capacities, to sign this registration statement of InMode Ltd. on Form F-1, and any other registration statement relating to the same offering (including any registration statement, or amendment thereto, that is to become effective upon filing pursuant to Rule 462(b) under the Securities Act of 1933, as amended), and any and all amendments thereto (including post-effective amendments to the registration statement), and to file the same, with all exhibits thereto, and all other documents in connection therewith, with the SEC, granting unto said attorney-in-fact and agent full power and authority to do and perform each and every act and thing requisite and necessary to be done in connection therewith, as fully to all intents and purposes as he or she might or could do in person, hereby ratifying and confirming all that said attorney-in-fact and agent, or his substitute or substitutes, may lawfully do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, as amended, this Registration Statement has been signed by the following persons for InMode Ltd. in the capacities indicated, on the dates indicated.
Signature
​ ​
Title
​ ​
Date
​
/s/ Moshe Mizrahy
​
Moshe Mizrahy
​ ​ Chief Executive Officer and Chairman of the Board of Directors (Principal Executive Officer) ​ ​
July 11, 2019
​
/s/ Yair Malca
​
Yair Malca
​ ​ Chief Financial Officer (Principal Financial and Accounting Officer) ​ ​
July 11, 2019
​
/s/ Dr. Michael Kreindel
​
Dr. Michael Kreindel
​ ​ Chief Technology Officer and Director Nominee ​ ​
July 11, 2019
​
/s/ Dr. Hadar Ron, M.D.
​
Dr. Hadar Ron, M.D.
​ ​ Director Nominee ​ ​
July 11, 2019
​
/s/ Bruce Mann
​
Bruce Mann
​ ​ Director Nominee ​ ​
July 11, 2019
​
/s/ Dr. Michael Anghel
​
Dr. Michael Anghel
​ ​ Director Nominee ​ ​
July 11, 2019
​
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Authorized Representative in the United States
Pursuant to the Securities Act of 1933, the undersigned, the duly authorized representative in the United States of InMode Ltd., has signed this Registration Statement in the city of Lake Forest, the State of California, on July 11, 2019.
​ INMODE LTD. ​
​ By: ​ ​ /s/ Moshe Mizrahy ​
​ ​ ​ ​ Name: ​ ​ Moshe Mizrahy ​
​ ​ ​ ​ Title: ​ ​ Chief Executive Officer and Chairman of the Board of Directors ​

 

Exhibit 1.1

 

INMODE LTD.

 

Ordinary Shares

 

UNDERWRITING AGREEMENT

 

, 2019

 

Barclays Capital Inc.

UBS Securities LLC ,
As Representatives of the several
Underwriters named in Schedule I attached hereto

 

c/o Barclays Capital Inc.
745 Seventh Avenue
New York, New York 10019

 

c/o UBS Securities LLC

1285 Avenue of the Americas

New York, New York 10019

 

Ladies and Gentlemen:

 

InMode Ltd., a company organized under the laws of the State of Israel (the “ Company ”), proposes to sell [●] shares (the “ Firm Shares ”) of the Company’s ordinary shares, par value NIS 0.01 per ordinary share (the “ Ordinary Shares ”). In addition, the Company proposes to grant to the underwriters named in Schedule I (the “ Underwriters ”) attached to this agreement (this “ Agreement ”) an option to purchase up to [●] additional Ordinary Shares on the terms set forth in Section 2 (the “ Option Shares ”). The Firm Shares and the Option Shares, if purchased, are hereinafter collectively called the “ Shares .” This Agreement is to confirm the agreement concerning the purchase of the Shares from the Company by the Underwriters.

 

1.      Representations, Warranties and Agreements of the Company . The Company represents, warrants and agrees that:

 

(a)          A registration statement on Form F-1 (File No. 333-[●]) relating to the Shares (i) has been prepared by the Company in conformity with the requirements of the Securities Act of 1933, as amended (the “ Securities Act ”), and the rules and regulations of the Securities and Exchange Commission (the “ Commission ”) thereunder; (ii) has been filed with the Commission under the Securities Act; and (iii) has become effective under the Securities Act. Copies of such registration statement and any amendment thereto have been delivered by the Company to you as the representatives (the “ Representatives ”) of the Underwriters. As used in this Agreement:

 

 

 

 

(i)          “ Applicable Time ” means [●] [A.M.][P.M.], New York City time, on [●], 2019;

 

(ii)         “ Effective Date ” means the date at which such registration statement, or the most recent post-effective amendment thereto, was declared effective by the Commission in accordance with the rules and regulations under the Securities Act;

 

(iii)        “ Issuer Free Writing Prospectus ” means each “issuer free writing prospectus” (as defined in Rule 433 under the Securities Act) relating to the Shares;

 

(iv)        “ Preliminary Prospectus ” means any preliminary prospectus relating to the Shares included in such registration statement or filed with the Commission pursuant to Rule 424(b) under the Securities Act;

 

(v)         “ Pricing Disclosure Package ” means, as of the Applicable Time, the most recent Preliminary Prospectus, together with the information included in Schedule IV hereto and each Issuer Free Writing Prospectus filed or used by the Company at or before the Applicable Time, other than a road show, that is an Issuer Free Writing Prospectus but is not required to be filed under Rule 433 under the Securities Act;

 

(vi)        “ Prospectus ” means the final prospectus relating to the Shares, as filed with the Commission pursuant to Rule 424(b) under the Securities Act;

 

(vii)       “ Registration Statement ” means such registration statement, as amended as of the Effective Date, including any Preliminary Prospectus or the Prospectus, all exhibits to such registration statement and including the information deemed by virtue of Rule 430A under the Securities Act to be part of such registration statement as of the Effective Date;

 

(viii)      “ Testing-the-Waters Communication ” means any oral or written communication with potential investors undertaken in reliance on Section 5(d) of the Securities Act; and

 

(ix)         “ Written Testing-the-Waters Communication ” means any Testing-the-Waters Communication that is a written communication within the meaning of Rule 405 under the Securities Act.

 

Any reference to the “ most recent Preliminary Prospectus ” shall be deemed to refer to the latest Preliminary Prospectus included in the Registration Statement or filed pursuant to Rule 424(b) under the Securities Act prior to or on the date hereof.

 

(b)          The Commission has not issued any order preventing or suspending the use of any Preliminary Prospectus or the Prospectus or suspending the effectiveness of the Registration Statement, and no proceeding or examination for such purpose has been instituted or, to the Company’s knowledge, threatened by the Commission.

 

 

 

 

(c)          From the time of the initial confidential submission of the Registration Statement to the Commission (or, if earlier, the first date on which the Company engaged directly or through any Person authorized to act on its behalf in any Testing the Water Communication) through the date hereof, the Company has been and is an “emerging growth company,” as defined in Section 2(a) of the Securities Act (an “ Emerging Growth Company ”).

 

(d)          The Company (i) has not engaged in any Testing-the-Waters Communication other than Testing-the-Waters Communications with the consent of the Representatives with entities that are qualified institutional buyers within the meaning of Rule 144A under the Securities Act, or with institutions that are accredited investors within the meaning of Rule 501 under the Securities Act and (ii) has not authorized anyone other than the Representatives to engage in Testing-the-Waters Communications. The Company reconfirms that the Representatives have been authorized to act on its behalf in undertaking Testing-the-Waters Communications. The Company has not distributed or approved for distribution any Written Testing-the-Waters Communications other than those listed on Schedule VII hereto.

 

(e)          The Company was not at the time of the initial filing of the Registration Statement and at the earliest time thereafter that the Company or another offering participant made a bona fide offer (within the meaning of Rule 164(h)(2) under the Securities Act) of the Shares, is not on the date hereof and will not be on the applicable Delivery Date (as defined below), an “ineligible issuer” (as defined in Rule 405 under the Securities Act). The Company is a “foreign private issuer” within the meaning of Rule 405 under the Securities Act.

 

(f)          The Registration Statement conformed and will conform in all material respects on the Effective Date and on the applicable Delivery Date, and any amendment to the Registration Statement filed after the date hereof will conform in all material respects when filed, to the requirements of the Securities Act and the rules and regulations thereunder. The most recent Preliminary Prospectus conformed, and the Prospectus will conform, in all material respects when filed with the Commission pursuant to Rule 424(b) under the Securities Act and on the applicable Delivery Date to the requirements of the Securities Act and the rules and regulations thereunder.

 

(g)          The Registration Statement did not, as of the Effective Date, contain an untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary to make the statements therein not misleading; provided that no representation or warranty is made as to information contained in or omitted from the Registration Statement in reliance upon and in conformity with written information furnished to the Company through the Representatives by or on behalf of any Underwriter specifically for inclusion therein, which information is specified in Section 8(e).

 

(h)          The Prospectus will not, as of its date or as of the applicable Delivery Date, contain an untrue statement of a material fact or omit to state a material fact necessary to make the statements therein, in the light of the circumstances under which they were made, not misleading; provided that no representation or warranty is made as to information contained in or omitted from the Prospectus in reliance upon and in conformity with written information furnished to the Company through the Representatives by or on behalf of any Underwriter specifically for inclusion therein, which information is specified in Section 8(e).

 

 

 

 

(i)          The Pricing Disclosure Package did not, as of the Applicable Time, contain an untrue statement of a material fact or omit to state a material fact necessary to make the statements therein, in the light of the circumstances under which they were made, not misleading; provided that no representation or warranty is made as to information contained in or omitted from the Pricing Disclosure Package in reliance upon and in conformity with written information furnished to the Company through the Representatives by or on behalf of any Underwriter specifically for inclusion therein, which information is specified in Section 8(e).

 

(j)          Each Issuer Free Writing Prospectus listed in Schedule V hereto, when taken together with the Pricing Disclosure Package, did not, as of the Applicable Time, contain an untrue statement of a material fact or omit to state a material fact necessary to make the statements therein, in the light of the circumstances under which they were made, not misleading; provided that no representation or warranty is made as to information contained in or omitted from such Issuer Free Writing Prospectus listed in Schedule V hereto in reliance upon and in conformity with written information furnished to the Company through the Representatives by or on behalf of any Underwriter specifically for inclusion therein, which information is specified in Section 8(e).

 

(k)          No Written Testing-the-Waters Communication, as of the Applicable Time, when taken together with the Pricing Disclosure Package, contained an untrue statement of a material fact or omitted to state a material fact necessary to make the statements therein, in the light of the circumstances under which they were made, not misleading; provided that no representation or warranty is made as to information contained in or omitted from such Written Testing-the-Waters Communication listed on Schedule VII hereto in reliance upon and in conformity with written information furnished to the Company through the Representatives by or on behalf of any Underwriter specifically for inclusion therein, which information is specified in Section 8(e); and the Company has filed publicly on EDGAR at least 15 calendar days prior to any “road show” (as defined in Rule 433 under the Securities Act), any confidentially submitted registration statement and registration statement amendments relating to the offer and sale of the Shares. Each Written Testing-the-Waters Communications did not, as of the Applicable Time, and at all times through the completion of the public offer and sale of the Shares will not, include any information that conflicted, conflicts or will conflict with the information contained in the Registration Statement, the Pricing Disclosure Package or the Prospectus.

 

(l)          Each Issuer Free Writing Prospectus conformed or will conform in all material respects to the requirements of the Securities Act and the rules and regulations thereunder on the date of first use, and the Company has complied with all prospectus delivery and any filing requirements applicable to such Issuer Free Writing Prospectus pursuant to the Securities Act and rules and regulations thereunder. The Company has not made any offer relating to the Shares that would constitute an Issuer Free Writing Prospectus without the prior written consent of the Representatives. The Company has retained in accordance with the Securities Act and the rules and regulations thereunder all Issuer Free Writing Prospectuses that were not required to be filed pursuant to the Securities Act and the rules and regulations thereunder. The Company has taken all actions necessary so that any “road show” (as defined in Rule 433 under the Securities Act) in connection with the offering of the Shares will not be required to be filed pursuant to the Securities Act and the rules and regulations thereunder.

 

 

 

 

(m)          Each of the Company and its subsidiaries has been duly organized, is validly existing and in good standing as a corporation or other business entity under the laws of its jurisdiction of organization and is duly qualified to do business and in good standing as a foreign corporation or other business entity in each jurisdiction in which its ownership or lease of property or the conduct of its businesses requires such qualification, except where the failure to be so qualified or in good standing could not, in the aggregate, reasonably be expected to have a material adverse effect on the condition (financial or otherwise), results of operations, shareholders’ equity, properties, business or prospects of the Company and its subsidiaries taken as a whole (a “ Material Adverse Effect ”). The Company and each of its subsidiaries have all power and authority necessary to own or hold its properties and to conduct the businesses in which it is engaged. The Company does not own or control, directly or indirectly, any corporation, association or other entity other than its wholly-owned subsidiaries, Invasix UK Ltd. and Guangshou InMode Medical Technology Ltd. None of the subsidiaries of the Company (other than Invasix Inc.) is a “significant subsidiary” (as defined in Rule 405 under the Securities Act). The Company has not been designated as a “breaching company” (within the meaning of the Israeli Companies Law, 5759-1999) by the Registrar of Companies of the State of Israel. The certificate of incorporation, articles of association and other organizational documents of the Company comply with the requirements of applicable Israeli law and are in full force and effect.

 

(n)          The Company has an authorized capitalization as set forth in each of the most recent Preliminary Prospectus and the Prospectus, and all of the issued shares of capital stock of the Company have been duly authorized and validly issued, are fully paid and non-assessable, conform in all material respects to the description thereof contained in the most recent Preliminary Prospectus and were issued in compliance with federal, state and local, including Israeli, securities laws and not in violation of any preemptive right, resale right, right of first refusal or similar right. All of the Company’s options to purchase shares of the Company’s capital stock have been duly authorized and validly issued, conform to the description thereof contained in the most recent Preliminary Prospectus and were issued in compliance with federal, state and local, including Israeli, securities laws. All of the issued shares of capital stock or other ownership interest of each subsidiary of the Company have been duly authorized and validly issued, are fully paid and non-assessable and are owned directly or indirectly by the Company, free and clear of all liens, encumbrances, equities or claims, except for such liens, encumbrances, equities or claims as could not, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect.

 

(o)          The Shares to be issued and sold by the Company to the Underwriters hereunder have been duly authorized and, upon payment and delivery in accordance with this Agreement, will be validly issued, fully paid and non-assessable, will conform to the description thereof contained in the most recent Preliminary Prospectus, will be issued in compliance with federal and state securities laws and will be free of statutory and contractual (including under the articles of association and other organizational documents of the Company) preemptive rights, rights of first refusal and similar rights. Subject to the compliance with Section 5(xviii) hereof, the Company is not required to publish a prospectus in the State of Israel under the laws of the State of Israel with respect to the offer or sale of the Shares.

 

 

 

 

(p)          The Company has all requisite corporate power and authority, including under Chapter 5 of Part VI of the Israeli Companies Law 5759-1999, to execute, deliver and perform its obligations under this Agreement. This Agreement has been duly and validly authorized, executed and delivered by the Company.

 

(q)          The issue and sale of the Shares, the execution, delivery and performance of this Agreement by the Company, the consummation of the transactions contemplated hereby and the application of the proceeds from the sale of the Shares as described under “Use of Proceeds” in the most recent Preliminary Prospectus will not (i) conflict with or result in a breach or violation of any of the terms or provisions of, impose any lien, charge or encumbrance upon any property or assets of the Company and its subsidiaries, or constitute a default under, any indenture, mortgage, deed of trust, loan agreement, license, lease or other agreement or instrument to which the Company or any of its subsidiaries is a party or by which the Company or any of its subsidiaries is bound or to which any of the property or assets of the Company or any of its subsidiaries is subject; (ii) result in any violation of the provisions of the articles of association, charter or by-laws (or similar organizational documents) of the Company or any of its subsidiaries; or (iii) result in any violation of any statute or any judgment, order, decree, rule or regulation of any court or governmental agency or body having jurisdiction over the Company or any of its subsidiaries or any of their properties or assets, except, with respect to clauses (i) and (iii), conflicts or violations that would not reasonably be expected to have a Material Adverse Effect.

 

(r)          No consent, approval, authorization or order of, or filing, registration or qualification with, any court or governmental agency or body having jurisdiction over the Company or any of its subsidiaries or any of their properties or assets is required for the issue and sale of the Shares, the execution, delivery and performance of this Agreement by the Company, the consummation of the transactions contemplated hereby, the application of the proceeds from the sale of the Shares as described under “Use of Proceeds” in the most recent Preliminary Prospectus, except for the registration of the Shares under the Securities Act and such consents, approvals, authorizations, orders, filings, registrations or qualifications as may be required under the Securities Exchange Act of 1934, as amended (the “ Exchange Act ”), and applicable state and foreign securities laws and/or the bylaws and rules of the Financial Industry Regulatory Authority (the “ FINRA ”) in connection with the purchase and sale of the Shares by the Underwriters, and except for the Company’s reporting obligations to the Bank of Israel in connection with the purchase and sale of the Shares by the Underwriters.

 

(s)          The historical financial statements (including the related notes and supporting schedules) included in the most recent Preliminary Prospectus comply as to form in all material respects with the requirements of Regulation S-X under the Securities Act and present fairly the financial condition, results of operations and cash flows of the entities purported to be shown thereby at the dates and for the periods indicated and have been prepared in conformity with accounting principles generally accepted in the United States applied on a consistent basis throughout the periods involved.

 

(t)          Kesselman & Kesselman, a member firm of PricewaterhouseCoopers International Limited (“ PwC ”), who have certified certain financial statements of the Company and its consolidated subsidiaries, whose report appears in the most recent Preliminary Prospectus and who have delivered the initial letter referred to in Section 7(j) hereof, are independent public accountants as required by the Securities Act and the rules and regulations thereunder.

 

 

 

 

(u)          The Company and its subsidiaries maintain internal accounting controls sufficient to provide reasonable assurances regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles in the United States, including, but not limited to, internal accounting controls sufficient to provide reasonable assurance that (i) transactions are executed in accordance with management’s general or specific authorization, (ii) transactions are recorded as necessary to permit preparation of the Company’s financial statements in conformity with accounting principles generally accepted in the United States and to maintain accountability for its assets, (iii) access to the Company’s assets is permitted only in accordance with management’s general or specific authorization and (iv) the recorded accountability for the Company’s assets is compared with existing assets at reasonable intervals and appropriate action is taken with respect to any differences. As of the date of the most recent balance sheet of the Company and its consolidated subsidiaries reviewed or audited by PwC and the audit committee of the the board of directors of the Company (the “ Audit Committee ”) 1 , there were no material weaknesses in the Company’s internal controls.

 

(v)         (i) The Company and its subsidiaries maintain disclosure controls and procedures (as such term is defined in Rule 13a-15(e) under the Exchange Act), (ii) such disclosure controls and procedures are designed to ensure that the information is accumulated and communicated to management of the Company and its subsidiaries, including their respective principal executive officers and principal financial officers, as appropriate, and (iii) such disclosure controls and procedures are effective in all material respects to perform the functions for which they were established.

 

(w)          Since the date of the most recent balance sheet of the Company and its subsidiaries reviewed or audited by PwC and the Audit Committee, (i) the Company has not been advised of or become aware of (A) any significant deficiencies in the design or operation of internal controls that could adversely affect the ability of the Company or any of its subsidiaries to record, process, summarize and report financial data, or any material weaknesses in internal controls, or (B) any fraud, whether or not material, that involves management or other employees who have a significant role in the internal controls of the Company and each of its subsidiaries; and (ii) there have been no significant changes in internal controls or in other factors that could significantly affect internal controls, including any corrective actions with regard to significant deficiencies and material weaknesses.

 

(x)          The section entitled “Management’s Discussion and Analysis of Financial Condition and Results of Operations – Critical Accounting Policies” set forth in the most recent Preliminary Prospectus accurately and fully describes (i) the accounting policies that the Company believes are the most important in the portrayal of the Company’s financial condition and results of operations and that require management’s most difficult, subjective or complex judgments (“ Critical Accounting Policies ”); (ii) the judgments and uncertainties affecting the application of Critical Accounting Policies; and (iii) the likelihood that materially different amounts would be reported under different conditions or using different assumptions and an explanation thereof.

 

 

1 NTD: This rep speaks to the Company at time of pricing/closing, Audit Committee will be in place then.

 

 

 

 

(y)          There is and has been no failure on the part of the Company and any of the Company’s directors or officers, in their capacities as such, to comply with any provision of the Sarbanes-Oxley Act of 2002 and the rules and regulations promulgated in connection therewith.

 

(z)          Since the date of the latest audited financial statements included in the most recent Preliminary Prospectus and except as described in the most recent Preliminary Prospectus, neither the Company nor any of its subsidiaries has (i) sustained any loss or interference with its business from fire, explosion, flood or other calamity, whether or not covered by insurance, or from any labor dispute or court or governmental action, order or decree, (ii) issued or granted any securities other than Ordinary Shares issued pursuant to employee benefit plans, qualified stock option plans or other employee compensation plans or pursuant to outstanding options, (iii) incurred any material liability or obligation, direct or contingent, other than liabilities and obligations that were incurred in the ordinary course of business, (iv) entered into any material transaction not in the ordinary course of business, or (v) declared or paid any dividend on its capital stock, and since such date, there has not been any change in the capital stock or long-term debt of the Company or any of its subsidiaries or any adverse change, or any development involving a prospective adverse change, in or affecting the condition (financial or otherwise), results of operations, shareholders’ equity, properties, management, business or prospects of the Company and its subsidiaries taken as a whole, in each case except as could not, in the aggregate, reasonably be expected to have a Material Adverse Effect.

 

(aa)         The Company and each of its subsidiaries have good and marketable title in fee simple to all real property and good and marketable title to all personal property owned by them, in each case free and clear of all liens, encumbrances and defects, except such liens, encumbrances and defects as are described in the most recent Preliminary Prospectus, or such as do not materially affect the value of such property and do not materially interfere with the use made and proposed to be made of such property by the Company and its subsidiaries. All assets held under lease by the Company and its subsidiaries are held by them under valid, subsisting and enforceable leases, with such exceptions as do not materially interfere with the use made and proposed to be made of such assets by the Company and its subsidiaries.

 

 

 

 

(bb)         Except as described in the most recent Preliminary Prospectus, the Company and each of its subsidiaries have, and are operating in compliance with, such permits, licenses, patents, clearances, registrations, exemptions and other approvals or authorizations of governmental or regulatory authorities (“ Permits ”) as are necessary under applicable law to own their properties and conduct their businesses in the manner described in the most recent Preliminary Prospectus, except for any of the foregoing that would not, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect. The Company and each of its subsidiaries have fulfilled and performed all of their respective obligations with respect to the Permits, and no event has occurred that allows, or after notice or lapse of time would allow, revocation or termination thereof or results in any other impairment of the rights of the holder or any such Permits, except for any of the foregoing that would not reasonably be expected to have a Material Adverse Effect. Neither the Company nor any of its subsidiaries has received notice of any revocation or modification of any such Permits or has any reason to believe that any such Permits will not be renewed in the ordinary course, except where such revocation or modification would not, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect. Neither the Company nor any of its subsidiaries has received any notice denying, revoking or modifying any “approved enterprise,” “benefited enterprise,” “preferred enterprise,” “preferred technology enterprise” or “special preferred technology enterprise” status with respect to any of its facilities or operations or with respect to any benefits from the Authority for Investment and Development of Industry and the Economy of the State of Israel (formerly known as the Investment Center) of the Israeli Ministry of Economy and Industry (the “ Investment Center ”) (including, in all such cases, notice of proceedings or investigations related thereto). All information supplied by the Company or any of its subsidiaries with respect to the applications or notifications relating to such “approved enterprise,” “benefited enterprise,” “preferred enterprise,” “preferred technology enterprise” or “special preferred technology enterprise” status and to benefits from the Investment Center was true, correct and complete in all material respects when supplied to the appropriate authorities. Neither the Company nor any of its subsidiaries has received any funding, grants or subsidies from or on behalf of or under the authority of the Israel Innovation Authority (formerly known as the Office of the Chief Scientist) of the Israeli Ministry of Economy and Industry, the Investment Center, any other governmental or regulatory agency or authority or any bi- or multi-national grant program, framework or foundation.

 

 

 

 

(cc)         The Company and each of its subsidiaries own or possess adequate rights to use all material patents, patent applications, trademarks, service marks, trade names, trademark registrations, service mark registrations, copyrights, licenses, know-how, inventions, domain names, software, systems and technology (including trade secrets and other unpatented and/or unpatentable proprietary or confidential information, systems or procedures) necessary for the conduct of their respective businesses and have no reason to believe that the conduct of their respective businesses conflict with, and have not received any notice of any claim of conflict with, any such rights of others, except for any of the foregoing that would not reasonably be expected to have a Material Adverse Effect. Furthermore, except as described in the most recent Prospectus, (A) there are no third parties who have rights to any Intellectual Property, except for customary reversionary rights of third-party licensors with respect to Intellectual Property that is disclosed in the Registration Statement, the Pricing Disclosure Package or the Prospectus as licensed to the Company or any of its subsidiaries, and the Company and each of its subsidiaries have taken all reasonable steps necessary to secure their respective interests in the Intellectual Property from their respective employees and contractors; (B) each of the Company and its subsidiaries is the sole owner of the Intellectual Property described in the Registration Statement, the Pricing Disclosure Package or the Prospectus as being solely owned by it and has the valid right to use such Intellectual Property; (C) to the knowledge of the Company, there is no infringement, misappropriation or violation by third parties of any such Intellectual Property, except as such infringement, misappropriation or violation would not reasonably be expected to result in a Material Adverse Effect; (D) there is no pending or, to the knowledge of the Company, threatened, action, suit, proceeding or claim by others challenging the Company’s or any of its subsidiaries’ rights in or to any such Intellectual Property, except as such action, suit, proceeding or claim would not reasonably be expected to result in a Material Adverse Effect, and the Company is unaware of any facts which would form a reasonable basis for any such claim; (E) the Intellectual Property owned by the Company and its subsidiaries, and to the knowledge of the Company, the Intellectual Property licensed to the Company and its subsidiaries, has not been adjudged invalid or unenforceable, in whole or in part, and there is no pending or, to the knowledge of the Company, threatened action, suit, proceeding or claim by others challenging the validity or scope of any such Intellectual Property, except as such action, suit, proceeding or claim would not reasonably be expected to result in a Material Adverse Effect, and the Company is unaware of any facts which would form a reasonable basis for any such claim; (F) there is no pending or, to the knowledge of the Company, threatened action, suit, proceeding or claim by others that the Company or any of its subsidiaries infringes, misappropriates or otherwise violates any Intellectual Property or other proprietary rights of others, or would, upon the commercialization of any product described in the Registration Statement, the Pricing Disclosure Package or the Prospectus, except as such action, suit, proceeding or claim would not reasonably be expected to result in a Material Adverse Effect, and neither the Company nor any of its subsidiaries has received any written notice of such claim and the Company is unaware of any other fact which would form a reasonable basis for any such claim; (G) to the knowledge of the Company, no employee of the Company or any of its subsidiaries is in or has ever been in violation of any term of any employment contract, patent disclosure agreement, invention assignment agreement, non-competition agreement, non-solicitation agreement, nondisclosure agreement or any restrictive covenant to or with a former employer where the basis of such violation relates to such employee’s employment with the Company or any of its subsidiaries or actions undertaken by the employee while employed with the Company or any of its subsidiaries, except as such violation would not reasonably be expected to result in a Material Adverse Effect; and (H) to the knowledge of the Company, there are no rights of third parties to any Intellectual Property owned by the Company and its subsidiaries, except as such rights would not reasonably be expected to result in a Material Adverse Effect. Except as would not reasonably be expected to have a Material Adverse Effect, (i) the Company has disclosed to the U.S. Patent and Trademark Office (“ USPTO ”) all material information of which it is aware that is relevant to the patentability of its inventions to the extent required by 37 C.F.R. Section 1.56, and (ii) the Company has not made any misrepresentation or concealed any information material to patentability of a claimed invention from the USPTO in any of the patents or patent applications owned or licensed to the Company, or in connection with the prosecution thereof, in violation of 37 C.F.R. Section 1.56.

 

(dd)         Except as described in the most recent Preliminary Prospectus, there are no legal or governmental proceedings pending to which the Company or any of its subsidiaries is a party or of which any property or assets of the Company or any of its subsidiaries is the subject that could, in the aggregate, reasonably be expected to have a Material Adverse Effect or could, in the aggregate, reasonably be expected to have a Material Adverse Effect on the performance of this Agreement or the consummation of the transactions contemplated hereby; and to the Company’s knowledge, no such proceedings are threatened or contemplated by governmental authorities or others.

 

(ee)         There are no contracts or other documents required to be described in the Registration Statement or the most recent Preliminary Prospectus or filed as exhibits to the Registration Statement, that are not described and filed as required. The statements made in the most recent Preliminary Prospectus, insofar as they purport to constitute summaries of the terms of the contracts and other documents described and filed, constitute accurate summaries of the terms of such contracts and documents in all material respects. Neither the Company nor any of its subsidiaries has knowledge that any other party to any such contract or other document has any intention not to render full performance as contemplated by the terms thereof, except where such intention not to render full performance as contemplated by the terms thereof would not, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect.

 

 

 

 

(ff)         The statements made in the most recent Preliminary Prospectus under the captions [●]insofar as they purport to constitute summaries of the terms of statutes, rules or regulations, legal or governmental proceedings or contracts and other documents, constitute accurate summaries of the terms of such statutes, rules and regulations, legal and governmental proceedings and contracts and other documents in all material respects.

 

(gg)         The Company and each of its subsidiaries carry, or are covered by, insurance from insurers of recognized financial responsibility in such amounts and covering such risks as is adequate for the conduct of their respective businesses and the value of their respective properties and as is customary for companies engaged in similar businesses in similar industries. All policies of insurance of the Company and its subsidiaries are in full force and effect; the Company and each of its subsidiaries are in compliance with the terms of such policies in all material respects; and neither the Company nor any of its subsidiaries has received notice from any insurer or agent of such insurer that capital improvements or other expenditures are required or necessary to be made in order to continue such insurance; there are no claims by the Company or any of its subsidiaries under any such policy or instrument as to which any insurance company is denying liability or defending under a reservation of rights clause; and neither the Company nor any such subsidiary has any reason to believe that it will not be able to renew its existing insurance coverage as and when such coverage expires or to obtain similar coverage from similar insurers as may be necessary to continue its business at a cost that could not reasonably be expected to have a Material Adverse Effect.

 

(hh)         Except as described in the most recent Preliminary Prospectus, no relationship, direct or indirect, exists between or among the Company, on the one hand, and the directors, officers, stockholders, customers or suppliers of the Company, on the other hand, that is required to be described in the most recent Preliminary Prospectus which is not so described.

 

(ii)         No labor disturbance by or dispute with the employees of the Company or any of its subsidiaries exists or, to the knowledge of the Company, is imminent that could reasonably be expected to have a Material Adverse Effect.

 

(jj)         Neither the Company nor any of its subsidiaries (i) is in violation of its articles of association, charter or by-laws (or similar organizational documents), (ii) is in default, and no event has occurred that, with notice or lapse of time or both, would constitute such a default, in the due performance or observance of any term, covenant, condition or other obligation contained in any indenture, mortgage, deed of trust, loan agreement, license or other agreement or instrument to which it is a party or by which it is bound or to which any of its properties or assets is subject, (iii) is in violation of any statute or any order, rule or regulation of any court or governmental agency or body having jurisdiction over it or its property or assets or (iv) has failed to obtain any license, permit, certificate, franchise or other governmental authorization or permit necessary to the ownership of its property or to the conduct of its business, except in the case of clauses (ii), (iii) and (iv), to the extent any such conflict, breach, violation or default could not, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect.

 

 

 

 

(kk)         Except as described in the most recent Preliminary Prospectus and except as would not be expected, individually or in the aggregate, to have a Material Adverse Effect, (i) there are no proceedings that are pending, or to the Company’s knowledge, contemplated against the Company or any of its subsidiaries under any laws, regulations, ordinances, rules, orders, judgments, decrees, permits or other legal requirements of any governmental authority, including without limitation any international, foreign, national, state, provincial, regional, or local authority, relating to pollution, the protection of human health or safety, the environment, or natural resources, or to use, handling, storage, manufacturing, transportation, treatment, discharge, disposal or release of hazardous or toxic substances or wastes, pollutants or contaminants (“ Environmental Laws ”) in which a governmental authority is also a party, other than such proceedings regarding which it is reasonably believed no monetary sanctions of $100,000 or more will be imposed, (ii) neither the Company nor any of its subsidiaries is aware of any issues regarding compliance with Environmental Laws, including any pending or proposed Environmental Laws, or liabilities or other obligations under Environmental Laws or concerning hazardous or toxic substances or wastes, pollutants or contaminants, that could reasonably be expected to have a material effect on the capital expenditures, earnings or competitive position of the Company and its subsidiaries, and (iii) neither the Company nor any of its subsidiaries anticipates material capital expenditures relating to Environmental Laws.

 

(ll)         (i) Each “employee benefit plan” (within the meaning of Section 3(3) of the Employee Retirement Security Act of 1974, as amended (“ ERISA ”)) for which the Company or any member of its “Controlled Group” (defined as any organization which is a member of a controlled group of corporations within the meaning of Section 414 of the Internal Revenue Code of 1986, as amended (the “ Code ”)) would have any liability (each a “Plan”) has been maintained in compliance with its terms and with the requirements of all applicable statutes, rules and regulations including ERISA and the Code; (ii) no prohibited transaction, within the meaning of Section 406 of ERISA or Section 4975 of the Code, has occurred with respect to any Plan excluding transactions effected pursuant to a statutory or administrative exemption; (iii) with respect to each Plan subject to Title IV of ERISA (A) no “reportable event” (within the meaning of Section 4043(c) of ERISA) has occurred or is reasonably expected to occur, (B) no Plan is or is reasonably expected to be “at risk” status (within the meaning of Section 430 of the Code or Section 303 of ERISA) (C) there has been no filing pursuant to Section 412(c) of the Code or Section 302(c) of ERISA of an application for a waiver of the minimum funding standard with respect to any Plan or the receipt by the Company or any of its ERISA Affiliates from the PBGC or the plan administrator of any notice relating to the intention to terminate any Plan or Plans or to appoint a trustee to administer any Plan, (D) no conditions contained in Section 303(k)(1)(A) of ERISA for imposition of a lien shall have been met with respect to any Plan and (E) neither the Company or any member of its Controlled Group has incurred, or reasonably expects to incur, any liability under Title IV of ERISA (other than contributions to the Plan or premiums to the Pension Benefit Guaranty Corporation in the ordinary course and without default) in respect of a Plan (including a “multiemployer plan”, within the meaning of Section 4001(c)(3) of ERISA) (“ Multiemployer Plan ”); (iv) no Multiemployer Plan is, or is expected to be, “insolvent” (within the meaning of Section 4245 of ERISA) or in “endangered” or “critical” status (within the meaning of Section 432 of the Code or Section 304 of ERISA); and (v) each Plan that is intended to be qualified under Section 401(a) of the Code is so qualified and nothing has occurred, whether by action or by failure to act, which would cause the loss of such qualification.

 

 

 

 

(mm)        The statistical and market-related data included in the most recent Preliminary Prospectus and the consolidated financial statements of the Company and its subsidiaries included in the most recent Preliminary Prospectus are based on or derived from sources that the Company believes to be reliable in all material respects.

 

(nn)         Neither the Company nor any of its subsidiaries is, and as of the applicable Delivery Date and, after giving effect to the offer and sale of the Shares and the application of the proceeds therefrom as described under “Use of Proceeds” in the most recent Preliminary Prospectus and the Prospectus, none of them will be, an “investment company” or a company “controlled” by an “investment company” within the meaning of the Investment Company Act of 1940, as amended (the “ Investment Company Act ”), and the rules and regulations of the Commission thereunder.

 

(oo)         The statements set forth in each of the most recent Preliminary Prospectus and the Prospectus under the captions “Description of Share Capital”, “Taxation”, and “Underwriting”, insofar as they purport to summarize the provisions of the laws and documents referred to therein, are accurate summaries in all material respects.

 

(pp)         There are no contracts, agreements or understandings between the Company and any person granting such person the right to require the Company to file a registration statement under the Securities Act with respect to any securities of the Company owned or to be owned by such person or to require the Company to include such securities in the securities registered pursuant to the Registration Statement or in any securities being registered pursuant to any other registration statement filed by the Company under the Securities Act.

 

(qq)         Neither the Company nor any of its subsidiaries is a party to any contract, agreement or understanding with any person (other than this Agreement) that would give rise to a valid claim against any of them or the Underwriters for a brokerage commission, finder’s fee or like payment in connection with the offering and sale of the Shares.

 

(rr)         The Company has not sold or issued any securities that would be integrated with the offering of the Shares contemplated by this Agreement pursuant to the Securities Act, the rules and regulations thereunder or the interpretations thereof by the Commission.

 

(ss)         The Company and its subsidiaries have not taken, directly or indirectly, any action designed to constitute, or that has constituted, or that could reasonably be expected to cause or result in the stabilization or manipulation of the price of any security of the Company in connection with the offering of the Shares. In addition, the Company has not engaged in any form of solicitation, advertising or other action constituting an offer or a sale under the Israeli Securities Law, 5728-1968, as amended (the “ Israeli Securities Law ”) and the regulations promulgated thereunder in connection with the transactions contemplated hereby which would require the Company to publish a prospectus in the State of Israel under the laws of the State of Israel.

 

 

 

 

(tt)          The Shares have been approved for listing, subject to official notice of issuance and evidence of satisfactory distribution on, The Nasdaq Global Market.

 

(uu)         The Company has not distributed and, prior to the later to occur of any Delivery Date and completion of the distribution of the Shares, will not distribute any offering material in connection with the offering and sale of the Shares other than any Preliminary Prospectus, the Prospectus, any Issuer Free Writing Prospectus to which the Representatives have consented in accordance with Section 1(j) or 5(a)(vi) and any Issuer Free Writing Prospectus set forth on Schedule VI hereto.

 

(vv)         Neither the Company nor any wholly-owned subsidiary is in violation of or has received notice of any violation with respect to any federal, state or foreign law relating to discrimination in the hiring, promotion or pay of employees, nor any applicable federal, state or foreign wage and hour laws, nor any applicable law precluding the denial of credit due to the neighborhood in which a property is situated, the violation of any of which could reasonably be expected to have a Material Adverse Effect.

 

(ww)         Neither the Company nor any of its subsidiaries, nor, to the knowledge of the Company, any director, officer, agent, employee or other person associated with or acting on behalf of the Company or any of its subsidiaries, has in the course of its actions for, or on behalf of, the Company or any of its subsidiaries: (i) made any unlawful contribution, gift, or other unlawful expense relating to political activity; (ii) made any direct or indirect bribe, kickback, rebate, payoff, influence payment, or otherwise unlawfully provided anything of value, to any “foreign official” (as defined in the U.S. Foreign Corrupt Practices Act of 1977, as amended (collectively, the “ FCPA ”)) or domestic government official; or (iii) violated or is in violation of any provision of the FCPA, the Bribery Act 2010 of the United Kingdom, as amended (the “ Bribery Act 2010 ”), or any other applicable anti-bribery statute or regulation. The Company and its subsidiaries and, to the knowledge of the Company, the Company’s affiliates, have conducted their respective businesses in compliance with the FCPA, Bribery Act 2010, and all other applicable anti-bribery statutes and regulations, and have instituted and maintain policies and procedures designed to ensure, and which are reasonably expected to ensure, continued compliance therewith. The foregoing representation and warranty shall also be deemed given regarding laws of non-U.S. jurisdictions similar to the FCPA, including, without limitation, Sections 291 and 291A of the Israel Penal Law 5737-1977 and the rules and regulations thereunder.

 

(xx)        The operations of the Company and its subsidiaries are and have been conducted at all times in compliance with applicable financial recordkeeping and reporting requirements of the Currency and Foreign Transactions Reporting Act of 1970, as amended, the money laundering statutes of all applicable jurisdictions, the rules and regulations thereunder and any related or similar rules, regulations or guidelines, that have been issued, administered or enforced by any governmental agency (collectively, the “ Money Laundering Laws ”) and no action, suit or proceeding by or before any court or governmental agency, authority or body or any arbitrator involving the Company or any of its subsidiaries with respect to the Money Laundering Laws is pending or, to the knowledge of the Company, threatened.

 

 

 

 

(yy)         Neither the Company nor any of its subsidiaries nor, to the knowledge of the Company, any director, officer, agent, employee or affiliate of the Company or any of its subsidiaries is: (i) currently subject to or the target of any sanctions administered or enforced by the Office of Foreign Assets Control of the U.S. Treasury Department, the U.S. Department of State, the United Nations Security Council, the European Union, Her Majesty’s Treasury, or other relevant sanctions authority, including similar laws or rules of the State of Israel (collectively, “ Sanctions ”); or (ii) located, organized or resident in a country or territory that is the subject or target of Sanctions (including, without limitation, Cuba, Iran, North Korea, Syria and Crimea); and the Company will not directly or indirectly use the proceeds of the offering, or lend, contribute or otherwise make available such proceeds to any subsidiary, joint venture partner or other person or entity, for the purpose of financing the activities of any person, or in any country or territory, that currently is the subject or target of Sanctions or in any other manner that will result in a violation by any person (including any person participating in the transaction whether as an underwriter, advisor, investor or otherwise) of Sanctions. The Company and its subsidiaries have not knowingly engaged in for the past five years, are not now knowingly engaged in, and will not engage in, any dealings or transactions with any individual or entity, or in any country or territory, that at the time of the dealing or transaction, is or was the subject or target of Sanctions.

 

(zz)         Neither the Company nor any of its subsidiaries is, and upon the sale of the Shares contemplated by this Agreement will not become, (i) a “passive foreign investment company” (as defined in Section 1297 of the Code and the regulations promulgated thereunder), or (ii) a “foreign personal holding company” (as defined in Section 522 of the Code).

 

(aaa)        The Company and each of its subsidiaries has filed all tax returns and has properly requested extensions thereof and has paid all taxes required to be paid by it and, if due and payable, any related or similar assessment, fine or penalty levied against it except, in each case, to the extent the requirement to file such tax returns or pay such taxes is being contested in good faith and by appropriate proceedings or the failure to do so could not be expected, individually or in the aggregate, to have a Material Adverse Effect. No tax deficiency has been determined adversely to the Company or any of its subsidiaries, nor does the Company have any knowledge of any tax deficiencies that have been, or could reasonably be expected to be asserted against the Company or any of its subsidiaries, that could, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect. The Company has made adequate charges, accruals and reserves in the applicable financial statements referred to in Section 1(s) above in respect of all income taxes for all periods as to which the tax liability of the Company and its subsidiaries has not been finally determined except to the extent the failure to do so could not be expected, individually or in the aggregate, to have a Material Adverse Effect.

 

(bbb)        Except as provided by laws or statutes generally applicable to transactions of the type described in this Agreement, neither the Company nor any of its respective properties, assets or revenues has any right of immunity under the laws of the State of Israel, New York or United States law, from any legal action, suit or proceeding, from the giving of any relief in any such legal action, suit or proceeding, from set-off or counterclaim, from the jurisdiction of any Israeli, New York or United States federal court, from service of process, attachment upon or prior judgment, or attachment in aid of execution of judgment, or from execution of a judgment, or other legal process or proceeding for the giving of any relief or for the enforcement of a judgment, in any such court, with respect to its obligations, liabilities or any other matter under or arising out of or in connection with this Agreement. To the extent that the Company or any of its respective properties, assets or revenues may have or may hereafter become entitled to any such right of immunity in any such court in which proceedings may at any time be commenced, the Company waives or will waive such right to the fullest extent permitted by law and has consented to such relief and enforcement as provided in Sections 18, 19 and 22 of this Agreement.

 

 

 

 

(ccc)        Except as described in the most recent Preliminary Prospectus, the Company and each of its subsidiaries are, and since January 1, 2015 have been, in compliance with all Health Care Laws, except where such noncompliance would not, individually or in the aggregate, be expected to have a Material Adverse Effect. For purposes of this Agreement, “ Health Care Laws ” means all health care laws applicable to the Company, including, but not limited to: the Federal Food, Drug, and Cosmetic Act, the Anti-Kickback Statute (42 U.S.C. Section 1320a-7b(b)), the Civil Monetary Penalties Law (42 U.S.C. § 1320a-7a), the Physician Payment Sunshine Act (42 U.S.C. § 1320a-7h), the Civil False Claims Act (31 U.S.C. Section 3729 et seq.), the criminal False Claims Law (42 U.S.C. § 1320a-7b(a)), all criminal laws relating to health care fraud and abuse, including but not limited to 18 U.S.C. Sections 286 and 287, and the health care fraud criminal provisions under the U.S. Health Insurance Portability and Accountability Act of 1996 (“ HIPAA ”) (42 U.S.C. Section 1320d et seq.), the exclusion laws (42 U.S.C. § 1320a-7), HIPAA, as amended by the Health Information Technology for Economic and Clinical Health Act (42 U.S.C. Section 17921 et seq.), Medicare (Title XVIII of the Social Security Act), Medicaid (Title XIX of the Social Security Act), and any and all other similar state, local, federal or foreign health care laws and the regulations promulgated pursuant to such laws, including, without limitation, the FDA’s current good manufacturing practice regulations at 21 CFR Part 820 and all other laws and regulations applicable to ownership, testing, development, manufacture, packaging, processing, use, advertising, sale, marketing, promotion, distribution, storage, import, export or disposal of the Company’s products, each as amended from time to time. Neither the Company nor any of its subsidiaries has received notice of any claim, action, suit, proceeding, hearing, enforcement, investigation, arbitration, notice of adverse finding, warning letter, untitled letter, FDA Form 483, or other action from any court or arbitrator or governmental or regulatory authority or third party alleging a material violation of any Health Care Laws, and, to the Company’s knowledge, no such claim, action, suit, proceeding, hearing, enforcement, investigation, arbitration or other action is threatened. Neither the Company nor its subsidiaries is a party to and has no ongoing reporting obligations pursuant to any corporate integrity agreements, deferred prosecution agreements, monitoring agreements, consent decrees, settlement orders, plans of correction or similar agreements with or imposed by any governmental or regulatory authority. Additionally, neither the Company, its subsidiaries, any of their employees, officers or directors nor, to the knowledge of the Company, their agents have been excluded, suspended or debarred from participation in any U.S. federal health care program or human research study or clinical trial or, to the knowledge of the Company, is subject to a governmental inquiry, investigation, proceeding, or other similar action that could reasonably be expected to result in debarment, suspension, or exclusion.

 

 

 

 

(ddd)        The preclinical tests and clinical trials, and other studies (collectively, “studies”) conducted or sponsored by the Company that are described in, or the results of which are referred to in, the Registration Statement, the most recent Preliminary Prospectus or the Prospectus were and, if still pending, are being conducted in all material respects in accordance with the protocols, procedures and controls designed and approved for such studies and with standard medical and scientific research procedures and the applicable laws, rules and regulations of the Food and Drug Administration of the U.S. Department of Health and Human Services (“ FDA ”), including, without limitation, the Federal Food, Drug, and Cosmetic Act and all implementing regulations, including 21 C.F.R. Parts 50, 54, 56, 58 and 812, as well as the laws, rules and regulations applicable in the European Union (the “ EU ”) and the EU Member States, each description of the results of such studies is accurate and complete in all material respects and fairly presents the data derived from such studies, and the Company has no knowledge of any other studies the results of which are inconsistent with, or otherwise call into question, the results described or referred to in the Registration Statement, the Time of Sale Prospectuses or the Prospectus; the Company has made all such filings and obtained all such Permits as may be required by the Israeli Ministry of Health, the FDA or any committee thereof, applicable EU and EU Member State laws and regulations, or from any other U.S., Israeli, EU, EU Member State, or foreign government or drug or medical device regulatory agency, or health care facility Institutional Review Board (collectively, the “ Regulatory Agencies ”); the Company has not received any notice of, or correspondence from, any Regulatory Agency requiring the termination, suspension or modification of any clinical trials that are described or referred to in the Registration Statement, the most recent Preliminary Prospectus or the Prospectus; and the Company has operated and currently are in compliance in all material respects with all applicable rules, regulations and policies of the Regulatory Agencies.

 

(eee)        Except as described in the most recent Preliminary Prospectus, since January 1, 2015, (i) there have been no recalls, field notifications, field corrections, market withdrawals or replacements, warnings, “dear doctor” letters, investigator notices, safety alerts or other notice of action relating to an alleged lack of safety, efficacy, or regulatory compliance of the Company’s products (“ Safety Notices ”), and (ii) to the Company’s knowledge, there are no facts that would be reasonably likely to result in (x) a Safety Notice with respect to the Company’s products or services, (y) a material change in labeling of any of the Company’s products, or (z) a termination or suspension of marketing or testing of any of the Company’s products.

 

(fff)        With respect to the share options (the “ Share Options ”) granted pursuant to the share-based compensation plans of the Company (the “ Company Share Plans ”), (i) to the knowledge of the Company, each grant intended to qualify for the “capital gains track” of Section 102 of the Israel Tax Ordinance so qualifies; (ii) each grant of a Share Option has been duly authorized, approved or ratified by all necessary corporate action, including, as applicable, approval or ratification by the board of directors of the Company and any required shareholder approval, and the award agreement governing such grant (if any) was duly executed and delivered by each party thereto, (iii) each such grant was made in accordance with the terms of the Company Share Plans and all other applicable laws and regulatory rules or requirements, and (iv) each such grant was properly accounted for in accordance with generally accepted accounting principles in the United States (“ GAAP ”) in the financial statements (including the related notes) of the Company.

 

 

 

 

(ggg)        The Company has the power to submit, and pursuant to Section 19 of this Agreement, has legally, validly, effectively and irrevocably submitted, to the personal jurisdiction of the U.S. federal and New York state courts in the Borough of Manhattan, The City of New York (each, a “ New York Court ”), and the Company has the power to designate, appoint and authorize, and pursuant to Section 19 of this Agreement, has legally, validly, effectively and irrevocably designated, appointed and authorized an agent for service of process in any action arising out of or relating to this Agreement or the transactions contemplated hereby in any New York Court, and service of process effected on such authorized agent will be effective to confer valid personal jurisdiction over the Company as provided in Section 19 hereof.

 

(hhh)        All dividends and other distributions properly declared and payable on the Shares may under the current laws and regulations of Israel be paid by the Company to the holder thereof in United States dollars. No wholly-owned subsidiary of the Company is currently prohibited, directly or indirectly, under any agreement or other instrument to which it is a party or is subject, (i) from paying any dividends to the Company; (ii) from making any other distribution on such wholly-owned subsidiary’s capital stock; (iii) from repaying to the Company any loans or advances made to such wholly-owned subsidiary from the Company; or (iv) from transferring any of such wholly-owned subsidiary’s material properties or assets to the Company or any other subsidiary of the Company.

 

(iii)         All obligations of the Company to provide statutory severance pay to all its currently engaged employees in Israel (“ Israeli Employees ”) are in accordance with Section 14 of the Israeli Severance Pay Law (5723-1963) (the “ Severance Pay Law ”) and are fully funded or are accrued on the financial statements, and all such employees have been subject to the provisions of Section 14 of the Severance Pay Law with respect to their entire salary, as defined under the Severance Pay Law from the date of commencement of their employment with the Company, and the Company has been in full compliance with the requirements for a Section 14 Arrangement with respect to severance pay with respect to 100% of such salary for which severance pay may be due under the Severance Pay Law; and all amounts that the Company is required by contract or applicable law either (A) to deduct from Israeli Employees’ salaries or to transfer to such Israeli Employees’ pension or provident, life insurance, incapacity insurance, advance study fund or other similar funds or insurance or (B) to withhold from their Israeli Employees’ salaries and benefits and to pay to any Israeli governmental authority as required by applicable Israeli tax law, have, in each case, been duly deducted, transferred, withheld and paid, and the Company has no outstanding obligation to make any such deduction, transfer, withholding or payment.

 

(jjj)        Any certificate signed by any officer of the Company and delivered to the Representatives or counsel for the Underwriters in connection with the offering of the Shares shall be deemed a representation and warranty by the Company, as to matters covered thereby, to each Underwriter.

 

(kkk)      Neither the Company nor its subsidiaries have any debt securities or preferred stock that are rated by any “nationally recognized statistical rating agency” (as defined in Section 3(a)(62) of the Exchange Act).

 

2.      Purchase of the Shares by the Underwriters. On the basis of the representations, warranties and covenants contained in, and subject to the terms and conditions of, this Agreement, the Company agrees to sell [●] shares of the Firm Shares to the several Underwriters, and each of the Underwriters, severally and not jointly, agrees to purchase the number of shares of the Firm Shares set forth opposite that Underwriter’s name in Schedule I hereto. The respective purchase obligations of the Underwriters with respect to the Firm Shares shall be rounded among the Underwriters to avoid fractional shares, as the Representatives may determine.

 

 

 

 

In addition, the Company grants to the Underwriters an option to purchase up to [●] additional shares of Option Shares. Such option is exercisable in the event that the Underwriters sell more Ordinary Shares than the number of shares of Firm Shares in the offering and as set forth in Section 4 hereof. Each Underwriter agrees, severally and not jointly, to purchase the number of shares of Option Shares (subject to such adjustments to eliminate fractional shares as the Representatives may determine) that bears the same proportion to the total number of shares of Option Shares to be sold on such Delivery Date as the number of shares of Firm Shares set forth in Schedule I hereto opposite the name of such Underwriter bears to the total number of shares of Firm Shares.

 

The purchase price payable by the Underwriters for both the Firm Shares and any Option Shares is $[●] per share.

 

The Company is not obligated to deliver any of the Firm Shares or Option Shares to be delivered on the applicable Delivery Date, except upon payment for all such Shares to be purchased on such Delivery Date as provided herein.

 

3.      Offering of Shares by the Underwriters . Upon authorization by the Representatives of the release of the Firm Shares, the several Underwriters propose to offer the Firm Shares for sale upon the terms and conditions to be set forth in the Prospectus.

 

4.      Delivery of and Payment for the Shares. Delivery of and payment for the Firm Shares shall be made at 10:00 A.M., New York City time, on the second full business day following the date of this Agreement or at such other date or place as shall be determined by agreement between the Representatives and the Company. This date and time are sometimes referred to as the “ Initial Delivery Date .” Delivery of the Firm Shares shall be made to the Representatives for the account of each Underwriter against payment by the several Underwriters through the Representatives and of the respective aggregate purchase prices of the Firm Shares being sold by the Company to or upon the order of the Company of the purchase price by wire transfer in immediately available funds to the accounts specified by the Company. Time shall be of the essence, and delivery at the time and place specified pursuant to this Agreement is a further condition of the obligation of each Underwriter hereunder. The Company shall deliver the Firm Shares through the facilities of the Depository Trust Company (“ DTC ”) unless the Representatives shall otherwise instruct.

 

The option granted in Section 2 will expire 30 days after the date of this Agreement and may be exercised in whole or from time to time in part by written notice being given to the Company by the Representatives; provided that if such date falls on a day that is not a business day, the option granted in Section 2 will expire on the next succeeding business day. Such notice shall set forth the aggregate number of shares of Option Shares as to which the option is being exercised, the names in which the shares of Option Shares are to be registered, the denominations in which the shares of Option Shares are to be issued and the date and time, as determined by the Representatives, when the shares of Option Shares are to be delivered; provided, however , that this date and time shall not be earlier than the Initial Delivery Date nor earlier than the second business day after the date on which the option shall have been exercised nor later than the fifth business day after the date on which the option shall have been exercised. Each date and time the shares of Option Shares are delivered is sometimes referred to as an “ Option Shares Delivery Date ,” and the Initial Delivery Date and any Option Shares Delivery Date are sometimes each referred to as a “ Delivery Date .”

 

 

 

 

Delivery of the Option Shares by the Company and payment for the Option Shares by the several Underwriters through the Representatives shall be made at 10:00 A.M., New York City time, on the date specified in the corresponding notice described in the preceding paragraph or at such other date or place as shall be determined by agreement between the Representatives and the Company. On each Option Shares Delivery Date, the Company shall deliver, or cause to be delivered, the Option Shares, to the Representatives for the account of each Underwriter, against payment by the several Underwriters through the Representatives and of the respective aggregate purchase prices of the Option Shares being sold by the Company to or upon the order of the Company of the purchase price by wire transfer in immediately available funds to the accounts specified by the Company. Time shall be of the essence, and delivery at the time and place specified pursuant to this Agreement is a further condition of the obligation of each Underwriter hereunder. The Company shall deliver the Option Shares through the facilities of DTC unless the Representatives shall otherwise instruct.

 

5.      Further Agreements of the Company and the Underwriters . (a) The Company agrees:

 

(i)          To prepare the Prospectus in a form approved by the Representatives and to file such Prospectus pursuant to Rule 424(b) under the Securities Act not later than the Commission’s close of business on the second business day following the execution and delivery of this Agreement; to make no further amendment or any supplement to the Registration Statement or the Prospectus prior to the last Delivery Date except as provided herein; to advise the Representatives, promptly after it receives notice thereof, of the time when any amendment or supplement to the Registration Statement or the Prospectus has been filed and to furnish the Representatives with copies thereof; to advise the Representatives, promptly after it receives notice thereof, of the issuance by the Commission of any stop order or of any order preventing or suspending the use of the Prospectus or any Issuer Free Writing Prospectus, of the suspension of the qualification of the Shares for offering or sale in any jurisdiction, of the initiation or threatening of any proceeding or examination for any such purpose or of any request by the Commission for the amending or supplementing of the Registration Statement, the Prospectus or any Issuer Free Writing Prospectus or for additional information; and, in the event of the issuance of any stop order or of any order preventing or suspending the use of the Prospectus or any Issuer Free Writing Prospectus or suspending any such qualification, to use promptly its commercially reasonable efforts to obtain its withdrawal.

 

(ii)         To furnish promptly upon request to each of the Representatives and to counsel for the Underwriters a signed copy of the Registration Statement as originally filed with the Commission, and each amendment thereto filed with the Commission, including all consents and exhibits filed therewith.

 

 

 

 

(iii)        To deliver promptly to the Representatives such number of the following documents as the Representatives shall reasonably request: (A) conformed copies of the Registration Statement as originally filed with the Commission and each amendment thereto (in each case excluding exhibits), (B) each Preliminary Prospectus, the Prospectus and any amended or supplemented Prospectus, and (C) each Issuer Free Writing Prospectus; and, if the delivery of a prospectus is required at any time after the date hereof in connection with the offering or sale of the Shares or any other securities relating thereto and if at such time any events shall have occurred as a result of which the Prospectus as then amended or supplemented would include an untrue statement of a material fact or omit to state any material fact necessary in order to make the statements therein, in the light of the circumstances under which they were made when such Prospectus is delivered, not misleading, or, if for any other reason it shall be necessary to amend or supplement the Prospectus in order to comply with the Securities Act, to notify the Representatives and, upon their request, to file such document and to prepare and furnish without charge to each Underwriter and to any dealer in securities as many copies as the Representatives may from time to time reasonably request of an amended or supplemented Prospectus that will correct such statement or omission or effect such compliance.

 

(iv)        To file promptly with the Commission any amendment or supplement to the Registration Statement or the Prospectus that may, in the judgment of the Company or the Representatives, be required by the Securities Act or requested by the Commission.

 

(v)         Prior to filing with the Commission any amendment or supplement to the Registration Statement or the Prospectus, to furnish a copy thereof to the Representatives and counsel for the Underwriters and obtain the consent of the Representatives to the filing.

 

(vi)        Not to make any offer relating to the Shares that would constitute an Issuer Free Writing Prospectus without the prior written consent of the Representatives.

 

(vii)       To comply with all applicable requirements of Rule 433 under the Securities Act with respect to any Issuer Free Writing Prospectus. If at any time after the date hereof any events shall have occurred as a result of which any Issuer Free Writing Prospectus, as then amended or supplemented, would conflict with the information in the Registration Statement, the most recent Preliminary Prospectus or the Prospectus or would include an untrue statement of a material fact or omit to state any material fact necessary in order to make the statements therein, in the light of the circumstances under which they were made, not misleading, or, if for any other reason it shall be necessary to amend or supplement any Issuer Free Writing Prospectus, to notify the Representatives and, upon their request, to file such document and to prepare and furnish without charge to each Underwriter as many copies as the Representatives may from time to time reasonably request of an amended or supplemented Issuer Free Writing Prospectus that will correct such conflict, statement or omission or effect such compliance.

 

 

 

 

(viii)      As soon as practicable after the Effective Date (it being understood that the Company shall have until at least 410 days or, if the fourth quarter following the fiscal quarter that includes the Effective Date is the last fiscal quarter of the Company’s fiscal year, 545 days after the end of the Company’s current fiscal quarter), to make generally available to the Company’s security holders and to deliver to the Representatives an earnings statement of the Company and its subsidiaries (which need not be audited) complying with Section 11(a) of the Securities Act and the rules and regulations thereunder (including, at the option of the Company, Rule 158).

 

(ix)         Promptly from time to time to take such action as the Representatives may reasonably request to qualify the Shares for offering and sale under the securities or Blue Sky laws of Canada and such other jurisdictions as the Representatives may request and to comply with such laws so as to permit the continuance of sales and dealings therein in such jurisdictions for as long as may be necessary to complete the distribution of the Shares; provided , that in connection therewith the Company shall not be required to (A) qualify as a foreign corporation in any jurisdiction in which it would not otherwise be required to so qualify, (B) file a general consent to service of process in any such jurisdiction, or (C) subject itself to taxation in any jurisdiction in which it would not otherwise be subject.

 

(x)          For a period commencing on the date hereof and ending on the 180th day after the date of the Prospectus (the “ Lock-Up Period ”), not to, directly or indirectly, (A) offer for sale, sell, pledge, or otherwise dispose of (or enter into any transaction or device that is designed to, or could be expected to, result in the disposition by any person at any time in the future of) any Ordinary Shares or securities convertible into or exercisable or exchangeable for Ordinary Shares (other than the Shares and shares issued pursuant to employee benefit plans, qualified stock option plans or other employee compensation plans existing on the date hereof or pursuant to currently outstanding options or rights not issued under one of those plans), or sell or grant options, rights or warrants with respect to any Ordinary Shares or securities convertible into or exchangeable for Ordinary Shares (other than the grant of options pursuant to option plans existing on the date hereof), (B) enter into any swap or other derivatives transaction that transfers to another, in whole or in part, any of the economic benefits or risks of ownership of such Ordinary Shares, whether any such transaction described in clause (A) or (B) above is to be settled by delivery of Ordinary Shares or other securities, in cash or otherwise, (C) file or cause to be filed a registration statement, including any amendments thereto, with respect to the registration of Ordinary Shares or securities convertible, exercisable or exchangeable into Ordinary Shares or any other securities of the Company (other than pursuant to a registration statement on Form S-8 for employee benefit plans), or (D) publicly disclose the intention to do any of the foregoing, in each case without the prior written consent of Barclays Capital Inc., on behalf of the Underwriters, and to cause each officer, director and stockholder of the Company set forth on Schedule III hereto to furnish to the Representatives, prior to the Initial Delivery Date, a letter or letters, substantially in the form of Exhibit A hereto (the “ Lock-Up Agreements ”). The restrictions contained in this section shall not apply to (a) the Shares to be sold hereunder; (b) the issuance by the Company of Ordinary Shares upon the exercise of an outstanding stock option pursuant to the Company’s existing stock option plan or bonus plan as described in the Registration Statement or by the filing by the Company of a registration statement on Form S-8 in connection therewith; or (c) the entry into an agreement providing for the issuance of Ordinary Shares or any security convertible into or exercisable or exchangeable for Ordinary Shares or any security convertible into or exercisable or exchangeable for such securities in connection with bona fide commercial relationships (including, without limitation, joint ventures, marketing or distribution arrangements and collaboration agreements) or other strategic transactions (including, without limitation, any acquisition of assets or not less than a majority or controlling portion of the equity of another entity), and the issuance of any such securities pursuant to any such agreement, provided that (x) the aggregate number of Ordinary Shares issued or issuable pursuant to this clause (c) shall not exceed five percent (5%) of the total number of outstanding Ordinary Shares immediately following the issuance and sale of the Shares pursuant hereto and (y) the recipient of any such Ordinary Shares or securities issued pursuant to this clause (c) during the 180-day restricted period described above shall enter into an agreement substantially in the form of Exhibit A hereto.

 

 

 

 

(xi)         If Barclays Capital Inc., in its sole discretion, agrees to release or waive the restrictions set forth in a Lock-Up Agreement for an officer or director of the Company and provides the Company with notice of the impending release or waiver at least three business days before the effective date of the release or waiver, the Company agrees to announce the impending release or waiver by issuing a press release substantially in the form of Exhibit B hereto, and containing such other information as Barclays Capital Inc. may require with respect to the circumstances of the release or waiver and/or the identity of the officer(s) and/or director(s) with respect to which the release or waiver applies, through a major news service at least two business days before the effective date of the release or waiver.

 

(xii)        To apply the net proceeds from the sale of the Shares being sold by the Company substantially in accordance with the description as set forth in the Prospectus under the caption “Use of Proceeds.”

 

(xiii)       To file with the Commission such information on Form 20-F as may be required by Rule 463 under the Securities Act.

 

(xiv)      If the Company elects to rely upon Rule 462(b) under the Securities Act, the Company shall file a Rule 462(b) Registration Statement with the Commission in compliance with Rule 462(b) under the Securities Act by 10:00 P.M., Washington, D.C. time, on the date of this Agreement, and the Company shall at the time of filing pay the Commission the filing fee for the Rule 462(b) Registration Statement.

 

(xv)       The Company will promptly notify the Representatives if the Company ceases to be an Emerging Growth Company at any time prior to the later of (A) the time when a prospectus relating to the offering or sale of the Shares or any other securities relating thereto is not required by the Securities Act to be delivered (whether physically or through compliance with Rule 172 under the Securities Act or any similar rule) and (B) completion of the Lock-Up Period.

 

 

 

 

(xvi)      If at any time following the distribution of any Written Testing-the-Waters Communication there occurred or occurs an event or development as a result of which such Written Testing-the-Waters Communication included or would include an untrue statement of a material fact or omitted or would omit to state a material fact necessary in order to make the statements therein, in the light of the circumstances existing at that subsequent time, not misleading, the Company will promptly notify the Representatives and will promptly amend or supplement, at its own expense, such Written Testing-the-Waters Communication to eliminate or correct such untrue statement or omission. The Company will promptly notify the Representatives of (A) any distribution by the Company of Written Testing-the-Waters Communications and (B) any request by the Commission for information concerning the Written Testing-the-Waters Communications.

 

(xvii)     The Company and its affiliates will not take, directly or indirectly, any action designed to or that has constituted or that reasonably would be expected to cause or result in the stabilization or manipulation of the price of any security of the Company in connection with the offering of the Shares. In addition, the Company will not engage in any form of solicitation, advertising or other action constituting an offer or a sale under the Israeli Securities Law and the regulations promulgated thereunder in connection with the transactions contemplated hereby, which would require the Company to publish a prospectus in the State of Israel under the laws of the State of Israel.

 

(xviii)    The Company acknowledges, understands and agrees that the Shares may be offered and sold in Israel only by the Underwriters and only to such Israeli investors listed in the First Addendum to the Israeli Securities Law (the “ Addendum ”) who submit written confirmation to the Underwriters and the Company that such investor (A) falls within the scope of the Addendum, is aware of the meaning of same and agrees to it and (B) is acquiring the Shares for investment for its own account or, if applicable, for investment for clients who are investors listed in the Addendum and in any event not as a nominee, market maker or agent and not with a view to, or for the resale in connection with, any distribution thereof.

 

(xix)       The Company will do and perform all things required or necessary to be done and performed under this Agreement by it prior to each Delivery Date, and to satisfy all conditions precedent to the Underwriters’ obligations hereunder to purchase the Shares.

 

(b)           Each Underwriter severally agrees:

 

(i)            Each Underwriter shall not include any “issuer information” (as defined in Rule 433 under the Securities Act) in any “free writing prospectus” (as defined in Rule 405 under the Securities Act) used or referred to by such Underwriter without the prior written consent of the Company (any such issuer information with respect to whose use the Company has given its written consent, “ Permitted Issuer Information ”); provided that (i) no such consent shall be required with respect to any such issuer information contained in any document filed by the Company with the Commission prior to the use of such free writing prospectus, and (ii) “issuer information”, as used in this Section 5(b), shall not be deemed to include information prepared by or on behalf of such Underwriter on the basis of or derived from issuer information.

 

 

 

 

6.      Expenses. The Company agrees, whether or not the transactions contemplated by this Agreement are consummated or this Agreement is terminated, to pay all expenses, costs, fees and taxes incident to and in connection with (a) the authorization, issuance, sale and delivery of the Shares and any stamp duties or other taxes payable in that connection, and the preparation and printing of certificates for the Shares; (b) the preparation, printing and filing under the Securities Act of the Registration Statement (including any exhibits thereto), any Preliminary Prospectus, the Prospectus, any Issuer Free Writing Prospectus, any Written Testing-the-Waters Communication, and any amendment or supplement thereto; (c) the distribution of the Registration Statement (including any exhibits thereto), any Preliminary Prospectus, the Prospectus, any Issuer Free Writing Prospectus, any Written Testing-the-Waters Communication, and any amendment or supplement thereto, all as provided in this Agreement; (d) the production and distribution of this Agreement, any supplemental agreement among Underwriters, and any other related documents in connection with the offering, purchase, sale and delivery of the Shares; (e) any required review by the FINRA of the terms of sale of the Shares (including related fees and expenses of counsel to the Underwriters in an amount that is not greater than $25,000); (f) the listing of the Shares on The Nasdaq Global Market and/or any other exchange; (g) the qualification of the Shares under the securities laws of the several jurisdictions as provided in Section 5(a)(ix) and the preparation, printing and distribution of a Blue Sky Memorandum (including related fees and expenses of counsel to the Underwriters); (h) the preparation, printing and distribution of one or more versions of the Preliminary Prospectus and the Prospectus for distribution in Canada, including in the form of a Canadian “wrapper” (including related fees and expenses of Canadian counsel to the Underwriters); (i) the investor presentations on any “road show” or any Testing-the-Waters Communication, undertaken in connection with the marketing of the Shares, including, without limitation, expenses associated with any electronic road show, travel and lodging expenses of the representatives and officers of the Company and 50% of the cost of any aircraft chartered in connection with the road show (it being understood that the Underwriters will pay or cause to be paid the other 50% of the cost of such aircraft); and (j) all other costs and expenses incident to the performance of the obligations of the Company.

 

7.      Conditions of Underwriters’ Obligations . The respective obligations of the Underwriters hereunder are subject to the accuracy, when made and on each Delivery Date, of the representations and warranties of the Company contained herein, to the performance by the Company of its obligations hereunder, and to each of the following additional terms and conditions:

 

(a)         The Prospectus shall have been timely filed with the Commission in accordance with Section 5(a)(i). The Company shall have complied with all filing requirements applicable to any Issuer Free Writing Prospectus used or referred to after the date hereof; no stop order suspending the effectiveness of the Registration Statement or preventing or suspending the use of the Prospectus or any Issuer Free Writing Prospectus shall have been issued and no proceeding or examination for such purpose shall have been initiated or threatened by the Commission; and any request of the Commission for inclusion of additional information in the Registration Statement or the Prospectus or otherwise shall have been complied with. If the Company has elected to rely upon Rule 462(b) under the Securities Act, the Rule 462(b) Registration Statement shall have become effective by 10:00 P.M., Washington, D.C. time, on the date of this Agreement.

 

 

 

 

(b)          No Underwriter shall have discovered and disclosed to the Company on or prior to such Delivery Date that the Registration Statement, the Prospectus or the Pricing Disclosure Package, or any amendment or supplement thereto, contains an untrue statement of a fact which is material or omits to state a fact which is material and is required to be stated therein or is necessary to make the statements therein not misleading.

 

(c)          All corporate proceedings and other legal matters incident to the authorization, form and validity of this Agreement, the Shares, the Registration Statement, the Prospectus and any Issuer Free Writing Prospectus, and all other legal matters relating to this Agreement and the transactions contemplated hereby shall be reasonably satisfactory in all material respects to counsel for the Underwriters, and the Company shall have furnished to such counsel all documents and information that they may reasonably request to enable them to pass upon such matters.

 

(d)          Mayer Brown LLP shall have furnished to the Representatives its written opinion, as counsel to the Company, addressed to the Underwriters and dated such Delivery Date, in form and substance reasonably satisfactory to the Representatives.

 

(e)          Primes, Shiloh, Givon, Meir Law Firm shall have furnished to the Representatives its written opinion, as Israeli counsel to the Company, addressed to the Underwriters and dated such Delivery Date, in form and substance reasonably satisfactory to the Representatives.

 

(f)          Mayer Brown LLP shall have furnished to the Representatives its written opinion, as special regulatory counsel to the Company, addressed to the Underwriters and dated such Delivery Date, in form and substance reasonably satisfactory to the Representatives.

 

(g)          Haley Guiliano LLP shall have furnished to the Representatives its written opinion, as special intellectual property counsel to the Company, addressed to the Underwriters and dated such Delivery Date, in form and substance reasonably satisfactory to the Representatives.

 

(h)          Gornitzky & Co. shall have furnished to the Representatives its written opinion, as Israeli counsel to the Underwriters, addressed to the Underwriters and dated such Delivery Date, in form and substance reasonably satisfactory to the Representatives.

 

(i)          The Representatives shall have received from Latham & Watkins LLP, counsel for the Underwriters, such opinion or opinions, dated such Delivery Date, with respect to the issuance and sale of the Shares, the Registration Statement, the Prospectus and the Pricing Disclosure Package and other related matters as the Representatives may reasonably require, and the Company shall have furnished to such counsel such documents as they reasonably request for the purpose of enabling them to pass upon such matters.

 

 

 

 

(j)          At the time of execution of this Agreement, the Representatives shall have received from PwC a letter, in form and substance satisfactory to the Representatives, addressed to the Underwriters and dated the date hereof (i) confirming that they are independent public accountants within the meaning of the Securities Act and are in compliance with the applicable requirements relating to the qualification of accountants under Rule 2-01 of Regulation S-X of the Commission, and (ii) stating, as of the date hereof (or, with respect to matters involving changes or developments since the respective dates as of which specified financial information is given in the most recent Preliminary Prospectus, as of a date not more than three days prior to the date hereof), the conclusions and findings of such firm with respect to the financial information and other matters ordinarily covered by accountants’ “comfort letters” to underwriters in connection with registered public offerings.

 

(k)          With respect to the letter of PwC referred to in the preceding paragraph and delivered to the Representatives concurrently with the execution of this Agreement (the “ initial letter ”), the Company shall have furnished to the Representatives a letter (the “ bring-down letter ”) of such accountants, addressed to the Underwriters and dated such Delivery Date (i) confirming that they are independent public accountants within the meaning of the Securities Act and are in compliance with the applicable requirements relating to the qualification of accountants under Rule 2-01 of Regulation S-X of the Commission, (ii) stating, as of the date of the bring-down letter (or, with respect to matters involving changes or developments since the respective dates as of which specified financial information is given in the Prospectus, as of a date not more than three days prior to the date of the bring-down letter), the conclusions and findings of such firm with respect to the financial information and other matters covered by the initial letter, and (iii) confirming in all material respects the conclusions and findings set forth in the initial letter.

 

(l)          The Company shall have furnished to the Representatives a certificate, dated such Delivery Date, of its Chief Executive Officer and its Chief Financial Officer as to such matters as the Representatives may reasonably request, including, without limitation, a statement:

 

(i)          That the representations, warranties and agreements of the Company in Section 1 are true and correct on and as of such Delivery Date, and the Company has complied with all its agreements contained herein and satisfied all the conditions on its part to be performed or satisfied hereunder at or prior to such Delivery Date;

 

(ii)         That no stop order suspending the effectiveness of the Registration Statement has been issued; and no proceedings or examination for that purpose have been instituted or, to the knowledge of such officers, threatened;

 

 

 

 

(iii)        That they have examined the Registration Statement, the Prospectus and the Pricing Disclosure Package, and, in their opinion, (A) (1) the Registration Statement, as of the Effective Date, (2) the Prospectus, as of its date and on the applicable Delivery Date, and (3) the Pricing Disclosure Package, as of the Applicable Time, did not and do not contain any untrue statement of a material fact and did not and do not omit to state a material fact required to be stated therein or necessary to make the statements therein (except in the case of the Registration Statement, in the light of the circumstances under which they were made) not misleading, and (B) since the Effective Date, no event has occurred that should have been set forth in a supplement or amendment to the Registration Statement, the Prospectus or any Issuer Free Writing Prospectus that has not been so set forth; and

 

(iv)        To the effect of Section 7(m) ( provided that no representation with respect to the judgment of the Representatives need be made) and Section 7(n).

 

(m)          On the date of this Agreement and on the applicable Delivery Date, the Company shall have furnished to the Representatives a certificate, dated the respective dates of delivery thereof and addressed to the Representatives, of its chief financial officer with respect to certain financial data contained in the Registration Statement, the Pricing Disclosure Package or the Prospectus, providing “management comfort” with respect to such information, in form and substance reasonably satisfactory to the Representatives.

 

(n)          (i) Neither the Company nor any of its subsidiaries shall have sustained, since the date of the latest audited financial statements included in the most recent Preliminary Prospectus, any loss or interference with its business from fire, explosion, flood or other calamity, whether or not covered by insurance, or from any labor dispute or court or governmental action, order or decree, or (ii) since such date there shall not have been any change in the capital stock or long-term debt of the Company or any of its subsidiaries or any change, or any development involving a prospective change, in or affecting the condition (financial or otherwise), results of operations, shareholders’ equity, properties, management, business or prospects of the Company and its subsidiaries taken as a whole, the effect of which, in any such case described in clause (i) or (ii), is, individually or in the aggregate, in the judgment of the Representatives, so material and adverse as to make it impracticable or inadvisable to proceed with the public offering or the delivery of the Shares being delivered on such Delivery Date on the terms and in the manner contemplated in the Prospectus.

 

 

 

 

(o)          Subsequent to the execution and delivery of this Agreement there shall not have occurred any of the following: (i) (A) trading in securities generally on any securities exchange that has registered with the Commission under Section 6 of the Exchange Act (including the New York Stock Exchange, The Nasdaq Global Select Market, The Nasdaq Global Market or The Nasdaq Capital Market), or (B) trading in any securities of the Company on any exchange or in the over-the-counter market, shall have been suspended or materially limited or the settlement of such trading generally shall have been materially disrupted or minimum prices shall have been established on any such exchange or such market by the Commission, by such exchange or by any other regulatory body or governmental authority having jurisdiction, (ii) a general moratorium on commercial banking activities shall have been declared by federal or state authorities, (iii) the United States shall have become engaged in hostilities, there shall have been a material escalation in hostilities involving the United States or there shall have been a declaration of a national emergency or war by the United States, or (iv) there shall have occurred such a material adverse change in general economic, political or financial conditions, including, without limitation, as a result of terrorist activities after the date hereof (or the effect of international conditions on the financial markets in the United States shall be such) or any other calamity or crisis either within or outside the United States, as to make it, in the judgment of the Representatives, impracticable or inadvisable to proceed with the public offering or delivery of the Shares being delivered on such Delivery Date on the terms and in the manner contemplated in the Prospectus.

 

(p)          The Nasdaq Global Market shall have approved the Shares for listing, subject only to official notice of issuance and evidence of satisfactory distribution.

 

(q)          The Lock-Up Agreements between the Representatives and the officers, directors and stockholders of the Company set forth on Schedule III, delivered to the Representatives on or before the date of this Agreement, shall be in full force and effect on such Delivery Date.

 

(r)           On or prior to each Delivery Date, the Company shall have furnished to the Underwriters such further certificates and documents as the Representatives may reasonably request.

   

(s)           The Company will deliver to each Underwriter (or its agent), on or prior to the date of execution of this Agreement, a properly completed and executed Certification Regarding Beneficial Owners of Legal Entity Customers, together with copies of identifying documentation and the Company undertakes to provide such additional supporting documentation as each Underwriter may reasonably request with the verification of the foregoing Certification.

 

All opinions, letters, evidence and certificates mentioned above or elsewhere in this Agreement shall be deemed to be in compliance with the provisions hereof only if they are in form and substance reasonably satisfactory to counsel for the Underwriters.

 

 

 

 

8.     Indemnification and Contribution.

 

(a)          The Company hereby agrees to indemnify and hold harmless each Underwriter, its affiliates, directors, officers and employees and each person, if any, who controls any Underwriter within the meaning of Section 15 of the Securities Act or Section 20 of the Exchange Act, from and against any loss, claim, damage or liability, joint or several, or any action in respect thereof (including, but not limited to, any loss, claim, damage, liability or action relating to purchases and sales of Shares), to which that Underwriter, affiliate, director, officer, employee or controlling person may become subject, under the Securities Act or otherwise, insofar as such loss, claim, damage, liability or action arises out of, or is based upon, (i) any untrue statement or alleged untrue statement of a material fact contained in (A) any Preliminary Prospectus, the Registration Statement, the Prospectus or in any amendment or supplement thereto, (B) any Issuer Free Writing Prospectus or in any amendment or supplement thereto, (C) any Permitted Issuer Information used or referred to in any “free writing prospectus” (as defined in Rule 405 under the Securities Act) used or referred to by any Underwriter, (D) any materials or information provided to investors by, or with the approval of, the Company in connection with the marketing of the offering of the Shares, including any “road show” (as defined in Rule 433 under the Securities Act) not constituting an Issuer Free Writing Prospectus and any Written Testing-the-Waters Communication (“ Marketing Materials ”), or (E) any Blue Sky application or other document prepared or executed by the Company (or based upon any written information furnished by the Company for use therein) specifically for the purpose of qualifying any or all of the Shares under the securities laws of any state or other jurisdiction (any such application, document or information being hereinafter called a “ Blue Sky Application ”) or (ii) the omission or alleged omission to state in any Preliminary Prospectus, the Registration Statement, the Prospectus, any Issuer Free Writing Prospectus or in any amendment or supplement thereto or in any Permitted Issuer Information, any Marketing Materials or any Blue Sky Application, any material fact required to be stated therein or necessary to make the statements therein not misleading, and shall reimburse each Underwriter and each such affiliate, director, officer, employee or controlling person promptly upon written demand for any legal or other expenses reasonably incurred by that Underwriter, affiliate, director, officer, employee or controlling person in connection with investigating or defending or preparing to defend against any such loss, claim, damage, liability or action as such expenses are incurred; provided , however , that the Company shall not be liable in any such case to the extent that any such loss, claim, damage, liability or action arises out of, or is based upon, any untrue statement or alleged untrue statement or omission or alleged omission made in any Preliminary Prospectus, the Registration Statement, the Prospectus, any Issuer Free Writing Prospectus or in any such amendment or supplement thereto or in any Permitted Issuer Information, any Marketing Materials or any Blue Sky Application, in reliance upon and in conformity with written information concerning such Underwriter furnished to the Company through the Representatives by or on behalf of any Underwriter specifically for inclusion therein, which information consists solely of the information specified in Section 8(e). The foregoing indemnity agreement is in addition to any liability which the Company may otherwise have to any Underwriter or to any affiliate, director, officer, employee or controlling person of that Underwriter.

 

(b)          Each Underwriter, severally and not jointly, shall indemnify and hold harmless the Company, its directors, officers and employees, and each person, if any, who controls the Company within the meaning of Section 15 of the Securities Act or Section 20 of the Exchange Act, from and against any loss, claim, damage or liability, joint or several, or any action in respect thereof, to which the Company or any such director, officer, employee or controlling person may become subject, under the Securities Act or otherwise, insofar as such loss, claim, damage, liability or action arises out of, or is based upon, (i) any untrue statement or alleged untrue statement of a material fact contained in any Preliminary Prospectus, the Registration Statement, the Prospectus, any Issuer Free Writing Prospectus or in any amendment or supplement thereto or in any Marketing Materials or Blue Sky Application, or (ii) the omission or alleged omission to state in any Preliminary Prospectus, the Registration Statement, the Prospectus, any Issuer Free Writing Prospectus or in any amendment or supplement thereto or in any Marketing Materials or Blue Sky Application, any material fact required to be stated therein or necessary to make the statements therein not misleading, but in each case only to the extent that the untrue statement or alleged untrue statement or omission or alleged omission was made in reliance upon and in conformity with written information concerning such Underwriter furnished to the Company through the Representatives by or on behalf of that Underwriter specifically for inclusion therein, which information is limited to the information set forth in Section 8(e). The foregoing indemnity agreement is in addition to any liability that any Underwriter may otherwise have to the Company or any such director, officer, employee or controlling person.

 

 

 

 

(c)          Promptly after receipt by an indemnified party under this Section 8 of notice of any claim or the commencement of any action, the indemnified party shall, if a claim in respect thereof is to be made against the indemnifying party under this Section 8, notify the indemnifying party in writing of the claim or the commencement of that action; provided , however , that the failure to notify the indemnifying party shall not relieve it from any liability which it may have under this Section 8 except to the extent it has been materially prejudiced (through the forfeiture of substantive rights and defenses) by such failure and, provided , further , that the failure to notify the indemnifying party shall not relieve it from any liability which it may have to an indemnified party otherwise than under this Section 8. If any such claim or action shall be brought against an indemnified party, and it shall notify the indemnifying party thereof, the indemnifying party shall be entitled to participate therein and, to the extent that it wishes, jointly with any other similarly notified indemnifying party, to assume the defense thereof with counsel reasonably satisfactory to the indemnified party. After notice from the indemnifying party to the indemnified party of its election to assume the defense of such claim or action, the indemnifying party shall not be liable to the indemnified party under this Section 8 for any legal or other expenses subsequently incurred by the indemnified party in connection with the defense thereof other than reasonable costs of investigation; provided, however , that the indemnified party shall have the right to employ counsel to represent jointly the indemnified party and those other indemnified parties and their respective directors, officers, employees and controlling persons who may be subject to liability arising out of any claim in respect of which indemnity may be sought under this Section 8 if (i) the indemnified party and the indemnifying party shall have so mutually agreed; (ii) the indemnifying party has failed within a reasonable time to retain counsel reasonably satisfactory to the indemnified party; (iii) the indemnified party and its directors, officers, employees and controlling persons shall have reasonably concluded that there may be legal defenses available to them that are different from or in addition to those available to the indemnifying party; or (iv) the named parties in any such proceeding (including any impleaded parties) include both the indemnified parties or their respective directors, officers, employees or controlling persons, on the one hand, and the indemnifying party, on the other hand, and representation of both sets of parties by the same counsel would be inappropriate due to actual or potential differing interests between them, and in any such event the fees and expenses of such separate counsel shall be paid by the indemnifying party. No indemnifying party shall (x) without the prior written consent of the indemnified parties (which consent shall not be unreasonably withheld), settle or compromise or consent to the entry of any judgment with respect to any pending or threatened claim, action, suit or proceeding in respect of which indemnification or contribution may be sought hereunder (whether or not the indemnified parties are actual or potential parties to such claim or action) unless such settlement, compromise or consent includes an unconditional release of each indemnified party from all liability arising out of such claim, action, suit or proceeding and does not include a statement as to, or an admission of fault, culpability or a failure to act by or on behalf of any indemnified party, or (y) be liable for any settlement of any such action effected without its written consent (which consent shall not be unreasonably withheld), but if settled with the consent of the indemnifying party or if there be a final judgment for the plaintiff in any such action, the indemnifying party agrees to indemnify and hold harmless any indemnified party from and against any loss or liability by reason of such settlement or judgment. Notwithstanding the foregoing sentence, if at any time an indemnified party shall have requested an indemnifying party to reimburse the indemnified party for fees and expenses of counsel as contemplated by Section 8(a) hereof, the indemnifying party agrees that it shall be liable for any settlement of any proceeding effected without its written consent if (i) such settlement is entered into more than 45 days after receipt by such indemnifying party of the aforesaid request and (ii) such indemnifying party shall not have reimbursed the indemnified party in accordance with such request or disputed in good faith the indemnified party’s entitlement to such reimbursement prior to the date of such settlement.

 

 

 

 

(d)          If the indemnification provided for in this Section 8 shall for any reason be unavailable to or insufficient to hold harmless an indemnified party under Section 8(a), in respect of any loss, claim, damage or liability, or any action in respect thereof, referred to therein, then each indemnifying party shall, in lieu of indemnifying such indemnified party, contribute to the amount paid or payable by such indemnified party as a result of such loss, claim, damage or liability, or action in respect thereof, (i) in such proportion as shall be appropriate to reflect the relative benefits received by the Company, on the one hand, and the Underwriters, on the other, from the offering of the Shares, or (ii) if the allocation provided by clause (i) above is not permitted by applicable law, in such proportion as is appropriate to reflect not only the relative benefits referred to in clause (i) above but also the relative fault of the Company, on the one hand, and the Underwriters, on the other, with respect to the statements or omissions that resulted in such loss, claim, damage or liability, or action in respect thereof, as well as any other relevant equitable considerations. The relative benefits received by the Company, on the one hand, and the Underwriters, on the other, with respect to such offering shall be deemed to be in the same proportion as the total net proceeds from the offering of the Shares purchased under this Agreement (before deducting expenses) received by the Company, as set forth in the table on the cover page of the Prospectus, on the one hand, and the total underwriting discounts and commissions received by the Underwriters with respect to the offering of the Shares purchased under this Agreement, as set forth in the table on the cover page of the Prospectus, on the other hand. The relative fault shall be determined by reference to whether the untrue or alleged untrue statement of a material fact or omission or alleged omission to state a material fact relates to information supplied by the Company or the Underwriters, the intent of the parties and their relative knowledge, access to information and opportunity to correct or prevent such statement or omission. The Company and the Underwriters agree that it would not be just and equitable if contributions pursuant to this Section 8(d) were to be determined by pro rata allocation (even if the Underwriters were treated as one entity for such purpose) or by any other method of allocation that does not take into account the equitable considerations referred to herein. The amount paid or payable by an indemnified party as a result of the loss, claim, damage or liability, or action in respect thereof, referred to above in this Section 8(d) shall be deemed to include, for purposes of this Section 8(d), any legal or other expenses reasonably incurred by such indemnified party in connection with investigating or defending any such action or claim. Notwithstanding the provisions of this Section 8(d), in no event shall an Underwriter be required to contribute any amount in excess of the amount by which the total underwriting discounts and commissions received by such Underwriter with respect to the offering of the Shares exceeds the amount of any damages that such Underwriter has otherwise been required to pay by reason of such untrue or alleged untrue statement or omission or alleged omission. No person guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of the Securities Act) shall be entitled to contribution from any person who was not guilty of such fraudulent misrepresentation. The Underwriters’ obligations to contribute as provided in this Section 8(d) are several in proportion to their respective underwriting obligations and not joint.

 

 

 

  

(e)          The Underwriters severally confirm and the Company acknowledges and agrees that the statements set forth on the cover page of, and the concession and reallowance figures and the paragraph relating to stabilization by the Underwriters appearing under the caption “Underwriting” in, the most recent Preliminary Prospectus and the Prospectus are correct and constitute the only information concerning such Underwriters furnished in writing to the Company by or on behalf of the Underwriters specifically for inclusion in any Preliminary Prospectus, the Registration Statement, the Prospectus, any Issuer Free Writing Prospectus or in any amendment or supplement thereto or in any Marketing Materials.

 

9.      Defaulting Underwriters .

 

(a)          If, on any Delivery Date, any Underwriter defaults in its obligations to purchase the Shares that it has agreed to purchase under this Agreement, the remaining non-defaulting Underwriters may in their discretion arrange for the purchase of such Shares by the non-defaulting Underwriters or other persons satisfactory to the Company on the terms contained in this Agreement. If, within 36 hours after any such default by any Underwriter, the non-defaulting Underwriters do not arrange for the purchase of such Shares, then the Company shall be entitled to a further period of 36 hours within which to procure other persons satisfactory to the non-defaulting Underwriters to purchase such Shares on such terms. In the event that within the respective prescribed periods, the non-defaulting Underwriters notify the Company that they have so arranged for the purchase of such Shares, or the Company notifies the non-defaulting Underwriters that it has so arranged for the purchase of such Shares, either the non-defaulting Underwriters or the Company may postpone such Delivery Date for up to seven full business days in order to effect any changes that in the opinion of counsel for the Company or counsel for the Underwriters may be necessary in the Registration Statement, the Prospectus or in any other document or arrangement, and the Company agrees to promptly prepare any amendment or supplement to the Registration Statement, the Prospectus or in any such other document or arrangement that effects any such changes. As used in this Agreement, the term “Underwriter” includes, for all purposes of this Agreement unless the context requires otherwise, any party not listed in Schedule I hereto that, pursuant to this Section 9, purchases Shares that a defaulting Underwriter agreed but failed to purchase.

 

 

 

 

(b)          If, after giving effect to any arrangements for the purchase of the Shares of a defaulting Underwriter or Underwriters by the non-defaulting Underwriters and the Company as provided in paragraph (a) above, the total number of the Shares that remains unpurchased does not exceed one-eleventh of the total number of shares of all the Shares, then the Company shall have the right to require each non-defaulting Underwriter to purchase the total number of shares of Shares that such Underwriter agreed to purchase hereunder plus such Underwriter’s pro rata share (based on the total number of shares of Shares that such Underwriter agreed to purchase hereunder) of the Shares of such defaulting Underwriter or Underwriters for which such arrangements have not been made; provided that the non-defaulting Underwriters shall not be obligated to purchase more than 110% of the total number of Shares that it agreed to purchase on such Delivery Date pursuant to the terms of Section 2.

 

(c)          If, after giving effect to any arrangements for the purchase of the Shares of a defaulting Underwriter or Underwriters by the non-defaulting Underwriters and the Company as provided in paragraph (a) above, the total number of Shares that remains unpurchased exceeds one-eleventh of the total number of all the Shares, or if the Company shall not exercise the right described in paragraph (b) above, then this Agreement shall terminate without liability on the part of the non-defaulting Underwriters. Any termination of this Agreement pursuant to this Section 9 shall be without liability on the part of the Company, except that the Company will continue to be liable for the payment of expenses as set forth in Sections 6 and 11 and except that the provisions of Section 8 shall not terminate and shall remain in effect.

 

(d)          Nothing contained herein shall relieve a defaulting Underwriter of any liability it may have to the Company or any non-defaulting Underwriter for damages caused by its default.

 

10.    Termination. The obligations of the Underwriters hereunder may be terminated by the Representatives by notice given to and received by the Company prior to delivery of and payment for the Firm Shares if, prior to that time, any of the events described in Sections 7(m) and 7(n) shall have occurred or if the Underwriters shall decline to purchase the Shares for any reason permitted under this Agreement.

 

11.    Reimbursement of Underwriters’ Expenses. If (a) the Company shall fail to tender the Shares for delivery to the Underwriters for any reason, or (b) the Underwriters shall decline to purchase the Shares for any reason permitted under this Agreement, the Company will reimburse the Underwriters for all reasonable out-of-pocket expenses (including fees and disbursements of counsel for the Underwriters) incurred by the Underwriters in connection with this Agreement and the proposed purchase of the Shares, and upon demand the Company shall pay the full amount thereof to the Representatives. If this Agreement is terminated pursuant to Section 9 by reason of the default of one or more Underwriters, the Company shall not be obligated to reimburse any defaulting Underwriter on account of those expenses.

 

 

 

 

12.    Research Analyst Independence. The Company acknowledges that the Underwriters’ research analysts and research departments are required to be independent from their respective investment banking divisions and are subject to certain regulations and internal policies, and that such Underwriters’ research analysts may hold views and make statements or investment recommendations and/or publish research reports with respect to the Company and/or the offering that differ from the views of their respective investment banking divisions. The Company hereby waives and releases, to the fullest extent permitted by law, any claims that the Company may have against the Underwriters with respect to any conflict of interest that may arise from the fact that the views expressed by their independent research analysts and research departments may be different from or inconsistent with the views or advice communicated to the Company by such Underwriters’ investment banking divisions. The Company acknowledges that each of the Underwriters is a full service securities firm and as such from time to time, subject to applicable securities laws, may effect transactions for its own account or the account of its customers and hold long or short positions in debt or equity securities of the companies that may be the subject of the transactions contemplated by this Agreement.

 

13.   No Fiduciary Duty . The Company acknowledges and agrees that in connection with this offering, sale of the Shares or any other services the Underwriters may be deemed to be providing hereunder, notwithstanding any preexisting relationship, advisory or otherwise, between the parties or any oral representations or assurances previously or subsequently made by the Underwriters: (a) no fiduciary or agency relationship between the Company and any other person, on the one hand, and the Underwriters, on the other, exists; (b) the Underwriters are not acting as advisors, expert or otherwise, to the Company, including, without limitation, with respect to the determination of the public offering price of the Shares, and such relationship between the Company, on the one hand, and the Underwriters, on the other, is entirely and solely commercial, based on arms-length negotiations; (c) any duties and obligations that the Underwriters may have to the Company shall be limited to those duties and obligations specifically stated herein; and (d) the Underwriters and their respective affiliates may have interests that differ from those of the Company. The Company hereby waives any claims that the Company may have against the Underwriters with respect to any breach of fiduciary duty in connection with this offering.

 

14.   Notices, etc. All statements, requests, notices and agreements hereunder shall be in writing, and:

 

(a)          if to the Underwriters, shall be delivered or sent by mail or facsimile transmission to Barclays Capital Inc., 745 Seventh Avenue, New York, New York 10019, Attention: Syndicate Registration (Fax: (646) 834-8133), with a copy, in the case of any notice pursuant to Section 8(c), to the Director of Litigation, Office of the General Counsel, Barclays Capital Inc., 745 Seventh Avenue, New York, New York 10019 and UBS Securities LLC, 1285 Avenue of the Americas, New York, New York 10019.

 

(b)          if to the Company, shall be delivered or sent by mail or facsimile transmission to the address of the Company set forth in the Registration Statement, Attention: Yair Malca (Fax: (855) 411-6789).

 

 

 

 

Any such statements, requests, notices or agreements shall take effect at the time of receipt thereof. The Company shall be entitled to act and rely upon any request, consent, notice or agreement given or made on behalf of the Underwriters by Barclays Capital Inc. on behalf of the Representatives.

 

15.   Persons Entitled to Benefit of Agreement . This Agreement shall inure to the benefit of and be binding upon the Underwriters, the Company, and their respective successors. This Agreement and the terms and provisions hereof are for the sole benefit of only those persons, except that (a) the representations, warranties, indemnities and agreements of the Company contained in this Agreement shall also be deemed to be for the benefit of the directors, officers and employees of the Underwriters and each person or persons, if any, who control any Underwriter within the meaning of Section 15 of the Securities Act, and (b) the indemnity agreement of the Underwriters contained in Section 8(d) of this Agreement shall be deemed to be for the benefit of the directors of the Company, the officers of the Company who have signed the Registration Statement and any person controlling the Company within the meaning of Section 15 of the Securities Act. Nothing in this Agreement is intended or shall be construed to give any person, other than the persons referred to in this Section 15, any legal or equitable right, remedy or claim under or in respect of this Agreement or any provision contained herein.

 

16.   Survival. The respective indemnities, representations, warranties and agreements of the Company and the Underwriters contained in this Agreement or made by or on behalf of them, respectively, pursuant to this Agreement, shall survive the delivery of and payment for the Shares and shall remain in full force and effect, regardless of any investigation made by or on behalf of any of them or any person controlling any of them.

 

17.   Definition of the Terms “Business Day , ” “Affiliate” and “Subsidiary . ” For purposes of this Agreement, (a) “ business day ” means each Monday, Tuesday, Wednesday, Thursday or Friday that is not a day on which banking institutions in New York are generally authorized or obligated by law or executive order to close, (b) “ affiliate ” has the meaning set forth in Rule 405 under the Securities Act, and (c) “ subsidiar y ” means each of the Company’s subsidiaries (as defined in Rule 405 under the Securities Act) except Invasix UK Ltd. and Guangzhou InMode Medical Technology Ltd..

 

18.   Governing Law . This Agreement shall be governed by and construed in accordance with the laws of the State of New York without regard to conflict of laws principles (other than Section 5-1401 of the General Obligations Law).

 

19.   Submission to Jurisdiction, etc. The Company hereby submits to the non-exclusive jurisdiction of the U.S. federal and New York state courts in the Borough of Manhattan, The City of New York in any suit or proceeding arising out of or relating to this Agreement or the transactions contemplated hereby. The parties hereby irrevocably and unconditionally waive any objection to the laying of venue of any lawsuit, action or other proceeding in such courts, and hereby further irrevocably and unconditionally waive and agree not to plead or claim in any such court that any such lawsuit, action or other proceeding brought in any such court has been brought in an inconvenient forum. The Company appoints Invasix Inc., 20996 Bake Parkway, Suite 106, Lake Forest, California 96320, as its authorized agent upon which process may be served in any such suit or proceeding, and agrees that service of process upon such agent, and written notice of said service to the Company by the person serving the same to the address provided in Section 14 shall be deemed in every respect effective service of process upon the Company in any such suit or proceeding. The Company further agrees to take any and all actions as may be necessary to maintain such designation and appointment of such agent in full force and effect for a period of seven years from the date of this Agreement.

 

 

 

 

20.          Waiver of Immunity . With respect to any suit or proceeding arising out of or relating to this Agreement or the transactions contemplated hereby, each party irrevocably waives, to the fullest extent permitted by applicable law, all immunity (whether on the basis of sovereignty or otherwise) from jurisdiction, service of process, attachment (both before and after judgment) and execution to which it might otherwise be entitled, and with respect to any such suit or proceeding, each party waives any such immunity in any court of competent jurisdiction, and will not raise or claim or cause to be pleaded any such immunity at or in respect of any such suit or proceeding, including, without limitation, any immunity pursuant to the U.S. Foreign Sovereign Immunities Act of 1976, as amended.

 

21.          Waiver of Jury Trial . The Company and the Underwriters hereby irrevocably waive, to the fullest extent permitted by applicable law, any and all right to trial by jury in any legal proceeding arising out of or relating to this Agreement or the transactions contemplated hereby.

 

22.          Judgment Currency. The obligation of the Company in respect of any sum due to any Underwriter under this Agreement shall, notwithstanding any judgment in a currency other than U.S. dollars or any other applicable currency (the “ Judgment Currency ”), not be discharged until the first business day, following receipt by such Underwriter of any sum adjudged to be so due in the Judgment Currency, on which (and only to the extent that) such Underwriter may in accordance with normal banking procedures purchase U.S. dollars or any other applicable currency with the Judgment Currency; if the U.S. dollars or other applicable currency so purchased are less than the sum originally due to such Underwriter hereunder, the Company agrees, as a separate obligation and notwithstanding any such judgment, to indemnify such Underwriter against such loss. If the U.S. dollars or other applicable currency so purchased are greater than the sum originally due to such Underwriter hereunder, such Underwriter agrees to pay to the Company an amount equal to the excess of the U.S. dollars or other applicable currency so purchased over the sum originally due to such Underwriter hereunder.

 

23.          Payments. All payments made or deemed to be made by the Company to the Underwriters, their respective affiliates, directors, officers, employees and agents or to any person controlling any Underwriter under this Agreement, if any, will be made without withholding or deduction for or on account of any present or future taxes, duties, assessments or governmental charges of whatever nature (other than taxes on net income or similar taxes) imposed or levied by or on behalf of the State of Israel or any political subdivision or any taxing authority thereof or therein unless the Company is or becomes required by law to withhold or deduct such taxes, duties, assessments or other governmental charges. In such event, the Company will pay such additional amounts as will result, after such withholding or deduction, in the receipt by each Underwriter, their respective affiliates, directors, officers, employees and each person controlling any Underwriter, as the case may be, of the amounts that would otherwise have been receivable in respect thereof.

 

 

 

 

24.          Counterparts. This Agreement may be executed in one or more counterparts and, if executed in more than one counterpart, the executed counterparts shall each be deemed to be an original but all such counterparts shall together constitute one and the same instrument.

 

25.         Headings. The headings herein are inserted for convenience of reference only and are not intended to be part of, or to affect the meaning or interpretation of, this Agreement.

 

 

 

 

If the foregoing correctly sets forth the agreement between the Company and the Underwriters, please indicate your acceptance in the space provided for that purpose below.

 

  Very truly yours,  
     
  INMODE LTD.  
     
  By:    
    Name:  
    Title:  

 

 

 

 

Accepted:

 

Barclays Capital Inc.

UBS Securities LLC

 

For themselves and as Representatives
of the several Underwriters named
in Schedule I hereto

 

By Barclays Capital Inc.

 

By:    
  Authorized Representative  

 

By UBS Securities LLC

 

By:    
  Authorized Representative  

 

 

 

 

SCHEDULE I

 

Underwriters   Number of Shares of
Firm Shares 		 
       
Barclays Capital Inc.      
UBS Securities LLC        
Canaccord Genuity LLC        
Robert W. Baird & Co. Incorporated        
Total        

 

 

 

 

SCHEDULE III

 

PERSONS DELIVERING LOCK-UP AGREEMENTS

 

Directors & Officers

 

Moshe Mizrahy

 

Yair Malca

 

Dr. Michael Kreindel

 

Shakil Lakhani

 

Dr. Spero Theodorou

 

Dr. Hadar Ron

 

Bruce Mann

 

Dr. Michael Anghel

 

Shareholders

 

SpaMedica International SRL

 

Israel Healthcare Ventures 2 LP Incorporated

 

Duotec Medical GmbH

 

Michael Bank

 

Ben Zion Levi

 

Brian Lodwig

 

Alexander Raveh

 

Yoram Sadeh

 

James Shaul

 

 

 

 

SCHEDULE IV

 

ORALLY CONVEYED PRICING INFORMATION

 

1. Public offering price per Ordinary Share: $[●]

 

2. Number of Firm Shares offered:

 

3. Number of Option Shares:

 

 

 

 

SCHEDULE V

 

ISSUER FREE WRITING PROSPECTUSES – ROAD SHOW MATERIALS

 

[●]

 

 

 

 

SCHEDULE VI

 

ISSUER FREE WRITING PROSPECTUS

 

 

 

 

 

 

EXHIBIT A

 

LOCK-UP LETTER AGREEMENT

 

Barclays Capital Inc.

UBS Securities LLC,

a s Representatives of the S everal
Underwriters named in Schedule I,

 

c/o Barclays Capital Inc.
745 Seventh Avenue
New York, New York 10019

 

c/o UBS Securities LLC

1285 Avenue of the Americas

New York, New York 10019

 

Ladies and Gentlemen:

 

The undersigned understands that you and certain other firms (the “ Underwriters ”) propose to enter into an Underwriting Agreement (the “ Underwriting Agreement ”) providing for the purchase by the Underwriters of a certain number of shares (the “ Shares ”) of Ordinary Shares, par value NIS 0.01 per share (the “ Ordinary Shares ”), of InMode Ltd., a company organized under the laws of the State of Israel (the “ Company ”), and that the Underwriters propose to reoffer the Shares to the public (the “ Offering ”).

 

In consideration of the execution of the Underwriting Agreement by the Underwriters, and for other good and valuable consideration, the undersigned hereby irrevocably agrees that, without the prior written consent of Barclays Capital Inc., on behalf of the Underwriters, the undersigned will not, directly or indirectly, (1) offer for sale, sell, pledge, or otherwise dispose of (or enter into any transaction or device that is designed to, or could be expected to, result in the disposition by any person at any time in the future of) any Ordinary Shares (including, without limitation, shares of Ordinary Shares that may be deemed to be beneficially owned by the undersigned in accordance with the rules and regulations of the Securities and Exchange Commission and Ordinary Shares that may be issued upon exercise of any options or securities convertible into or exercisable or exchangeable for Ordinary Shares, (2) enter into any swap or other derivatives transaction that transfers to another, in whole or in part, any of the economic benefits or risks of ownership of Ordinary Shares, whether any such transaction described in clause (1) or (2) above is to be settled by delivery of Ordinary Shares or other securities, in cash or otherwise, (3) make any demand for or exercise any right or cause to be filed a registration statement, including any amendments thereto, with respect to the registration of any Ordinary Shares or securities convertible into or exercisable or exchangeable for Ordinary Shares or any other securities of the Company, or (4) publicly disclose the intention to do any of the foregoing for a period commencing on the date hereof and ending on the 180th day after the date of the Prospectus relating to the Offering (such 180-day period, the “ Lock-Up Period ”).

 

  Exhibit A- 1  

 

 

The foregoing paragraph shall not apply to (a) transactions relating to Ordinary Shares or other securities acquired in the open market after the completion of the Offering, (b) bona fide gifts, sales or other dispositions of shares of any class of the Company’s capital stock, (c) the exercise of share options granted pursuant to the Company’s share option/incentive plans or otherwise outstanding on the date the Underwriting Agreement is entered into; provided , that the restrictions shall apply to Ordinary Shares issued upon such exercise or conversion, (d) the establishment of any contract, instruction or plan that satisfies all of the requirements of Rule 10b5-1 (a “ Rule 10b5-1 Plan ”) under the Securities Exchange Act of 1934, as amended (the “ Exchange Act ”); provided , however , that no sales of Ordinary Shares or securities convertible into, or exchangeable or exercisable for, Ordinary Shares, shall be made pursuant to a Rule 10b5-1 Plan prior to the expiration of the Lock-Up Period (as the same may be extended pursuant to the provisions hereof); provided further , that the Company is not required to report the establishment of such Rule 10b5-1 Plan in any public report or filing with the Commission under the Exchange Act during the lock-up period and does not otherwise voluntarily effect any such public filing or report regarding such Rule 10b5-1 Plan, (e) any transfer to a trust for the direct or indirect benefit of the undersigned or the immediate family of the undersigned, (f) if the undersigned is not an individual, any transfer or pledge to the undersigned’s subsidiaries, affiliates or any investment fund or other entity controlled or managed by, or under common control or management with, the undersigned; provided that it shall be a condition to any transfer pursuant to clauses (b), (e) and (f) that (i) the transferee/donee agrees to be bound by the terms of this Lock-Up Letter Agreement (including, without limitation, the restrictions set forth in the preceding sentence) to the same extent as if the transferee/donee were a party hereto, and (ii) each party (donor, donee, transferor or transferee) shall not be required by law (including without limitation the disclosure requirements of the Securities Act of 1933, as amended (the “ Securities Act ”), and the Exchange Act to make, and shall agree to not voluntarily make, any filing or public announcement of the transfer or disposition prior to the expiration of the 180-day period referred to above, (g) any transfer to the Company solely to satisfy tax withholding obligations in connection with share options granted pursuant to the Company’s share option/incentive plans or otherwise outstanding on the date the Underwriting Agreement is entered into; provided that any such plan is referred to in the Prospectus relating to the Offering, (h) any transfer by will or intestacy to the undersigned’s legal representative, heir or legatee, (i) if the undersigned is not an individual, any transfer to members, limited partners or stockholders of the undersigned and (j) any demands or requests for, exercise any right with respect to, or take any action in preparation of, the registration by the Company under the Act of the undersigned’s Ordinary Shares, provided that no transfer of the undersigned’s Ordinary Shares registered pursuant to the exercise of any such right and no registration statement shall be filed under the Act with respect to any of the undersigned’s Ordinary Shares during the Lock-Up Period.

 

  Exhibit A- 2  

 

 

If the undersigned is an officer or director of the Company, (i) the undersigned agrees that the foregoing provisions shall be equally applicable to any issuer-directed Shares, as referred to in FINRA Rule 5131(d)(2)(A) that the undersigned may purchase in the Offering pursuant to an allocation of Shares that is directed in writing by the Company, (ii) Barclays Capital Inc. agrees that, at least three business days before the effective date of any release or waiver of the foregoing restrictions in connection with a transfer of Ordinary Shares, Barclays Capital Inc. will notify the Company of the impending release or waiver and (iii) the Company has agreed in the Underwriting Agreement to announce the impending release or waiver by issuing a press release through a major news service (as referred to in FINRA Rule 5131(d)(2)(B)) at least two business days before the effective date of the release or waiver. Any release or waiver granted by Barclays Capital Inc. hereunder to any such officer or director shall only be effective two business days after the publication date of such press release. The provisions of this paragraph will not apply if both (a) the release or waiver is effected solely to permit a transfer not for consideration, and (b) the transferee has agreed in writing to be bound by the same terms described in this letter that are applicable to the transferor, to the extent and for the duration that such terms remain in effect at the time of the transfer.

 

In furtherance of the foregoing, the Company and its transfer agent are hereby authorized to decline to make any transfer of securities if such transfer would constitute a violation or breach of this Lock-Up Letter Agreement.

 

The undersigned understands that the Company and the Underwriters will proceed with the Offering in reliance on this Lock-Up Letter Agreement.

 

Whether or not the Offering actually occurs depends on a number of factors, including market conditions. Any Offering will only be made pursuant to an Underwriting Agreement, the terms of which are subject to negotiation between the Company and the Underwriters.

 

This Lock-Up Letter Agreement shall automatically terminate upon the earliest to occur, if any, of (1) the Company notifies the Underwriters that it does not intend to proceed with the Offering; (2) the termination of the Underwriting Agreement before the sale of any Shares to the Underwriters; or (3) December 31, 2019, in the event that the Underwriting Agreement has not been executed by that date.

 

[Signature page follows]

 

  Exhibit A- 3  

 

 

The undersigned hereby represents and warrants that the undersigned has full power and authority to enter into this Lock-Up Letter Agreement and that, upon request, the undersigned will execute any additional documents necessary in connection with the enforcement hereof. Any obligations of the undersigned shall be binding upon the heirs, personal representatives, successors and assigns of the undersigned.

 

  Very truly yours,  
     
  By:    
    Name:  
    Title:  
     

Dated: _______________

 

  Exhibit A- 4  

 

 

EXHIBIT B

 

Form of Press Release

 

InMode Ltd.
[ Insert date ]

 

InMode Ltd. (the “ Company ”), announced today that Barclays Capital Inc., the lead book-running manager in the Company’s recent public sale of [●] ordinary shares is [waiving] [releasing] a lock-up restriction with respect to [●] shares of the Company’s ordinary shares held by [certain officers or directors] [an officer or director] of the Company. The [waiver] [release] will take effect on [ insert date ], and the shares may be sold or otherwise disposed of on or after such date.

 

This press release is not an offer for sale of the securities in the United States or in any other jurisdiction where such offer is prohibited, and such securities may not be offered or sold in the United States absent registration or an exemption from registration under the United States Securities Act of 1933, as amended.

 

  Exhibit B- 1  

 

 

EXHIBIT C

 

Form of Company Counsel Opinion

 

[To be provided under separate cover]

 

  Exhibit C- 1  

 

 

 

Exhibit 3.1

 

INVASIX LTD.

 

ARTICLES OF ASSOCIATION

 

Duly adopted on March 6, 2008

 

 

 

 

TABLE OF CONTENTS

 

  PAGE
INTERPRETATION 1
PURPOSE AND LIMITATIONS 2
CAPITAL, SHARES AND RIGHTS 3
CALL ON SHARES 3
FORFEITURE AND LIEN 4
TRANSFER OF SHARES 5
BRING ALONG 5
RIGHT OF FIRST REFUSAL 6
TRANSMISSION OF SHARES 8
ALTERATIONS OF THE AUTHORIZED CAPITAL 8
MODIFICATION OF CLASS RIGHTS 9
GENERAL MEETINGS 9
PROCEEDINGS AT GENERAL MEETINGS 10
VOTE OF SHAREHOLDERS 10
DIRECTORS 12
PROCEEDINGS OF THE DIRECTORS 12
COMMITTEES 13
MINUTES 13
CEO & SECRETARY 14
INSURANCE, INDEMNITY AND EXCULPATION 14
VALIDITY OF ACTS 15
BUSINESS AND BORROWING POWERS 16
FINANCIAL REPORTS, AUDITOR 16
SIGNATORIES 16
DISTRIBUTIONS 16
MERGERS 17
WINDING - UP 17
REGISTERS AND DOCUMENTS 17
DONATIONS 18
NOTICES 18

 

 

 

 

ARTICLES OF ASSOCIATION

 

of

 

INVASIX LTD.

 

INTERPRETATION

 

1. In these Articles the following words shall bear the meanings set opposite to them, unless inconsistent with the subject or context:

 

TERM   MEANING
     
Affiliate   An Affiliate of a Shareholder is an entity controlling, controlled by or under common control with such Shareholder, and the term “control” means that the controlling party holds 50% or more of the shares or voting rights in the controlled party.
     
Articles   These Articles of Association as originally adopted or as altered from time to time in accordance with their terms.
     
As-converted basis   Means as if all the issued shares of the Company, of all classes, and all securities of the Company convertible into or exchangeable for shares of the Company, have been fully converted into Ordinary Shares.
     
Auditor   An independent certified accountant, appointed in order to undertake auditing functions as set out in the Law and in these Articles.
     
Board   The Board of Directors of the Company
     
Company   Invasix Ltd.
     
Directors   Members of the Board, elected as provided in these Articles.
     
Dollar   US Dollar or an amount in NIS equal to the value of US Dollar, based on the representative rate of exchange of the NIS to the US Dollar as last published by the Bank of Israel or any other commercial body authorized to do so, prior to the relevant date.
     
Equity Securities   means any securities evidencing an ownership interest in the Company, or any securities convertible into or exercisable for any shares of the foregoing, or any agreement or commitment to issue any of the foregoing, including the Ordinary Shares.
     
IPO   means an initial public offering of the Company's shares in a public offering pursuant to a registration statement in any locality.
     
M&A Transaction   means (i) any event of consolidation, merger or reorganization of the Company, in one transaction or series of related transactions, following which holders of the majority of the Company’s Ordinary Shares outstanding immediately prior to such transaction or series of related transactions, hold less than 50% of the issued and outstanding shares of the entity surviving such transaction or series of related transactions or an entity controlling such surviving entity; or (ii) the sale or transfer by the Company of all or substantially all of its assets for cash or other consideration, or licensing (excluding business licenses granted in the ordinary course of business) of all or substantially all of the intellectual property of the Company or sale of all or substantially all of the Company's issued and outstanding share capital, to, any other company, or any other entity or person, other than a wholly-owned subsidiary of the Company.

 

  1  

 

 

Office   The registered office of the Company.
     
Office Holder   As such term is defined in the Law.
     
Ordinary Shares   The Company’s Ordinary Shares, NIS 0.01 par value each.
     
Pari passu   Means that each share participating in a certain right or distribution, shall have the same rights as any other share of the same class, regardless of the amount paid for the share.
     
Permitted Transferee   As defined in Article 28.9 below.
     
Person   A physical person or a legal entity.
     
Pro Rata   Means that a certain quantity or amount is distributed among the members of a certain group according to the ratio of the shares held by each participating member to the total number of shares held by all the members of the relevant group.
     
Qualified Holder   A Shareholder holding 1% or more of the outstanding share capital of the Company.
     
Register   The register of the Shareholders.
     
Shareholder   Any Person or entity that is the owner of at least one share, individually or jointly, in the Company, as registered in the Register.
     
Shekel or NIS   New Israeli Shekel.
     
Statutes   The Companies law 1999 (the “ Law ”) and the Companies Ordinance (New Version) 5743-1983 if and to the extent it applies, and any other law in force from time to time concerning joint stock companies and affecting the Company and the Articles, as amended from time to time.
     
2. Writing shall include printing and any other mode or modes of representing or reproducing words in a visible form.

 

Words importing the singular number shall include the plural number, and vice-versa.

 

Words importing the masculine gender shall include the feminine and neuter gender, and vice-versa.

 

Words importing persons shall include corporate bodies.

 

PURPOSE AND LIMITATIONS

 

3. The Company is:

 

3.1 Incorporated for the purpose of engaging in any lawful act or activity for which companies may be organized under the Law, as shall be designated by the Board from time to time.

 

3.2 Limited by the following legal restrictions:

 

3.2.1 The right to transfer shares in the Company is restricted in the manner provided in these Articles.

 

3.2.2 The number of Shareholders at any time is limited to 50 (exclusive of persons who are in the employment of the Company and of persons who, having been formerly in the employment of the Company were while in such employment and have continued after the termination of such employment to be Shareholders); provided, that where two or more persons jointly hold one or more shares in the Company they shall, for the purpose of this paragraph be treated as a single Shareholder.

 

3.2.3 Any invitation to the public to subscribe for any shares or debentures of the Company is hereby prohibited.

 

  2  

 

 

CAPITAL, SHARES AND RIGHTS

 

4. The authorized share capital of the Company is NIS 200,000, divided into 20,000,000 Ordinary Shares, each with a par value of NIS 0.01.

 

All issued shares of the Company of the same class shall rank equal among them as concerning the rights attached to the shares irrespective of the price per share paid for such shares.

 

The liability of each Shareholder for the Company's debts is limited to the full payment of the original issue price of the shares allotted to him. Once such price is paid, there is no further liability of the holder and his transferees.

 

5. Each issued Ordinary Share shall entitle its holder to the rights as described below:

 

5.1 One vote in all General Meetings.

 

5.2 The right to participate, pari passu, in the distribution of cash or stock dividends.

 

5.3 The right to participate, pari passu, in the distribution of assets available for distribution in the event of liquidation of the Company.

 

6. The Company may pay any person commission for signing or underwriting, or consenting to sign or underwrite, the Company's shares, either subject to pre-conditions or not, so long as the rate or amount to be paid as commission shall not surpass the rate or amount set out by the Directors. The commission shall be paid in cash or in the Company's shares fully or partially paid, or part in cash and part in shares.

 

7. A Person holding shares of the Company in trust for another (“ Trustee ”) must inform the Company of that fact no later than the date of allocation/transfer of the shares to the Trustee. The Company shall register that fact in the Register in respect of said shares. The Trustee shall be deemed to be the sole holder of said shares and the Company shall not be bound by or required to recognize any equitable, contingent, future or partial interest in any share or any right whatsoever in respect of any share other than an absolute right to the entirety thereof in the registered holder.

 

8. Every Shareholder shall be entitled without payment to receive, after allotment or registration of the transfer of shares, one or more certificates for the shares registered in his name, specifying the number and denoting numbers of the shares in respect of which it is issued, provided that in the case of joint holders the Company shall not be bound to issue more than one certificate to all the joint holders, and delivery of such certificate to any one of them shall be sufficient delivery to all. Every certificate shall be signed by one Director and countersigned by another Director or by the Secretary or some other person nominated by the Directors for that purpose.

 

9. If any share certificate be defaced, worn out, destroyed or lost, it may be renewed on such evidence being produced and such indemnity (if any) being given as the Directors shall require and (in case of defacement or wearing out) on delivery up of the old certificate.

 

CALL ON SHARES

 

10. The Directors may, subject to the provisions of these Articles, from time to time, make such calls upon the Shareholders in respect of all moneys unpaid on their shares (if any), provided that at least fourteen (14) days notice is given of each call, and each Shareholder shall be liable to pay the amount of every call so made upon him by the installments (if any) and at the times and places appointed by the Directors.

 

11. No Shareholder shall be entitled to receive any dividend or to exercise any privileges as a Shareholder until he shall have paid the full sum of calls duly made on account of the shares issued to him, whether alone or jointly with any other person.

 

The joint holders of a share shall be jointly and severally liable for the payment of all calls and installments in respect thereof.

 

12. If a payment of a call or installment payable in respect of a share is not paid on time, the holder or allottee of the share shall pay linkage differentials to the Consumer Price Index or to the Dollar plus interest on the amount of the call or installment at such rate per annum as the Directors shall fix, from the day appointed for payment thereof to the time of actual payment, but the Directors may waive payment of such interest wholly or in part.

 

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13. Any sum which by the terms of allotment of a share is made payable upon allotment or at any fixed date, whether on account of the amount of the share or by way of premium, shall for all purposes of these Articles, be deemed to be a call duly made, and payable on the date fixed for payment, and in case of non-payment the provisions of these Articles as to payment of interest and expenses, forfeiture and the like, and all other relevant provisions of these Articles, shall apply as if such sum were a call duly made and notified as hereby provided.

 

14. The Directors may, if they think fit, receive from any Shareholder willing to advance the same, all or any part of the moneys due upon his shares beyond the sums actually called up thereon, and upon the moneys so paid in advance, or so much thereof as exceeds the amount for the time being called upon on the shares in respect of which such advance has been made, the Directors may pay or allow such interest as may be agreed between them and such Shareholder.

 

FORFEITURE AND LIEN

 

15. If any Shareholder fails to pay any call or installment by no later than the day appointed for the payment of the same, the Directors may at any time thereafter during such time as the call or installment remains unpaid serve a notice on such Shareholder requiring him to pay the same together with interest and any expenses incurred by the Company by reason of such non payment.

 

16. The notice shall name a day (being not less than 14 days from the date of such notice) and a place on and at which such call or installment and such interest and expenses as aforesaid are to be paid. The notice shall also state that in the event of non-payment at or before the time and at the place appointed, the shares in respect of which the call was made or installment is payable will be liable to be forfeited.

 

17. If the requirements of any such notice as aforesaid are not complied with, any shares in respect of which such notice has been given may at any time thereafter (as long as payment of all calls or installments, interest and expenses, due in respect thereof is not fully made), be forfeited by a resolution of the Directors. Such forfeiture shall include all dividends, cash or other, declared in respect of the forfeited shares, whether actually paid or not paid, or whether granted or not granted, before forfeiture, and any other rights applicable to the forfeited share.

 

18. The Directors may sell, re-allot or otherwise dispose of any share so forfeited in such manner as they may think fit, subject to the provisions hereof, whether with or without all or any part of the amount previously paid on the share being credited as paid. Until such re-sale or re-allotment, the forfeited shares shall be deemed to be dormant shares.

 

19. The Directors may, at any time before any shares so forfeited shall have been sold, re-allotted or otherwise disposed of, annul the forfeiture thereof upon such conditions as they think fit.

 

20. A Shareholder whose shares have been forfeited shall, despite the forfeiture, be liable to pay to the Company all calls made and not paid on such shares up to the time of forfeiture with maximum interest thereon till the date of payment in the same manner in all respects as if the shares had not been forfeited and to satisfy all claims and demands which the Company might have enforced in respect of the shares at the time of forfeiture, without any deduction or allowance for the value of the shares at the time of forfeiture. Such Shareholder's liability shall cease upon receipt by the Company in full of the amount due in respect of the shares so forfeited including interest and expenses.

 

21. The Company shall have a first and paramount lien upon all of the shares (not being fully paid-up) registered in the name of each Shareholder (whether solely or jointly with others) and upon the proceeds of sale thereof for the moneys (whether presently payable or not) called or payable at a fixed time in respect of that share, and the Company shall also have a lien on all shares (other than fully paid-up shares), registered in the name of a Shareholder for all moneys presently payable by him or his estate to the Company, whether such debts are due solely from him or jointly with others. This lien shall also apply to dividends declared from time to time on these shares. The registration of a transfer of shares by the Company shall operate as a waiver of the Company's lien (if any) upon the shares, but shall be without prejudice to the rights of the Company against the transferor for moneys owed for the transferred shares.

 

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22. For the purpose of enforcing such lien the Directors may sell the shares subject thereto in such manner as they think fit, subject to the other provisions herein. However, no sale shall be made until such period as aforesaid shall have arrived and until notice in writing of the intention to sell shall have been served on such Shareholder, his heirs, executors, or administrators and default shall have been made by him or them in payment, fulfillment or discharge of such debts or engagements for 30 days after such notice.

 

23. The net proceeds of any sale of forfeited shares or shares sold by way of executing a lien, after payment of the expenses of such sale, shall be applied in or towards satisfaction of the debts or engagements (including interest) of such Shareholder. From the residue (if any), the Shareholder shall be paid the amount he did pay, if at all, and the same to his heirs, executors, administrators or assignees.

 

24. Upon any sale after forfeiture or enforcement of a lien in purported exercise of the powers hereinbefore given, the Directors will cause the purchaser's name to be entered in the Shareholders Register in respect of the shares sold, and the purchaser shall not be bound to see to the regularity of the proceedings or to the application of the purchase money, and after his name has been entered in the Register in respect of such shares, the validity of the sale shall not be impeached by any person, and the remedy of any person aggrieved by the sale shall be in damages only and against the Company exclusively.

 

An affidavit signed by a Director stating that a share has been duly forfeited on a certain date or a lien has been executed, shall be deemed sufficient and conclusive evidence in respect with any person claiming to have rights to said share.

 

TRANSFER OF SHARES

 

25. Until an IPO, and except for transfers of shares as permitted in Articles 25 through 30 below, and except for encumbrance of shares which receive the prior written consent of the Board, no Shareholder may sell, assign, transfer, pledge, hypothecate, or otherwise encumber or dispose of in any way, all or any part of or any interest in the Equity Securities to any person (a “ Transfer ”) now or hereafter owned or held by them, except in accordance with the provisions of these Articles.

 

Notwithstanding the above-stated and unless approved by the Board, no Shareholder will Transfer Equity Securities to a competitor of the Company as determined by the Board.

 

Any transfer of shares shall be subject to the prior approval of the Board and shall become effective only if the Shareholder has complied with all of the terms of these Articles and further provided that in the event of a Transfer by a Shareholder that is party to a then in effect agreement between shareholders of the Company, such transferee shall become party to such agreement by executing an agreement to accept all the rights and obligation of the transferring shareholder according to the said agreement. The Board shall be deemed to have approved such transfer within 14 days of the date all the pre-conditions to transfer have been complied with, unless the Board objects to the transfer within the said period. Any Transfer of Equity Securities not made in conformance with these Articles shall be null and void, shall not be recorded on the books of the Company and shall not be recognized by the Company.

 

BRING ALONG

 

26. Bring-Along

 

26.1 Prior to the consummation of an IPO or M&A Transaction and notwithstanding anything herein to the contrary in the event Shareholders holding more than seventy percent (70%) of the Company’s issued and outstanding share capital, calculated on an as-converted basis (the “ Proposing Holders ”), accept an offer to sell all of their Equity Securities to a buyer (the “ Buyer ”) pursuant to a bona fide written offer, and such sale is conditioned upon the sale of all remaining Equity Securities to the Buyer, then at the closing of such offered purchase of all the issued and outstanding shares of the Company: (i) all of the shareholders of the Company will transfer their shares to such Buyer on the same terms and conditions (the “ Bring Along Sale ”); (ii) all the Shareholders of the Company agree with respect to all Equity Securities of the Company which it/they own(s) or otherwise exercises voting or dispositive authority, as follows:

 

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(i) In the event such transaction is to be brought to a vote at a Shareholders meeting, after receiving proper notice of any meeting of shareholders of the Company, to be present, in person or by proxy, as a holder of shares of voting securities, at all such meetings and be counted for the purposes of determining the presence of a quorum at such meetings;

 

(ii) to vote (in person, by proxy or by action by written consent, as applicable) all shares of the Company as to which it has beneficial ownership in favor of such Bring Along Sale and in opposition of any and all other proposals that could reasonably be expected to delay or impair the ability of the Company or the Proposing Holders to consummate such Bring Along Sale;

 

(iii) to execute and deliver all related documentation and take such other action in support of the Bring Along Sale as shall reasonably be requested by the Company; and, neither any of the Shareholders of the Company nor any Affiliates thereof, shall deposit any shares of the Company beneficially owned by such Shareholder or Affiliate in a voting trust or subject any such shares to any arrangement or agreement with respect to the voting of such shares unless such trust, arrangement or agreement are subject to the provisions hereof; and the Company will be authorized to cancel all share certificates, to register the shares in the name of the purchaser in the Company’s share register and to issue the purchaser a share certificate representing all shares sold pursuant to this Article.

 

26.2 The aforesaid seventy percent (70%) shareholding requirement is hereby determined also for the purposes of Sections 341 of the Law, and the procedure set forth in Section 341 of the Law regarding the method by which shareholders who do not sign all related documentation shall be forced to sell their securities shall apply.

 

27. The term “Buyer” may include an existing Shareholder or its Affiliates, in which case the vote of the Proposing Holders shall not include such Shareholder’s holdings in calculating the outstanding share capital and the required 70% majority in Article 26 above shall be calculated from the remaining outstanding share capital excluding the holding of the Buyer.

 

RIGHT OF FIRST REFUSAL

 

28. Right of First Refusal

 

28.1 If at any time prior to an IPO any shareholder proposes to transfer Equity Securities to one or more buyers, then such shareholder (“ Transferor ”) shall give the Company written notice of the Transferor’s intention to make the Transfer (“ Transfer Notice ”), which Transfer Notice shall include (i) a description of the Equity Securities to be transferred (“ Offered Shares ”), (ii) the identity of the prospective buyer(s) and (iii) the consideration and the material terms and conditions upon which the proposed Transfer is to be made, including payment terms and closing conditions. The Company shall forward such Transfer Notice to each Qualified Holder. Each Qualified Holder undertakes to hold in strict confidence all the above information disclosed to them with respect to the Offered Shares and to use such information only for the purpose of evaluation whether it wishes to purchase any or all of the Offered Shares from the Transferor pursuant to this Article 28.

 

28.2 Qualified Holders’ Option. Prior to an IPO or an M&A Transaction, the Qualified Holders shall have an option, for a period of fourteen (14) days from receipt of the Transfer Notice, to elect to purchase their respective Pro Rata shares of the Offered Shares at the same price and subject to the same terms and conditions as described in the Transfer Notice. Each Qualified Holder may exercise such purchase option and, thereby, purchase all or any portion of its Pro Rata share of the Offered Shares, by notifying the Transferor and the Company in writing, before expiration of the fourteen (14) day period as to the number of such shares which it wishes to purchase. The Qualified Holder shall further notify the Transferor of any additional shares that such Qualified Holder wishes to purchase (the “ Extra Shares ”), in addition to its Pro Rata shares. Such notices shall be irrevocable.

 

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28.3 Each Qualified Holders’ Pro Rata share of the Offered Shares shall be a fraction of the Offered Shares, of which the number of Equity Securities owned by such Qualified Holder on the date of the Transfer Notice shall be the numerator and the total number of Equity Securities held by all Qualified Holders on the date of the Transfer Notice shall be the denominator.

 

28.4 To the extent that any Offered Shares are not purchased in full by the Qualified Holders (the “ Overallotment Shares ”), those Qualified Holders who have notified the Transferor of their wish to purchase Extra Shares (the “ Electing Holders ”) shall purchase such number of Extra Shares which was requested by such Electing Holder (in addition to their Pro Rata share). In the event that the total number of the requested Extra Shares is greater than the total number of the Overallotment Shares, then each of the Electing Holders shall purchase such number of Overallotment Shares as shall equal the number of Overallotment Shares multiplied by a fraction, the numerator of which shall be the number of Extra Shares that such Electing Holder has requested to purchase and the denominator shall be the total number of Extra Shares that were requested by the Electing Shareholders, at the same price and subject to the same material terms and conditions as described in the notice to the Transferor. Provided however that such Electing Holder shall not be obligated to purchase more than the number of Extra Shares included in his notice. The Transferor selling the Offered Shares shall notify the Company and each of the Electing Shareholders within five (5) days of the date of the notice given by the Electing Shareholders of the number of the Extra Shares to be purchased by each of them according to the above calculation, if any.

 

28.5 Each Qualified Holder shall be entitled to apportion Offered Shares and the Overallotment Shares to be purchased among its Permitted Transferees, as this term is defined below, provided that such Qualified Holder notifies the Transferor of such allocation.

 

28.6 If a Qualified Holder gives the Transferor notice that it desires to purchase its Pro Rata share of the Offering Shares and, as the case may be, any of the Extra Shares, then payment for its Pro Rata share of the Offered Shares and, as the case may be, its Extra Shares, shall be in the same method as specified in the Transfer Notice, against delivery of the Shares to be purchased at a place agreed upon between the parties according to the payment terms and at the time of the scheduled closing as were intended in the original offer therefore, as set forth in the Transfer Notice.

 

28.7 If the total number of shares requested to be purchased by the Qualified Holders does not reach the number of Offered Shares, the Company may purchase the remaining shares on the same terms as those offered by the Buyer for a period of 7 days.

 

28.8 If the number of shares requested to be purchased by the Qualified Holders and the Company together does not reach the number of Offered Shares, the Transferor may sell the remaining un-purchased Offered Shares or all of the Offered Shares, at the Transferee’s sole discretion, to the Buyer; always provided that: (a) the Board resolves that the admittance of the Buyer as a Shareholder is not detrimental to the Company; (b) the terms of the sale to such Buyer/s shall not be more beneficial to the Buyer/s than those offered in the Transfer Notice, and (c) that the sale to the Buyer/s is completed within 90 days after the expiration of the first refusal period.

 

28.9 Limitations to Rights of Refusal . The right of first refusal as set forth in Article 28 above shall not apply in the following transfers, and such transfers shall not require approval of the Board or the shareholders, and any of the Shareholders (i) may sell, transfer or otherwise assign, with or without consideration, Equity Securities to any: (a) spouse or member of the transferring Shareholder’s immediate family; or (b) between a trustee and beneficiary and vice-a-versa; or (c) in the case of any Shareholder which is a limited or general partnership, to any of its partners or affiliated partnerships managed by the same management company or managing (general) partner or by an entity which controls, is controlled by, or is under common control with, such management company or managing (general) partner; or (ii) may sell, transfer or otherwise assign, with or without consideration, Equity Securities to any entity controlling, controlled by or under common control with such Shareholder and the term control shall have the same meaning as set out in the securities law; (each a " Permitted Transferee "), provided that , such Permitted Transferee has agreed in writing to assume the obligations of the transferor under all agreements involving the Company and these Articles including undertakings towards the Office of the Chief Scientist if the transferee is a foreign citizen or entity, restrictions on transferability and more.. Additionally, the Right of First Refusal shall not apply in an event of Bring Along as set forth in Article 26 above.

 

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29. No transfer of shares shall be registered unless the transferor delivers to the Company a duly signed proper instrument of transfer in a form approved by the Company, and the transferor shall be deemed to remain the holder of the shares until the name of the transferee is entered in the Register in respect thereof.

 

Every transfer must be in writing and signed by both the transferor and the transferee.

 

Such transfer form must be duly stamped (if needed according to law), must be left at the Office, accompanied by the certificate of the Shares to be transferred, and such other evidence (if any) as the Directors may require to prove the title of the intending Transferor.

 

30. The Directors may refuse to register transfer of shares that are not fully paid up.

 

The Directors may refuse transfer to a Person whose holding of shares may, in their reasonable judgment, be detrimental to the Company.

 

The Directors may suspend transfer of shares during the 14 days period prior to a General Meeting.

 

The Directors may not register any transfer of shares if the transfer does not comply with the provisions of Articles 26 through 29 above.

 

TRANSMISSION OF SHARES

 

31. In the case of the death, liquidation, bankruptcy, dissolution, winding-up or a similar occurrence regarding a Shareholder, the legal successors of such Shareholder shall be the only persons recognized by the Company as having any title to his shares, but nothing herein contained shall release the estate of the predecessor from any liability in respect of any share held by him.

 

The legal successors may, upon producing such evidence of title as the Directors shall require, be registered themselves as the holder/s of the share/s, or subject to the provisions as to transfers herein contained, transfer the same to some other person.

 

32. A person entitled to shares by transmission as set forth in Article 31 above shall not be entitled with respect of such shares to receive notices of, or to attend or vote at meetings of the Company, or, save as aforesaid, to exercise any of the rights or privileges of a Shareholder, except with respect to accrue dividends or other moneys payable in respect of such shares, unless and until he shall become and be registered as a Shareholder with respect of such shares.

 

ALTERATIONS OF THE AUTHORIZED CAPITAL

 

33. Subject to the other provisions of these Articles, the General Meeting may from time to time resolve to:

 

33.1 Alter or add classes of shares that shall constitute the Company's Authorized Capital, including shares with preference rights, deferred rights, conversion rights or any other special rights or limitations.

 

33.2 Increase the Company's authorized share capital by the creation of new shares whether all the shares for the time being authorized shall have been issued or all the shares for the time being issued shall have been fully called up or not.

 

33.3 Consolidate and divide all or any of its share capital into shares of larger or smaller amounts than the existing shares.

 

33.4 Cancel any shares not taken or agreed to be taken by any Person.

 

34. The Company shall be entitled to issue redeemable securities which will be, or at the option of the Company may be, redeemed on such terms and in such manner as shall be determined by the Company. Redeemable securities shall not constitute part of the Company's equity, except as provided in section 312 of the Law.

 

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35. Except as far as otherwise provided by or pursuant to these Articles or by the conditions of issue, any new share capital of a certain class shall be considered as part of the original share capital of the same class, and shall be subject to the same provisions with reference to the payment of calls, lien, transfer, transmission, forfeiture and otherwise.

 

MODIFICATION OF CLASS RIGHTS

 

36. If at any time the share capital is divided into different classes of shares, the rights attached to any class (unless otherwise provided by the terms of issue of the shares of that class) may be varied by a resolution passed at a separate General Meeting of the holders of the shares of the said class. The provisions of these Articles relating to General Meetings shall, mutatis mutandis, apply to any class meeting.

 

GENERAL MEETINGS

 

37. Annual General Meetings shall be held at least once in every calendar year, at such time not being more than fifteen (15) months after the holding of the last preceding Annual General Meeting, and at such place as may be determined by the Directors. Such General Meetings shall be called "Annual Meetings" and all other meetings of the Shareholders shall be called "Special Meetings". The Annual Meeting shall receive and consider the Directors' Report, the Financial Reports, shall appoint Directors and the Auditor and shall transact any other business which under these Articles or by the Law are to be transacted at an Annual Meeting of the Company.

 

In accordance with Section 61 to the Law and without derogating from any right granted herein, the Board may resolve that an Annual Meeting shall not be convened, unless to the extent that an appointment of the Auditor is required. In the event that the Annual Meeting is not held as aforementioned, the Board shall send each of the Shareholders in the Register the Company’s Financial Statements by not later than the date on which the Annual Meeting was to take place.

 

38. The Directors may decide to convene a Special Meeting whenever they think fit, and they shall be required to convene a Special Meeting should they receive a request, in writing, from a person or persons entitled, under the Law, to request such meeting, provided however, that in every calendar year there shall be no more than two (2) Special Meetings convened by any one Shareholder.

 

Any request for convening a Special Meeting must specify the purposes for which the meeting is to be called, shall be signed by the persons requesting the meeting, and shall be delivered to the Office. In addition, subject to the Law, the Board may accept a request of a shareholder to include a subject in the agenda of a general meeting, only if the request also sets forth: (a) the name and address of the Shareholder making the request; (b) a representation that the Shareholder is a holder of record of shares of the Company entitled to vote at such meeting and intends to appear in person or by proxy at the meeting; (c) a description of all arrangements or understandings between the Shareholder and any other person or persons (naming such person or persons) in connection with the subject which is requested to be included in the agenda; and (d) a declaration that all the information that is required under the Statutes to be provided to the Company in connection with such subject, if any, has been provided. In addition, if such subject includes a nomination to the Board in accordance with the Articles, the request shall also set forth the consent of each nominee to serve as a Director of the Company if so elected and a declaration signed by each nominee declaring that there is no limitation under the Law for the appointment of such nominee. Furthermore, the Board may, in its discretion and to the extent it deems necessary, direct that the Shareholders making the request provide additional information necessary so as to include a subject in the agenda of a General Meeting, as the Board may reasonably require.

 

39. The Board shall decide upon the agenda for the General Meeting and shall include in the meeting the issues listed in the requisition as per Article 38 above.

 

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40. At least 7 days and no more than 60 days prior notice of any General Meeting (Annual and Special) shall be given to the Shareholders, unless either generally or in any particular case all of the Shareholders, by written notice to the Company, waive the necessity of such notice or agree to a shorter notice. A waiver may be given retrospectively even after the date of the meeting. A list of the matters to be dealt with at a General Meeting shall be given together with the notice convening the meeting.

 

41. The Company is obligated to give notice of each General Meeting, whether Annual or Special, to: (i) any Shareholder entitled to receive notice in accordance with these Articles; and (ii) any person who is the legal representative in connection with the death, liquidation, bankruptcy, dissolution, winding-up of a Shareholder, provided the original Shareholder had such right and provided that the successor has submitted to the Company proof of his status.

 

The accidental omission to give notice of any meeting to or the non-receipt of any such notice by any of the Shareholders shall not invalidate any resolution passed at any such meeting.

 

PROCEEDINGS AT GENERAL MEETINGS

 

42. Notwithstanding anything in these Articles to the contrary, no business shall be transacted at any General Meeting unless a quorum of Shareholders is present at the opening of the Meeting.

 

Save as provided in the following Article with regard to an adjourned Meeting, the quorum for any General Meeting shall be at least two Shareholders holding together more than 50% of the voting power in the Company.

 

43. If within half an hour from the time appointed for the holding of a General Meeting a quorum is not present, the Meeting shall stand adjourned to the same day one week later at the same time and place or to such other day, time and place as the Board may appoint by notice to the Shareholders. At such adjourned Meeting the necessary quorum for the business for which the original Meeting was called shall be any number of shareholders.

 

The aforesaid notwithstanding, if a General Meeting is called in order to deal solely with issues presented by a Shareholder(s) as provided in Article 38 above, and a quorum is not present, such General Meeting shall be canceled.

 

44. The Chairman (if any) of the Board shall preside as the chairman at every General Meeting, but if there shall be no such Chairman or if at any meeting he shall not be present within fifteen minutes after the time appointed for holding the same, or shall be unwilling to act as Chairman, the Shareholders present shall choose another Director, or if no Director be present or if all the Directors present decline to take the chair, they shall choose a Shareholder present to be Chairman of the meeting.

 

45. The Chairman may, with the consent of a General Meeting at which a quorum is present, and shall if so directed by the General Meeting, adjourn any meeting from time to time and from place to place as the meeting shall determine. Whenever a meeting is adjourned for 30 days or more, notice of the adjourned meeting shall be given in the same manner as in the case of the original meeting. Save as aforesaid, no Shareholder shall be entitled to any notice of an adjournment or of the business to be transacted at an adjourned meeting. No business shall be transacted at any adjourned meeting other than the business which might have been transacted at the meeting from which the adjournment took place.

 

46. A vote in respect of the election of the Chairman of the Meeting or regarding a resolution to adjourn the meeting shall be carried out immediately. All other matters shall be voted upon during the meeting at such time as directed by the Chairman.

 

VOTE OF SHAREHOLDERS

 

47. All resolutions proposed at any General Meeting will require a simple majority of the participating votes (excluding abstentions), unless otherwise required by the Statutes or in these Articles.

 

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Subject to the modification of class rights as provided in Article 36 above, no separate Class Meeting shall be required for an amendment of these Articles in the event the Company's outstanding shares are divided into more than one class.

 

An amendment to these Articles requiring a Shareholder to purchase additional shares, or increasing his liability, shall not be binding upon a Shareholder without his consent.

 

48. At all General Meetings a resolution put to the vote of the meeting shall be decided upon by an open vote. A declaration by the Chairman of the meeting that a resolution has been carried, or has been carried unanimously or by a particular majority, or rejected, or not carried by a particular majority, shall be conclusive, and an entry to that effect in the minutes of the meeting shall be conclusive evidence thereof (without need to prove the number or proportion of the votes in favor of or against such resolution).

 

49. If two or more persons are jointly entitled to a share, the vote of the senior one who tenders a vote, whether in person or by proxy, shall be accepted to the exclusion of the votes of the other registered holders of the share, and for this purpose seniority shall be determined by the order in which the names stand in the Register.

 

50. Votes may be given either personally or by proxy. A proxy need not be a Shareholder of the Company.

 

51. Any instrument appointing a proxy (whether for a specified meeting or otherwise) shall be in the form as the Directors will from time to time approve.

 

The instrument appointing a proxy shall be in writing under the hand of the appointor or of his attorney in fact duly authorized in writing, or if such appointor is a corporation, under the hand of a duly authorized officer of the corporation.

 

The appointment must be submitted to the Chairman of the General Meeting no later than at the opening of the first General Meeting to be attended by such proxy. Such appointment may be by a facsimile transmission.

 

52. A proxy may be appointed in respect of only some of the shares held by a Shareholder, and a Shareholder may appoint more than one proxy, each empowered to vote by virtue of some of the shares.

 

53. A Shareholder being of unsound mind or pronounced to be unfit to vote by a competent court of law may vote through a legally appointed guardian or any other representative appointed by a court of law to vote on behalf of said Shareholder.

 

54. No person shall be entitled to vote at any General Meeting or be taken into account in a quorum with regard to any shares whilst any call shall be due and payable to the Company in respect of those shares of such Shareholder, unless otherwise resolved by the Board.

 

55. A Shareholder entitled to vote may signify his approval of or dissent from any resolution passed or intended to be proposed at a General Meeting or any amendment in any such resolution by a written communication (including fax or electronic form) to the Company, and such Shareholder shall be taken into account in determining the quorum as if such Shareholder was present at the meeting and his vote counted pursuant to the vote indicated.

 

Furthermore, a Resolution in writing signed by all the Shareholders entitled to vote in a General Meeting shall be as valid and effectual as if it had been passed at a General Meeting duly convened and held. Any such Resolution may consist of several documents in like form, each signed by one or more Shareholders (including fax or electronic form).

 

56. The Chairman shall be responsible for recording the minutes of the General Meeting and any resolution adopted. The Company shall keep the Minutes at the Office for a period of 7 years after the date of the meeting. The Minutes shall be available for review by the Shareholders, and any Shareholder may request a copy.

 

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DIRECTORS

 

57. The Board shall have and execute all powers, authorities and responsibilities not specifically allocated to the CEO or the General Meeting by the Statutes or in these Articles.
The Board shall consist of up to ten (10) Directors .

 

The Directors shall be appointed by a majority vote of the Shareholders in a general meeting of all the shareholders on an as converted basis.

 

A Director need not hold any qualification shares nor be a Shareholder.

 

58. Subject to the foregoing, if a seat be vacated on the Board, the remaining Directors may at any time act, notwithstanding any such vacancy, provided a legal quorum exists.

 

59. Subject to the Law, a Director shall be entitled at any time and from time to time to appoint in writing any person who is qualified to serve as a Director, to act as his/her alternate and to terminate the appointment of such person. The appointment of an alternate Director does not negate the responsibility of the appointing Director and such responsibility shall continue to apply to such appointing Director - taking into account the circumstances of the appointment.

 

Alternate Directors shall be entitled, while holding office, to receive notices of meetings of the Board and to attend and vote as a Director at any meeting at which the appointing Director is not present and generally to exercise all the powers, rights, duties and authorities and to perform all functions of the appointing Director.

 

The document appointing an alternate Director must be submitted to the Chairman no later than at the opening of the first Board meeting to be attended by such alternate Director.

 

60. The Directors shall be entitled to remuneration by virtue of their office, if and to the extent so resolved by a General Meeting.

 

61. No person shall be appointed to the office of a Director if such person:

 

61.1 Has been convicted of a crime as provided in section 226 to the Law, during the last five years prior to his appointment; or

 

61.2 Becomes bankrupt or unduly suspends payment to his creditors; or

 

61.3 Be found lunatic or becomes of unsound mind - as determined by a competent court of law; or

 

61.4 If an incorporated entity is a Director and has filed for liquidation or a liquidation writ or order has been granted against it.

 

62. The office of a Director shall be vacated if one or more of the events mentioned in Article 61 has occurred, or:

 

62.1 If the Director resigns his office by notice in writing given to the Company; or

 

62.2 If the Director is removed, replaced, substituted or his appointment terminated by the General Meeting who nominated the Director; or

 

63. A Director may hold any other office or deal in any other business outside the Company, and a Director may do business with the Company, subject to his duty to disclose his interest in the transaction and any other duty imposed by the Statutes or any other relevant law.

 

PROCEEDINGS OF THE DIRECTORS

 

64. The Directors shall meet together for the dispatch of business, adjourn and otherwise regulate their meetings as they think fit - subject to these Articles. The Board shall meet no less than once every calendar quarter.

 

65. The Chairman may, and on the request of any Director shall, at any time summon a meeting of the Board. Written notice of any meeting of the Board and the agenda setting out the matters to be discussed at such meeting, shall be given to all Directors at least three (3) days (or such shorter notice as all the Directors may agree) before the meeting. The Directors may waive the necessity of such notice either beforehand or retrospectively. In the event a meeting of the Board is not convened within 14 days of request, any Director may convene the meeting.

 

  12  

 

 

66. Notwithstanding anything in these Articles to the contrary, no business shall be transacted at any meeting of the Board unless a quorum of Directors is present at the opening of the meeting. Save as provided in this Article with regard to an adjourned meeting, a quorum shall be formed with the presence, personally or by proxy, of at least a majority of the Directors actually nominated at that time, provided always that the matters to be discussed at any such meeting shall only be those matters that were set out in the agenda previously circulated.

 

If within half an hour from the time appointed for the holding of a Board meeting a quorum is not present, the Board meeting shall stand adjourned to the same time and place on the next business day or to such other day, time and place as the Chairman may appoint by notice to the Directors, and at such adjourned Board meeting the necessary quorum for the business for which the original Board Meeting was called shall be at least two (2) Directors present.

 

67. The Board shall elect the Chairman of the Board from time to time and shall decide upon the period in which the Chairman shall preside.

 

The Chairman shall preside at meetings of the Directors, but if at any meeting the Chairman is not present within (15) minutes after the time appointed for holding the meeting, the Directors shall choose a present Director to be Chairman of such meeting.

 

68. The Chairman or any other chairman of the Meeting will not have a second and/or a casting vote.

 

69. Some or all of the Directors may attend meetings of the Board through computer network, telephone or any other media of communication, enabling the Directors to communicate with each other, in the deemed presence of all of them, provided that due prior notice detailing the time and manner of holding a given meeting is served (orally or otherwise) upon all the Directors. Any resolution adopted by the Directors in such a meeting will be recorded in writing and signed by the Chairman of the Board or the Chairman of the meeting, and shall be valid as if adopted at a meeting of the Board duly convened and held.

 

70. A resolution in writing signed by all the Directors, or to which all the Directors have agreed in writing or by fax or electronic mail, shall be as valid and effective for all purposes as if passed at a meeting of the Board duly convened and held.

 

Any such Resolution may consist of several documents in like form, each signed by one or more Directors. Such resolution in writing (including fax and e-mail) shall be effective as of the last date of the resolution, or if the resolution is signed in two or more counterparts, as of the last date appearing on the counterparts.

 

71. While exercising his voting right, each Director shall have one vote. Resolutions of the Board will be decided by a simple majority of the voting Directors, except as otherwise provided in these Articles or by the Statutes. In the event of a dead lock, or in the event that the required majority vote is not reached with respect to any resolution tabled at a meeting of the Board, the resolutions shall be deemed rejected.

 

A Director, as such, shall not be party to a voting agreement.

 

COMMITTEES

 

72. The Directors may delegate their powers (not including their powers as listed in section 112(a) of the Law) to committees consisting of such Director or Directors of their body as they think fit. Any committee so formed shall in the exercise of the powers so delegated conform to any regulations that may be imposed on it by the Board.

 

Meetings of committees and proceedings thereat (including the convening of the meetings, the election of the chairman and the votes) shall be governed by the provisions herein contained for regulating the meetings and proceedings of the Board so far as the same are applicable thereto.

 

MINUTES

 

73. The resolutions of the Board and committees shall be recorded in the minutes book of the Company. A declaration by the Chairman that a resolution has been carried, or has been carried unanimously or by a particular majority, or rejected, or not carried by a particular majority, shall be conclusive, and an entry to that effect in the minutes of the meeting shall be conclusive evidence thereof (without need to prove the number or proportion of the votes in favor of or against such resolution).

 

  13  

 

 

74. Every Director shall have the right to inspect the Company's books and receive copies thereof and review the Company's assets, solely for the purpose of executing his duties as a Director in the Company. The Board may restrict or prevent a Director from reviewing certain documents or assets if the Board is of the opinion that the Director is not acting in good faith or that the review may be contrary to the Company's interests.

 

CEO & SECRETARY

 

75. The Board may appoint any person to be Chief Executive Officer (may such Person’s title be the Chief Executive Officer, President, General Manager or such other title as the Directors will determine - in these Articles referred to as “ CEO ”). The Board, subject to the rights of certain shareholders according to agreements between them and the Company, for such period and upon such terms as they think fit, and may vest in such person such powers as provided by the Law and such powers may be made exercisable for such period or periods and upon such conditions and subject to such restrictions and generally upon such terms as to remuneration and otherwise as they may determine. The remuneration of the person/s mentioned above may be by way of salary or commission or participation in profits, or by any or all of these modes.

 

76. The CEO, if appointed, shall have all managing and execution powers not given to the Board or the General Meeting, and shall be under the supervision of the Board.

 

77. The CEO may delegate any of his powers to his subordinates, subject to the approval of the Board.

 

78. The CEO shall report to the Chairman of the Board any material issues which are outside the normal course of business, and shall submit to the Board periodical reports as may be required by the Board.

 

79. The Directors may appoint a Secretary of the Company on any terms they think proper, and they may from time to time appoint a temporary substitute for the Secretary - who shall be deemed to be Secretary during the term of his appointment.

 

INSURANCE, INDEMNITY AND EXCULPATION

 

80. The Company may insure the liability of an Office Holder, subject to the following provisions and the restrictions as set out in the Law.

 

The Company may enter into a contract to insure an Office Holder for liabilities imposed on him/her in consequence of an act performed in his/her capacity as an Office Holder, in any of the following cases:

 

80.1 a breach of the duty of care to the Company or to another person;

 

80.2 a breach of the duty of loyalty to the Company, provided that the Office Holder acted in good faith and had a reasonable basis to believe that the act would not harm the Company;

 

80.3 a monetary obligation imposed on him in favor of another person.

 

80.4 any other act which is insurable under the Law.

 

81. The Company may indemnify an Office Holder, subject to the following provisions:

 

81.1 The Company may undertake to indemnify an Office Holder for future obligation or expense imposed on him/her in consequence of an act done in his/her capacity as an Office Holder, as specified below:

 

(a) a monetary obligation imposed on him/her in favor of another person pursuant to a judgment, including a judgment given in settlement or a court approved settlement or arbitrator's award;

 

  14  

 

 

(b) reasonable legal fees, incurred by an Office Holder or which he is ordered to pay by a court, in proceedings filed against him by the Company or on its behalf or by another person, or in a criminal charge of which he is acquitted, or in a criminal charge of which he is convicted of an offence that does not require proof of criminal intent.

 

(c) reasonable legal fees, including attorneys fees, incurred by an Office Holder in an investigatory proceeding or other proceeding filed by a governmental authority, which has terminated without the filing of criminal charges and without imposing a fine, or with imposing a fine in lieu of a criminal charge which does not require proof of criminal intent.

 

The termination of a proceedings without the filing of criminal charge in a matter in which a criminal investigations was initiated – means the closing of such file in accordance with Section 62 to the Criminal Procedure Act [Combined Version], 1982 (in this article the “ Criminal Procedure Act ”), or the stay of proceedings by the attorney general in accordance to section 231 of the Criminal Procedure Act.

 

The term “imposing a fine in lieu of a criminal charge” means that a fine is imposed in accordance with applicable law in lieu of a criminal procedure, including administrative fines according to the Administrative Offense Law, 1985, and including fines on such offenses as are recognized to be fine offenses in accordance with the Criminal Procedure Act.

 

(d) Any other obligation or expense, which is allowable according to the Law.”

 

81.2 The Company may undertake in advance to indemnify an Office Holder for:

 

(a) Obligations and expenses as set out in Article 81.1(a) above, provided that such undertaking is limited to events which in the Boards' opinion are foreseeable at the time of providing the indemnity undertaking in view of the Company’s activities at that time, and in such amount and/or criteria as the Board deems foreseeable in view of the Company’s activities at that time; and the undertaking instrument must specify such events, sums and criteria.

 

(b) Obligations and expenses as set out in sub-Articles 81.1(b), 81.1(c) and 81.1(d).

 

81.3 Without prejudice to the aforesaid provisions, the Company may retroactively indemnify an Office Holder, for events specified in sub-Article 81.1 above, beyond the limits set forth in sub-Article 81.2 above.

 

82. The Company may waive in advance any claim against an Office Holder for all or any of his/her liability for damage in consequence of a breach of his duty of care to the Company. Such waiver in advance shall not apply to breach of duty of care in a Distribution.

 

83. The provisions of Articles 80, 81 and 82 shall not apply in the following cases: (a) a breach of the duty of loyalty to the Company, unless the Office Holder acted in good faith and had reasonable foundation for presuming that the act would not harm the Company; (b) a breach of a duty of care committed intentionally or recklessly; (c) an act done with intent to make unlawful personal profit; or (d) a fine or forfeit imposed upon the Office Holder, except for a conviction in a felony which does not require criminal intent.

 

84. The above provisions with regard to insurance, exculpation and indemnification shall not limit the Company with regard to its entering into an insurance contract and/or with regard to indemnity and/or with regard to exculpation provided to:

 

84.1 a person who is not an Office Holder, including employees, contractors or consultants who are not Office Holders;

 

84.2 Office Holders, to the extent that the insurance, waiver or indemnification are not expressly prohibited by the Law.

 

VALIDITY OF ACTS

 

85. All acts bona fide done by any meeting of the Board or of a committee of the Board, shall, notwithstanding it be afterwards discovered that there was some defect in the appointment of any such Director or person acting as aforesaid, or that they or any of them were disqualified, be as valid as if every such person had been duly appointed and was qualified to be Director.

 

  15  

 

 

BUSINESS AND BORROWING POWERS

 

86. The Company may engage in any type of business which is allowed under the Statutes, at any time and during any period that is deemed beneficial to the Company, and it may cease engagement in any such business; all subject to the resolutions of the Board and to these Articles.

 

87. The Company may, from time to time, raise or borrow or secure the payment of any sum or sums of money for the purposes of the Company. The Company may also raise or secure the payment or repayment of such sum or sums in such manner and upon such terms and conditions in all respects as the Board deems fit, and in particular by the issue of debentures or debenture stock of the Company charged upon all or any part of the property of the Company (both present and future) including its unissued and/or its uncalled capital for the time being.

 

FINANCIAL REPORTS, AUDITOR

 

88. The Company shall keep accounts and shall cause financial reports to be prepared in accordance with the guidelines set out in the Law and any other relevant Statute.

 

89. Subject to the Statutes, the Annual Meeting shall appoint an Auditor for a period ending at the next Annual Meeting, or for a longer period - but no longer than until the third Annual Meeting after the meeting at which the Auditor has been appointed. The same Auditor may be re-appointed.

 

Subject to the Statutes, the fees of the Auditor for the audit services shall be determined by the Board or a committee of the Board if such determination was delegated to a committee. The Board shall report the fees of the Auditor to the Annual Meeting.

 

SIGNATORIES

 

90. The signature of any person or persons appointed from time to time by the Board, generally or for any particular occasion, together with the rubber stamp or printed or typed name of the Company, shall be binding upon the Company.

 

DISTRIBUTIONS

 

91. The Board may decide upon a Distribution (as such term is defined in the Law), subject to the provisions set forth in the Law and these Articles.

 

92. Whenever the Board decides upon distribution of dividends (cash, shares or in kind), the dividends shall be paid in the same manner to all the outstanding shares having rights to receive dividends on the date of the resolution (or a later date as determined by the Board), subject to preferred rights (if any) of any class of shares in respect of the distribution.

 

93. Notice of the declaration of any Distribution, shall be given to all registered holders of shares eligible to such Distribution, as determined by the Board.

 

94. The Board will determine the method of payment of any Distribution.

 

The cashing of a check or the wiring of the sum to such person whose name appears on the record date on the Register as the owner of any share, or in the case of joint holders, of any one of such joint holders, shall serve as confirmation of receipt with respect to all the payments made in connection with that share.

 

All dividends unclaimed after having been declared may be invested or otherwise used by the Directors for the benefit of the Company until claimed. Unpaid dividends shall not bear interest nor accrue linkage differentials.

 

95. If a Distribution requires a written instrument between the Company and the Shareholders according to the Law, the Board may appoint one representative on behalf of all the Shareholders entitled to receive such Distribution and such appointment shall be deemed due appointment by all participating Shareholders.

 

  16  

 

 

96. For the purpose of implementing any resolution concerning any Distribution, the Board may settle, as it deems fit, any difficulty that may arise with respect to the Distribution, including the value for the purpose of the said Distribution of certain assets, and may decide that payments in cash shall be made to the Shareholders based on the value so determined, and the Board may determine provisions with respect to fractions of shares or with respect to the non-payment of small sums.

 

97. If two or more Persons are registered as joint holders of any shares, any one of such Persons may give effectual receipts for any dividend or other moneys in respect of such share.

 

MERGERS

 

98. The Company may, by a simple majority resolution of the General Meeting but subject to the other provisions of these Articles, decide to merge with another company - in accordance with the provisions set out in the Law and in these Articles.

 

WINDING - UP

 

99. Should any Shareholder request the winding up of the Company, such Shareholder shall offer his shares in the Company to the Company and the other Shareholders, and if the Company or the other Shareholders or some of them agree to purchase such shares at a price agreed between them (which shall not be more than the aggregate investment amount invested by the selling shareholder), then the shares will be sold to the Company or to such Shareholders, and the request for winding up will be canceled.

 

100. If the Company shall be wound up, whether voluntarily or otherwise, the liquidators may, with the sanction of a resolution as provided in the Statutes and subject to the terms of these Articles, divide among the Shareholders in specie any part of the assets of the Company, and may with the like sanction vest any part of the assets of the Company in trustees upon such trusts for benefit of the Shareholders as the liquidators with the like sanction shall think fit.

 

101. On any sale of the assets of the Company, subject to the special rights of any class of shares, the Directors or the liquidators on a winding-up may, if authorized by a resolution as provided in the Ordinance, and subject to the other provisions of these Articles, accept fully paid up shares, debentures or securities of any other company, whether Israeli or foreign, either then existing or to be formed for the purchase in whole or in part of the property of the Company; and the Directors (if the profits of the Company permit), or the liquidators (on a winding-up), may distribute such shares or securities or any other property of the Company amongst the Shareholders without realization, and any such resolution may provide for the distribution or appropriation of the cash, shares or other securities, benefits or property, otherwise than in accordance with the strict legal rights of the Shareholders, and for the valuation of any such securities or property at such price and in such manner as the Meeting may approve, and all holders of shares shall be bound to accept and shall be bound by any valuation or distribution so authorized.

 

REGISTERS AND DOCUMENTS

 

102. The Company shall keep at the Office:

 

102.1 These Articles as amended from time to time.

 

102.2 Minutes of the meetings of the General Meeting.

 

102.3 Minutes of the meetings of the Board and Board Committees.

 

102.4 Copies of all notices sent by the Company to the Shareholders.

 

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102.5 The Company's Financial Reports.

 

102.6 The Shareholders Register

 

102.7 The list of Directors.

 

103. The Company may keep the above-mentioned documents solely in the form of electronic data, provided that a person entitled to review said documents shall be able to receive hard copies.

 

104. Subject to and in accordance with the provisions of the Statutes, the Company shall be at liberty to cause to be kept in any country to which the said provisions may be extended a branch Register or Register of Shareholders resident in any such country as aforesaid, and to exercise all the other powers mentioned in the Statutes relating to such branch registers.

 

DONATIONS

 

105. The Company may make donations of reasonable amounts of money for purposes which the Board deems to be worthy causes, even if the donations are not made in relation to business considerations for increasing the Company's profits.

 

NOTICES

 

106. Subject to the Statutes, notice or any other document which the Company shall deliver and which it is entitled or required to give pursuant to the provisions of these Articles and/or the Statutes shall be delivered by the Company to any person, in any one of the following manners as the Company may choose: in person, by mail, transmission by fax or by electronic means such as e-mail.

 

Any notice or other document which is sent to the Shareholders or the Directors, shall be deemed to have reached its destination: on the 7th day after the day of mailing if sent by registered mail or regular mail, or on the first day after transmission if delivered in person, transmitted by fax or electronic means (e-mail etc.).

 

Should it be required to prove delivery, it shall be sufficient to prove that the notice or document was sent to the correct address - as registered in the Register, or as provided by the Shareholder or Director, or as otherwise reasonably determined by the Company.

 

Subject to the Statutes, the Company shall not be required to send notices to any Shareholder who is not registered in the Register or has not provided the Company with accurate and sufficient mailing details.

 

107. In cases where it is necessary to give advance notice of a particular number of days or notice which shall remain in effect for a particular period, the day the notice is sent shall be excluded and the scheduled day of the meeting or the last date of the period shall be included in the count.

 

108. Any notice to be given to the Shareholders shall be given, with respect to joint shareholders, to the person whose name appears first in the Register as the holder of the said share, and any notice so given shall be sufficient notice for all holders of the said share.

 

109. Any notice or other document served upon or sent to any Shareholder in accordance with these Articles shall, notwithstanding that he be then deceased or bankrupt, and whether the Company received notice of his death or bankruptcy or not, be deemed to be duly served or sent in respect of any shares held by him (either alone or jointly with others) until some other person is registered in his stead as the holder or joint holder of such shares, and such service or sending shall be a sufficient service or sending on or to his heirs, executors, administrators or assigns and all other persons (if any) interested in such share.

 

110. The accidental omission to give notice to any Shareholder or the non-receipt of any such notice, shall not cancel or annul any action made in reliance on the notice.

 

111. The provisions of Articles 106 thorough to Article 109 shall apply in the same manner, subject to required adjustments, on any notice or other document that is sent by a Director or Shareholder to the Company, or to another Director or any other Shareholder.

 

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

  18  

 

 

Amendment to the Current Articles of Association

 

1. Article 4 will be replaced in its entirety with the following new Article 4:

 

4. The authorized share capital of the Company is NIS 1,000,000, divided into 100,000,000 Ordinary Shares, each with a par value of NIS 0.01 .

 

All issued shares of the Company of the same class shall rank equal among them as concerning the rights attached to the shares irrespective of the price per share paid for such shares .

 

The liability of each Shareholder for the Company's debts is limited to the full payment of the original issue price of the shares allotted to such Shareholder. Once such price is paid, there is no further liability of the holder and his transferees.

 

2. A new Article 9A will be added as follows:

 

9A. Preemption Rights. Section 290(a) to the Companies Law shall not apply to any past and future issuances of shares and/or other securities of the Company made or to be made by the Company, including without limitation, with respect to any and all options to purchase shares previously granted by the Company pursuant to the Company's 2008 Israeli Option Plan, 2008 ROW Option Plan and 2018 Incentive Plan, and any shares issued pursuant to the exercise thereof.

 

3. Articles 80 – 84 will be replaced in its entirety with the following new Articles 80 - 84:

 

Exemption, Indemnity and Insurance

 

80. Insurance

 

Subject to the provisions of the Companies Law, and to the extent applicable, the Israeli Securities Law, 5728-1968 (the " Securities Law ") and the Israeli Economic Competition Law, 5748-1988 (the " IEC Law "), with regard to such matters, the Company may enter into a contract for the insurance of the liability, in whole or in part, of any of its Office Holders imposed on such Office Holder due to an act performed by or an omission of the Office Holder in the Office Holder’s capacity as an Office Holder of the Company arising from any matter permitted by law, including the following:

 

 

 

 

80.1 a breach of duty of care to the Company or to any other person, to the extent such a breach arises out of the negligent conduct of the Office Holder;

 

80.2 a breach of his duty of loyalty to the Company, provided that the Office Holder acted in good faith and had reasonable grounds to assume that the act would not harm the Company;

 

80.3 a financial liability imposed on such Office Holder in favor of a third party;

 

80.4 expenses incurred by the Office Holder with respect to proceedings held pursuant to certain provisions of the IEC Law;

 

80.5 a monetary liability imposed on the Office Holder in favor of an injured party at an Administrative Procedure pursuant to Section 52(54)(a)(1)(a) of the Securities Law; and

 

80.6 expenses incurred by an Office Holder in connection with an Administrative Procedure, including reasonable litigation expenses and reasonable attorneys’ fees.

 

81. Indemnity

 

81.1 Subject to the provisions of the Companies Law, and to the extent applicable, the Securities Law and the IEC Law, the Company may retroactively indemnify an Office Holder of the Company with respect to the following liabilities, payments and expenses, provided that such liabilities, payments or expenses were imposed on such Office Holder or incurred by such Office Holder for acts performed or omissions committed by him or her as an Office Holder:

 

81.1.1 a financial liability imposed on an Office Holder in favor of another person by any court judgment, including a judgment given as a result of a settlement or an arbitrator’s award which has been confirmed by a court in respect of an act performed by the Office Holder;

 

81.1.2 reasonable litigation expenses, including attorneys’ fees, expended by the Office Holder (A) as a result of an investigation or proceeding instituted against him or her by an authority authorized to conduct such investigation or proceeding, provided that (1) no indictment (as defined in the Companies Law) was filed against such Office Holder as a result of such investigation or proceeding; and (2) no financial liability in lieu of a criminal proceeding (as defined in the Companies Law) was imposed upon him or her as a result of such investigation or proceeding or if such financial liability was imposed, it was imposed with respect to an offence that does not require proof of criminal intent; and (B) in connection with a monetary sanction;

 

  - 2 -  

 

 

 

81.1.3 reasonable litigation costs, including attorney’s fees, expended by an Office Holder or which were imposed on an Office Holder by a court in proceedings filed against the Office Holder by the Company or in its name or by any other person or in a criminal charge in respect of which the Office Holder was acquitted or in a criminal charge in respect of which the Office Holder was convicted for an offence which did not require proof of criminal intent;

 

81.1.4 a financial obligation imposed upon an Office Holder and reasonable litigation costs, including attorney’s fees, expended by an Office Holder as a result of an Administrative Procedure under the Securities Law, instituted against an Office Holder. Without derogating from the generality of the foregoing, such obligation or expenses will include a payment which an Office Holder is obligated to make to an injured party as set forth in Section 52(54)(a)(1)(a) of the Securities Law and expenses that an Office Holder incurred in connection with a proceeding under Chapters H’3, H’4 or I’1 of the Securities Law; and

 

81.1.5 any other event, occurrence, matter or circumstances under any law with respect to which the Company may, or will be able to, indemnify an Office Holder, and to the extent such law requires the inclusion of a provision permitting such indemnity in these Articles, then such provision is deemed to be included and incorporated herein by reference (including, without limitation, in accordance with Section 56h(b)(1) of the Securities Law, if and to the extent applicable, and Section 50P(b)(2) of the IEC Law).

 

81.2 Subject to the provisions of the Companies Law, the Company may undertake to indemnify an Office Holder, in advance, with respect to those liabilities and expenses described in the following Articles:

 

81.2.1 Sub-Article 81.1.2 to 81.1.5; and;

 

81.2.2 Sub-Article 81.1.1, provided that:

 

81.2.2.1 the undertaking to indemnify is limited to such events which the Board of Directors shall deem to be likely to occur in light of the operations of the Company at the time that the undertaking to indemnify is made and for such amounts or criterion which the Board of Directors may, at the time of the giving of such undertaking to indemnify, deem to be reasonable under the circumstances; and

 

81.2.2.2 the undertaking to indemnify shall set forth such events which the Board of Directors shall deem to be likely to occur in light of the operations of the Company at the time that the undertaking to indemnify is made, and the amounts and/or criterion which the Board of Directors may, at the time of the giving of such undertaking to indemnify, deem to be reasonable under the circumstances.

 

  - 3 -  

 

 

 

82. Exemption

 

Subject to the provisions of the Companies Law, the Company may, to the maximum extent permitted by law exempt and release, in advance, any Office Holder from any liability to the Company for damages arising out of a breach of a duty of care towards the Company.

 

83. General

 

83.1 Any amendment to the Companies Law adversely affecting the right of any Office Holder to be indemnified or insured pursuant to Articles 80 to 82 and any amendments to Articles 80 to 82 shall be prospective in effect, and shall not affect the Company’s obligation or ability to indemnify or insure an Office Holder for any act or omission occurring prior to such amendment, unless otherwise provided by applicable law.

 

83.2 The provisions of Articles 80 to 82 : (i) shall apply to the maximum extent permitted by law (including, the Companies Law, the Securities Law and the IEC Law); and (ii) are not intended, and shall not be interpreted so as to restrict the Company, in any manner, in respect of the procurement of insurance and/or in respect of indemnification (whether in advance or retroactively) and/or exemption, in favor of any person who is not an Office Holder, including, without limitation, any employee, agent, consultant or contractor of the Company who is not an Office Holder; and/or any Office Holder to the extent that such insurance and/or indemnification is not specifically prohibited under law.

 

84. [Intentionally left blank].

 

  - 4 -  

 

 

Exhibit 3.2

 

InMode Ltd.

 

Amended and Restated Articles of Association

 

of a Public Company

   

Effective as of [____________, 2019] 

 

 

 

 

Public Company Limited by Shares

The Companies Law, 5759 - 1999

 

Amended and Restated Articles of Association

 

of

 

InMode Ltd.

( אינמוד בע"מ )

 

Preliminary

 

1. Definitions; Interpretation

 

1.1 In these Articles, the following terms (whether or not capitalized) shall bear the meanings set forth opposite them, respectively, unless the subject or context requires otherwise.

 

“Articles”   shall mean these Articles of Association, as amended from time to time.
“Board of Directors”   shall mean the Board of Directors of the Company.
“Chairperson”   shall mean the Chairperson of the Board of Directors, or the Chairperson of the General Meeting, as the context implies.
“Company”   shall mean InMode LTD .
“Companies Law”   shall mean the Israeli Companies Law, 5759-1999, and the regulations promulgated thereunder.  The Companies Law shall include reference to the Israeli Companies Ordinance (New Version), 5743-1983, to the extent in effect according to the provisions thereof.
“Director(s)”   shall mean the member(s) of the Board of Directors holding office at any given time, including alternate directors.
“External Director(s)”   shall have the meaning provided for such term in the Companies Law.

“General Meeting”

 

“IEC Law”

 

shall mean an Annual General Meeting or Special General Meeting of the Shareholders, as the case may be.

shall mean the Israeli Economic Competition Law, 5748-1988.

“NIS”   shall mean New Israeli Shekels.
“Office”   shall mean the registered office of the Company at any given time.
“Office Holder”or “Officer” (“ Nosse Misra ”)   shall have the meaning provided for such term in the Companies Law.
     
“Securities Law”   shall mean the Israeli Securities Law, 5728-1968.
“Shareholder(s)”   shall mean the shareholder(s) of the Company, at any given time.

 

  - 2 -  

 

 

“Supermajority Resolution”   means a resolution adopted at the (Annual or Special) General Meeting by a special majority of 2/3 (two thirds) of those votes cast excluding abstaining votes.
“in writing” or “writing”   shall mean written, printed, photocopied, photographed or typed, including if appearing in an email, facsimile or if produced by any visible substitute for a writing, or partly one and partly another. The term “signed” or “signature” shall be construed in a corresponding manner.

 

1.2 Unless otherwise defined in these Articles or required by the context, terms used herein shall have the meaning provided therefor under the Companies Law.

 

1.3 Unless the context shall otherwise require: words in the singular shall also include the plural, and vice versa; any pronoun shall include the corresponding masculine, feminine and neuter forms; the words “include”, “includes” and “including” shall be deemed to be followed by the phrase “without limitation”; the words “herein”, “hereof” and “hereunder” and words of similar import refer to these Articles in their entirety and not to any part hereof; all references herein to Articles, Sections or clauses shall be deemed references to Articles, Sections or clauses of these Articles; any references to any agreement or other instrument or law, statute or regulation are to it as amended, supplemented or restated, from time to time (and, in the case of any law, to any successor provisions or re-enactment or modification thereof being in force at the time); any reference to “law” shall include any supranational, national, federal, state, local, or foreign statute or law and all rules and regulations promulgated thereunder (including, any rules, regulations or forms prescribed by any governmental authority or securities market or exchange, if and to the extent applicable); any reference to a “day” or a number of “days” (without any explicit reference otherwise, such as to business days) shall be interpreted as a reference to a calendar day or number of calendar days; any reference to a month or year shall be interpreted in accordance with the Gregorian calendar; any reference to a “company”, “corporate body” or “entity” shall include a partnership, corporation, limited liability company, association, trust, unincorporated organization, or a government or agency or political subdivision thereof, and any reference to a “person” shall include any of the foregoing types of entities or a natural person.

 

1.4 The captions in these Articles are for convenience only and shall not be deemed a part hereof or affect the construction or interpretation of any provision hereof.

 

1.5 These Articles may be translated into Hebrew and/or into other languages. Notwithstanding the aforesaid, the English version of these Articles shall be binding upon the Company, its Shareholders and/or any third party and shall supersede any translation thereof.

 

Limited Liability

 

2. The Company is a company with limited liability and each Shareholder’s obligations to the Company shall therefore be limited to the payment of the nominal value of the shares held by such Shareholder, subject to the provisions of the Companies Law.

 

  - 3 -  

 

 

3. Public Company; Objectives

 

3.1 The Company is a public company as such term is defined and for so long as it so qualifies under the Companies Law.

 

3.2 The Company’s objectives are to engage in any lawful activity.

 

4. Donations

 

The Company may donate a reasonable amount of money (in cash or in kind, including the Company’s securities) for any purpose that the Board of Directors finds appropriate.

 

Share Capital

 

5. Authorized Share Capital

 

The authorized share capital of the Company shall consist of NIS 1,000,000 divided into 100,000,000 Ordinary Shares, of a nominal value of NIS 0.01 each (the “ Shares ”).

 

The Shares shall rank pari passu in all respects.  The Shares may be redeemable to the extent set forth in Article 13.

 

6. Increase of Authorized Share Capital

 

6.1 The Company may, from time to time, by a Shareholders’ resolution, whether or not all of the shares then authorized have been issued, increase its authorized share capital.  Any such increase shall be in such amount and shall be divided into shares of such nominal amounts, and such shares shall confer such rights and preferences, and shall be subject to such restrictions, as such resolution shall provide.

 

6.2 Except to the extent otherwise provided in such resolution, any new shares included in the authorized share capital increase as aforesaid shall be subject to all of the provisions of these Articles that are applicable to shares of such class that are included in the existing share capital.

 

7. Special or Class Rights; Modification of Rights

 

7.1 The Company may, from time to time, by a Shareholders’ resolution, provide for shares with such preferred or deferred rights or other special rights and/or such restrictions, whether in regard to dividends, voting, repayment of share capital or otherwise, as may be stipulated in such resolution.

 

7.2 If at any time the share capital of the Company is divided into different classes of shares, the rights attached to any class, unless otherwise provided by these Articles, may be modified or cancelled by the Company by a resolution of the holders of a majority of shares of that class present and voted at the class meeting, excluding abstentions.

 

7.3 The provisions of these Articles relating to General Meetings shall apply, mutatis mutandis, to any separate General Meeting of the holders of the shares of a particular class, it being clarified that the requisite quorum at any such separate General Meeting shall be two or more Shareholders present in person or by proxy and holding not less than twenty-five percent (25%) of the issued shares of such class.

 

7.4 Unless otherwise provided by these Articles, an increase in the authorized share capital, the creation of a new class of shares, an increase in the authorized share capital of a class of shares, or the issuance of additional shares thereof out of the authorized and unissued share capital, shall not be deemed, for purposes of this Article 7, to modify or derogate or cancel the rights attached to previously issued shares of such class or of any other class.

 

  - 4 -  

 

 

8. Consolidation, Division, Cancellation and Reduction of Share Capital

 

8.1 The Company may, from time to time, by or pursuant to an authorization of a Shareholders’ resolution, and subject to applicable law:

 

8.1.1 consolidate all or any part of its issued or unissued authorized share capital into shares of a per share nominal value which is larger, equal to or smaller than the per share nominal value of its existing shares;

 

8.1.2 divide or sub-divide its shares (issued or unissued) or any of them, into shares of smaller or the same nominal value (subject, however, to the provisions of the Companies Law), and the resolution whereby any share is divided may determine that, as among the holders of the shares resulting from such subdivision, one or more of the shares may, in contrast to others, have any such preferred or deferred rights or rights of redemption or other special rights, or be subject to any such restrictions, as the Company may attach to unissued or new shares;

 

8.1.3 cancel any shares which, at the date of the adoption of such resolution, have not been taken or agreed to be taken by any person, and reduce the amount of its share capital by the amount of the shares so canceled; or

 

8.1.4 reduce its share capital in any manner.

 

8.2 With respect to any consolidation of issued shares and with respect to any other action which may result in fractional shares, the Board of Directors may settle any difficulty which may arise with regard thereto, as it deems fit, and, in connection with any such consolidation or other action which could result in fractional shares, may, without limiting its aforesaid power:

 

8.2.1 determine, as to the holder of shares so consolidated, which issued shares shall be consolidated into a share of a larger, equal or smaller nominal value per share;

 

8.2.2 issue, in contemplation of or subsequent to such consolidation or other action, shares sufficient to preclude or remove fractional share holdings;

 

8.2.3 redeem such shares or fractional shares sufficient to preclude or remove fractional share holdings;

 

8.2.4 round up, round down or round to the nearest whole number, any fractional shares resulting from the consolidation or from any other action which may result in fractional shares; or;

 

8.2.5 cause the transfer of fractional shares by certain Shareholders of the Company to other Shareholders thereof so as to most expediently preclude or remove any fractional shareholdings, and cause the transferees of such fractional shares to pay the transferors thereof the fair value thereof, and the Board of Directors is hereby authorized to act in connection with such transfer, as agent for the transferors and transferees of any such fractional shares, with full power of substitution, for the purposes of implementing the provisions of this sub-Article 8.2.5.

 

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9. Issuance of Share Certificates, Replacement of Lost Certificates

 

9.1 To the extent that the Board of Directors determines that all shares shall be certificated or, if the Board of Directors does not so determine, to the extent that any Shareholder requests a share certificate or the Company’s transfer agent so requires, share certificates shall be issued under the corporate seal of the Company or its written, typed or stamped name and shall bear the signature of one Director, the Company’s Chief Executive Officer, or  any person or persons authorized therefor by the Board of Directors.  Signatures may be affixed in any mechanical or electronic form, as the Board of Directors may prescribe.

 

9.2 Subject to the provisions of Article 9.1, each Shareholder shall be entitled to one numbered certificate for all of the shares of any class registered in his name.  Each certificate shall specify the serial numbers of the shares represented thereby and may also specify the amount paid up thereon.  The Company (as determined by an Officer of the Company to be designated by the Chief Executive Officer) shall not refuse a request by a Shareholder to obtain several certificates in place of one certificate, unless such request is, in the opinion of such Officer, unreasonable.  Where a Shareholder has sold or transferred some of such Shareholder’s shares, such Shareholder shall be entitled to receive a certificate in respect of such Shareholder’s remaining shares, provided that the previous certificate is delivered to the Company before the issuance of a new certificate.

 

9.3 A share certificate registered in the names of two or more persons shall be delivered to the person first named in the Register of Shareholders in respect of such co-ownership.

 

9.4 A share certificate which has been defaced, lost or destroyed, may be replaced, and the Company shall issue a new certificate to replace such defaced, lost or destroyed certificate upon payment of such fee, and upon the furnishing of such evidence of ownership and such indemnity, as the Board of Directors and the transfer agent in their discretion deems fit.

 

10. Registered Holder

 

Except as otherwise provided in these Articles or the Companies Law, the Company shall be entitled to treat the registered holder of each share as the absolute owner thereof, and accordingly, shall not, except as ordered by a court of competent jurisdiction, or as required by the Companies Law, be obligated to recognize any equitable or other claim to, or interest in, such share on the part of any other person.

 

11. Issuance and Repurchase of Shares

 

11.1 The unissued shares from time to time shall be under the control of the Board of Directors (and, to the full extent permitted by law, any Committee thereof), which shall have the power to issue or otherwise dispose of shares and of securities convertible or exercisable into or other rights to acquire from the Company to such persons, on such terms and conditions, and either at par or at a premium, or subject to the provisions of the Companies Law, at a discount and/or with payment of commission, and at such times, as the Board of Directors (or the Committee, as the case may be) deems fit, and the power to give to any person the option to acquire from the Company any shares or securities convertible or exercisable into or other rights to acquire from the Company, either at par or at a premium, or, subject as aforesaid, at a discount and/or with payment of commission, during such time and for such consideration as the Board of Directors (or the Committee, as the case may be) deems fit.

 

  - 6 -  

 

 

11.2 The Company may at any time and from time to time, subject to the Companies Law, repurchase or finance the purchase of any shares or other securities issued by the Company, in such manner and under such terms as the Board of Directors shall determine, whether from any one or more Shareholders.  Such purchase shall not be deemed as payment of dividends and no Shareholder will have the right to require the Company to purchase his shares or offer to purchase shares from any other Shareholders.

 

12. Payment in Installment

 

If pursuant to the terms of issuance of any share, all or any portion of the price thereof shall be payable in installments, every such installment shall be paid to the Company on the due date thereof by the then registered holder(s) of the share or the person(s) then entitled thereto.

 

13. Redeemable Shares

 

The Company may, subject to applicable law, issue redeemable shares or other securities and redeem the same upon terms and conditions to be set forth in a written agreement between the Company and the holder of such shares or in their terms of issuance.

 

Transfer of Shares

 

14. Registration of Transfer

 

No transfer of shares shall be registered unless a proper writing or instrument of transfer (in any customary form or any other form satisfactory to the Board of Directors) has been submitted to the Company (or its transfer agent), together with any share certificate(s) and such other evidence of title as the Board of Directors may reasonably require. Notwithstanding anything to the contrary herein, shares registered in the name of The Depository Trust Company or its nominee shall be transferrable in accordance with the policies and procedures of The Depository Trust Company. Until the transferee has been registered in the Register of Shareholders in respect of the shares so transferred, the Company may continue to regard the transferor as the owner thereof.  The Board of Directors, may, from time to time, prescribe a fee for the registration of a transfer, and may approve other methods of recognizing the transfer of shares in order to facilitate the trading of the Company’s shares on the Nasdaq Stock Market or on any other stock exchange on which the Company’s shares are then listed for trading.

 

15. Suspension of Registration

 

The Board of Directors may, in its discretion to the extent it deems necessary, close the Register of Shareholders of registration of transfers of shares for a period determined by the Board of Directors, and no registrations of transfers of shares shall be made by the Company during any such period during which the Register of Shareholders is so closed.

 

  - 7 -  

 

 

Transmission of Shares

 

16. Decedents’ Shares

 

16.1 In the case of the death of one of the holders of a share registered in the names of two or more persons, the Company may recognize the survivor(s) as the sole owner(s) thereof unless and until the provisions of Article 16.2 have been effectively invoked.

 

16.2 Any person becoming entitled to a share in consequence of the death of any person, upon producing evidence of the grant of probate or letters of administration or declaration of succession (or such other evidence as the Board of Directors, or an Officer of the Company to be designated by the Chief Executive Officer, may reasonably deem sufficient), shall be registered as a Shareholder in respect of such share, or may, subject to the provisions as to transfer contained herein, transfer such share.

 

17. Receivers and Liquidators

 

17.1 The Company may recognize any receiver, liquidator or similar official appointed to wind-up, dissolve or otherwise liquidate a corporate Shareholder, and a trustee, manager, receiver, liquidator or similar official appointed in bankruptcy or in connection with the reorganization of, or similar proceeding with respect to a Shareholder or its properties, as being entitled to the shares registered in the name of such Shareholder.

 

17.2 Such receiver, liquidator or similar official appointed to wind-up, dissolve or otherwise liquidate a corporate Shareholder and such trustee, manager, receiver, liquidator or similar official appointed in bankruptcy or in connection with the reorganization of, or similar proceedings with respect to a Shareholder or its properties, upon producing such evidence as the Board of Directors (or an Officer of the Company to be designated by the Chief Executive Officer) may deem sufficient as to his authority to act in such capacity or under this Article, shall with the consent of the Board of Directors (which the Board of Directors may grant or refuse in its absolute discretion), be registered as a Shareholder in respect of such shares, or may, subject to the regulations as to transfer herein contained, transfer such shares.

 

General Meetings

 

18. General Meetings

 

18.1 An annual General Meeting (“ Annual General Meeting ”) shall be held at least once in every calendar year, not later than 15 months after the last preceding Annual General Meeting, at such time and at such place, either within or out of the State of Israel, as may be determined by the Board of Directors.

 

18.2 All General Meetings other than Annual General Meetings shall be called “ Special General Meetings ”.

 

19. Record Date for General Meeting

 

Notwithstanding any provision of these Articles to the contrary, and to allow the Company to determine the Shareholders entitled to notice of or to vote at any General Meeting or any adjournment thereof, or entitled to receive payment of any dividend or other distribution or grant of any rights, or entitled to exercise any rights in respect of or to take or be the subject of any other action, the Board of Directors may fix a record date, which shall not be more than the maximum period and not less than the minimum period permitted by law.  A determination of Shareholders of record entitled to notice of or to vote at a meeting shall apply to any adjournment of the meeting; provided, however, that the Board of Directors may fix a new record date for the adjourned meeting.

 

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20. Shareholder Proposal Request

 

20.1 Any Shareholder or Shareholders of the Company holding at least one percent (1%) of the voting rights of the Company (the “ Proposing Shareholder(s) ”) may request, subject to the Companies Law, that the Board of Directors include a matter on the agenda of a General Meeting to be held in the future, provided that the Board of Directors determines that the matter is appropriate to be considered at a General Meeting (a “ Proposal Request ”).  In order for the Board of Directors to consider a Proposal Request and whether to include the matter stated therein in the agenda of a General Meeting, notice of the Proposal Request must be timely delivered in accordance with applicable law, and the Proposal Request must comply with the requirements of these Articles (including this Article 20) and any applicable law including, for the avoidance of doubt, stock exchange rules and regulations. The Proposal Request must be in writing, signed by all of the Proposing Shareholder(s) making such request, delivered, either in person or by certified mail, postage prepaid, and received by the Secretary (or, in the absence thereof by the Chief Executive Officer of the Company). To be considered timely, a Proposal Request must be received within the time periods prescribed by applicable law.  The announcement of an adjournment or postponement of a General Meeting shall not commence a new time period (or extend any time period) for the delivery of a Proposal Request as described above.  In addition to any information required to be included in accordance with applicable law, a Proposal Request must include the following: (i) the name, address, telephone number, fax number and email address of the Proposing Shareholder (or each Proposing Shareholder, as the case may be) and, if an entity, the name(s) of the person(s) that controls or manages such entity; (ii) the number of Shares held by the Proposing Shareholder(s), directly or indirectly (and, if any of such Shares are held indirectly, an explanation of how they are held and by whom), which shall be in such number no less than as is required to qualify as a Proposing Shareholder, accompanied by evidence satisfactory to the Company of the record holding of such Shares by the Proposing Shareholder(s) as of the date of the Proposal Request, and a representation that the Proposing Shareholder(s) intends to appear in person or by proxy at the meeting; (iii) the matter requested to be included on the agenda of a General Meeting, all information related to such matter, the reason that such matter is proposed to be brought before the General Meeting and the complete text of the resolution that the Proposing Shareholder proposes to be voted upon at the General Meeting, (iv) a description of all arrangements or understandings between the Proposing Shareholders and any other person(s) (naming such person or persons) in connection with the matter that is requested to be included on the agenda and a declaration signed by all Proposing Shareholder(s) of whether any of them has a personal interest in the matter and, if so, a description in reasonable detail of such personal interest; (v) a description of all Derivative Transactions (as defined below) by each Proposing Shareholder(s) during the previous twelve (12) month period, including the date of the transactions and the class, series and number of securities involved in, and the material economic terms of, such Derivative Transactions; and (vi) a declaration that all of the information that is required under the Companies Law and any other applicable law, including, for the avoidance of doubt, stock exchange rules and regulations, to be provided to the Company in connection with such matter, if any, has been provided to the Company.  The Board of Directors, may, in its discretion, to the extent it deems necessary, request that the Proposing Shareholder(s) provide additional information necessary so as to include a matter in the agenda of a General Meeting, as the Board of Directors may reasonably require.

 

  - 9 -  

 

 

A “ Derivative Transaction ” means any agreement, arrangement, interest or understanding entered into by, or on behalf or for the benefit of, any Proposing Shareholder or any of its affiliates or associates, whether of record or beneficial:  (1) the value of which is derived in whole or in part from the value of any class or series of shares or other securities of the Company, (2) which otherwise provides any direct or indirect opportunity to gain or share in any gain derived from a change in the value of securities of the Company, (3) the effect or intent of which is to mitigate loss, manage risk or benefit of security value or price changes, or (4) which provides the right to vote or increase or decrease the voting power of, such Proposing Shareholder, or any of its affiliates or associates, with respect to any shares or other securities of the Company, which agreement, arrangement, interest or understanding may include, without limitation, any option, warrant, debt position, note, bond, convertible security, swap, stock appreciation right, short position, profit interest, hedge, right to dividends, voting agreement, performance-related fee or arrangement to borrow or lend shares (whether or not subject to payment, settlement, exercise or conversion in any such class or series), and any proportionate interest of such Proposing Shareholder in the securities of the Company held by any general or limited partnership, or any limited liability company, of which such Proposing Shareholder is, directly or indirectly, a general partner or managing member.

 

20.2 The information required pursuant to this Article shall be updated as of (i) the record date of the General Meeting, (ii) five business days before the General Meeting, and (iii) as of the General Meeting, and any adjournment or postponement thereof.

 

20.3 The provisions of Articles 20(a) and 20(b) shall apply, mutatis mutandis, on any matter to be included on the agenda of a Special General Meeting which is convened pursuant to a request of a Shareholder duly delivered to the Company in accordance with the Companies Law.

 

21. Notice of General Meetings; Omission to Give Notice

 

21.1 The Company is not required to give notice of a General Meeting, subject to any mandatory provision of the Companies Law.  Notwithstanding anything herein to the contrary, to the extent permitted under the Companies Law, with the consent of all Shareholders entitled to vote thereon, a resolution may be proposed and passed at a General Meeting although a lesser notice period than hereinabove prescribed has been given.

 

21.2 The accidental omission to give notice of a General Meeting to any Shareholder, or the non-receipt of notice sent to such Shareholder, shall not invalidate the proceedings at such meeting or any resolution adopted thereat.

 

21.3 No Shareholder present, in person or by proxy, at any time during a General Meeting shall be entitled to seek the cancellation or invalidation of any proceedings or resolutions adopted at such General Meeting on account of any defect in the notice of such meeting relating to the time or the place thereof, or any item acted upon at such meeting.

 

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21.4 The full text of the proposed resolutions to be adopted at a General Meeting will be published in the manner set forth in Article 62.7. The Company may add additional places for Shareholders to review the full text of the proposed resolutions to be adopted at a General Meeting.

 

Proceedings at General Meetings

 

22. Quorum

 

22.1 No business shall be transacted at a General Meeting, or at any adjournment thereof, unless the quorum required under these Articles for such General Meeting or such adjourned meeting, as the case may be, is present when the meeting proceeds to business.

 

22.2 In the absence of contrary provisions in these Articles, two or more Shareholders, present in person or by proxy and holding shares conferring in the aggregate at least twenty-five percent (25%) of the voting power of the Company, shall constitute a quorum of General Meetings.  A proxy may be deemed to be two (2) or more Shareholders pursuant to the number of Shareholders represented by the proxy holder.

 

22.3 If within half an hour from the time appointed for the meeting a quorum is not present, then without any further notice the meeting shall be adjourned either (i) to the same day in the next week, at the same time and place, (ii) to such day and at such time and place as indicated in the notice to such meeting, or (iii) to such day and at such time and place as the Chairperson of the General Meeting shall determine (which may be earlier or later than the date pursuant to clause (i) above).  No business shall be transacted at any adjourned meeting except business which might lawfully have been transacted at the meeting as originally called.  At such adjourned meeting, if the original meeting was convened upon requisition under Section 63 or Section 64 of the Companies Law, one or more Shareholders, present in person or by proxy, and holding the number of shares required for making such requisition, shall constitute a quorum, but in any other case any Shareholder present in person or by proxy, shall constitute a quorum.

 

23. Chairperson of General Meeting

 

The Chairperson of the Board of Directors, shall preside as Chairperson of every General Meeting of the Company.  If at any meeting the Chairperson is not present within fifteen (15) minutes after the time fixed for holding the meeting or is unwilling to act as Chairperson, any of the following may preside as Chairperson of the meeting (and in the following order): Director, Chief Executive Officer, Chief Financial Officer, Secretary, General Legal Counsel, in each case, of the Company, or any person designated by any of the foregoing.  If at any such meeting none of the foregoing persons is present or all are unwilling to act as Chairperson, the Shareholders present (in person or by proxy) shall choose a Shareholder or its proxy present at the meeting to be Chairperson.  The office of Chairperson shall not, by itself, entitle the holder thereof to vote at any General Meeting nor shall it entitle such holder to a second or casting vote (without derogating, however, from the rights of such Chairperson to vote as a Shareholder or proxy of a Shareholder if, in fact, he is also a Shareholder or such proxy).

 

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24. Adoption of Resolutions at General Meetings

 

24.1 Except as required by the Companies Law or these Articles (such as set out in Article 34 below), a resolution of the Shareholders shall be adopted if approved by the holders of a simple majority of the voting power represented at the General Meeting in person or by proxy and voting thereon, as one class, and disregarding abstentions from the count of the voting power present and voting. 

 

24.2 Every question submitted to a General Meeting shall be decided by a show of hands, but the Chairperson of the General Meeting may determine that a resolution shall be decided by a written ballot.  A written ballot may be implemented before the proposed resolution is voted upon or immediately after the declaration by the Chairperson of the results of the vote by a show of hands.  If a vote by written ballot is taken after such declaration, the results of the vote by a show of hands shall be of no effect, and the proposed resolution shall be decided by such written ballot.

 

24.3 A declaration by the Chairperson of the General Meeting that a resolution has been carried unanimously, or carried by a particular majority, or rejected, and an entry to that effect in the minute book of the Company, shall be prima facie evidence of the fact without proof of the number or proportion of the votes recorded in favor of or against such resolution.

 

25. Power to Adjourn

 

A General Meeting, the consideration of any matter on its agenda or the resolution on any matter on its agenda, may be postponed or adjourned, from time to time and from place to place: (i) by the Chairperson of a General Meeting at which a quorum is present (and he shall if so directed by the General Meeting, with the consent of the holders of a majority of the voting power represented in person or by proxy and voting on the question of adjournment), but no business shall be transacted at any such adjourned meeting except business which might lawfully have been transacted at the General Meeting as originally called, or a matter on its agenda with respect to which no resolution was adopted at the meeting originally called; or (ii) by the Board of Directors (whether prior to or at a General Meeting).

 

26. Voting Power

 

Subject to any provision hereof conferring special rights as to voting, or restricting the right to vote, each share shall entitle the holder thereof, who is present at a General Meeting and participating in the vote, whether in person, or by proxy, to one vote on every resolution, without regard to whether the vote thereon is conducted by a show of hands, by written ballot or by any other means.

 

27. Voting Rights

 

27.1 A company or other corporate body being a Shareholder of the Company may duly authorize any person to be its representative at any meeting of the Company or to execute or deliver a proxy on its behalf.  Any person so authorized shall be entitled to exercise on behalf of such Shareholder all the power, which the Shareholder could have exercised if it were an individual.  Upon the request of the Chairperson of the General Meeting, written evidence of such authorization (in form acceptable to the Chairperson) shall be delivered to him.

 

27.2 Any Shareholder entitled to vote may vote either in person or by proxy (who need not be Shareholder of the Company), or, if the Shareholder is a company or other corporate body, by representative authorized pursuant to Article 27.1 above.

 

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27.3 If two or more persons are registered as joint holders of any share, the vote of the senior who tenders a vote, in person or by proxy, shall be accepted to the exclusion of the vote(s) of the other joint holder(s).  For the purpose of this Article 27.3, seniority shall be determined by the order of registration of the joint holders in the Register of Shareholders.

 

Proxies

 

28. Instrument of Appointment

 

28.1 An instrument appointing a proxy shall be in writing and shall be substantially in the following form:

 

“I         ____________________          of      ____________________

      (Name of Shareholder)                       (Address of Shareholder)

 

Being a shareholder of InMode Ltd. hereby appoints

 

    ____________________         of        ____________________

            (Name of Proxy)                                   (Address of Proxy)

 

as my proxy to vote for me and on my behalf at the General Meeting of the Company to be held on the ___ day of _______, _______ and at any adjournment(s) thereof.

 

Signed this ____ day of ___________, ______.

 

(Signature of Appointor)”

 

or in any usual or common form or in such other form as may be approved by the Board of Directors.  Such proxy shall be duly signed by the appointor or such person’s duly authorized attorney, or, if such appointor is company or other corporate body, in the manner in which it signs documents which binds it together with a certificate of an attorney with regard to the authority of the signatories.

 

28.2 Subject to the Companies Law, the original instrument appointing a proxy or a copy thereof certified by an attorney (and the power of attorney or other authority, if any, under which such instrument has been signed) shall be delivered to the Company (at its Office, at its principal place of business, or at the offices of its registrar or transfer agent, or at such place as notice of the meeting may specify) not less than forty eight (48) hours (or such shorter period as the notice shall specify) before the time fixed for such meeting.  Notwithstanding the above, the Chairperson of the General Meeting shall have the right to waive the time requirement provided above with respect to all instruments of proxies and to accept any and all instruments of proxy until the beginning of a General Meeting.  A document appointing a proxy shall be valid for every adjourned meeting of the General Meeting to which the document relates.

 

29. Effect of Death of Appointor of Transfer of Share and or Revocation of Appointment

 

29.1 A vote cast in accordance with an instrument appointing a proxy shall be valid notwithstanding the prior death or bankruptcy of the appointing Shareholder (or of his attorney-in-fact, if any, who signed such instrument), or the transfer of the share in respect of which the vote is cast, unless written notice of such matters shall have been received by the Company or by the Chairperson of such meeting prior to such vote being cast.

 

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29.2 Subject to the Companies Law, an instrument appointing a proxy shall be deemed revoked (i) upon receipt by the Company or the Chairperson of the General Meeting, subsequent to receipt by the Company of such instrument, of written notice signed by the person signing such instrument or by the Shareholder appointing such proxy canceling the appointment thereunder (or the authority pursuant to which such instrument was signed) or of a later-dated instrument appointing a different proxy (and such other documents, if any, required under Article 28.2 for such new appointment), provided such notice of cancellation or instrument appointing a different proxy were so received at the place and within the time for delivery of the instrument revoked thereby as referred to in Article 28.2 hereof, or (ii) if the appointing Shareholder is present in person at the meeting for which such instrument of proxy was delivered.  A vote cast in accordance with an instrument appointing a proxy shall be valid notwithstanding the revocation or purported cancellation of the appointment, or the presence in person or vote of the appointing Shareholder at a meeting for which it was rendered, unless such instrument of appointment was deemed revoked in accordance with the foregoing provisions of this Article 29.2 at or prior to the time such vote was cast.

 

Board of Directors

 

30. Powers of Board of Directors

 

30.1 The Board of Directors may exercise all such powers and do all such acts and things as the Board of Directors is authorized by law or as the Company is authorized to exercise and do and are not hereby or by law required to be exercised or done by the General Meeting, the Chief Executive Officer or any other organ of the Company.  The authority conferred on the Board of Directors by this Article 30 shall be subject to the provisions of the Companies Law, these Articles and any regulation or resolution consistent with these Articles adopted from time to time at a General Meeting, provided, however, that no such regulation or resolution shall invalidate any prior act done by or pursuant to a decision of the Board of Directors which would have been valid if such regulation or resolution had not been adopted.

 

30.2 Without limiting the generality of the foregoing, the Board of Directors may, from time to time, set aside any amount(s) out of the profits of the Company as a reserve or reserves for any purpose(s) which the Board of Directors, in its absolute discretion, shall deem fit, including without limitation, capitalization and distribution of bonus shares, and may invest any sum so set aside in any manner and from time to time deal with and vary such investments and dispose of all or any part thereof, and employ any such reserve or any part thereof in the business of the Company without being bound to keep the same separate from other assets of the Company, and may subdivide or re-designate any reserve or cancel the same or apply the funds therein for another purpose, all as the Board of Directors may from time to time think fit.

 

31. Exercise of Powers of Board of Directors

 

31.1 A meeting of the Board of Directors at which a quorum is present shall be competent to exercise all the authorities, powers and discretion vested in or exercisable by the Board of Directors.

 

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31.2 A resolution proposed at any meeting of the Board of Directors shall be deemed adopted if approved by a majority of the Directors present, entitled to vote and voting thereon when such resolution is put to a vote.

 

31.3 The Board of Directors may adopt resolutions, without convening a meeting of the Board of Directors, in writing or in any other manner permitted by the Companies Law.

 

31.4 The Board of Directors may hold meetings by use of any means of communication on the condition that all participating directors can hear each other at the same time.

 

32. Delegation of Powers

 

32.1 The Board of Directors may, subject to the provisions of the Companies Law, delegate any or all of its powers to committees (in these Articles referred to as a “ Committee of the Board of Directors ”, or “ Committee ”), each consisting of one or more persons (who may or may not be Directors), and it may from time to time revoke such delegation or alter the composition of any such Committee.  No regulation imposed by the Board of Directors on any Committee and no resolution of the Board of Directors shall invalidate any prior act done or pursuant to a resolution by the Committee which would have been valid if such regulation or resolution of the Board of Directors had not been adopted.  The meeting and proceedings of any such Committee of the Board of Directors shall, mutatis mutandis , be governed by the provisions herein contained for regulating the meetings of the Board of Directors, to the extent not superseded by any regulations adopted by the Board of Directors.  Unless otherwise expressly prohibited by the Board of Directors or applicable law, in delegating powers to a Committee of the Board of Directors, such Committee shall be empowered to further delegate such powers.

 

32.2 Without derogating from the provisions of Article 44, the Board of Directors may from time to time appoint a Secretary to the Company, as well as Officers, agents, employees and independent contractors, as the Board of Directors deems fit, and may terminate the service of any such person.  The Board of Directors may, subject to the provisions of the Companies Law, determine the powers and duties, as well as the salaries and compensation, of all such persons.

 

32.3 The Board of Directors may from time to time, by power of attorney or otherwise, appoint any person, company, firm or body of persons to be the attorney or attorneys of the Company at law or in fact for such purposes(s) and with such powers, authorities and discretions, and for such period and subject to such conditions, as it deems fit, and any such power of attorney or other appointment may contain such provisions for the protection and convenience of persons dealing with any such attorney as the Board of Directors deems fit, and may also authorize any such attorney to delegate all or any of the powers, authorities and discretions vested in him.

 

33. Number of Directors

 

33.1 The Board of Directors shall consist of such number of Directors not less than three (3) nor more than 7 (seven), including External Directors (if any were elected), as may be fixed from time to time by the Board of Directors.

 

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33.2 Notwithstanding anything to the contrary herein, this Article 33 may only be amended or replaced by a resolution adopted at a General Meeting by a Supermajority Resolution.

 

34. Election and Removal of Directors

 

34.1 The Directors, excluding the External Directors if any were elected, shall be classified, with respect to the term for which they each severally hold office, into three classes, as nearly equal in number as practicable, hereby designated as Class I, Class II and Class III.  The Board of Directors may assign members of the Board of Directors already in office to such classes at the time such classification becomes effective.

 

34.1.1 The term of office of the initial Class I directors shall expire at the first Annual General Meeting to be held in 2020,

 

34.1.2 The term of office of the initial Class II directors shall expire at the first Annual General Meeting following the Annual General Meeting referred to in clause (1) above, and

 

34.1.3 The term of office of the initial Class III directors shall expire at the first Annual General Meeting following the Annual General Meeting referred to in clause (2) above.

 

34.2 At each Annual General Meeting, commencing with the Annual General Meeting to be held in 2020, each of the nominees elected to replace the Directors of a Class whose term shall have expired at such Annual General Meeting shall be elected to hold office until the third Annual General Meeting next succeeding his or her election. 

 

34.3 If the number of Directors (excluding External Directors, if any were elected) that constitutes the Board of Directors is hereafter changed, any newly created directorships or decrease in directorships shall be so apportioned by the Board of Directors among the classes as to make all classes as nearly equal in number as is practicable.

 

34.4 Prior to every General Meeting of the Company at which Directors are to be elected, and subject to clauses (1) and (7) of this Article, the Board of Directors (or a Committee thereof) shall select, by a resolution adopted by a majority of the Board of Directors (or such Committee), a number of persons to be proposed to the Shareholders for election as Directors at such General Meeting (the “ Nominees ”).

 

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34.5 Any Proposing Shareholder requesting to include on the agenda of a General Meeting a nomination of a person to be proposed to the Shareholders for election as Director (such person, an “ Alternate Nominee ”), may so request  provided that it complies with this Article 34(5) and Article 20 and applicable law.  In addition to any information required to be included in accordance with applicable law, such a Proposal Request shall include information required pursuant to Article 20, and shall also set forth: (i) the name, address, telephone number, fax number and email address of the Alternate Nominee and all citizenships and residencies of the Alternate Nominee; (ii) a description of all arrangements, relations or understandings between the Proposing Shareholder(s) or any of its affiliates and each Alternate Nominee; (iii) a declaration signed by the Alternate Nominee that he or she consents to be named in the Company’s notices and proxy materials relating to the General Meeting, if provided or published, and, if elected, to serve on the Board of Directors and to be named in the Company’s disclosures and filings, (iv) a declaration signed by each Alternate Nominee as required under the Companies Law and any other applicable law, including, for the avoidance of doubt, stock exchange rules and regulations, for the appointment of such an Alternate Nominee and an undertaking that all of the information that is required under law, including, for the avoidance of doubt, stock exchange rules and regulations to be provided to the Company in connection with such an appointment has been provided (including, information in respect of the Alternate Nominee as would be provided in response to the applicable disclosure requirements under Form 20-F or any other applicable form prescribed by the U.S. Securities and Exchange Commission (the “ SEC ”); (v) a declaration made by the Alternate Nominee of whether he or she meets the criteria for a Director, an independent director and/or External Director of the Company under the Companies Law and/or under any applicable law, regulation or stock exchange rules, and if not, then an explanation of why not; and (vi) any other information required at the time of submission of the Proposal Request by applicable law, regulations or stock exchange rules. In addition, the Proposing Shareholder shall promptly provide any other information reasonably requested by the Company.  The Board of Directors may refuse to acknowledge the nomination of any person not made in compliance with the foregoing. The Company shall be entitled to publish any information provided by a Proposing Shareholder pursuant to this Article 34.5 and Article 20, and the Proposing Shareholder shall be responsible for the accuracy and completeness thereof.

 

34.6 The Nominees or Alternate Nominees shall be elected by a resolution adopted at the General Meeting at which they are subject to election.

 

34.7 Notwithstanding anything to the contrary herein, this Article 34 and Article 37.5 may only be amended, replaced or suspended by a resolution adopted at a General Meeting by a Supermajority Resolution.

 

34.8 Notwithstanding anything to the contrary in these Articles, the election, qualification, removal or dismissal of External Directors, if so elected, shall be only in accordance with the applicable provisions set forth in the Companies Law.

 

35. Commencement of Directorship

 

Without derogating from Article 34, the term of office of a Director shall commence as of the date of his appointment or election, or on a later date if so specified in his appointment or election.

 

36. Continuing Directors in the Event of Vacancies

 

The Board may at any time and from time to time appoint any person as a Director to fill a vacancy (whether such vacancy is due to a Director no longer serving or due to the number of Directors serving being less than the maximum number stated in Article 33 hereof). In the event of one or more such vacancies in the Board of Directors, the continuing Directors may continue to act in every matter, provided, however, that if they number less than the minimum number provided for pursuant to Article 33 hereof, they may only act in an emergency or to fill the office of director which has become vacant up to a number equal to the minimum number provided for pursuant to Article 33 hereof, or in order to call a General Meeting of the Company for the purpose of electing Directors to fill any or all vacancies.  The office of a Director that was appointed by the Board of Directors to fill any vacancy shall only be for the remaining period of time during which the Director whose service has ended was filled would have held office, or in case of a vacancy due to the number of Directors serving being less than the maximum number stated in Article 33 hereof the Board of Directors shall determine at the time of appointment the class pursuant to Article 34 to which the additional Director shall be assigned.

 

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37. Vacation of Office

 

The office of a Director shall be vacated and he shall be dismissed or removed:

 

37.1 ipso facto, upon his death;

 

37.2 if he is prevented by applicable law from serving as a Director;

 

37.3 if the Board of Directors determines that due to his mental or physical state he is unable to serve as a director;

 

37.4 if his directorship expires pursuant to these Articles and/or applicable law;

 

37.5 by a resolution adopted at a General Meeting by a Supermajority Resolution.  Such removal shall become effective on the date fixed in such resolution;

 

37.6 by his written resignation, such resignation becoming effective on the date fixed therein, or upon the delivery thereof to the Company, whichever is later; or

 

37.7 with respect to an External Director, if so elected, and notwithstanding anything to the contrary herein, only pursuant to applicable law.

 

38. Conflict of Interests; Approval of Related Party Transactions

 

Subject to the provisions of the Companies Law and these Articles, no Director shall be disqualified by virtue of his office from holding any office or place of profit in the Company or in any company in which the Company shall be a shareholder or otherwise interested, or from contracting with the Company as vendor, purchaser or otherwise, nor shall any such contract, or any contract or arrangement entered into by or on behalf of the Company in which any Director shall be in any way interested, be avoided, nor, other than as required under the Companies Law, shall any Director be liable to account to the Company for any profit arising from any such office or place of profit or realized by any such contract or arrangement by reason only of such Director’s holding that office or of the fiduciary relations thereby established, but the nature of his interest, as well as any material fact or document, must be disclosed by him at the meeting of the Board of Directors at which the contract or arrangement is first considered, if his interest then exists, or, in any other case, at no later than the first meeting of the Board of Directors after the acquisition of his interest.

 

39. Alternate Directors

 

39.1 Subject to the provisions of the Companies Law, a Director may, by written notice to the Company, appoint, remove or replace any person as an alternate for himself; provided that the appointment of such person shall have effect only upon and subject to its being approved by the Board of Directors (in these Articles, an “ Alternate Director ”).   Unless the appointing Director, by the instrument appointing an Alternate Director or by written notice to the Company, limits such appointment to a specified period of time or restricts it to a specified meeting or action of the Board of Directors, or otherwise restricts its scope, the appointment shall be for all purposes, and for a period of time concurrent with the term of the appointing Director.

 

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39.2 Any notice to the Company pursuant to Article 39.1 shall be given in person to, or by sending the same by mail to the attention of the Chairperson of the Board of Directors at the principal office of the Company or to such other person or place as the Board of Directors shall have determined for such purpose, and shall become effective on the date fixed therein, upon the receipt thereof by the Company (at the place as aforesaid) or upon the approval of the appointment by the Board of Directors, whichever is later.

 

39.3 An Alternate Director shall have all the rights and obligations of the Director who appointed him, provided however, that (i) he may not in turn appoint an alternate for himself (unless the instrument appointing him otherwise expressly provides), and (ii) an Alternate Director shall have no standing at any meeting of the Board of Directors or any Committee thereof while the Director who appointed him is present.

 

39.4 Any individual, who qualifies to be a member of the Board of Directors, may act as an Alternate Director.  One person may not act as Alternate Director for several directors or if he is serving as a Director.

 

39.5 The office of an Alternate Director shall be vacated under the circumstances, mutatis mutandis, set forth in Article 37, and such office shall ipso facto be vacated if the office of the Director who appointed such Alternate Director is vacated, for any reason.

 

Proceedings of the Board of Directors

 

40. Meetings

 

40.1 The Board of Directors may meet and adjourn its meetings and otherwise regulate such meetings and proceedings as the Board of Directors think fit.

 

40.2 Any Director may at any time, and the Secretary, upon the request of such Director, shall, convene a meeting of the Board of Directors, but not less than two (2) days’ notice shall be given of any meeting so convened, unless such notice is waived in writing by all of the Directors as to a particular meeting or unless the matters to be discussed at such meeting are of such urgency and importance that notice ought reasonably to be waived under the circumstances.

 

40.3 Notice of any such meeting shall be given orally, by telephone, in writing or by mail, email, electronic means or facsimile or such other means of delivery of notices as the Company may apply, from time to time.

 

40.4 Notwithstanding anything to the contrary herein, failure to deliver notice to a Director of any such meeting in the manner required hereby may be waived by such Director, and a meeting shall be deemed to have been duly convened notwithstanding such defective notice if such failure or defect is waived by all Directors entitled to participate at such meeting to whom notice was not duly given as aforesaid.  Without derogating from the foregoing, no Director present at any time during a meeting of the Board of Directors shall be entitled to seek the cancellation or invalidation of any proceedings or resolutions adopted at such meeting on account of any defect in the notice of such meeting relating to the date, time or the place thereof or the convening of the meeting.

 

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41. Quorum

 

Until otherwise unanimously decided by the Board of Directors, a quorum at a meeting of the Board of Directors shall be constituted by the presence in person or by any means of communication of a majority of the Directors then in office who are lawfully entitled to participate and vote in the meeting.  No business shall be transacted at a meeting of the Board of Directors unless the requisite quorum is present (in person or by any means of communication) when the meeting first proceeds to business.

 

42. Chairperson of the Board of Directors

 

The Board of Directors shall, from time to time, elect one of its members to be the Chairperson of the Board of Directors, remove such Chairperson from office and appoint in his place.  The Chairperson of the Board of Directors shall preside at every meeting of the Board of Directors, but if there is no such Chairperson, or if at any meeting he is not present within fifteen (15) minutes of the time fixed for the meeting or if he is unwilling to take the chair, the Directors present shall choose one of the Directors present at the meeting to be the Chairperson of such meeting.  The office of Chairperson of the Board of Directors shall not, by itself, entitle the holder to a second or casting vote. The Chief Executive Officer may also serve as Chairperson according to the limitations set out in applicable laws.

 

43. Validity of Acts Despite Defects

 

All acts done or transacted at any meeting of the Board of Directors, or of a Committee of the Board of Directors, or by any person(s) acting as Director(s), shall, notwithstanding that it may afterwards be discovered that there was some defect in the appointment of the participants in such meeting or any of them or any person(s) acting as aforesaid, or that they or any of them were disqualified, be as valid as if there were no such defect or disqualification.

 

Chief Executive Officer

 

44. Chief Executive Officer

 

44.1 The Board of Directors shall from time to time appoint one or more persons, whether or not Directors, as Chief Executive Officer of the Company and may confer upon such person(s), and from time to time modify or revoke, such titles and such duties and authorities of the Board of Directors as the Board of Directors may deem fit, subject to such limitations and restrictions as the Board of Directors may from time to time prescribe.  Such appointment(s) may be either for a fixed term or without any limitation of time, and the Board of Directors may from time to time (subject to any additional approvals required under, and the provisions of, the Companies Law and of any contract between any such person and the Company) fix their salaries and compensation, remove or dismiss them from office and appoint another or others in his or their place or places.

 

44.2 Unless otherwise determined by the Board of Directors, the Chief Executive Officer shall have authority with respect to the management and operations of the Company in the ordinary course of business.

 

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Minutes

 

45. Minutes

 

Any minutes of the General Meeting or the Board of Directors or any committee thereof, if purporting to be signed by the Chairperson of the General Meeting, the Board of Directors or a committee thereof, as the case may be, or by the Chairperson of the next succeeding General Meeting, meeting of the Board of Directors or meeting of a committee thereof, as the case may be, shall constitute prima facie evidence of the matters recorded therein.

 

Dividends

 

46. Declaration of Dividends

 

The Board of Directors may from time declare, and cause the Company to pay, such dividend as may appear to the Board of Directors to be justified by the profits of the Company and as permitted by the Companies Law.  The Board of Directors shall determine the time for payment of such dividends and the record date for determining the Shareholders entitled thereto.

 

47. Amount Payable by Way of Dividends

 

Subject to the provisions of these Articles and subject to the rights or conditions attached at that time to any share in the capital of the Company granting preferential, special or deferred rights or not granting any rights with respect to dividends, any dividend paid by the Company shall be allocated among the Shareholders entitled thereto in proportion to their respective holdings of the shares in respect of which such dividends are being paid.

 

48. Interest

 

No dividend shall carry interest as against the Company.

 

49. Capitalization of Profits, Reserves, etc

 

The Board of Directors may determine that the Company (i) may cause any moneys, investments, or other assets forming part of the undivided profits of the Company, standing to the credit of a reserve fund, or to the credit of a reserve fund for the redemption of capital, or in the hands of the Company and available for dividends, or representing premiums received on the issuance of shares and standing to the credit of the share premium account, to be capitalized and distributed among such of the Shareholders as would be entitled to receive the same if distributed by way of dividend and in the same proportion, on the footing that they become entitled thereto as capital; and (ii) may cause such distribution or payment to be accepted by such Shareholders in full satisfaction of their interest in the said capitalized sum.

 

50. Implementation of Powers

 

For the purpose of giving full effect to any resolution under Article 49, the Board of Directors may settle any difficulty which may arise in regard to the distribution as it thinks expedient, and, in particular, may fix the value for distribution of any specific assets and may determine that cash payments shall be made to any Shareholders upon the footing of the value so fixed, or that fractions of less value than a certain determined value may be disregarded in order to adjust the rights of all persons, and may vest any such cash, shares, debentures, debenture stock or specific assets in trustees upon such trusts for the persons entitled to the dividend or capitalized fund as may seem expedient to the Board of Directors.  Where requisite, a proper contract shall be made in accordance with Section 291 of the Companies Law, and the Board of Directors may appoint any person to sign such contract on behalf of the persons entitled to the dividend or capitalized fund.

 

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51. Unclaimed Dividends

 

All unclaimed dividends or other moneys payable in respect of a share may be invested or otherwise made use of by the Board of Directors for the benefit of the Company until claimed.  The payment by the Directors of any unclaimed dividend or such other moneys into a separate account shall not constitute the Company a trustee in respect thereof, and any dividend unclaimed after a period of seven (7) years from the date of declaration of such dividend, and any such other moneys unclaimed after a like period from the date the same were payable, shall be forfeited and shall revert to the Company, provided, however, that the Board of Directors may, at its discretion, cause the Company to pay any such dividend or such other moneys, or any part thereof, to a person who would have been entitled thereto had the same not reverted to the Company.  The principal (and only the principal) of any unclaimed dividend of such other moneys shall be, if claimed, paid to a person entitled thereto.

 

52. Mechanics of Payment

 

Any dividend or other moneys payable in cash in respect of a share may be paid by check or payment order sent through the post to, or left at, the registered address of the person entitled thereto or by transfer to a bank account specified by such person (or, if two or more persons are registered as joint holders of such share or are entitled jointly thereto in consequence of the death or bankruptcy of the holder or otherwise, to the joint holder whose name is registered first in the Register of Shareholders or his bank account or the person who the Company may then recognize as the owner thereof or entitled thereto under Article 16 or 17 hereof, as applicable, or such person’s bank account), or to such person and at such other address as the person entitled thereto may by writing direct, or in any other manner the Board of Directors deems appropriate.  Every such check or warrant or other method of payment shall be made payable to the order of the person to whom it is sent, or to such person as the person entitled thereto as aforesaid may direct, and payment of the check or warrant by the banker upon whom it is drawn shall be a good discharge to the Company.

 

53. Receipt from a Joint Holder

 

If two or more persons are registered as joint holders of any share, or are entitled jointly thereto in consequence of the death or bankruptcy of the holder or otherwise, any one of them may give effectual receipts for any dividend or other moneys payable or property distributable in respect of such share.

 

Accounts

 

54. Books of Account

 

The Company’s books of account shall be kept at the Office of the Company, or at such other place or places as the Board of Directors may think fit, and they shall always be open to inspection by all Directors.  No shareholder, not being a Director, shall have any right to inspect any account or book or other similar document of the Company, except as conferred by law or authorized by the Board of Directors.  The Company shall make copies of its annual financial statements available for inspection by the Shareholders at the principal offices of the Company.  The Company shall not be required to send copies of its annual financial statements to Shareholders.

 

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55. Auditors

 

The appointment, authorities, rights and duties of the auditor(s) of the Company, shall be regulated by applicable law, provided, however, that in exercising its authority to fix the remuneration of the auditor(s), the Shareholders in a General Meeting may act (and in the absence of any action in connection therewith shall be deemed to have so acted) to authorize the Board of Directors (with right of delegation to a Committee or management) to fix such remuneration subject to such criteria or standards, and if no such criteria or standards are so provided, such remuneration shall be fixed in an amount commensurate with the volume and nature of the services rendered by such auditor(s).

 

Supplementary Registers

 

56. Supplementary Registers

 

Subject to and in accordance with the provisions of Sections 138 and 139 of the Companies Law, the Company may cause supplementary registers to be kept in any place outside Israel as the Board of Directors may think fit, and, subject to all applicable requirements of law, the Board of Directors may from time to time adopt such rules and procedures as it may think fit in connection with the keeping of such branch registers.

 

Exemption, Indemnity and Insurance

 

57. Insurance

 

Subject to the provisions of the Companies Law, and to the extent applicable, the Securities Law and the IEC Law, with regard to such matters, the Company may enter into a contract for the insurance of the liability, in whole or in part, of any of its Office Holders imposed on such Office Holder due to an act performed by or an omission of the Office Holder in the Office Holder’s capacity as an Office Holder of the Company arising from any matter permitted by law, including the following:

 

57.1 a breach of duty of care to the Company or to any other person, to the extent such a breach arises out of the negligent conduct of the Office Holder;

 

57.2 a breach of his duty of loyalty to the Company, provided that the Office Holder acted in good faith and had reasonable grounds to assume that the act would not harm the Company;

 

57.3 a financial liability imposed on such Office Holder in favor of a third party;

 

57.4 expenses incurred by the Office Holder with respect to proceedings held pursuant to certain provisions of the IEC Law;

 

57.5 a monetary liability imposed on the Office Holder in favor of an injured party at an Administrative Procedure pursuant to Section 52(54)(a)(1)(a) of the Securities Law; and

 

57.6 expenses incurred by an Office Holder in connection with an Administrative Procedure, including reasonable litigation expenses and reasonable attorneys’ fees.

 

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58. Indemnity

 

58.1 Subject to the provisions of the Companies Law, and to the extent applicable, the Securities Law and the IEC Law, the Company may retroactively indemnify an Office Holder of the Company with respect to the following liabilities, payments and expenses, provided that such liabilities, payments or expenses were imposed on such Office Holder or incurred by such Office Holder for acts performed or omissions committed 1 by him or her as an Office Holder:

 

58.1.1 a financial liability imposed on an Office Holder in favor of another person by any court judgment, including a judgment given as a result of a settlement or an arbitrator’s award which has been confirmed by a court in respect of an act performed by the Office Holder;

 

58.1.2 reasonable litigation expenses, including attorneys’ fees, expended by the Office Holder (A) as a result of an investigation or proceeding instituted against him or her by an authority authorized to conduct such investigation or proceeding, provided that (1) no indictment (as defined in the Companies Law) was filed against such Office Holder as a result of such investigation or proceeding; and (2) no financial liability in lieu of a criminal proceeding (as defined in the Companies Law) was imposed upon him or her as a result of such investigation or proceeding or if such financial liability was imposed, it was imposed with respect to an offence that does not require proof of criminal intent; and (B) in connection with a monetary sanction;

 

58.1.3 reasonable litigation costs, including attorney’s fees, expended by an Office Holder or which were imposed on an Office Holder by a court in proceedings filed against the Office Holder by the Company or in its name or by any other person or in a criminal charge in respect of which the Office Holder was acquitted or in a criminal charge in respect of which the Office Holder was convicted for an offence which did not require proof of criminal intent;

 

58.1.4 a financial obligation imposed upon an Office Holder and reasonable litigation costs, including attorney’s fees, expended by an Office Holder as a result of an Administrative Procedure under the Securities Law, instituted against an Office Holder. Without derogating from the generality of the foregoing, such obligation or expenses will include a payment which an Office Holder is obligated to make to an injured party as set forth in Section 52(54)(a)(1)(a) of the Securities Law and expenses that an Office Holder incurred in connection with a proceeding under Chapters H’3, H’4 or I’1 of the Securities Law; and

 

58.1.5 any other event, occurrence, matter or circumstances under any law with respect to which the Company may, or will be able to, indemnify an Office Holder, and to the extent such law requires the inclusion of a provision permitting such indemnity in these Articles, then such provision is deemed to be included and incorporated herein by reference (including, without limitation, in accordance with Section 56h(b)(1) of the Securities Law, if and to the extent applicable, and Section 50P(b)(2) of the IEC Law).

 

58.2 Subject to the provisions of the Companies Law, the Company may undertake to indemnify an Office Holder, in advance, with respect to those liabilities and expenses described in the following Articles:

 

 

1 Reference to omissions to be added to the F-1.

 

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58.2.1 Sub-Article 58.1.2 to 58.1.5; and;

 

58.2.2 Sub-Article 58.1.1, provided that:

 

58.2.2.1. the undertaking to indemnify is limited to such events which the Board of Directors shall deem to be likely to occur in light of the operations of the Company at the time that the undertaking to indemnify is made and for such amounts or criterion which the Board of Directors may, at the time of the giving of such undertaking to indemnify, deem to be reasonable under the circumstances; and

 

58.2.2.2. the undertaking to indemnify shall set forth such events which the Board of Directors shall deem to be likely to occur in light of the operations of the Company at the time that the undertaking to indemnify is made, and the amounts and/or criterion which the Board of Directors may, at the time of the giving of such undertaking to indemnify, deem to be reasonable under the circumstances.

 

59. Exemption

 

Subject to the provisions of the Companies Law, the Company may, to the maximum extent permitted by law exempt and release, in advance, any Office Holder from any liability to the Company for damages arising out of a breach of a duty of care towards the Company.

 

60. General

 

60.1 Any amendment to the Companies Law adversely affecting the right of any Office Holder to be indemnified or insured pursuant to Articles 57 to 59 and any amendments to Articles 57 to 59 shall be prospective in effect, and shall not affect the Company’s obligation or ability to indemnify or insure an Office Holder for any act or omission occurring prior to such amendment, unless otherwise provided by applicable law.

 

60.2 The provisions of Articles 57 to 59 : (i) shall apply to the maximum extent permitted by law (including, the Companies Law, the Securities Law and the IEC Law); and (ii) are not intended, and shall not be interpreted so as to restrict the Company, in any manner, in respect of the procurement of insurance and/or in respect of indemnification (whether in advance or retroactively) and/or exemption, in favor of any person who is not an Office Holder, including, without limitation, any employee, agent, consultant or contractor of the Company who is not an Office Holder; and/or any Office Holder to the extent that such insurance and/or indemnification is not specifically prohibited under law.

 

Winding Up

 

61. Winding Up

 

If the Company is wound up, then, subject to applicable law and to the rights of the holders of shares with special rights upon winding up, the assets of the Company available for distribution among the Shareholders shall be distributed to them in proportion to the nominal value of their respective holdings of the shares in respect of which such distribution is being made.

 

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Notices

 

62. Notices

 

62.1 Any written notice or other document may be served by the Company upon any Shareholder either personally, by facsimile, email or other electronic transmission, or by sending it by prepaid mail (airmail if sent internationally) addressed to such Shareholder at his address as described in the Register of Shareholders or such other address as he may have designated in writing for the receipt of notices and other documents.

 

62.2 Any written notice or other document may be served by any Shareholder upon the Company by tendering the same in person to the Chief Executive Officer of the Company at the principal office of the Company, by facsimile transmission, email or by sending it by prepaid registered mail (airmail if posted outside Israel) to the Company at its Office.

 

62.3 Any such notice or other document shall be deemed to have been served:

 

62.3.1 in the case of mailing, forty-eight (48) hours after it has been posted, or when actually received by the addressee if sooner than forty-eight hours after it has been posted,

 

62.3.2 in the case of overnight air courier, on the next business day following the day sent, with receipt confirmed by the courier, or when actually received by the addressee if sooner than three business days after it has been sent;

 

62.3.3 in the case of personal delivery, when actually tendered in person, to such addressee, or

 

62.3.4 in the case of facsimile, email or other electronic transmission, on the first business day (during normal business hours in place of addressee) on which the sender receives automatic electronic confirmation by the addressee’s facsimile machine that such notice was received by the addressee or delivery confirmation from the addressee’s email or other communication server.

 

62.4 If a notice is, in fact, received by the addressee, it shall be deemed to have been duly served, when received, notwithstanding that it was defectively addressed or failed, in some other respect, to comply with the provisions of this Article 62.

 

62.5 All notices to be given to the Shareholders shall, with respect to any share to which persons are jointly entitled, be given to whichever of such persons is named first in the Register of Shareholders, and any notice so given shall be sufficient notice to the holders of such share.

 

62.6 Any Shareholder whose address is not set forth in the Register of Shareholders, and who shall not have designated in writing an address for the receipt of notices, shall not be entitled to receive any notice from the Company.

 

62.7 Notwithstanding anything to the contrary contained herein, notice by the Company of a General Meeting, containing the information required by applicable law and these Articles to be set forth therein, which is published, within the time otherwise required for giving notice of such meeting, in either or several of the following manners (as applicable) shall  be deemed to be notice of such meeting duly given, for the purposes of these Articles, to any Shareholder whose address as registered in the Register of Shareholders (or as designated in writing for the receipt of notices and other documents) is located either inside or outside the State of Israel:

 

62.7.1 if the Company’s shares are then listed for trading on a national securities exchange in the United States or quoted in an over-the-counter market in the United States, publication of notice of a General Meeting by a Report of Foreign Private Issuer on Form 6-K (or an equivalent form subsequently adopted by the SEC) furnished to the SEC; and/or

 

62.7.2 on the Company’s internet site.

 

62.8 The mailing or publication date and the record date and/or date of the meeting (as applicable) shall be counted among the days comprising any notice period under the Companies Law and the regulations thereunder.

 

*          *          *

 

  - 26 -  

 

Exhibit 4.1

 

SPECIMEN SHARE CERTIFICATE

 

 

InMode Ltd.

 

Number Shares
   
INMD CUSIP:

 

  See Reverse for
  Certain
  Definitions

 

INMODE LTD.

INCORPORATED UNDER THE LAWS OF THE STATE OF ISRAEL

 

THIS CERTIFIES that  
   
   
is the Registered Holder of  

 

FULLY PAID AND NON-ASSESSABLE ORDINARY
SHARES OF NIS 0.01 PAR VALUE EACH

 

of InMode Ltd. transferable on the books of the Company by the holder hereof in person or by duly authorized attorney only upon surrender of this Certificate properly endorsed or with an appropriate instrument of transfer. This Certificate and the shares represented hereby are issued and shall be held subject to all the provisions of the Amended and Restated Articles of Association of the Company and amendments thereto, to all of which the holder by the acceptance hereof assents. This Certificate is not valid unless countersigned and registered by the Transfer Agent and Registrar.

 

IN WITNESS WHEREOF, the Company has caused this Certificate to be issued under the facsimile seal of the Company.

 

Dated:        
         
  InMode Ltd.      
  Corporate Seal   ISRAEL  
        /s/ Moshe Mizrahy
        Moshe Mizrahy
        Chief Executive Officer

 

 

 

 

The following abbreviations, when used in the inscription on the face of this Certificate, shall be construed as though they were written out in full according to applicable laws or regulations:

 

TEN COM- as tenants in common UNIF GIFT MIN ACT ________ Custodian ________
TEN ENT - as tenants by the entireties   (Cust)   (Minor)
JT TEN - as joint tenants with right of survivorship and not as tenants in common under Uniform Gifts to Minors
    Act  
      (State)

 

Additional abbreviations may also be used though not in the above list.

 

FOR VALUE RECEIVED , ___________________ HEREBY SELLS, ASSIGNS AND TRANSFERS UNTO

PLEASE INSERT SOCIAL SECURITY OR OTHER IDENTIFYING NUMBER OF ASSIGNEE

 

 

 

(PLEASE PRINT OR TYPEWRITE NAME AND ADDRESS INCLUDING POSTAL ZIP CODE OF ASSIGNEE )

 

                                                             SHARES REPRESENTED BY THE WITHIN CERTIFICATE, AND DO HEREBY IRREVOCABLY CONSTITUTES AND APPOINTS

 

_______________________________________________________________________, ATTORNEY TO TRANSFER THE SAID SHARES ON THE BOOKS OF THE WITHIN-NAMED CORPORATION WITH FULL POWER OF SUBSTITUTION IN THE PREMISES.

 

DATED:      

 

       
      NOTICE: THE SIGNATURE TO THIS ASSIGNMENT MUST CORRESPOND WITH THE NAME AS WRITTEN UPON THE FACE OF THE CERTIFICATE, IN EVERY PARTICULAR, WITHOUT ALTERATION OR ENLARGEMENT, OR ANY CHANGE, WHATSOEVER.
       
Signature(s) Guaranteed:      
       
THE SIGNATURE(S) SHOULD BE GUARANTEED BY AN ELIGIBLE GUARANTOR INSTITUTION (BANKS, STOCKBROKERS, SAVINGS AND LOAN ASSOCIATIONS AND CREDIT UNIONS WITH MEMBERSHIP IN AN APPROVED SIGNATURE GUARANTEE MEDALLION PROGRAM), PURSUANT TO S.E.C. RULE 17 Ad-15.      

 

TRANSFER FEE WILL APPLY

 

  - 2 -  

 

Exhibit 10.1

 

 

 

INVASIX LTD.

 

2008 ROW OPTION PLAN

 

 

 

 

     

 

 

TABLE OF CONTENTS

 

1. Purpose 2
     
2. Definitions 2
     
3. Stock Subject to the Plan 5
     
4. Administration of the Plan 5
     
5. Eligibility 6
     
6. Terms and Conditions of Awards 7
     
7. Award Exercise or Purchase Price 8
     
8. Exercise of Award 9
     
9. Conditions Upon Issuance of Shares 10
     
10. Adjustments Upon Changes in Capitalization 10
     
11. Corporate Transactions 11
     
12. Effective Date and Term of Plan 11
     
13. Amendment, Suspension or Termination of the Plan 11
     
14. Reservation of Shares 12
     
15. No Effect on Terms of Employment/Consulting 12
     
16. No Effect on Retirement and Other Benefit Plans 12
     
17. Stockholder Approval 12

     

 

 

1.   Purposes of the Plan . The Plan is intended to provide an incentive to retain, in the employ of the Company and its Related Entities, persons of training, experience, and ability, to attract new Employees, Directors, and Consultants which the Board shall decide their services are considered valuable to the Company, to encourage the sense of proprietorship of such persons, and to stimulate the active interest of such persons in the development and financial success of the Company by providing them with opportunities to purchase shares in the Company, pursuant to the Plan.

 

2.   Definitions . As used herein, the following definitions shall apply:

 

(a)  “ Administrator ” means the Board or any of the Committees appointed to administer the Plan.

 

(b)  “ Applicable Laws ” means the legal requirements relating to the administration of stock incentive plans, if any, under applicable provisions of Israel, United States, Canada and other applicable countries tax including the Code and securities laws, Israeli Companies Law, the rules of any applicable stock exchange or national market system, and the rules of any jurisdiction applicable to Awards granted to residents therein.

 

(c)  “ Assumed ” means that pursuant to a Corporate Transaction either (i) the Award is expressly affirmed by the Company or (ii) the contractual obligations represented by the Award are expressly assumed (and not simply by operation of law) by the successor entity or its Parent in connection with the Corporate Transaction with appropriate adjustments to the number and type of securities of the successor entity or its Parent subject to the Award and the exercise or purchase price thereof which at least preserves the compensation element of the Award existing at the time of the Corporate Transaction as determined in accordance with the instruments evidencing the agreement to assume the Award.

 

(d)  “ Award ” means the grant of an Option, Restricted Stock, or other right or benefit under the Plan.

 

(e)  “ Award Agreement ” means the written agreement evidencing the grant of an Award executed by the Company and the Grantee, including any amendments thereto.

 

(f)  “ Board ” means the Board of Directors of the Company.

 

(g)  “ Cause ” means, with respect to the termination by the Company, or a Related Entity of the Grantee’s Continuous Service, that such termination is for “Cause” as such term is expressly defined in a then-effective written agreement between the Grantee and the Company, or such Related Entity, or in the absence of such then-effective written agreement and definition, shall mean: (i) conviction of any felony involving moral turpitude or affecting the Company or a Related Entity; (ii) any refusal to carry out a reasonable directive of the chief executive officer, the Board or the Optionee’s direct supervisor, which involves the business of the Company or a Related Entity and was capable of being lawfully performed; (iii) embezzlement of funds of the Company or a Related Entity; (iv) any breach of the Optionee’s fiduciary duties or duties of care of the Company or a Related Entity; including without limitation disclosure of confidential information of the Company or a Related Entity; and (v) any conduct (other than conduct in good faith) reasonably determined by the Board to be materially detrimental to the Company or a Related Entity.

 

(h)  “ Code ” means the USA Internal Revenue Code of 1986, as amended.

 

(i)  “ Committee ” means any committee appointed by the Board to administer the Plan.

 

(j)   “ Company ” means Invasix Ltd., a corporation organized under the laws of the State of Israel.

 

(k)  “ Consultant ” means any person (other than an Employee or a Director, solely with respect to rendering services in such person’s capacity as a Director) who is engaged by the Company or any Related Entity to render consulting or advisory services to the Company or such Related Entity.

 

  2  

 

 

(l)   “ Continuous Service ” means that the provision of services to the Company or a Related Entity in any capacity of Employee, Director or Consultant, is not interrupted or terminated. Continuous Service shall not be considered interrupted in the case of (i) any approved leave of absence, (ii) transfers among the Company, any Related Entity, or any successor, in any capacity of Employee, Director or Consultant, or (iii) any change in status as long as the individual remains in the service of the Company or a Related Entity in any capacity of Employee, Director or Consultant (except as otherwise provided in the Award Agreement). An approved leave of absence shall include sick leave, military leave, or any other authorized personal leave. For purposes of each Incentive Stock Option granted under the Plan, if such leave exceeds ninety (90) days, and reemployment upon expiration of such leave is not guaranteed by statute or contract, then the Incentive Stock Option shall be treated as a Non-Qualified Stock Option on the day three (3) months and one (1) day following the expiration of such ninety (90) day period.

 

(m)  “ Corporate Transaction ” means any of the following transactions:

 

(i)    a merger or consolidation in which the Company is not the surviving entity, except for a transaction the principal purpose of which is to change the jurisdiction in which the Company is incorporated;

 

(ii)   the sale, transfer or other disposition of all or substantially all of the assets of the Company (including the capital stock of the Company’s subsidiary corporations);

 

(iii)  the complete liquidation or dissolution of the Company;

 

(iv)  any reverse merger in which the Company is the surviving entity but in which securities possessing more than fifty percent (50%) of the total combined voting power of the Company’s outstanding securities are transferred to a person or persons different from those who held such securities immediately prior to such merger; or

 

(v)   acquisition by any person or related group of persons (other than the Company or by a Company-sponsored employee benefit plan) of beneficial ownership (within the meaning of Rule 13d-3 of the Exchange Act) of securities possessing more than fifty percent (50%) of the total combined voting power of the Company’s outstanding securities.

 

(n)  “ Director ” means a member of the Board or the board of directors of any Related Entity.

 

(o)  “ Disability ” means as defined under the long-term disability policy of the Company or the Related Entity to which the Grantee provides services regardless of whether the Grantee is covered by such policy. If the Company or the Related Entity to which the Grantee provides service does not have a long-term disability plan in place, “Disability” means that a Grantee is unable to carry out the responsibilities and functions of the position held by the Grantee by reason of any medically determinable physical or mental impairment. A Grantee will not be considered to have incurred a Disability unless he or she furnishes proof of such impairment sufficient to satisfy the Administrator in its discretion.

 

(p)  “ Employee ” means any person, including an Officer or Director, who is an employee of the Company or any Related Entity. The payment of a director’s fee by the Company or a Related Entity shall not be sufficient to constitute “employment” by the Company.

 

(q)  “ Exchange Act ” means the Securities Exchange Act of 1934, as amended.

 

(r)  “ Fair Market Value ” means, as of any date, the value of the Ordinary Shares determined as follows:

 

  3  

 

 

(i)    If the Shares are listed on any established stock exchange or a national market system, the Fair Market Value shall be the closing sales price for such Shares (or the closing bid, if no sales were reported), as quoted on such exchange or system on the date of determination, as reported in the Wall Street Journal, or such other source as the Board deems reliable;

 

(ii)   If the Shares are regularly quoted by a recognized securities dealer but selling prices are not reported, the Fair Market Value shall be the mean between the high bid and low asked prices for the Shares on the date of determination, or;

 

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

 

(s)   “ Grantee ” means an Employee, Director or Consultant who receives an Award under the Plan.

 

(t)   “ Incentive Stock Option ” means an Option intended to qualify as an incentive stock option within the meaning of Section 422 of the Code.

 

(u)  “ Israeli Companies Law ” means the Israeli Companies Law 1999, as amended or replaced from time to time.

 

(v)  “ Non-Qualified Stock Option ” means an Option not intended to qualify as an Incentive Stock Option.

 

(w) “ Officer ” means a person who is an officer of the Company or a Related Entity within the meaning of Section 16 of the Exchange Act and the rules and regulations promulgated thereunder.

 

(x)  “ Option ” means an option to purchase one (1) Ordinary Shares pursuant to an Award Agreement granted under the Plan.

 

(y)  “ Ordinary Shares ” means the ordinary shares par value NIS 0.01 per share of the Company.

 

(z)   “ Parent ” means a “parent corporation,” whether now or hereafter existing, as defined in Section 424(e) of the Code.

 

(aa)  “ Plan ” means this 2008 ROW Option Plan.

 

(bb)  “ Post-Termination Exercise Period ” means the period specified in the Award Agreement (or if not mentioned therein – as specified in this Plan) commencing on the date of termination (other than termination by the Company or any Related Entity for Cause) of the Grantee’s Continuous Service.

 

(cc)  “ Related Entity ” means any Parent or Subsidiary of the Company and any business, corporation, partnership, limited liability company or other entity in which the Company or a Parent or a Subsidiary of the Company holds a substantial ownership interest, directly or indirectly.

 

(dd)  “ Replaced ” means that pursuant to a Corporate Transaction the Award is replaced with a comparable stock award or a cash incentive program of the Company, the successor entity (if applicable) or Parent of either of them which at least preserves the compensation element of such Award existing at the time of the Corporate Transaction and provides for subsequent payout in accordance with the same (or a more favorable) vesting schedule applicable to such Award. The determination of Award comparability shall be made by the Administrator and its determination shall be final, binding and conclusive.

 

(ee)  “ Restricted Stock ” means Shares issued under the Plan to the Grantee for such consideration, if any, and subject to such restrictions on transfer, rights of first refusal, repurchase provisions, forfeiture provisions, and other terms and conditions as established by the Administrator.

 

(ff)   “ Rule 16b-3 ” means Rule 16b-3 promulgated under the Exchange Act or any successor thereto.

 

(gg)  “ Share ” means a share of the Ordinary Shares.

 

  4  

 

 

(hh)  “ Subsidiary ” means a “subsidiary corporation,” whether now or hereafter existing, as defined in Section 424(f) of the Code.

 

3.   Stock Subject to the Plan .

 

(a)  Subject to the provisions of Section 10, below, the maximum aggregate number of Shares which may be issued pursuant to all Awards is 180,000 Shares, plus any increase to be added from time to time as determined by the Board. Out of such maximum aggregate number of Shares (as may be increased from time to time), any number of Shares may be issued pursuant to Incentive Stock Options arrangements. The Shares to be issued pursuant to Awards may be authorized, but unissued, or reacquired Ordinary Shares.

 

(b)  Any Shares covered by an Award (or portion of an Award) which is forfeited, canceled or expires (whether voluntarily or involuntarily) shall be deemed not to have been issued for purposes of determining the maximum aggregate number of Shares which may be issued under the Plan. Shares that actually have been issued under the Plan pursuant to an Award shall not be returned to the Plan and shall not become available for future issuance under the Plan, except that if unvested Shares are forfeited, or repurchased by the Company at the lower of their original purchase price or their Fair Market Value at the time of repurchase, such Shares shall become available for future grant under the Plan. To the extent not prohibited by Section 422(b)(1) of the Code (and the corresponding regulations thereunder), the listing requirements of The Nasdaq National Market (or other established stock exchange or national market system on which the Common Stock is traded) and Applicable Law, any Shares covered by an Award which are surrendered (i) in payment of the Award exercise or purchase price or (ii) in satisfaction of tax withholding obligations incident to the exercise of an Award shall be deemed not to have been issued for purposes of determining the maximum number of Shares which may be issued pursuant to all Awards under the Plan, unless otherwise determined by the Administrator.

 

4.   Administration of the Plan .

 

(a)   Plan Administrator.

 

(i)     Administration with Respect to Directors and Officers . With respect to grants of Awards to Directors or Employees who are also Officers or Directors of the Company, the Plan shall be administered by (A) the Board or (B) a Committee designated by the Board, which Committee shall be constituted in such a manner as to satisfy the Applicable Laws and to permit such grants and related transactions under the Plan to be exempt from Section 16(b) of the Exchange Act in accordance with Rule 16b-3. Once appointed, such Committee shall continue to serve in its designated capacity until otherwise directed by the Board.

 

(ii)    Administration With Respect to Consultants and Other Employees . With respect to grants of Awards to Employees or Consultants who are neither Directors nor Officers of the Company, the Plan shall be administered by (A) the Board or (B) a Committee designated by the Board, which Committee shall be constituted in such a manner as to satisfy the Applicable Laws. Once appointed, such Committee shall continue to serve in its designated capacity until otherwise directed by the Board. The Board may authorize one or more Officers to grant such Awards and may limit such authority as the Board determines from time to time.

 

(iii)   Administration Errors . In the event an Award is granted in a manner inconsistent with the provisions of this subsection (a), such Award shall be presumptively valid as of its grant date to the extent permitted by the Applicable Laws.

 

  5  

 

 

(b)   Powers of the Administrator . Subject to Applicable Laws and the provisions of the Plan (including any other powers given to the Administrator hereunder), and except as otherwise provided by the Board, the Administrator shall have the authority, in its discretion:

 

(i)    to select the Employees, Directors and Consultants to whom Awards may be granted from time to time hereunder;

 

(ii)   to determine whether and to what extent Awards are granted hereunder;

 

(iii)  to determine the number of Shares or the amount of other consideration to be covered by each Award granted hereunder;

 

(iv)  to approve forms of Award Agreements for use under the Plan;

 

(v)   to determine the terms and conditions of any Award granted hereunder;

 

(vi)  to amend the terms of any outstanding Award granted under the Plan, provided that any amendment that would adversely affect the Grantee’s rights under an outstanding Award shall not be made without the Grantee’s written consent;

 

(vii)  to construe and interpret the terms of the Plan and Awards, including without limitation, any notice of award or Award Agreement, granted pursuant to the Plan;

 

(viii) to establish additional terms, conditions, rules or procedures, to accommodate the rules or laws of applicable foreign jurisdictions and to afford Grantees favorable treatment under such rules or laws; provided, however, that no Award shall be granted under any such additional terms, conditions, rules or procedures with terms or conditions which are inconsistent with the provisions of the Plan; and

 

  (ix) to take such other action, not inconsistent with the terms of the Plan, as the Administrator deems appropriate.

 

(c)   Indemnification . In addition to such other rights of indemnification as they may have as members of the Board or as Officers or Employees of the Company or a Related Entity, members of the Board and any Officers or Employees of the Company or a Related Entity to whom authority to act for the Board, the Administrator or the Company is delegated shall be defended and indemnified by the Company to the extent permitted by law on an after-tax basis against all reasonable expenses, including attorneys’ fees, actually and necessarily incurred in connection with the defense of any claim, investigation, action, suit or proceeding, or in connection with any appeal therein, to which they or any of them may be a party by reason of any action taken or failure to act under or in connection with the Plan, or any Award granted hereunder, and against all amounts paid by them in settlement thereof (provided such settlement is approved by the Company) or paid by them in satisfaction of a judgment in any such claim, investigation, action, suit or proceeding, except in relation to matters as to which it shall be adjudged in such claim, investigation, action, suit or proceeding that such person is liable for gross negligence, bad faith or intentional misconduct; provided, however, that within thirty (30) days after the institution of such claim, investigation, action, suit or proceeding, such person shall offer to the Company, in writing, the opportunity at the Company’s expense to defend the same.

 

5.   Eligibility . Awards other than Incentive Stock Options may be granted to Employees, Directors and Consultants. Incentive Stock Options may be granted only to Employees of the Company or a Parent or a Subsidiary of the Company. An Employee, Director or Consultant who has been granted an Award may, if otherwise eligible, be granted additional Awards. Awards may be granted to such Employees, Directors or Consultants who are residing in foreign jurisdictions as the Administrator may determine from time to time.

 

  6  

 

 

6.   Terms and Conditions of Awards .

 

(a)   Type of Awards . The Administrator is authorized under the Plan to award any type of arrangement to an Employee, Director or Consultant that is not inconsistent with the provisions of the Plan and that by its terms involves or might involve the issuance of (i) Shares, (ii) an Option or similar right with a fixed or variable price related to the Fair Market Value of the Shares and with an exercise or conversion privilege related to the passage of time, the occurrence of one or more events, or the satisfaction of performance criteria or other conditions, or (iii) any other security with the value derived from the value of the Shares. Such awards include, without limitation, Options or sales or bonuses of Restricted Stock, and an Award may consist of one such security or benefit, or two (2) or more of them in any combination or alternative.

 

(b)   Designation of Award . Each Award shall be designated in the Award Agreement. In the case of an Option, the Option shall be designated as either an Incentive Stock Option or a Non-Qualified Stock Option. However, notwithstanding such designation, to the extent that the aggregate Fair Market Value of Shares subject to Options designated as Incentive Stock Options which become exercisable for the first time by a Grantee during any calendar year (under all plans of the Company or any Parent or Subsidiary of the Company) exceeds $100,000, such excess Options, to the extent of the Shares covered thereby in excess of the foregoing limitation, shall be treated as Non-Qualified Stock Options. For this purpose, Incentive Stock Options shall be taken into account in the order in which they were granted, and the Fair Market Value of the Shares shall be determined as of the grant date of the relevant Option.

 

(c)   Conditions of Award . Subject to the terms of the Plan, the Administrator shall determine the provisions, terms, and conditions of each Award including, but not limited to, the Award vesting schedule, repurchase provisions, rights of first refusal, forfeiture provisions, form of payment (cash, Shares, or other consideration) upon settlement of the Award, payment contingencies, and satisfaction of any performance criteria. The performance criteria established by the Administrator may be based on any one of, or combination of, increase in share price, earnings per share, total stockholder return, return on equity, return on assets, return on investment, net operating income, cash flow, revenue, economic value added, personal management objectives, or other measure of performance selected by the Administrator. Partial achievement of the specified criteria may result in a payment or vesting corresponding to the degree of achievement as specified in the Award Agreement.

 

(d)   Acquisitions and Other Transactions . The Administrator may issue Awards under the Plan in settlement, assumption or substitution for, outstanding awards or obligations to grant future awards in connection with the Company or a Related Entity acquiring another entity, an interest in another entity or an additional interest in a Related Entity whether by merger, stock purchase, asset purchase or other form of transaction.

 

(e)   Separate Programs . The Administrator may establish one or more separate programs under the Plan for the purpose of issuing particular forms of Awards to one or more classes of Grantees on such terms and conditions as determined by the Administrator from time to time.

 

(f)   Early Exercise . The Award Agreement may, but need not, include a provision whereby the Grantee may elect at any time while an Employee, Director or Consultant to exercise any part or all of the Award prior to full vesting of the Award. Any unvested Shares received pursuant to such exercise may be subject to a repurchase right in favor of the Company or a Related Entity or to any other restriction the Administrator determines to be appropriate.

 

  7  

 

 

(g)   Term of Award . The term of each Award shall be the term stated in the Award Agreement, provided, however, that the term of an Award shall be no more than seven (7) years from the date of grant thereof. However, in the case of an Incentive Stock Option granted to a Grantee who, at the time the Option is granted, owns stock representing more than ten percent (10%) of the voting power of all classes of stock of the Company or any Parent or Subsidiary of the Company, the term of the Incentive Stock Option shall be five (5) years from the date of grant thereof or such shorter term as may be provided in the Award Agreement.

 

(h)   Transferability of Awards . No Option or any right with respect thereto, purchasable hereunder, whether fully paid or not, shall be assignable, transferable or given as collateral, or any right with respect to it given to any third party whatsoever, except as specifically allowed under the Plan. During the lifetime of the Grantee, each and all of such Grantee's rights to purchase Shares hereunder shall be exercisable only by the Grantee. Vested options are transferable by will or by law of descent and distribution. Any such action made directly or indirectly, for an immediate validation or for a future one, shall be void.

 

(i)   Time of Granting Awards . The date of grant of an Award shall for all purposes be the date on which the Administrator makes the determination to grant such Award, or such other date as is determined by the Administrator. Notice of the grant determination shall be given to each Employee, Director or Consultant to whom an Award is so granted within a reasonable time after the date of such grant.

 

7.   Award Exercise or Purchase Price, Consideration and Taxes .

 

(a)   Exercise or Purchase Price . The exercise or purchase price, if any, for an Award shall be as follows:

 

(i)    In the case of an Incentive Stock Option:

 

(A)  granted to an Employee who, at the time of the grant of such Incentive Stock Option owns stock representing more than ten percent (10%) of the voting power of all classes of stock of the Company or any Parent or Subsidiary of the Company, the per Share exercise price shall be not less than one hundred ten percent (110%) of the Fair Market Value per Share on the date of grant; or

 

(B)  granted to any Employee other than an Employee described in the preceding paragraph, the per Share exercise price shall be not less than one hundred percent (100%) of the Fair Market Value per Share on the date of grant.

 

(ii)   In the case of a Non-Qualified Stock Option, the per Share exercise price shall be not less than one hundred percent (100%) of the Fair Market Value per Share on the date of grant.

 

(iii)  In the case of other Awards, such price as is determined by the Administrator.

 

(iv)  Notwithstanding the foregoing provisions of this Section 7(a), in the case of an Award issued pursuant to Section 6(d), above, the exercise or purchase price for the Award shall be determined in accordance with the principles of Section 424(a) of the Code.

 

(b)   Consideration . Subject to Applicable Laws, the consideration to be paid for the Shares to be issued upon exercise or purchase of an Award including the method of payment, shall be determined by the Administrator (and, in the case of an Incentive Stock Option, shall be determined at the time of grant). In addition to any other types of consideration the Administrator may determine, the Administrator is authorized to accept as consideration for Shares issued under the Plan the following:

 

(i)    cash;

 

(ii)   check;

 

(iii)  wire transfer.

 

  8  

 

 

The Administrator may at any time or from time to time, by adoption of or by amendment to the standard forms of Award Agreement described in Section 4(b)(iv), or by other means, grant Awards which do not permit all of the foregoing forms of consideration to be used in payment for the Shares or which otherwise restrict one or more forms of consideration.

 

(c)   Taxes . No Shares shall be delivered under the Plan to any Grantee or other person until such Grantee or other person has made arrangements acceptable to the Administrator for the satisfaction of any foreign, federal, state, or local income and employment tax withholding obligations, including, without limitation, obligations incident to the receipt of Shares or the disqualifying disposition of Shares received on exercise of an Incentive Stock Option. Upon exercise of an Award the Company shall withhold or collect from Grantee an amount sufficient to satisfy such tax obligations.

 

8.   Exercise of Award .

 

(a)   Procedure for Exercise; Rights as a Stockholder .

 

(i)    Any Award granted hereunder shall be exercisable at such times and under such conditions as determined by the Administrator under the terms of the Plan and specified in the Award Agreement.

 

(ii)   An Award shall be deemed to be exercised when written notice of such exercise has been given to the Company in accordance with the terms of the Award by the person entitled to exercise the Award and full payment for the Shares with respect to which the Award is exercised is actually received and cleared.

 

(b)   Exercise of Award Following Termination of Continuous Service . In the event of termination of a Grantee’s Continuous Service for any reason other than Disability or death (but not in the event of a Grantee’s change of status from Employee to Consultant or from Consultant to Employee), such Grantee may, but only during the Post-Termination Exercise Period (but in no event later than the expiration date of the term of such Award as set forth in the Award Agreement), exercise the portion of the Grantee’s Award that was vested at the date of such termination or such other portion of the Grantee’s Award as may be determined by the Administrator. The Grantee’s Award Agreement may provide that upon the termination of the Grantee’s Continuous Service for Cause, the Grantee’s right to exercise the Award shall terminate concurrently with the termination of Grantee’s Continuous Service. In the event of a Grantee’s change of status from Employee to Consultant, an Employee’s Incentive Stock Option shall convert automatically to a Non-Qualified Stock Option on the day three (3) months and one day following such change of status. To the extent that the Grantee’s Award was unvested at the date of termination, or if the Grantee does not exercise the vested portion of the Grantee’s Award within the Post-Termination Exercise Period, the Award shall terminate.

 

(c)   Disability of Grantee . In the event of termination of a Grantee’s Continuous Service as a result of his or her Disability, such Grantee may, but only within twelve (12) months from the date of such termination (or such longer or shorter period as specified in the Award Agreement but in no event later than the expiration date of the term of such Award as set forth in the Award Agreement), exercise the portion of the Grantee’s Award that was vested at the date of such termination; provided, however, that if such Disability is not a “disability” as such term is defined in Section 22(e)(3) of the Code, in the case of an Incentive Stock Option such Incentive Stock Option shall automatically convert to a Non-Qualified Stock Option on the day three (3) months and one day following such termination. To the extent that the Grantee’s Award was unvested at the date of termination, or if Grantee does not exercise the vested portion of the Grantee’s Award within the time specified herein, the Award shall terminate.

 

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(d)   Death of Grantee . In the event of a termination of the Grantee’s Continuous Service as a result of his or her death, or in the event of the death of the Grantee during the Post-Termination Exercise Period or during the twelve (12) month period following the Grantee’s termination of Continuous Service as a result of his or her Disability, the Grantee’s estate or a person who acquired the right to exercise the Award by bequest or inheritance may exercise the portion of the Grantee’s Award that was vested as of the date of termination, within twelve (12) months from the date of death (or such longer or shorter period as specified in the Award Agreement but in no event later than the expiration of the term of such Award as set forth in the Award Agreement). To the extent that, at the time of death, the Grantee’s Award was unvested, or if the Grantee’s estate or a person who acquired the right to exercise the Award by bequest or inheritance does not exercise the vested portion of the Grantee’s Award within the time specified herein, the Award shall terminate.

 

(e)   Extension if Exercise Prevented by Law . Notwithstanding the foregoing, if the exercise of an Award within the applicable time periods set forth in this Section 8 is prevented by the provisions of Section 9 below, the Award shall remain exercisable until one (1) month after the date the Grantee is notified by the Company that the Award is exercisable, but in any event no later than the expiration of the term of such Award as set forth in the Award Agreement.

 

(f)   Post Termination Forfeiture . The reason of termination of Continuous Service notwithstanding, if during the Post-Termination Exercise Period, the Grantee breaches the confidentiality, non-competition, non-solicitation, non-use or assignment of intellectual property undertakings binding upon such Grantee, the Company shall have the right to effect a forfeiture of all of the Grantee’s then outstanding Awards (whether vested or non-vested).

 

9.   Conditions Upon Issuance of Shares .

 

(a)  Shares shall not be issued pursuant to the exercise of an Award unless the exercise of such Award and the issuance and delivery of such Shares pursuant thereto shall comply with all Applicable Laws, and shall be further subject to the approval of counsel for the Company with respect to such compliance.

 

(b)  As a condition to the exercise of an Award, the Company may require the person exercising such Award to represent and warrant at the time of any such exercise that the Shares are being purchased only for investment and without any present intention to sell or distribute such Shares if, in the opinion of counsel for the Company, such a representation is required by any Applicable Laws.

 

10.   Adjustments Upon Changes in Capitalization . Subject to any required action by the stockholders of the Company, the number of Shares covered by each outstanding Award, and the number of Shares which have been authorized for issuance under the Plan but as to which no Awards have yet been granted or which have been returned to the Plan, the exercise or purchase price of each such outstanding Award, as well as any other terms that the Administrator determines require adjustment shall be proportionately adjusted for (i) any increase or decrease in the number of issued Shares resulting from a stock split, reverse stock split, stock dividend, combination or reclassification of the Shares, or similar transaction affecting the Shares, (ii) any other increase or decrease in the number of issued Shares effected without receipt of consideration by the Company, or (iii) as the Administrator may determine in its discretion, any other transaction with respect to Common Stock including a corporate merger, consolidation, acquisition of property or stock, separation (including a spin-off or other distribution of stock or property), reorganization, liquidation (whether partial or complete) or any similar transaction; provided, however that conversion of any convertible securities of the Company shall not be deemed to have been “effected without receipt of consideration.” Such adjustment shall be made by the Administrator and its determination shall be final, binding and conclusive. Except as the Administrator determines, no issuance by the Company of shares of stock of any class, or securities convertible into shares of stock of any class, shall affect, and no adjustment by reason hereof shall be made with respect to, the number or price of Shares subject to an Award.

 

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11.   Corporate Transactions.

 

(a)   Termination of Award to Extent Not Assumed. Effective upon the consummation of a Corporate Transaction, all outstanding Awards under the Plan shall terminate. However, all such Awards shall not terminate to the extent they are Assumed in connection with the Corporate Transaction.

 

(b)   Acceleration of Award Upon Corporate Transaction . Except as provided otherwise in an individual Award Agreement, in the event of a Corporate Transaction, for the portion of each Award that is neither Assumed nor Replaced, such proportional part of the Award, calculated by dividing the sum of the then vested Options by the total Options granted to a Grantee time the total number of un-vested Options (see example below), shall automatically become fully vested and exercisable and be released from any repurchase or forfeiture rights (other than repurchase rights exercisable at Fair Market Value) for all of the Shares at the time represented by such portion of the Award, immediately prior to the specified effective date of such Corporate Transaction, provided that the Grantee’s Continuous Service has not terminated prior to such date. The portion of the Award that is not Assumed shall terminate under subsection (a) of this Section 11 to the extent not exercised prior to the consummation of such Corporate Transaction.

 

Example for proportional acceleration of Options:

 

Example  

Options

Awarded

 

Vested

Options

 

Un-vested

Options

  Formula   Total
1   400   100   300   100 + (300 x 100/400)   175
2   400   200   200   200 + (200 x 200/400)   300
3   400   300   100   300 + (100 x 300/400)   175

 

(c)   Effect of Acceleration on Incentive Stock Options. The portion of any Incentive Stock Option accelerated under this Section 11 in connection with a Corporate Transaction shall remain exercisable as an Incentive Stock Option under the Code only to the extent the $100,000 dollar limitation of Section 422(d) of the Code is not exceeded. To the extent such dollar limitation is exceeded, the accelerated excess portion of such Option shall be exercisable as a Non-Qualified Stock Option.

 

12.   Effective Date and Term of Plan . The Plan shall become effective upon the earlier to occur of its adoption by the Board or its approval by the stockholders of the Company. It shall continue in effect for a term of ten (10) years unless sooner terminated. Subject to Section 17, below, and Applicable Laws, Awards may be granted under the Plan upon its becoming effective.

 

13.   Amendment, Suspension or Termination of the Plan .

 

(a)  The Board may at any time amend, suspend or terminate the Plan; provided, however, that no such amendment shall be made without the approval of the Company’s stockholders to the extent such approval is required by Applicable Laws, or if such amendment would change any of the provisions of Section 4(b)(vi) or this Section 13(a).

 

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(b)  No Award may be granted during any suspension of the Plan or after termination of the Plan.

 

(c)  Any amendment, suspension or termination of the Plan (including termination of the Plan under Section 12, above) shall not affect Awards already granted, and such Awards shall remain in full force and effect as if the Plan had not been amended, suspended or terminated, unless mutually agreed otherwise between the Grantee and the Administrator, which agreement must be in writing and signed by the Grantee and the Company.

 

14.   Reservation of Shares .

 

(a)  The Company, during the term of the Plan, will at all times reserve and keep available such number of Shares as shall be sufficient to satisfy the requirements of the Plan.

 

(b)  The inability of the Company to obtain authority from any regulatory body having jurisdiction, which authority is deemed by the Company’s counsel to be necessary to the lawful issuance and sale of any Shares hereunder, shall relieve the Company of any liability in respect of the failure to issue or sell such Shares as to which such requisite authority shall not have been obtained.

 

15.   No Effect on Terms of Employment/Consulting Relationship . The Plan shall not confer upon any Grantee any right with respect to the Grantee’s Continuous Service, nor shall it interfere in any way with his or her right or the Company’s right to terminate the Grantee’s Continuous Service at any time, with or without Cause, and with or without notice. The Company’s ability to terminate the employment of a Grantee who is employed at will is in no way affected by its determination that the Grantee’s Continuous Service has been terminated for Cause for the purposes of this Plan.

 

16.   No Effect on Retirement and Other Benefit Plans . Except as specifically provided in a retirement or other benefit plan of the Company or a Related Entity, Awards shall not be deemed compensation for purposes of computing benefits or contributions under any retirement plan of the Company or a Related Entity, and shall not affect any benefits under any other benefit plan of any kind or any benefit plan subsequently instituted under which the availability or amount of benefits is related to level of compensation. The Plan is not a “Retirement Plan” or “Welfare Plan” under the U.S. Employee Retirement Income Security Act of 1974, as amended.

 

17.   Stockholder Approval . The grant of Incentive Stock Options under the Plan shall be subject to approval by the stockholders of the Company within twelve (12) months before or after the date the Plan is adopted excluding Incentive Stock Options issued in substitution for outstanding Incentive Stock Options pursuant to Section 424(a) of the Code. Such stockholder approval shall be obtained in the degree and manner required under Applicable Laws. The Administrator may grant Incentive Stock Options under the Plan prior to approval by the stockholders, but until such approval is obtained, no such Incentive Stock Option shall be exercisable. In the event that stockholder approval is not obtained within the twelve (12) month period provided above, all Incentive Stock Options previously granted under the Plan shall be exercisable as Non-Qualified Stock Options.

 

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

 

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Exhibit 10.2

INVASIX LTD.

 

THE 2008 ISRAEL OPTION PLAN

 

   - i -  

 

 

Invasix Ltd.

 

2008 Israel Option Plan

 

1. NAME OF THE PLAN

 

This plan, and the amendments to be made thereto from time to time, shall be named the 2008 Israel Option Plan of Invasix Ltd. (hereinafter: the “ Plan ”).

 

2. SCOPE AND PURPOSEOF THE PLAN

 

The Plan is intended to provide an incentive to attract new employees, directors, consultants and service providers, and to retain in the service of the Company experienced and capable professionals by providing them with opportunities to purchase shares in the Company, pursuant to the Plan, which was approved by the board of directors of the Company (hereinafter: the “ Board ”).

 

This Plan shall serve as a “Master Plan” for the Company worldwide, therefore, as required, annexes may be added, which include adjustments according to the local laws of the international subsidiaries of the Company, and in order to adapt the Plan to the various circumstances where this Plan does not extend, at the discretion of the Board.

 

The options to be granted under this Plan shall be granted in accordance with applicable law, including the Income Tax Ordinance (New Version) – 1961, and subject to any law, regulation, order, judgment committee, circular or procedure existing and/or to be published thereafter, and/or to be amended from time to time (hereinafter jointly: the “ Ordinance ”).

 

As such, the options to be granted under this Plan may be subject to conditions that may turn the options into options that are allocated in accordance with a plan with a trustee or in accordance with any other method permitted compatible with the law. All options mentioned above shall be referred to hereinafter: the “ Options ”).

 

At any time, the Board may order the translation of the Plan into English, and turn the translation into the binding version. The translation may be done in a manner that shall preserve the meaning of the arrangements included in the Plan, even if it is not an accurate translation.

 

3. ADMINISTRATION OF THE PLAN

 

3.1       The Board or the Options Committee to be appointed by the Board (hereinafter: the “ Committee ”) shall administer the Plan. Notwithstanding the above, the Board shall have residual authority if the Committee is not constituted or if such Committee shall cease to operate for any reason. The Board shall appoint the members of the Committee, and may from time to time add members to, and replace members of the Committee. In this Plan, any reference to the term “Committee” shall also mean the Board - if no Options Committee is operating at that time in the Company.

 

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3.2       The Committee shall select one of its members to serve as its Chairman, and shall hold its meetings at such times and places as the Chairman shall determine. The resolutions of the Committee that are adopted by the majority of Committee members present shall be valid, and written resolutions adopted by all members of the Committee shall be considered valid resolutions of the Committee. The Committee shall determine internal procedures for the conduct of its business, and shall appoint a secretary who shall document the meetings in the minutes.

 

3.3       The Committee shall fulfill the following tasks: (1) designate grantees to whom Options shall be granted (hereinafter: “ Grantee ” or “ Participant ”); and (2) recommend to the Board to grant Options to the Grantees. Notwithstanding the above, the Board is authorized to allot shares in respect of Options on behalf of the Company, which were granted and exercised as required. If the Articles of Association so permit, and upon the consent of the Board, the Committee may grant options and allot shares in respect thereof within the quantity reserved under the Plan and under the directives of the Board.

 

3.4       Subject to the terms of this Plan, the Committee shall have the full power and authority, to determine from time to time and at any time, the terms included in the Option agreements to be signed between the Company and each of the Grantees (hereinafter: the “ Option Agreement ”). Including (but not limited), to determine: (1) the type of option granted; (2) the date or dates and terms according to which the option shall become vested (including by way of achieving goals); (3) the duration and nature of restriction on offenses; (4) additional special conditions for a certain Grantee.

 

The Committee shall be authorized to: (1) interpret the Plan, to monitor and vise the administration of the Plan; (2) amend, modify or replace conditions and rules in a certain Option Agreement or in a number of Option Agreements (it shall be emphasized that such action that shall be done for one or more Grantees shall not automatically entitle the other Grantees to the same entitlement, and in the event that said action shall have a significant negative influence on the rights of the Grantee, such modification must be agreed upon by the Grantee whose rights were derogated from); (3) convert granted un-vested Options from previous plans to Options under the Plan – subject to applicable law; and (4) any other matter that is necessary, desirable or incidental to the administration of the Plan.

 

3.5       The Committee shall adopt from time to time rules for the implementation of the Plan in a manner that it believes to be best. No Board member or Committee member shall be liable for any action or resolution made in good faith in connection with the Plan or the grant of Options in the framework thereof.

 

3.6       The Board or Committee member may receive options according to the Plan during his tenure on the Committee, subject to the provisions of the Companies Law, 1999 (hereinafter: the “ Companies Law ”).

 

3.7       The meaning and interpretation given by the Committee to any terms of the Plan or to any Option granted pursuant thereto shall be final and exclusive, unless otherwise determined by the Board.

 

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3.8       To the extent permitted by law, each member of the Board or the Committee shall be indemnified and held harmless by the Company against any reasonable expense incurred (including attorneys’ fees) or any liability (including any sum paid in settlement of a claim with the approval of the Company) arising out of any act or omission to act in connection with the Plan of the Board / Committee member, unless said act or omission were done fraudulently or in bad faith. Such indemnification shall be in addition to any rights of indemnification the member may have, if any, as a Board or Committee member by virtue of him being a Board member under the Company's articles of association, agreement, resolutions or any vote of shareholders or disinterested directors, insurance policy or otherwise.

 

4. DESIGNATION OF GRANTEES

 

4.1       Subject to the limitations and restrictions set forth in applicable law, Options may be granted to: office holder, employee in a key position, other employee of the Company, Board member, consultant or service provider of the Company, provided that: (1) the employees who are taxed under the laws of the State of Israel are granted Options only in accordance with Section 102 of the Ordinance; (2) the controlling shareholders, as such term is defined in the Ordinance, consultants and service providers who are taxed under the laws of the State of Israel are granted Options only under Section 3(i) of the Ordinance.

 

4.2       The grant of an Option hereunder shall neither entitle the Grantee to participate nor disqualify the Grantee from participating in any other grant of Options pursuant to this Plan or any incentive or any other plan of the Company or its affiliates..

 

4.3       Notwithstanding the foregoing in this Plan, the grant of options to office holders (as defined in the Companies Law) shall be approved in the manner prescribed by the Companies Law.

 

4.4       The Company chose, as its first choice, to apply the capital gains track with a trustee to all Grantees who are taxed under Israeli law and are eligible to be included in this Plan as part of the capital gains track. The Board may decide to modify the track to an ordinary income track in accordance with the provisions of the Ordinance.

 

5. TRUST AND ADDITIONAL TERMS UNDER SECTION 102 OF THE ORDINANCE

 

5.1       Any Option to be granted in the framework of a track with a trustee and/or shares of the Company to be allotted following the exercise of Options under a trustee shall be held by a trustee to be appointed by the Board (hereinafter: the “ Trustee ”) in accordance with the terms set forth in the Ordinance, in accordance with the Trust Agreement, a copy of which is attached hereto and constitutes an integral part of this Plan, and in accordance with the provisions of the Company, to be given from time to time. Each Grantee hereby consents to the terms of the trust agreement, which includes an indemnification clause and waiver of the Grantee.

 

5.2       The Grantee’s signature on the Option agreement constitutes consent on behalf of the Grantee to release the Trustee from any liability in respect of any action or decision taken and executed in good faith in relation with the Plan, or any Option or Share granted to the Grantees. It is hereby clarified that the Trustee serves as a Trustee for the payment of tax and execution of the relevant sections of the Ordinance, and he does not serve as the Trustee of the Grantee or the Company, with the exception as stated explicitly in the Trust Agreement.

 

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5.3       The Trustee may resign and the Company may terminate the appointment of the Trustee at any time, subject to the provision of advance notice as required in the Trust Agreement. The Company may, at its discretion, determine the identity of the new Trustee.

 

5.4       Without derogating from the aforesaid, the following restrictions shall apply:

 

5.4.1 In accordance with the provisions of Section 102 of the Ordinance, Options in a Trustee track shall be issued to the Trustee, and held in trust for the benefit of the Grantees for such period of time to commence on the date of deposit of the Options in trust, and shall end, at the earliest, upon the completion of the Holding Period, as defined in the Ordinance (the “ Restricted Period ”). During the Restricted Period, the Options and/or shares, as the case may be, shall not be exercised, transferred or be subject to an attachment, unless and to the extent permitted by the Ordinance.

 

5.4.2 Following the lapse of the Restricted Period, the Trustee shall release the Options to the Grantee at the Grantee’s request, only after, to the Trustee’s satisfaction, all requirements of the Tax Authorities were satisfied in accordance with the Ordinance (including payment of the required tax).

 

5.4.3 During the Restricted Period, all rights received from the Options / shares, including bonus shares, shall be deposited with the Trustee for the duration of the Holding Period, and the capital gains track and the provisions of Section 102 of the Ordinance shall apply to said benefits.

 

5.4.4 If a Grantee ceases to be employed by the Company before exercising all of the Options that he may exercise, and before selling all of his shares, the Grantee shall provide a security or guarantee in favor of the Company, to its satisfaction, which shall ensure timely tax payment.

 

6. SCOPE OF THE PLAN

 

At first, the Company reserves from the registered unpaid capital of the Company 90,000 ordinary shares, par value 0.01 NIS per share of the Company (hereinafter: the “ Shares ”) for the Plan, subject to adjustments, if any, as stated in Section 11 below. The Board may increase this initial amount from time to time. As long as the Plan is in effect, any Share reserved for this Plan, for which the Option expired for any reason or ended without being exercised, shall become available for grant again in accordance with this Plan.

 

7. GRANT OF OPTIONS

 

7.1       The Committee, at its discretion, may grant Options for the purchase of shares of the Company under the Plan. Options can be granted under the Plan throughout the duration of the Plan specified in Section 13 below. The grant date of each Option shall be the date determined by the Committee on the date of its decision to grant.

 

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7.2       The grant of Options under the Plan shall be evidence by a written Option Agreement. The Option Agreement shall determine, inter alia, whether the Options granted are Options under the Trustee track, the number of Options granted, the vesting dates (subject to Section 9.1), the exercise price and other terms and conditions which the Committee shall prescribe, at its discretion.

 

8. EXERCISE PRICE

 

The exercise price of each Share shall be determined by the Committee, subject to any guidelines as may be determined by the Board from time to time, as long as the exercise price is not less that the par value of the Shares. Each Option Agreement will contain the Exercise Price determined for each Grantee. Each Option granted shall entitle the Grantee the right to purchase one share in exchange of the exercise price and subject to the terms of the Plan, the Options Agreement, the Trust Agreement (if relevant) and the law, including the tax laws.

 

9. TERM AND EXERCISE OF THE OPTIONS

 

9.1       Vested Options may be exercised provided that in no case shall the Option be exercised after the lapse of 7 years from the date it was granted, unless a different term (longer or shorter) was explicitly determined in the terms of the Option Agreement and subject to the shortening thereof in accordance with the provisions of Section 10 below (hereinafter: the “ Exercise Period ”).

 

The vesting schedule as appears in the grant notice shall be extended in case of unpaid leave for the duration of the leave.

 

9.2       A vested Option, or any part thereof, shall be exercisable upon the signature of the Grantee on the Exercise Notice and its delivery to the Company (and to the Trustee when the Options are under a Trustee) at its principal office. The format of the Exercise Notice and its content shall be determined by the Committee from time to time. The Exercise Notice shall be accompanied by payment of the exercise price, in accordance with the Ordinance.

 

9.3       Notwithstanding the content of this Plan, if any Option or any part thereof is not exercised and the Shares included therein are not paid for during the Exercise Period, these Options and the right to purchase the Shares under these Options and any right of the Grantee in respect of the Option shall expire. If the Company created an actual trust of Shares for said Options, such trust shall expire, and the Trustee shall maintain these Shares for the Company until the Company informs him of the creation of a new trust for the other Grantee(s).

 

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9.4       Payment for Shares shall be made for an entire Share amount, without the right to purchase fractions of Shares; the payment shall be made in cash or by a cashier’s check or in any other of payment as may be customary in the Company, and shall be accompanied by the Exercise Notice.

 

9.5       Before exercising the Shares, the Grantees shall not have rights of shareholders in the Company in connection with the Options granted. Furthermore, the Grantees shall not be considered a class of shareholders or creditors of the Company for purposes of the Company’s activities according to the Companies Law, inter alia, in connection with Sections 350 and 351 of the Companies Law.

 

10. TERMINATION OF EMPLOYMENT

 

10.1       In the event the employee’s employment with the Company is terminated, or in the event that consulting services / services provided by a consultant to the Company shall be terminated (hereinafter, jointly: “ Termination of Employment ”), all Options granted to a Grantee which are vested on the Termination of Employment date may be exercised within a period of up to 6 months following the Termination of Employment date (or within another period to be determined by the Committee (the “ Extension Period ”), provided that it shall not be later than the Exercise Period determined by this Plan or the Option Agreement (if another date was determined). If, on the Employment Termination date, not all Options are vested or in the event that the vested Options are not exercised during the Exercise Period and the Extension Period – these Options shall expire, and the Shares reserved in favor of these Options shall be returned to the total unallocated amount reserved for future grants under the Plan, and the Grantee shall have no right in respect thereof.

 

10.2        Termination of Employment for Cause . Despite the aforementioned, in the event that a Grantee is terminated from his employment in the Company “for cause” as defined below, all Options not yet exercised by the Grantee (whether vested or unvested) shall expire immediately, unless the Committee determines otherwise, and the Shares reserved in favor of these Options shall be returned to the total unallocated amount reserved for future grants under the Plan, and the Grantee shall have no right in respect thereof.

 

“For Cause” for purposes of this Plan: (1) a conviction for any offense with which there is moral turpitude or an offense that is harmful to the Company; (2) refusal to follow a reasonable instruction of the CEO or of the Board, which is related to the Company’s business, provided that it could be followed legally; (3) embezzlement of the Company's funds or assets; (4) material breach of the Grantee’s duty of loyalty or care towards the Company, including breach of the duty of confidentiality, prohibition of competition and non-use; (5) material breach of the terms of the employment agreement and/or the terms of this Agreement, which have not been corrected within 15 days of receipt of written notice; (6) in liquidation, receivership and/or termination of a Grantee which is an incorporated entity.

 

10.3        Retirement . Without derogating from the aforementioned in Section 10.2 above, if a Grantee retires, the Committee may, at its discretion, allow a Grantee to continue enjoying his rights under the Plan for a period as prescribed by the same terms and conditions which the Committee shall determine, at its discretion. The aforementioned in this Section shall not apply to a Grantee which is an incorporated entity (not a human).

 

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10.4        Termination of Employment as a result of Death or Disability of the Grantee . In the event of the Grantee’s termination of employment with the Company as a result of death or disability (as defined below), any vested Options available to the Grantee on the employment termination date may be exercised by the Grantee, the Grantee’s guardian, estate or any individual that has the right to exercise the Option by virtue of an inheritance or an estate within a period of twelve (12) months after the date of such termination (or another period which the Committee shall determine in the Option Agreement), however, in any case, no later than the lapse of the Exercise Period, as set forth in the Option Agreement. If, on the termination date, the Options are not vested, the Shares reserved in favor of these Options shall be returned to the total unallocated amount reserved for future grants under the Plan. If the vested Options are not exercised on the dates stated herein, the Options shall expire and the Shares reserved in favor of these Options shall be returned to the total unallocated amount reserved for future grants under the Plan, and the Grantee, his survivors and heirs shall have no right in respect thereof.

 

For the purpose stated above, the term “disability” means complete and permanent inability due to illness or injury, preventing or expected to prevent the Grantee from performing tasks required of the position in which he was employed on the eve of the onset of the disability, as determined by the Committee, based on medical evidence acceptable to the Committee. Section 10.4 does not apply to Grantees who are incorporated entities (i.e. not humans).

 

10.5        Forfeiture of Options following Termination of Employment . Regardless of the reason for the Termination of Employment, if at any period following the Termination of Employment during which the Grantee may still exercise options, the Grantee breaches the duty of confidentiality, prohibition of competition with the Company, prohibition of solicitation of employees, suppliers or customers of the Company, prohibition of use of the intellectual property of the Company

 

The reason of termination notwithstanding, if during the period after the Termination of Employment during which the Grantee may still exercise Options, the Grantee breaches the duty of confidentiality, non-competition, non-solicitation of employees, suppliers and customers of the Company, non-use of intellectual property of the Company, or fails to sign documents transferring knowledge in favor of the Company – binding the Grantee, the Company shall have the right to effect a forfeiture of all of the Grantee’s Options and the Shares reserved in favor of such Options shall revert to the Plan.

 

10.6        Continuity of Rights . For the purpose of Section 10, transfer of the Grantee from performing his position for the Company to a company associated with the Company (and vice versa), and the transfer from status of a consultant or contractor to an employee (and vice versa), shall not be considered Termination of Employment, to the extent permitted by law.

 

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11. ADJUSTMENTS

 

Upon the occurrence of any of the following described events, a Grantee's rights to purchase Shares under the Plan shall be adjusted as hereafter provided:

 

11.1       In the event that the ordinary Shares of the Company are split into or consolidated with a larger or smaller number of Shares, as applicable, or that the ordinary Shares of the Company are replaced with other securities of the Company, then during the exercise of the Options, a Grantee shall be entitled to purchase a number of ordinary Shares or an amount of other securities of the Company which replaced the ordinary Shares, equal to the number the Grantee was entitled to purchase on the eve of the split, consolidation, replacement or other adjustment, in addition to the adjustment made for that amount.

 

11.2       In the event that the Company merges with or into another corporation, in the framework of which the Company is liquidated, or that all or most of its assets or shares are sold (hereinafter: the “ Transaction ”), and at that time there are Options within the Plan that have not yet been exercised, the Company shall try to ensure that these Options are replaced with parallel Options of the purchasing company, and their amount, exercise price, etc. shall be determined accordingly. The type of Shares which may be purchased from the exercise of the new Options shall be the same type which the holders of Ordinary Shares of the Company received in exchange for their Shares.

 

If the new entity refuses to replace said Options, the Exercise Period shall be shortened to the Determining Date (as determined by the Committee) prior to the completion of the Transaction. If the Options are not replaced, as stated above, partial acceleration of the unvested Options shall apply, in a manner in which the number of vested Options, divided by the overall number of Options granted, multiplied by the number of unvested Options, shall be accelerated and shall become vested Options. Numerical examples are as follows:

 

 

Example No. of
Granted
Options 		No. of
Vested
Options 		No. of
Unvested
Options 		Calculation Total amount of
Vested Options
1. 400 100 300 100 + (300 x 100/400) 175
2. 400 200 200 200 + (200 x 200/400) 300
3. 400 300 100 300 + (100 x 300/400) 375

 

The conditions that shall apply to the vested Options by virtue of the acceleration shall be identical to the Options already granted, and the provisions of Section 11.2 shall apply thereto, and if they are not exercised as stated, they shall expire together with the remaining vested Options.

 

Without derogating from the aforesaid, the Committee, at its exclusive discretion, may include in certain Option Agreements different provisions regarding acceleration of the Vesting Period regarding unvested Options in the event of a Transaction, as stated above, or upon the occurrence of other events.

 

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Options which have not been exercised by the Determining Date shall expire.

 

The abovementioned conditions are subject to the actual completion of the Transaction. If the Transaction is not completed, any action taken in accordance with sub-Section 11.2 shall be canceled until the situation is restored.

 

11.3       If the Company issues Ordinary Shares or other securities of the Company as bonus shares which the holders of Ordinary Shares of the Company are entitled to, then on the date the Grantee exercises Options, if he so chooses, he shall also be entitled to receive that amount of bonus shares that he would have received had he held the same amount of Shares he now wishes to purchase, on the eve of the distribution of the bonus shares.

 

11.4       The Committee shall determine the specific adjustments to be made in the framework of Section 11, and its resolution shall be decisive and final. The Committee’s resolution may be different from one Grantee to another, with the exception of its resolutions regarding the adjustments determined in Sections 11.1 and 11.3, which shall be implemented in the same manner for all appropriate Grantees.

 

12. ASSIGNMENT AND SALE OF OPTIONS

 

12.1       Options that are exercised by virtue of this Plan shall not be assignable unless in accordance with applicable law and the Company’s Articles of Association.

 

12.2       The Options shall not be sold, pledged, assigned or transferred in any other way, except by way of inheritance or according to a will. As long as the Grantee is alive, only the Grantee may exercise the Options. These limitations of assignment apply also to direct transfer or by way of change of control of incorporated entities, unless said transfer is approved the Committee in advance and in writing – at the Committee’s sole discretion. The terms of the Plan and the Option Agreement shall apply and bind the guardians, heirs and transferees of the Grantee.

 

13. DURATION OF THE PLAN AND AMENDMENTS THERETO

 

13.1       The Plan shall expire 10 years after its approval by the Board.

 

13.2       The Board may, at any time and from time to time, terminate or amend the Plan in any manner, provided that the Company shall not alter or impair material rights granted to the Grantee, without the consent of the Grantee.

 

14. CONTINUANCE OF EMPLOYMENT

 

Neither the Plan nor the Option Agreement with the Grantee shall impose any obligation on the Company or an Affiliate thereof, to continue to employ any employee or to continue to receive services provided from the Grantee, and nothing in the Plan or in any Option granted pursuant thereto shall confer upon any Grantee any right to continue to be employed or provide services to the Company, and shall not restrict the right of the Company to terminate such engagement with said employee or service provider or consultant at any time, with or without cause.

 

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15. APPLICABLE LAW

 

The Plan and all accompanying documents thereof or related thereto shall be governed by and construed in accordance with the laws of the State of Israel.

 

16. TAX CONSEQUENCES

 

Any tax consequences arising from the grant or exercise of any Option, the payment for Shares covered or the sale or transfer of Shares or any other act or event related thereto (whether by the Grantee or by the Company or the Trustee), shall be borne solely by the Grantee. The Company and/or the Trustee shall withhold taxes according to the requirements under the applicable laws, rules, and regulations, including withholding taxes. Furthermore, the Grantee agrees to compensate and indemnify the Company and/or the Trustee and/or the shareholders of the Company and/or the Board members and/or the office holders and hold them harmless against and from any and all liability for any such tax or interest, including without limitation, liabilities relating to the necessity to withhold any such tax from any payment made to the Grantee. Except as otherwise determined by law, the Company shall not be obliged to accept the exercise of any Option by or on behalf of a Grantee until the tax consequences (if any) created as a result of the exercise of the Options and/or sale of the Shares and/or any related action shall be resolved in a manner reasonably acceptable to the Company (and to the Trustee – if the Shares are in a trust track).

 

17. MULTIPLE AGREEMENTS

 

The terms set forth in each Option and in each Option Agreement may differ from one another, even if the Options or Option Agreements were signed at the same time or at any other time. The Committee may also grant more than one Option to a given Grantee during the term of the Plan, in addition to one or more Options previously granted to that Grantee. Granting of a number of Options shall be accompanied by one notice per Grantee or by a number of notices per Grantee, as determined by the Committee.

 

18. NON-EXCLUSIVITY OF THE PLAN

 

The adoption of the Plan by the Board shall not be construed as amending, modifying or rescinding any previous incentive arrangement or as creating any limitations on the power of the Board to adopt such other incentive arrangements, including the granting of Options not under the Plan, and such arrangement may be applicable generally or only in specific cases.

 

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

 

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Exhibit 10.3

 

INMODE LTD.

 

2018 INCENTIVE PLAN

 

1.           Purpose of The Plan:

 

1.1           This plan, as amended from time to time, shall be known as the "InMode Ltd. 2018 Incentive Plan".

 

1.2           The Plan is intended to provide an incentive to employees, directors, consultants and/or contractors of the Group worldwide, by providing them with opportunities to be granted Awards in the Company, pursuant to the Plan.

 

1.3           Awards granted under the Plan to Participants (as defined below) in various jurisdictions may be subject to specific terms and conditions for such grants and may be set forth in one or more separate appendix to the Plan, as may be approved by the Board from time to time.

 

2.          Definitions:

 

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

 

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

 

"3(i) Award" means a grant of an Award to a Consultant, contractor or a Controlling Shareholder of the Group, and other Participants who did not receive a 102 Award, pursuant to the provisions of Section 3(i) of the Tax Ordinance and the rules and regulations promulgated thereunder, or any other section of the Ordinance that will be relevant for such issuance in the future.

 

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

 

"Affiliate" means any company in which the Company holds at least 10% of the issued share capital or voting power.

 

"Award" means, individually or collectively, Options, Shares, Restricted Stock, or Restricted Stock Units.

 

"Award Agreement" means an agreement between the Company and a Participant relating to the terms of grant of said Award.

 

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"Beneficial Participant" means the Participant for the benefit of whom the Trustee holds an Award in Trust.

 

"Board" means the Board of Directors of the Company.

 

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

 

"Cause" means (i) breach of the Participant's duty of loyalty towards the Group, or (H) breach of the Participant's duty of care towards the Group, or (Hi) the commission of any criminal offense (except for offenses of strict liability not requiring Mens Rea) by the Participant, or (iv) the commission of any act of fraud, embezzlement or dishonesty towards the Group by the Participant, or (v) any unauthorized use or disclosure by the Participant of confidential information or trade secrets of the Group, or (vi) involvement in a transaction in connection with the performance of duties to the Group which transaction is adverse to the interests of the Group and which is engaged in for personal profit (including without limitation breach of secrecy, non-compete and IP assignment undertakings by Participant pursuant to his/her engagement terms with the Group), or (vii) any other intentional misconduct by the Participant (by act or omission) adversely affecting the business or affairs of the Group in a material manner, or (viii) any act or omission by the Participant which would allow for the termination of the Participant's employment without severance pay, according to Applicable Laws (including the Israeli Severance Pay Law, 1963), or any similar provision of law in the jurisdiction in which the Participant is employed.

 

"Committee" means the compensation committee appointed by the Board.

 

"Company" means InMode Ltd., a company organized under the laws of the State of Israel.

 

"Consultant means any person, including an advisor, engaged by the Group to render services to it, who is not an Employee.

 

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

 

"Date of Grant means the effective date of grant of an Award, as determined by the Board and set forth in the Award Agreement.

 

"Director" means a member of the Board.

 

"Employee" means any person, including officers and Directors, employed by the Group.

 

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

 

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

 

"Fair Market Value" means, as of any date, the value of a Share, determined as follows:

 

(i)  If the Shares are listed on any established stock exchange or a national market system, including without limitation the NASDAQ National Market system, or the NASDAQ SmallCap Market of the NASDAQ Stock Market, the Fair Market Value shall be the closing sales price for such Shares (or the closing bid, if no sales were reported), as quoted on such exchange or system for the last market trading day prior to time of determination, as reported in the Wall Street Journal, or such other source as the Board deems reliable.

 

Without derogating from the above, solely for the purpose of determining the tax liability pursuant to Section 102(b)(3) of the Ordinance, if at the Date of Grant the Company's shares are listed on any established stock exchange or a national market system or if the Company's shares will be registered for trading within ninety (90) days following the Date of Grant, the Fair Market Value of a Share at the Date of Grant shall be determined in accordance with the average value of the Company's shares on the thirty (30) trading days preceding the Date of Grant or on the thirty (30) trading days following the date of registration for trading, as the case may be;

 

(ii)  If the Shares are regularly quoted by a recognized securities dealer but selling prices are not reported, the Fair Market Value shall be the mean between the high bid and low asked prices for the Shares on the last market trading day prior to the day of determination, or;

 

(iii)  In the absence of an established market for the Shares, the Fair Market Value thereof shall be determined in good faith by the Board.

 

"Group" — means the Company and any Affiliate thereof

 

"IPO" means an initial underwritten public offering of Shares.

 

"Notice of Exercise" means a written notice of exercise of an Award, delivered by a Participant to the Company and with respect to a 102 Award held in the Trust, a copy of such written notice shall be provided to the Trustee.

 

"Option" means an option to purchase a Share or Shares.

 

"Ordinance" means the Israeli Income Tax Ordinance [New Version], 1961, as now in effect or as hereafter amended, and the rules and regulations promulgated thereunder, including the Israeli Income Tax Regulations (Tax Relief for Issue of Shares to Employees) of 2003.

 

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

 

"Participant" means a person who receives an Award under the Plan either directly or through the Trustee.

 

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"Plan" means this "InMode Ltd. 2018 Incentive Plan", as amended from time to time.

 

"Restricted Stock" means a Share issued under the Plan to a Participant for such consideration, if any, and subject to such restrictions as established by the Board. All other terms and conditions of the Plan applicable to Options, shall apply to Restricted Stock, mutandis mutatis

 

"Restricted Stock Unit (RSU)" means a right to receive a Share, under certain terms and conditions, for a consideration of no more than the underlying Share's par value. Upon the lapse of the Vesting Period of a RSU, such RSU shall automatically vest into an Exercised Share of the Company (subject to adjustments under Section 10 herein) and the Participant shall pay to the Company its par value. The Board, in its sole discretion, shall determine procedures from time to time for payment of such par value by the Participant or for collection of such amount from the Participant by the Company. All other relevant terms and conditions of the Plan applicable to Options, shall apply to RSUs, mutatis mutandis.

 

"Share" means an Ordinary Share, par value of NIS 0.01 each, of the Company.

 

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

 

"Successor Company" means any entity the Company is merged to, consolidated to or is acquired by, in which the Company is not the surviving entity.

 

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

 

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

 

"Termination of Service" means Participant's termination of providing services as an Employee, Director, Consultant or contractor of the Group.

 

"Transaction" means (i) a merger, acquisition or consolidation of the Company with one or more other entities in which the Company is not the surviving entity; or (ii) a sale or other disposition of all or substantially all, as determined by the Board in its discretion, of the outstanding shares of the Company; or (iii) a sale or other disposition of all or substantially all, as determined by the Board in its discretion, of the consolidated assets of the Company and its Affiliates.

 

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

 

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

 

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"Trustee" means a trustee designated by the Board or the Committee in accordance with the provisions of Section 13 below and, with respect to 102 Awards, approved by the Israeli Tax Authorities.

 

"Vesting Commencement Date" means the Date of Grant, or any other date of commencement of vesting of an Award, for the purposes of the Plan, that is determined by the Board or by the Committee for a given grant of an Award.

 

"Vesting Period" of an Award means, for the purpose of the Plan and its related instruments, the period between the Vesting Commencement Date and the date on which (i) the Participant may exercise the Award into Exercised Shares; or (H) if said Award does not require the Participant to exercise it, the date on which the Award vests into an Exercised Share; or (iii) the date on which a Share (not resulting from another type of Award) may be freely transferred by the Participant (subject to any other restrictions prescribed herein or by law).

 

3.             Administration of The Plan:

 

3.1           The Board by itself and/or through the Committee shall have the power to administer the Plan, subject to applicable law and in accordance with the Company's Articles of Association. Notwithstanding the above, the Board shall automatically have residual authority if no Committee shall be constituted or if such Committee shall cease to operate for any reason.

 

3.2           The Committee, if appointed, shall select one of its members as its Chairman and shall hold its meetings at such times and places as the Chairman shall determine. The Committee shall keep records of its meetings and shall make such rules and regulations for the conduct of its business as it shall deem advisable.

 

3.3           Subject to the general terms and conditions of the Plan, the Committee shall have the full authority in its discretion, from time to time and at any time to determine (i) the Participants under the Plan, (ii) the number of Shares subject to each Award, the type of Award, and the Exercise Price per Share, if applicable, (iii) the time or times at which the same shall be granted, (iv) the schedule and conditions on which Awards may vest or be exercised (which may be based on performance criteria), (v) the method of payment for Shares purchased pursuant to any Award, (vi) the method for satisfaction of any tax withholding obligation arising in connection with an Award, including by the withholding, delivery or sale of Shares, (vii) rules and provisions, as may be necessary or appropriate to permit eligible Participants resident or employed in any specific jurisdiction to participate in the Plan and/or to receive preferential tax treatment in their country of residence, with respect to Awards granted hereunder, including the adoption of a sub-plan to this Plan, as provided in Section 12.2 below; (viii) the Fair Market Value of a Share covered by an Award, (ix) that any Award previously granted shall be accelerated in whole or in part, and/or (x) any other matter which is necessary or desirable for, or incidental to, the administration of the Plan.

 

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3.4           in addition, subject to the general terms and conditions of the Plan, the Ordinance, and any other applicable laws and regulations, the Committee shall have the full authority in its discretion, from time to time and at any time, to determine:

 

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

 

In the event the Committee determines that the Company shall elect one of the Taxation Routes for grants of 102 Awards, all grants of 102 Awards made following such election, shall be subject to the elected Taxation Route and the Company shall be entitled to change such election only following the lapse of one year from the end of the tax year in which 102 Awards are first granted under the then prevailing Taxation Route or following the lapse of any shorter or longer period, if provided by law; and

 

(b)          With respect to the grant of 102 (c) and 3(i) Awards - whether or not such Awards shall be granted to a trustee in accordance with the terms and conditions of the Plan, and the identity of the trustee who shall be granted such Awards in accordance with the provisions of the Plan.

 

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

 

3.6           The interpretation and construction by the Committee of any provision of the Plan or of any Award thereunder shall be final and conclusive and binding on all parties who have an interest in the Plan or any Award or Exercised Share.

 

4.           Designation of Participants:

 

4.1           The persons eligible for participation in the Plan as Participants shall include any Employee, director, contractor or Consultant of the Group. Anything in the Plan to the contrary notwithstanding, all grants of Awards shall be authorized and implemented only in accordance with the provisions of applicable laws.

 

4.2           Subject to the provisions of the Ordinance and applicable law, all grants of Awards to Israeli Employees, Directors and office holders of the Group, other than to a Controlling Shareholder, shall be of 102 Awards; and all grants of Awards to Israeli Consultants, contractors or Controlling Shareholders of the Group shall be of 3(i) Awards.

 

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

 

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5.            Shares Reserved for The Plan:

 

5.1           The Company has reserved sufficient authorized but unissued Shares, for the purposes of the Plan and for the purposes of any other share option plans which may be adopted by the Company in the future, subject to adjustments as provided in Section 10 hereof. The Company may from time to time increase the authorized and unissued Shares reserved under the Plan, by a resolution of the Board.

 

5.2           All Shares under the Plan, in respect of which the right of a Participant to purchase or be issued the same shall, for any reason, terminate, expire or otherwise cease to exist, shall again be available for grant through Awards under the Plan, as determined by the Board, from time to time, provided, however, that until termination of the Plan the Company shall at all times reserve sufficient number of unissued Shares to meet the requirements of the Plan.

 

5.3           Any Shares that are retained by the company upon exercise of an Award in order to satisfy the Exercise Price for such Award or any withholding taxes due with respect to such Award shall be treated as not issued and shall continue to be available under the Plan for issuance pursuant to future Awards. Shares that are issued under the Plan and later forfeited to the Company due to the failure to vest shall again be available for future grant under the Plan.

 

6.            Date of Grant and Shareholder Rights:

 

6.1           Subject to Sections 7.1 and 7.2 hereof and to any applicable laws, the Date of Grant shall be the date the Board resolves to grant such Award, or any future date determined as the effective date of a grant of an Award, if so expressly stated by the Board in its determination relating to the grant of an Award.

 

6.2           Unless determined otherwise by the Committee, as a condition precedent to any Award being exercised or vested, as applicable, the Participant shall execute and deliver a proxy and power of attorney with respect to any Exercised Shares held by the Participant (or for his benefit) in a form that is appropriate under applicable laws and that appoints the Chairman of the Board or such other person as shall be designated by the Committee, from time to time. The proxy holder shall vote such Exercised Shares only in the same proportion as the result of the shareholders vote, in respect of which such Exercised Shares are being cast. Such proxy shall terminate and be of no further force and effect upon a consummation of an IPO (as defined herein).

 

Such person or persons designated by the Board to act pursuant to such proxy, shall be indemnified and held harmless by the Company against any cost or expense (including counsel fees) reasonably incurred by him/her, or any liability (including any sum paid in settlement of a claim with the approval of the Company) arising out of any act or omission to act in connection with such proxy unless arising out of such person's own fraud or bad faith, to the extent permitted by Applicable Laws. Such indemnification shall be in addition to any rights of indemnification the proxy holder may have under the Company's Articles of Association, any agreement, any vote of shareholders, insurance policy or otherwise.

 

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

 

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

 

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

 

7.            Award Agreement; Vesting of Award:

 

7.1           The Award Agreement shall state, among others, the number of Shares subject to each Award, the type of Award, the Vesting Period (which may be based on performance criteria), the dates when the Award may be exercised and/or will vest (as applicable), any restrictions upon transfer or sale of Shares (if applicable), the Exercise Price, the tax treatment to which the Award is subject including whether the Award granted to Israeli Participants are 102 Award (and in particular whether the 102 Award is granted under the Ordinary Income Route, the Capital Gains Route or as 102(c) Award), or 3(i) Award and such other terms and conditions as the Committee at its discretion may prescribe, provided that they are consistent with the Plan.

 

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

 

7.3           The Vesting Period pursuant to which such Awards shall vest, shall be determined by the Board or the Committee.

 

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7.4           Unless determined otherwise by the Board or the Committee, any period in which the Participant shall have taken an unpaid leave of absence (excluding a leave for military reserves duty or the mandatory maternity leave determined by law), or in which the Participant shall cease to serve as Employee, director, contractor or Consultant of the Group, shall not be included in the Vesting Period.

 

8.            Exercise Price of Options; Method of Exercise:

 

8.1           The Exercise Price per Share subject to each Option shall be determined by the Committee in its sole and absolute discretion, subject to applicable laws and to guidelines adopted by the Board, from time to time. In the event the Exercise Price is not determined by the Committee and provided the Company's shares are listed on any Stock Market, the Exercise Price of an Option shall be equal to the Fair Market Value of a Share determined on the Date of Grant.

 

8.2           Options shall be exercisable pursuant to the terms under which they were awarded and subject to the terms and conditions of the Plan. The exercise of an Option shall be made by a written Notice of Exercise delivered by the Participant to the Company at its principal executive office, and/or to any third party designated by the Company for the purpose of the exercise of Awards ("Representative"), in such form and method as may be determined by the Company, specifying the number of Shares to be purchased and accompanied by the payment of the Exercise Price and applicable withholding taxes, at the Company's or the Representative's principal office and in accordance with the provisions of the Plan, and containing such other terms and conditions as the Board shall prescribe from time to time. With respect to a 102 Award held in the Trust, a copy of the Notice of Exercise shall be provided to the Trustee.

 

8.3           Each payment for Exercised Shares shall be in respect of a whole number of Shares and shall be affected by bank transfer, or such other method of payment acceptable to the Company.

 

8.4           Unless otherwise determined by the Committee, anything herein to the contrary notwithstanding, but without derogating from the provisions of Section 10 hereof, if any Option has not been exercised and the Shares subject thereto not paid for within seven (7) years after the Date of Grant (or any shorter or longer period set forth in the Award Agreement), such Option and the right to acquire such Shares shall terminate, all interests and rights of the Participant in and to the same shall expire, and the Shares subject to such Options shall again be available for grant through Awards under the Plan, or under any sub-plans of the Plan.

 

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

 

8.6           Notwithstanding the provisions of Section 8.2 or 8.3 above, the Board may determine that instead of issuing one Exercised Share as a result of the exercise of each one Option (subject to adjustments under Section 10 herein), any Options shall be exercised using the following method (the "Net Exercise"):

 

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(a)          Upon exercise of the Options, the Company shall issue to the Participant (or for his benefit) the Net Exercise Shares (as defined below), and the following formula shall apply:

 

X  =   Y(A — B)
A - N

 

Whereas:

 

X = The number of Shares resulting from the exercise of the Options (the "Net Exercise Shares").

 

Y = The number Options in respect of which a Notice of Exercise has been delivered to the Company.

 

A = The Fair Market Value.

 

B = The Exercise Price.

 

N = The par Value of a Share.

 

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

 

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

 

9.          Termination off Service:

 

9.1           In the event of a Termination of Service, all Options granted to such Participant, unless determined otherwise by the Committee or the Board, shall terminate as follows:

 

(a)          All such Options that are not vested on the Date of Termination shall terminate immediately on the effective date of a Termination of Service (the "Date of Termination"). It is hereby clarified that the Termination of Service of an Israeli Participant who is an Employee shall be the termination of the employee-employer relationship between the Israeli Participant and the Group.

 

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

 

(c)          If the Participant's Termination of Service is due to any reason other than those stated in Sections 9(b) and 9(d) herein, Options (to the extent vested on the Date of Termination) shall be exercisable at any time until the lapse of ninety (90) days from the Date of Termination (but in no event after the expiration date of such Options), and shall thereafter terminate; provided however that if the Participant dies within such period, such Options (to the extent vested on the Date of Termination) shall be exercisable by the Participant's legal representative, estate or other person to whom the Participants rights are transferred by will or by laws of descent or distribution at any time until the lapse of twelve (12) months from the Date of Termination (but in no event after the expiration date of such Options), and shall thereafter terminate.

 

(d)          Notwithstanding the aforesaid, if the Participant's Termination of Service is for Cause, all of the Options whether vested or not shall expire immediately and be of no legal effect.

 

(e)          The decision whether the Termination of Service of a particular Participant is by reason of disability or Cause, shall be finally and conclusively determined by the Committee or the Board in its absolute discretion.

 

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

 

9.2           Notwithstanding the foregoing provisions of this Section 9, the Committee or the Board shall have the discretion to extend the period of time for which an Option is to remain exercisable following the Date of Termination to such greater period of time, but in no event beyond the specified expiration of the term of the Option; and/or permit the Option to be exercised, during the applicable exercise period following the Date of Termination, not only with respect to the number of Shares for which such Option is exercisable at the Date of Termination but also with respect to one or more additional installments in which the Participant would have vested under the Option had the Participant continued in the employ or service of the Group.

 

9.3           Notwithstanding the foregoing provisions of this Section 9, unless determined otherwise by the Committee, and for the avoidance of doubt, the transfer of a Participant from the employ or service within the Group entities, shall not be deemed a Termination of Service for purposes hereof. Furthermore, and notwithstanding the foregoing provisions of this Section 9, the transfer of a Participant from a status of an Employee to a status of a Consultant or from a status of a Consultant to a status of an Employee, shall not be deemed a Termination of Service for purposes hereof.

 

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9.4           Unless determined otherwise by the Board, in the event of a Termination of Service, all RSUs theretofore granted to such Participant when such Participant was an Employee, director, contractor or Consultant of the Group that are not vested on the Date of Termination, shall terminate immediately and have no legal effect.

 

9.5           Unless otherwise provided by the Board, in the event of Termination of Service of a Participant, for any reason, whether voluntary or involuntary (including the Participant's death or disability), then the Participant shall forfeit to the Company any Shares acquired by the Participant pursuant to an award of Restricted Stock which remain subject to the Vesting Period as of the Date of Termination.

 

10.         Adjustments, Liquidation and Transaction:

 

10.1 Subject to any required action under any applicable law, the number of Shares subject to each outstanding Award, and the number of Shares which have been authorized for issuance under the Plan but as to which no Awards have yet been granted or which have been returned to the Plan upon cancellation, forfeiture, or expiration of an Award, as well as the Exercise Price per share of Shares subject to each outstanding Award, shall be adjusted, as the Board deems necessary or appropriate, for any increase or decrease in the number of issued Shares resulting from a share split, reverse share split, stock dividend, combination or reclassification of the Shares, or any other increase or decrease in the number of issued Shares effected without receipt of consideration by the Company, such that an adjustment is appropriate in order to prevent dilution or enlargement of the rights of a Participant under the Plan; provided, however that conversion of any convertible securities of the Company shall not be deemed to have been "effected without receipt of consideration." Except as expressly provided in this Section 9, no issuance by the Company of shares of any class, or securities convertible into shares of any class, shall affect, and no adjustment by reason thereof shall be made with respect to, the number or price of Shares subject to an Award.

 

Except as expressly provided in this Section 10, the grant of Awards under the Plan shall in no way affect the right of the Company to distribute bonus shares, to offer rights to purchase its securities, or to distribute dividends.

 

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

 

10.3          Transaction:

 

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10.3.1      In the event of a Transaction, the unexercised Awards then outstanding under the Plan may be assumed or substituted for an appropriate number of shares of each class of shares or other securities of the Successor Company (or a parent or subsidiary of the Successor Company) as were distributed to the shareholders of the Company in connection and with respect to the Transaction. In case of such assumption and/or substitution of Awards, appropriate adjustments shall be made to the Exercise Price and number and type of shares so as to reflect such action and all other terms and conditions of the Award Agreements shall remain unchanged, including but not limited to the Vesting Period, all subject to the determination of the Committee or the Board, which determination shall be in their sole discretion and final and to applicable law including among others regarding taxation. The Company shall notify the Participant of the Transaction in such form and method as it deems appropriate at least ten (10) days prior to the closing of such Transaction. Subject to Section 10.3.2 below, immediately following the consummation of the Transaction, the Board shall have full power and authority to determine that all outstanding Awards shall terminate and cease to be outstanding, except to the extent assumed or substituted as aforesaid. In the event that Awards are not assumed or substituted by the Successor Company the Board may (but shall not be obligated to) provide the Participant to have the right to exercise the vested Awards under such terms and conditions as the Board shall determine prior to the Transaction.

 

10.3.2      Notwithstanding the above and subject to any applicable law, the Board or the Committee shall have full power and authority to determine that in certain Option Awards there shall be a clause providing different provisions with respect to the Vesting Period of Awards underling such Award Agreement or any portion thereof in case of a Transaction.

 

10.3.3      For the purposes of Section 10.3.1 above, an Award shall be considered assumed or substituted if, following the Transaction, the Award confers the right to purchase or receive, for each Share underlying an Award immediately prior to the Transaction, the consideration (whether shares, options, cash, or other securities or property) received in the Transaction by holders of shares held on the effective date of the Transaction (and if such holders were offered a choice of consideration, the type of consideration chosen by the holders of a majority of the outstanding shares); provided, however, that if such consideration received in the Transaction is not solely ordinary shares (or their equivalent) of the Successor Company or its parent or subsidiary, the Committee may, with the consent of the Successor Company, provide for the consideration to be received upon the exercise of the Award to be solely ordinary shares (or their equivalent) of the Successor Company or its parent or subsidiary equal in Fair Market Value to the per Share consideration received by holders of a majority of the outstanding shares in the Transaction; and provided further that the Committee may determine, in its discretion, that in lieu of such assumption or substitution of Awards for options of the Successor Company or its parent or subsidiary, such Awards will be substituted for any other type of asset or property including cash which is fair under the circumstances.

 

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

 

10.5        The grant of Awards under the Plan shall in no way affect the right of the Company to adjust, reclassify, reorganize or otherwise change its capital or business structure or to merge, consolidate, dissolve, liquidate or sell or transfer all or any part of its business or assets.

 

11.          Limitations on Transfer:

 

11.1         Unless determined otherwise by the Board, no Award (excluding Shares as set out in the next paragraph below) shall be assignable, transferable, sold, pledged, encumbered, hypothecated, or otherwise disposed of in any manner by the Participant to whom granted otherwise than by will or the laws of descent and distribution, and an Award shall vest or may be exercised (as applicable) during the lifetime of the Participant only by such Participant or by such Participant's guardian or legal representative. The terms of such Award shall be binding upon the beneficiaries, executors, administrators, heirs and successors of such Participant. Any Shares acquired upon exercise or vesting of Awards shall be transferable only in accordance with the provisions of the Company's Articles of Association and with applicable securities and other local laws, and may be subject to substantial statutory or regulatory restrictions on transfer, except to the extent exemptions (whether by registration or otherwise) are available. The Committee, in its discretion, may impose such restrictions on Shares acquired pursuant to the exercise or settlement of an Award as it determines to be desirable, including, without limitation, restrictions relating to disposition of the Shares and forfeiture restrictions based on service, performance, Share ownership by the Participant, and such other factors as the Committee determines to be appropriate.

 

11.2         Prior to an IPO, the sale or transfer of Exercised Shares to a third party shall be subject to any right of first refusal to purchase such Shares and to such other terms and conditions prescribed by the Company's Articles of Association. In addition, at any time prior or after an IPO, the sale or transfer of Exercised Shares to a third party shall also be subject to such other applicable transfer restrictions, if any, and any other terms and conditions as may be set forth in the applicable Award Agreement, shareholders agreement, or other applicable written agreement. Any purported transfer effected in violation of this Section 11.2, the Company's Articles of Association or the applicable Award Agreement, shareholders agreement, or other applicable written agreement shall be null and void and shall have no force or effect and the Company shall not be required (i) to transfer on its books any Shares that have been sold or otherwise transferred in violation of any such provisions or (ii) to treat as owner of such Shares or to accord the right to vote or pay dividends to any purchaser or other transferee to whom such Shares shall have been so transferred.

 

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11.3        The Participant acknowledges that in the event that the Company's shares shall be registered for trading in any public market, Participant's rights to sell the Shares in respect of which the Participant has exercised Awards, may be subject to certain limitations (including a lock-up period), as will be requested by the Company or its underwriters, and the Participant unconditionally agrees and accepts any such limitations. No such limitations shall affect the Vesting Periods with respect to outstanding Awards, which have not yet expired.

 

12.         Term and Amendment of the Plan:

 

12.1        The Plan shall terminate upon the lapse of a ten (10) year period measured from the date the Plan was adopted by the Board. All Awards outstanding at the time of the termination shall continue to have full force and effect in accordance with the provisions of the Plan and the documents evidencing such Awards.

 

12.2        Subject to applicable law, the Board in its discretion may, at any time and from time to time, amend, alter, extend or terminate the Plan, as it deems advisable, including without limitation, change the vesting and exercise periods, but no amendment or termination shall be made that would materially and adversely affect the rights of any Participant under any outstanding Award, without his or her consent. In addition, to the extent necessary and desirable to comply with applicable laws, the Company shall obtain the approval of its shareholders with respect to any Plan amendment in such a manner and to such a degree as required. Furthermore, the Committee or the Board may adopt, as part of the Plan and based on it, sub-plans, in order to comply with all relevant and applicable law of the country of residence of any Participants.

 

13.         Trust:

 

13.1         In the event Awards are deposited with a Trustee, the Trustee shall hold each such Award and any Exercised Shares in Trust for the benefit of the Beneficial Participant. In accordance with Section 102, the tax benefits afforded to 102 Awards (and any Exercised Shares) in accordance with the Ordinary Income Route or Capital Gains Route, as applicable, shall be contingent upon the Trustee holding such 102 Awards for the applicable Trust Period.

 

13.2         As long as 102 Awards are deposited with a Trustee, the Participant granted 102 Awards shall not be entitled to sell the Exercised Shares or to transfer such Exercised Shares (or such 102 Awards) from the Trust prior to the lapse of the Trust Period; and any and all rights issued in respect of Exercised Shares, including bonus shares, shall be issued to the Trustee and held thereby until the lapse of the Trust Period, and such rights shall be subject to the Taxation Route which is applicable to such Exercised Shares.

 

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13.3        Notwithstanding the aforesaid, the Trustee may release such Exercised Shares or rights from Trust and the Exercised Shares or such rights may be sold or transferred, prior to the lapse of the Trust Period, provided however, that tax is paid or withheld in accordance with Section 102 of the Ordinance and Section 7 of the 102 Rules, and any other provision in any other section of the Ordinance and any regulation, ruling, procedure and clarification promulgated thereunder, that will be relevant, from time to time.

 

13.4        The Company shall register the Exercised Shares issued to the Trustee pursuant to the Plan, in the name of the Trustee for the benefit of the Israeli Participants, in accordance with any applicable law, rules and regulations, until such time that such Shares are released from the Trust as herein provided. If the Company shall issue any certificates representing Exercised Shares deposited with the Trustee under the Plan, then such certificates shall be deposited with the Trustee, and shall be held by the Trustee until such time that such Exercised Shares are released from the Trust as herein provided.

 

14.         Tax Consequences:

 

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

 

14.2       The Group and/or the Trustee shall have the right, but not the obligation, to deduct from the Shares issuable to a Participant upon the exercise or vesting of an Award, or to accept from the Participant the tender of, a number of whole Shares having a fair market value, as determined by the Company, that will enable the Group to satisfy any Tax withholding obligations of the Group.

 

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

 

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

 

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

 

15.          Continuance of Employment:

 

Neither the Plan nor the Award Agreement with the Participant shall impose any obligation on the Group, to continue any Participant in its employ or service, and nothing in the Plan or in any Award granted pursuant thereto shall confer upon any Participant any right to continue in the employ or service of the Group or restrict the right of the Group to terminate such employment or service at any time.

 

16.          Governing Law & Jurisdiction:

 

The Plan shall be exclusively governed by and construed and enforced in accordance with the exclusive laws of the State of Israel applicable to contracts made and to be performed therein, without giving effect to the principles of conflict of laws. The competent courts of Tel-Aviv, Israel shall have exclusively sole jurisdiction in any matters pertaining to the Plan.

 

17.          Multiple Agreements:

 

The terms of each Award may differ from other Awards granted under the Plan at the same time, or at any other time. The Board may also grant more than one Award to a given Participant during the term of the Plan, either in addition to, or in substitution for, one or more Awards previously granted to that Participant.

 

18.          Non-Exclusivity of the Plan:

 

The adoption of the Plan by the Board shall not be construed as amending, modifying or rescinding any previously approved incentive arrangement or as creating any limitations on the power of the Board to adopt such other incentive arrangements as it may deem desirable, including, without limitation, the granting of share-based Awards otherwise than under the Plan, and such arrangements may be either applicable generally or only in specific cases.

 

19.          The provisions of the Plan shall not be construed as deviating from any applicable law, rules and regulations.

 

 

 

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Exhibit 10.4

 

INMODE LTD.

 

INDEMNIFICATION AND EXCULPATION AGREEMENT

 

_________________, 2019

 

To: _______________

Holder of Israeli ID Number / [_____] Passport Number: ____________________

(the “ Indemnitee ”)

 

This Indemnification and Exculpation Agreement (“Indemnification Agreement”) is being entered into effective as of ___________ __, 2019, pursuant to the resolutions of the Board of Directors of InMode Ltd ., (Israeli Company No. 514073618) a company organized under the laws of the State of Israel (the “Company” and the “Board” respectively) dated _____________, 2019 as approved by the Company’s shareholders on _____________, 2019.

 

It is in the best interests of the Company to retain and attract as directors and/or officers the most capable persons available and such persons are becoming increasingly reluctant to serve in companies unless they are provided with adequate protection through insurance and indemnification in connection with such service.

 

You are or have been appointed as a director or other Office Holder (as defined below) of the Company, and in order to enhance your service to the Company in an effective manner, the Company desires to provide hereunder for your indemnification to the fullest extent permitted by law. In consideration of your continuing to serve the Company, the Company hereby agrees as follows:

 

1. The Company hereby undertakes to indemnify you to the maximum extent permitted by applicable law in respect of the following expenses, payments or liabilities imposed on, or incurred by, you in consequence of any act performed or omission committed by you in your capacity as an “Office Holder” (such term shall have herein the meaning assigned to it in the Companies Law – 1999 (the “Companies Law”)) of the Company (including your service, at the request of the Company, as an officer, director, employee or board observer of any other company controlled directly or indirectly by the Company (a “Subsidiary”) or in which the Company holds shares (an “Affiliate”)) (your service in any of the Company, its Subsidiaries and Affiliates is referred to herein as the “Corporate Capacity”). Notwithstanding the foregoing, in the event that you are a beneficiary of an indemnification undertaking provided by a Subsidiary or an Affiliate with respect to your Corporate Capacity with such Subsidiary or Affiliate, then the indemnification obligations of the Company hereunder with respect to such Corporate Capacity shall only apply to the extent that the indemnification by such Subsidiary or Affiliate does not actually fully cover the indemnifiable liabilities, payments and expenses relating thereto.

 

1.1 Any monetary liability imposed on you pursuant to a court judgment in favor of a third party (which third parties include, without limitation and to the fullest extent permitted by applicable law, any governmental entity), including pursuant to any settlement confirmed as judgment or to an arbitration decision approved by a competent court;

 

1.2 All reasonable litigation expenses, including attorney’s fees, which were incurred by you as a result of an investigation or proceeding conducted against you by an authority authorized to conduct such an investigation or proceeding, which was either (i) “concluded without the filing of an indictment” (as defined in Section 260(a)(1A) of the Companies Law) against you and without the imposition on you of any “monetary obligation in lieu of a criminal proceeding” (as defined in Section 260(a)(1A) of the Companies Law) , or (ii) “concluded without the filing of an indictment” against you but with the imposition on you of a “monetary obligation in lieu of a criminal proceeding” for an offense that does not require proof of mens rea , or (iii) is in connection with a monetary sanction pursuant to the Companies Law or the Israeli Securities Law, 5728-1968, as amended (the “Securities Law”);

 

1.3 All reasonable litigation expenses, including attorneys' fees, incurred by you, or which were imposed on you by a court, (i) in a proceeding instituted against you by the Company or a Subsidiary or Affiliate or on its behalf or by a third party, or (ii) in a criminal indictment of which you were acquitted, or (iii) in a criminal indictment of which you were convicted of an offense which does not require proof of mens rea ;

 

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1.4 a payment which you will be obligated to make to an injured party as set forth in Section 52(54)(a)(1)(a) of the Securities Law;

 

1.5 expenses incurred by you in connection with a proceeding under Chapters H’3, H’4, or I’1 of the Securities Law, including reasonable legal expenses, which term includes attorneys’ fees;

 

1.6 expenses (including reasonable legal expenses) incurred by you in connection with a proceeding under Chapter G’1 of the Economic Competition Law, 5748-1988; and

 

1.7 any other event, occurrence or circumstances arising in respect of which the Company may indemnify an Office Holder of the Company under applicable law.

 

2. Notwithstanding the aforesaid, the Company will not indemnify you for any amount you may be obligated to pay in respect of:

 

2.1 a breach of your duty of loyalty to the Company or a Subsidiary or Affiliate, except, to the extent permitted by the Companies Law, for a breach of a duty of loyalty to the Company or a Subsidiary or Affiliate while acting in good faith and having reasonable basis to assume that such act would not prejudice the interests of the Company or a Subsidiary or Affiliate;

 

2.2 a breach of your duty of care to the Company or a Subsidiary or Affiliate committed intentionally or recklessly, unless committed in negligence only;

 

2.3 an action taken or omission by you with the intent of unlawfully realizing personal gain; and

 

2.4 a fine, civil fine, monetary sanction or forfeit imposed upon you; and,

 

2.5 with respect to proceedings or claims initiated or brought voluntarily by you against the Company or a Subsidiary or Affiliate, other than by way of defense or by way of third party notice to the Company or a Subsidiary or an Affiliate or by way of countersuit in connection with claims brought against you or in specific cases in which the Company’s Board of Directors has approved the initiation or bringing of such suit by yourself.

 

3. To the fullest extent permitted by law, the Company will, following receipt by the Company of your written request therefor, make available all amounts payable to you in accordance with Section 1 above on the date on which such amounts are first payable by you (“Time of Indebtedness”), and with respect to items referred to in Sections 1.2 and 1.3 above, even prior to the time on which the applicable court renders its decision, provided however , that advances given to cover legal expenses in criminal proceedings will be repaid by you to the Company if you are found guilty of a crime which requires proof of mens rea (criminal intent). Other advances will be repaid by you to the Company if it is determined by a court of competent jurisdiction that you are not lawfully entitled to such indemnification as contemplated hereby.

 

As part of the aforementioned undertaking, the Company will make available to you any security or guarantee that you may be required to post in accordance with an interim decision given by a court or an arbitrator, including for the purpose of substituting liens imposed on your assets.

 

4. The Company will indemnify you even if at the relevant Time of Indebtedness you no longer serve in any Corporate Capacity, provided that the obligations with respect to which you will be indemnified hereunder are in respect of actions taken or omissions committed by you while you were an Office Holder of the Company as aforesaid or served in another Corporate Capacity, and in such capacity.

 

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5. The undertaking of the Company set forth in Section 1.1 shall be limited as follows:

 

5.1 to matters that result from or are connected or otherwise related to events or circumstances set forth in Schedule A hereto, which are deemed by the Board, based on the current activity of the Company, to be foreseeable as of the date hereof; and

 

5.2 the maximum amount for which the Company undertakes to indemnify you hereunder for matters and circumstances described in Schedule A (or otherwise pursuant to this Indemnification Agreement), shall not exceed your pro-rated amount out of the lower of: (i) the cap below, or (ii) your pro-rated proven indemnifiable amount as detailed below. The total obligation of the Company to all Office Holders, in the aggregate, including all then pending claims for indemnification made by all Office Holders and other eligible indemnitees of the Company, whether under law, agreement or the Articles of Association of the Company, will not exceed a cap amount which is the greater of: (i) US$ 40,000,000; and (ii) an amount equivalent to 25% of the Company’s effective equity. Said cap does not derogate from the right to receive amounts from insurance providers in accordance with Section 7 below. For this purpose “the Company’s effective equity ” - means the amount of the Company’s equity as reflected in its most recent publicly available consolidated financial statements as of the payment date of such indemnifiable event. If the total of all such claims exceed such amount (or the remaining balance of such amount at the relevant time), then the limit amount per each such indemnitee shall be pro-rated among all such indemnitees proportionately to the proven indemnifiable amount of each respective indemnitee out of the aggregate indemnifiable amount of all proven claims by all such indemnitees . Such amount has been determined to be reasonable by the Company’s Board of Directors.

 

All amounts stated herein in US$, and if paid in NIS, are to be calculated according to the representative rate of exchange, or any other official rate of exchange that may replace it, published by the Bank of Israel on the date of payment by the Company hereunder.

 

6. Subject to the limitations of Section 5 above and Section 7 below, the indemnification hereunder will, in each case, cover all sums of money (100%) that you will be obligated to pay, in those circumstances for which indemnification is permitted under the law and under this Indemnification Agreement.

 

7. The Company will not indemnify you for any liability with respect to which you have received payment from a third party or by virtue of an insurance policy taken out by the Company other than for amounts which are in excess of the amounts actually paid to you by such third party or pursuant to any such insurance policy (including deductible amounts not covered by insurance policies), within the limits set forth in Section 5 above. The Company will be entitled to receive any amount collected by you from a third party or by virtue of an insurance policy taken out by the Company in connection with liabilities actually indemnified hereunder, up to the amount actually paid to you by the Company as indemnification hereunder. The amounts to be transferred by you to the Company shall equal the difference between the total indemnification amounts you have actually received from any source (including the Company) and your pro-rated proven indemnifiable liability, but no more than the actual amount paid to you by the Company hereunder for such indemnifiable events. For example: if your pro-rated indemnifiable amount is US $1M and you have actually received from the Company and the insurer an amount of US $1.2M (US $600K from the Company and additional US $600K from the insurer), then you will be required to reimburse the Company the balance of US $200K. Said payment shall be transferred by you to the Company within fifteen (15) days following the receipt of the said amount.

 

8. In all indemnifiable circumstances, indemnification will be subject to the following:

 

8.1 You shall promptly notify the Company in writing of any legal proceedings initiated against you and of all possible or threatened legal proceedings for which you may seek indemnification hereunder, without delay, and in any event within seven (7) days, following your first becoming aware thereof, provided , however , that your failure to notify the Company as aforesaid shall not derogate from your right to be indemnified as provided herein except and to the extent that such failure to provide notice adversely prejudices the Company’s and/or a Subsidiary's and/or Affiliate's ability to defend against such action or to conduct any directly related legal proceeding. You shall deliver to the Company, or to such person as it shall advise you, without delay all documents you receive in connection with these proceedings or possible or threatened proceedings. Notice to the Company shall be directed to the Chief Executive Officer of the Company at the address shown in the signature page of this Indemnification Agreement (or at such other address as the Company shall advise you).

 

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Similarly, you shall advise the Company on an ongoing and current basis concerning all events which you suspect may give rise to the initiation of legal proceedings against you in connection with your actions or omissions as an Office Holder of the Company or in another Corporate Capacity for which you may seek indemnification hereunder.

 

8.2 Other than with respect to proceedings that have been initiated against you by the Company and/or Subsidiary or Affiliate or in its name, the Company (including a Subsidiary or Affiliate, as applicable) shall be entitled to undertake the conduct of your defense in respect of such legal proceedings and/or to hand over the conduct thereof to any attorney which the Company may choose for that purpose, except to an attorney who is not, upon reasonable grounds, acceptable to you. The Company shall notify you of any such decision to defend within ten (10) calendar days of receipt of notice of any such proceeding.

 

The Company (including a Subsidiary or Affiliate) or the attorney as aforesaid shall be entitled, within the context of the conduct as aforesaid, to conclude such proceedings, all as they shall see fit, including by way of settlement.

 

Notwithstanding the foregoing, in the case of criminal proceedings, the Company (including a Subsidiary or Affiliate) or the attorneys as aforesaid will not have the right to plead guilty in your name or to agree to a plea-bargain in your name without your consent. Furthermore, in a civil proceeding (whether before a court or as a part of a compromise arrangement), the Company (including a Subsidiary or Affiliate) and/or its attorneys will not have the right to admit to any occurrences that are not indemnifiable pursuant to this Indemnification Agreement, without your consent. However, the aforesaid will not prevent the Company (including a Subsidiary or Affiliate) or its attorneys as aforesaid, with the approval of the Company or the Subsidiary or Affiliate, as applicable, to come to a financial arrangement with a plaintiff in a civil proceeding or to consent to the entry of any judgment against you or enter into any settlement, arrangement or compromise, in each case without your consent, so long as such arrangement, judgment, settlement or compromise: (i) does not include an admission of your fault, (ii) is fully indemnifiable pursuant to this Indemnification Agreement, and (iii) further provides, as an unconditional term thereof, the full release of you from all liability and limitation in respect of such proceeding. This paragraph shall not apply to a proceeding brought by you under Section 8.7 below.

 

8.3 You will fully cooperate with the Company and/or any Subsidiary and/or Affiliate and/or any attorney as aforesaid in every reasonable way as may be required of you within the context of their conduct of such legal proceedings, including but not limited to the execution of power(s) of attorney and other documents required to enable the Company and its Subsidiaries and Affiliates or its attorney as aforesaid to conduct your defense in your name, and to represent you in all matters connected therewith, in accordance with the aforesaid, provided that the Company shall cover all reasonable costs incidental thereto such that you will not be required to pay the same or to finance the same yourself; and provided, further, that you shall not be required to take any action that would reasonably prejudice your defense in connection with any indemnifiable proceeding.

 

8.4 Notwithstanding the provisions of Sections 8.2 and 8.3 above, (i) if in a proceeding to which you are a party by reason of your status as an Office Holder of the Company or in another Corporate Capacity, the named parties to any such proceeding include both you and the Company or any Subsidiary or Affiliate, and joint representation is inappropriate under applicable standards of professional conduct due to a conflict of interest or potential conflict of interest (including the availability to the Company and its Subsidiary or Affiliate, on the one hand, and you, on the other hand, of different or inconsistent defenses or counterclaims) that exists between you and the Company, or (ii) if the Company fails to assume the defense of such proceeding in a timely manner, or (iii) if the Company refers the conduct of your defense to an attorney who is not, upon reasonable grounds, acceptable to you, you shall be entitled to be represented by separate legal counsel, which may represent other persons similarly situated, of the Company’s choice and reasonably acceptable to you and such other persons' choice, at the expense of the Company. In addition, if the Company fails to comply with any of its material obligations under this Indemnification Agreement or in the event that the Company or any other person takes any action to declare this Indemnification Agreement void or unenforceable, or institutes any action, suit or proceeding to deny or to recover from you the benefits intended to be provided to you hereunder, except with respect to such actions, suits or proceedings brought by the Company that are resolved in favor of the Company, you shall have the right to retain counsel of your choice, and reasonably acceptable to the Company and at the expense of the Company, to represent you in connection with any such matter.

 

  4  

 

 

8.5 If, in accordance with Section 8.2 (but subject to Section 8.4), the Company (including a Subsidiary or Affiliate, as applicable) has taken upon itself the conduct of your defense, you shall have the right to employ counsel in any such action, suit or proceeding, who shall fully update, and be fully updated by, the Company (including a Subsidiary or Affiliate, if applicable) on the defense procedure and shall consult with, and be consulted with by, the Company (including a Subsidiary or Affiliate, if applicable) and the attorney conducting the legal defense on behalf of the Company or the Subsidiary or Affiliate if applicable, but the fees and expenses of such counsel, incurred after the assumption by the Company (or the Subsidiary or Affiliate, if applicable) of the defense thereof, shall be at your expense and the Company will have no liability or obligation pursuant to this Indemnification Agreement or otherwise to indemnify you for any legal expenses, including any legal fees, that you may expend in connection with such counsel, unless the Company shall agree to such expenses in writing; in which event all reasonable fees and expenses of your counsel shall be borne by the Company to the extent so agreed to by the Company in writing.

 

8.6 The Company will have no liability or obligation pursuant to this Indemnification Agreement to indemnify you for any amount expended by you pursuant to any compromise or settlement agreement reached in any suit, demand or other proceeding as aforesaid without the Company’s written consent to such compromise or settlement, which consent shall not be unreasonably withheld.

 

8.7 If required by law, the Company’s authorized organs will consider the request for indemnification and the amount thereof and will determine if you are entitled to indemnification and the amount thereof. In the event that you make a request for payment of an amount of indemnification hereunder or a request for an advancement of indemnification expenses hereunder and the Company fails to determine your right to indemnification hereunder or fails to make such payment or advancement, you may petition any court which has jurisdiction to enforce the Company’s obligations hereunder. The Company agrees to reimburse you in full for any reasonable expenses incurred by you in connection with investigating, preparing for, litigating, defending or settling any action brought by you under the immediately preceding sentence or otherwise in enforcing this Indemnification Agreement, except where such action or any claim or counterclaim in connection therewith is resolved in favor of the Company.

 

8.8 Neither the Company nor any of its agents, employees, directors or officers shall make any statement to the public or to any other person regarding any settlement of claims made pursuant to this Indemnification Agreement against you that would in any manner cast any negative light, inference or aspersion against you.

 

8.9 By signing this Indemnification Agreement you hereby accept that you shall not make any statement to the public or to any other person regarding any settlement of claims made pursuant to this Indemnification Agreement against you or the Company (including any Subsidiary or Affiliate thereof) that would in any manner cast any negative light, inference or aspersion against the Company or any Subsidiary or Affiliate thereof, and that you will keep the terms of such settlement confidential.

 

  5  

 

 

9. The Company hereby exempts you, to the fullest extent permitted by law, from any liability for damages caused as a result of a breach of your duty of care to the Company while acting in good faith and having reasonable basis to assume that such act or omission would not prejudice the interests of the Company and its Subsidiaries and Affiliates, provided that in no event shall you be exempt with respect to any actions listed in Section 2 above or for a breach of your duty of care in connection with a Distribution (as defined in the Companies Law) or with respect to any action or omission as to which, under applicable law, the Company is not entitled to exculpate you.

 

10. If for the validation of any of the undertakings in this Indemnification Agreement, any act, resolution, approval or other procedure is required, the Company undertakes to cause them to be done or adopted in a manner which will enable the Company to fulfill all its undertakings as aforesaid.

 

11. Nothing contained in this Indemnification Agreement shall derogate from the Company’s right (but in no way obligation) to indemnify you post factum for any amounts which you may be obligated to pay as set forth in Section 1 above without regard to the limitations set forth in Section 5 above. Your rights of indemnification hereunder shall not be deemed exclusive of any other rights you may have under the Company’s Articles of Association or applicable law or otherwise.

 

12. If any undertaking included in this Indemnification Agreement is held invalid or unenforceable, such invalidity or unenforceability will not affect any of the other undertakings which will remain in full force and effect. Furthermore, if such invalid or unenforceable undertaking may be modified or amended so as to be valid and enforceable as a matter of law, such undertaking will be deemed to have been modified or amended, and any competent court or arbitrator is hereby authorized to modify or amend such undertaking, so as to be valid and enforceable to the maximum extent permitted by law.

 

13. This Indemnification Agreement and the agreements herein shall be governed by and construed and enforced in accordance with the laws of the State of Israel, without regard to the rules of conflict of laws. Any dispute, controversy or claim arising in relation to this Indemnification Agreement, will be exclusively referred to the competent court in Haifa, Israel.

 

14. This Indemnification Agreement cancels and replaces any preceding letter of indemnification or arrangement for indemnification or exculpation that may have been issued to you by the Company. Notwithstanding the foregoing, the indemnification obligations set forth in this Indemnification Agreement will also apply, subject to the terms, conditions and limitations set forth in this Indemnification Agreement, with respect to actions performed or omissions committed, in your capacity as an Office Holder of the Company or in another Corporate Capacity, during the period prior to the date of this Indemnification Agreement. Notwithstanding, your rights hereunder shall not be deemed exclusive of any other rights you may have under the Company’s Articles of Association, applicable law, any agreement, a vote of shareholders or a resolution of directors, or otherwise. To the extent that during the period of indemnification under this Agreement the indemnification rights of the then-serving directors and/or officers are more favorable to such directors or officers than the indemnification rights provided under this Indemnification Agreement to you, you shall be entitled to the full benefits of such more favorable indemnification rights to the extent permitted by law. No amendment, alteration or repeal of this Indemnification Agreement or of any provision hereof shall limit or restrict any of your rights under this Indemnification Agreement in respect of any action taken or omitted by you prior to such amendment, alteration or repeal, subject to applicable law. No right or remedy herein conferred is intended to be exclusive of any other right or remedy, and every other right and remedy shall be cumulative and in addition to every other right and remedy given hereunder or now or hereafter existing at law or in equity or otherwise. The assertion or employment of any right or remedy hereunder, or otherwise, shall not prevent the concurrent assertion or employment of any other right or remedy.

 

15. Neither the settlement nor termination of any proceeding nor the failure of the Company to award indemnification or to determine that indemnification is payable shall create an adverse presumption that you are not entitled to indemnification hereunder. In addition, the termination of any proceeding by judgment or order (unless such judgment or order provides so specifically) or settlement, shall not create a presumption that you did not act in good faith and in a manner which you reasonably believed to be in or not opposed to the best interests of the Company or, with respect to any criminal action or proceeding, had reasonable cause to believe that your action was unlawful.

 

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16. This Indemnification Agreement shall be (a) binding upon all successors and assigns of the Company (including any transferee of all or a substantial portion of the business, shares and/or assets of the Company and any direct or indirect successor by merger or consolidation or otherwise by operation of law), and (b) binding on and shall inure to the benefit of your heirs, personal representatives, executors and administrators. This Indemnification Agreement shall continue for your benefit and your heirs', personal representatives', executors' and administrators' benefit after you cease to be a director or other Office Holder of the Company or serving in another Corporate Capacity.

 

17. Except with respect to changes in the governing law which expand your right to be indemnified by the Company, no supplement, modification or amendment of this Indemnification Agreement shall be binding unless executed in writing by each of the parties hereto. No waiver of any of the provisions of this Indemnification Agreement shall be deemed or shall constitute a waiver of any other provisions of this Indemnification Agreement (whether or not similar), nor shall such waiver constitute a continuing waiver. Any waiver shall be in writing.

 

18. All notices and other communications required or permitted under this Indemnification Agreement shall be in writing, shall be effective (i) if mailed within Israel, seven (7) business days after mailing (unless mailed abroad, in which case it shall be effective fourteen (14) business days after mailing), (ii) if by air courier, three (3) business days after delivery to the courier service, (iii) if sent by messenger, upon delivery, (iv) if sent via facsimile, upon transmission and electronic (or other) confirmation of receipt or (if transmitted and received on a non-business day) on the first business day following transmission and electronic (or other) confirmation of receipt, and (iv) if sent by email, on the date of transmission or (if transmitted and received on a non-business day) on the first business day following transmission, except where a notice is received stating that such mail has not been successfully delivered.

 

The Board has determined, based on the current activity of the Company, that the amount stated in Section 5 is reasonable and that the events listed in Schedule A are reasonably anticipated.

 

Kindly sign and return the enclosed copy of this Indemnification Agreement to acknowledge your agreement to the contents hereof.

 

Sincerely,

 

   
InMode Ltd .  

 

By:    
     
Title:    

 

I accept and agree to the above:

 

   
Signature  

 

Full Name:    

 

  7  

 

 

Schedule A

 

All references in this schedule to the “ Company ” shall be deemed to refer to a Subsidiary or Affiliate as well, to the extent that your service as an officer, director, employee or board observer of the Subsidiary or Affiliate is at the request of the Company in the circumstances described in the preface of Section 1 to the Indemnification Agreement.

 

1. The offering of securities by the Company and/or by a shareholder to the public and/or to private investors or the offer by the Company to purchase securities from the public and/or from private investors or other holders pursuant to a prospectus, agreement, notice, report, tender and/or other proceeding, whether in Israel or abroad (including, inter alia, claims based on disclosure or non-disclosure of facts in the offering documents, any report or failure to report as required by applicable rules, or the compliance or non-compliance with applicable law);

 

2. Claims relating to violations of securities laws of any jurisdiction, including, without limitation, fraudulent disclosure claims, failure to comply with the Securities Exchange Commission and/or the Israeli Securities Authority rules and other claims relating to relationships with investors and the investment community;

 

3. Occurrences in connection with investments the Company make in other corporations whether before and/or after the investment is made, the entering into the transaction, the execution, development and monitoring thereof, including actions taken by you in the name of the Company as an Office Holder and/or board observer of the corporation which is the subject of the transaction and the like;

 

4. The sale, purchase and holding of negotiable securities or other investments for or in the name of the Company;

 

5. Actions in connection with the merger of the Company with or into another entity;

 

6. Actions in connection with the sale of the operations and/or business, or part thereof, of the Company;

 

7. Without derogating from the generality of the above, actions in connection with the purchase or sale of companies, legal entities or assets, and the division or consolidation thereof;

 

8. Actions concerning the approval of transactions of the Company with officers and/or directors and/or holders of controlling interests in the Company, and any other transactions referred to in Section 270 of the Companies Law;

 

9. Actions taken in connection with labor relations and/or employment matters in the Company (including, inter alia , the handling of pension funds, provident funds, insurance and savings funds, options, bonuses, etc.) and trade relations of the Company, including with employees, independent contractors, customers, suppliers and various service providers;

 

10. Claims arising out of any incentive plan in favor of employees, office holders, contractors, consultants and service providers;

 

11. Claims made by business associates, including joint venture partners;

 

12. Actions in connection with the development or testing of products developed by the Company, including the performance of pre-clinical and clinical trials on such products, whether performed by the Company or by third parties on behalf of the Company, and/or in connection with the distribution, sale, license or use of such products, including without limitation in connection with professional liability and product liability claims and/or in connection with the procedure of obtaining regulatory approvals regarding such products, whether in Israel or abroad;

 

13. Any claim or demand based upon actual or alleged infringement, misuse or misappropriation of any third party's intellectual property rights, including but not limited to confidential information, patents, copyrights, design rights, trade and service marks, trade secrets, misappropriation of ideas; and any actions taken in connection with the intellectual property of the Company, and its protection, including the registration or assertion of rights to intellectual property and the defense of claims related to intellectual property, including any assertion that the Company’s products infringe on the intellectual property rights or constitute a misappropriation of any third party’s trade secrets;

 

14. Actions taken pursuant to or in accordance with the policies and procedures of the Company (including tax policies and procedures), whether such policies and procedures are published or not;

 

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15. Approval of corporate actions, in good faith, including the approval of the acts of the Company’s management, their guidance and their supervision;

 

16. Claims of negligent failure to exercise business judgment and a reasonable level of proficiency, expertise and care in regard of the Company’s business;

 

17. Violations of laws requiring the Company to obtain regulatory and governmental licenses, permits and authorizations in any jurisdiction;

 

18. Claims in connection with publishing or providing any information, including any filings with governmental authorities (including, without limitation, the Israeli income tax authorities and the National Insurance Institute of Israel), on behalf of the Company, in the circumstances required under applicable laws;

 

19. Any claim or demand made under any securities laws or by reference thereto, or related to the failure to disclose any information in the manner or time such information is required to be disclosed pursuant to such laws, or related to inadequate or improper disclosure of information to shareholders, or prospective shareholders, or related to the purchase, holding or disposition of securities of the Company or any other investment activity involving or effected by such securities, including, for the removal of doubt, any offering of the Company’s securities to private investors or to the public, and listing of such securities, or the offer by the Company to purchase securities from the public or from private investors or other holders, and any undertakings, representations, warranties and other obligations related to any such offering, listing or offer or to the Company’s status as a public company or as an issuer of securities;

 

20. Occurrences resulting from the Company's becoming, or its status as, a public company, and/or from the fact that the Company's securities were offered to the public and/or traded on any stock exchange;

 

21. Any claim or demand made by any lenders or other creditors or for monies borrowed by, or other indebtedness of, the Company, including without limitation, claims in dissolution, winding-up, settlement with creditors and other similar proceedings;

 

22. Any claim or demand made directly or indirectly in connection with complete or partial failure, by the Company, or its Subsidiaries or Affiliates, or their respective directors, officers and employees, to pay, report, keep applicable records or otherwise, any state, municipal or foreign taxes or other mandatory payments of any nature whatsoever, including, without limitation, income, sales, use, transfer, excise, value added, registration, severance, stamp, occupation, customs, duties, real property, personal property, capital stock, social security, unemployment, disability, payroll or employee withholding or other withholding, including any interest, penalty or addition thereto, whether disputed or not;

 

23. Any claim or demand made by purchasers, holders, lessors or other users of products of the Company, or individuals treated with or exposed to such products, for damages or losses related to such use or treatment;

 

24. Actions taken in connection with the financial and tax reports of the Company;

 

25. Claims in connection with safety laws, tax laws, anti-trust laws, regulation of commercial wrongdoing, rules promulgated by any competent government agency, accounting rules, and such other similar rules of any applicable jurisdiction;

 

26. Claims in connection with laws and regulations regarding invasion of privacy and breach of other civil rights, including with respect to databases, and laws and regulations in regard of libel and slander, misleading or wrongful distribution of information;

 

27. Claims by any third party suffering any personal injury and/or bodily injury and/or property damage to business or personal property through any act or omission attributed to the Company, its Subsidiaries or Affiliates, or their respective employees, agents or other persons acting or allegedly acting on their behalf;

 

28. Claims based upon failure to maintain appropriate insurance, and claims based upon inadequate safety measures and/or malpractice of risk management;

 

29. Actions relating to the operations and management of the Company and/or its Subsidiaries and/or Affiliates;

 

30. Claims in connection with the preparation or providing of any annual or quarterly financial statements, profit and loss statements, balance sheets and similar financial information.

 

  9  

 

Exhibit 10.5

 

CONSULTANCY AGREEMENT

 

This Consultancy Agreement (“ Agreement ”), is made effective as of August 1, 2018 (“ Effective Date ”) by and between:

 

InMode Ltd., duly incorporated under the laws of the State of Israel, located at Tavor Building, Sha’ar Yokneam, P.O. Box 533, Yokneam 20692, Israel (the “ Company ”); and

 

M.N. Business Strategy Ltd. Israeli incorporation number 512297508, of 2 Yatziz St., Tel-Aviv, Israel, via its sole principal Mr. Moshe Mizrahy (respectively the " Consultant " and the " Principal ").

 

(Each a " Party " and together the " Parties ")

 

Whereas the Principal is the sole principal and shareholder of the Consultant;

 

Whereas the Parties are parties to that certain consultancy agreement dated July 1, 2017 (the " Previous Agreement "); and

 

Whereas The Parties agree to amend the terms of the Previous Agreement and replace it with this Agreement, effective as of the Effective Date, and to establish the terms and basis of continuous engagement of the Principal as the CEO of the Company and the Group (as defined below), and to provide his management services to the Company via the Consultant;

 

Now, therefore , the parties have agreed as follows:

 

1. Consultancy Agreement

 

1.1. The preamble hereto and the appendices attached hereto form integral and binding parts of this Agreement.

 

1.2. The term " Group " as used in this Agreement shall mean the Company and any of the Company's present or future subsidiaries in which the Company is a shareholder, directly or indirectly, as currently exist and as may exist in the future.

 

1.3. The Company wishes to retain the Consultant’s services described in the attached Appendix A (the “ Services ”) pursuant to the terms set out herein, and the Consultant agrees to provide these Services. The scope of the Services will be as set forth in Appendix A .

 

1.4. The Principal shall be entitled to enter into indemnification and exemption agreement with the Company and to be included in the Company's D&O Insurance, once consummated by the Company.

 

1.5. The Consultant will provide the Services solely via the Principal and neither the Consultant nor the Principal may employ/retain other persons for the performance of the Services, or assign or sub-contract the performance hereunder to any third party, without the prior written consent of the Company. The Consultant agrees to cause the Principal to dedicate his time (to the extent agreed upon), experience, talent, expertise and knowledge for the provision of the Services, and to perform the Services in a loyal and dedicated manner and in accordance with the Company’s policies and instructions.

 

 

 

 

1.6. The Consultant hereby declares that neither it nor the Principal are under any restrictions regarding the rendering of the Services to the Company and the execution of this Agreement.

 

1.7. The Consultant is an independent contractor. The Parties do not intend, and this Agreement and the performance hereunder shall not be construed to give effect to employment, partnership, joint venture or agency relations between the Parties and/or between the Company and the Principal. The Consultant and the Principal undertake not to present any claims against the Company in that regard.

 

1.8. Should the Consultant, the Principal or any other party on their behalf present any claim against the Company for compensation, based upon allegation of employee-employer relations or otherwise, the Consultant will indemnify and hold the Company harmless for and against such claims, and the Company may offset any sum it may owe the Consultant against the due indemnification sums. Furthermore, the Consultant agrees that if a claim is filed by the Principal or any other party on its behalf against the Company based on alleged employee-employer relations, and a competent court of law accept such claims, then: (i) the monthly gross salary due will be calculated as 60% of the Consulting Fee (as per Section 2.1 below), (ii) the Consultant shall refund to the Company all sums previously paid by the Company in excess of such gross salary, and (iii) the Company shall use the refund amounts towards satisfaction of employer's obligations arising from the aforesaid court-recognized employee-employer relations.

 

1.9. All reasonable procedures, policies and directives of the Company (present and future) applicable to subjects of work behavior, discipline etc., will have a binding effect on the Consultant and the Principal as if they were included in this Agreement, provided however, that such policies have been brought to the Consultant's or Principal’s attention in advance.

 

1.10. The Services performed hereunder are "work for hire", and the Consultant and the Principal shall have no rights or title in such Services, or any part thereof or any of its products or results, and the Company shall own all rights to such work in its name or otherwise, including copyrights, patents, trademarks and other rights.

 

1.11. The Consultant shall (and shall cause the Principal to) perform the Services according to all laws, rules and regulations applicable to it.

 

2. Remuneration & Scope

 

2.1. In consideration of the provision of the Services by the Consultant via the Principal, and all other obligations of the Consultant and Principal hereunder, the Company will pay to the Consultant a gross monthly consulting fee in the amount set out in the attached Appendix A (the " Consulting Fee ").

 

2.2. Expenses: in addition to the Consulting Fee, the Consultant shall be reimbursed for all Service-related out of pocket expenditures incurred by it in connection with the performance of the Services, including travel abroad and other business expenses, subject to prior written approval of the Company and in accordance with the Company’s reasonable expense return policy.

 

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2.3. At the end of each calendar month, the Consultant will submit an Invoice for the Consulting Fee due for the applicable month. If applicable, VAT will be added at the rate applicable at the time of each payment. The Company will pay the monthly Invoice within 10 business days after receipt thereof. Withholding taxes will be deducted according to applicable laws to the extent applicable.

 

2.4. The Consultant shall bear, be responsible for, and shall indemnify and hold the Company harmless from, all payments required to be made to the tax authorities, National Insurance Institute, health and life insurance and any other obligatory payments related to the provision of the Services hereunder or to the remuneration provided in connection therewith.

 

2.5. The Parties confirm that the remuneration detailed in this Section 2 above is the full and exclusive remuneration due to the Consultant for the Services hereunder, and constitute the total cost to the Company.

 

3. Secrecy, Non-Compete and other Intellectual Property Issues

 

3.1. The Consultant undertakes to (and shall cause the Principal to) execute, perform and abide by the Secrecy, Non-Compete and Intellectual Property Undertakings as attached hereto as Appendix B .

 

4. Period of the Agreement

 

4.1. This Agreement is made for an un-defined period, subject to the right of each party, at any time, to terminate it by giving prior notice: (i) 90 days prior notice if termination is provided by either party at will; or (ii) immediately - if termination is made for cause.

 

The term “ cause ” in this agreement shall be defined as any of the following events or acts of the Consultant and/or Principal: (a) self-dealing, embezzlement or misappropriation of the Company’s property or serious damage to the Company’s property which is intentionally caused, (b) gross negligence or gross misconduct which represents also a breach of duty of loyalty as defined in the Companies Law, (c) criminal behavior as determined by a court of law, except as for traffic violations.

 

4.2. The Company shall have the right to terminate the Agreement immediately without cause, provided however that it pays to the Consultant the Consulting Fee due for the entire notice period, on the termination date.

 

4.3. Except as provided by law, termination of this Agreement is without liability of the Company for any claims or payments beyond those earned or accrued in the course of the engagement hereunder; and the Consultant hereby waives any and all such claims towards the Company, its affiliates and any other third party.

 

4.4. The termination of this Agreement will not entitle either party to any compensation.

 

4.5. The provisions of Sections 1.7, 1.8, 1.10, 2.4, 4.3, 4.4 and 5.1 through 5.5 of this Agreement shall remain valid and binding regardless the termination of this Agreement, and will survive such termination.

 

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5. General Provisions

 

5.1. This Agreement forms the complete and exclusive agreement between the Parties as to its subject matter; and cancels any prior verbal or written agreement related thereto. Any change to this Agreement requires a duly signed document.

 

5.2. The failure or delay of either Party to require the performance of any term under this Agreement, or the waiver by either Party of any breach under this Agreement, shall not prevent subsequent enforcement of such terms, nor be deemed a waiver of any subsequent or prolonged breach.

 

5.3. Any notice sent by one Party to the other by registered mail will be deemed to have been received on the 7 th business day after the day of mailing. Fax and electronic messages will be deemed to have been received on the first business day following the day of transmission.

 

5.4. This Agreement may be executed in counterparts, each of which shall be deemed an original, and all of which taken together shall constitute one and the same instrument, with the same effect as if the signatures thereto were upon the same instrument. The exchange of signature pages (in counterparts or otherwise) by electronic transmission in electronic files or by facsimile copies shall have the same legal effect as the exchange of signed originals and shall be sufficient to bind the Parties to the terms and conditions of this Agreement.

 

5.5. The exclusive law of this Agreement is the law of Israel, as it applies to agreements made and to be performed in Israel, without regard to “choice of law” provisions. The courts of Israel (in the city of Haifa) will have exclusive jurisdiction over all claims arising out of or relating to this Agreement, and each Party hereby consents and submits to such exclusive jurisdiction. However, in matters involving a breach or infringement of intellectual property rights, the Company shall be entitled to bring action against the Consultant in any other competent court. Judgements, verdicts and decrees of any of the aforesaid courts shall be enforceable against either Party in any country.

 

In Witness Hereof, the parties execute this Agreement effective as of August 1, 2018

 

/s/ Rafael Lickerman          /s/ Nir Malkah   /s/ Mr. Moshe Mizrahy
InMode Ltd.
The Company 		  M.N. Business Strategy Ltd.
The Consultant
By: Rafael Lickerman and Nir Malkah   By: Mr. Moshe Mizrahy

 

Confirmation :

 

I, the undersigned, being the above referenced Principal pursuant to the above Agreement, hereby confirm and undertake towards the Company with respect to all of the undertakings and representations of the Consultant and the Principal as detailed above.

 

/s/ Mr. Moshe Mizrahy  
Mr. Moshe Mizrahy  
Date of signature as of the Effective Date  

 

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APPENDIX A

 

1. The Services

 

1.1. Pursuant to Section 1.3 to the Agreement, the Services provided by the Consultant via the Principal shall be the Chief Executive Officer of the Group (as defined in the Agreement) or another such executive position as may be determined by the Board of Directors of the Company.

 

1.2. The Principal shall report to the Board of Directors.

 

2. The Scope of the Services

 

2.1. The Parties confirm that the Consultant’s Services to the Company will be in a scope required for the performance of the Services which may be less than of a full time position, requiring work at long and irregular hours including extensive travel abroad.

 

3. Consulting Fee

 

3.1. As per Section 2.1 to the Agreement, the Consultant shall be entitled to a gross monthly Consulting Fee equal to US $18,000 plus VAT, if applicable.

 

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APPENDIX B

SECRECY; INTELLECTUAL PROPERTY AND NON-COMPETE UNDERTAKINGS

 

In consideration of the disclosure by the Company to the Consultant and Principal of information relating to the Services and the remuneration as set out in the Agreement, the Consultant and the Principal agree as follows:

 

1. In this Appendix B, the term “ Group ” shall mean the Company and any of the Company’s present or future subsidiaries in which the Company is a shareholder, directly or indirectly, and the Company’s affiliates, as currently exist and as may exist in the future.

 

2. The term “ Proprietary Information ” means any and all confidential and/or proprietary knowledge, data or information of the Group or of any third party which is disclosed to Consultant and/or Principal or which it/he otherwise obtains or generates as a result of the Services (including the implications, results and applications of the Services and any knowhow, intellectual property and other rights relating to the results of the Services), including without limitation technical, business, marketing, financial, administrative, management and commercial information related to the Group, its products, current or prospective, knowhow, technology, trade secrets, software, copyright, process, commercial relations, actual and potential clients and suppliers, business or other plans, and any other information of a proprietary or confidential nature. Without derogating from the generality of the above said, information which by nature is deemed to be proprietary and non-public information and any information discussed and presented at any meeting of the Group in which the Principal attended shall also be recognized as Proprietary Information.

 

3. The term “Proprietary Information” does not include information (i) which is, at the date of signature hereof or thereafter, enters the public domain, through no act or omission by the Consultant and/or Principal, (ii) information which was known to Consultant and/or Principal prior to its disclosure (in the case of information disclosed by Group) or prior to its generation (in the case of Proprietary Information generated by Consultant and/or Principal), as evidenced by its/his written records at the time of disclosure or generation (as applicable), (iii) which reflects information generally known in the industries or trades in which the Company operates, (iv) received by Consultant and/or Principal at any time from other sources that were legally entitled to receive and transfer such information without any obligation of confidentiality to the Group.

 

4. Proprietary Information and any part thereof are recognized by Consultant and Principal as being confidential and the exclusive and sole property of the Group.

 

5. The Consultant and the Principal undertake to maintain the confidentiality of the Proprietary Information, not to disclose or make available to any third party any of the Proprietary Information nor to make any use or enable others to make any use thereof other than for purposes of the Services, without the express prior written approval of the Company.

 

If required by law or pursuant to discovery requirements of a stock exchange or pursuant to securities laws and regulations, if applicable to the Company, Consultant and/or Principal may disclose Proprietary Information to a governmental authority and/or stock exchange or by order of a court of competent jurisdiction, provided that: (a) unless restricted by such authority, Consultant and/or Principal, as applicable, shall immediately notify Company and take reasonable steps to assist Company in contesting such request, requirement or order or otherwise protecting Company’s rights; and (b) Consultant and/or Principal, as applicable, shall limit the scope of such disclosure only to such portion of the Proprietary Information that it/he is legally required to disclose.

 

- 6 -  

 

 

The confidentiality and non-use obligations contained herein will remain valid and binding regardless of the termination of the Agreement and shall survive for a period of seven (7) years from the date of termination of this Agreement, and with respect to technological and technical information of the Group including trade secrets, the post termination period of compliance shall remain until said information comes into the public domain through no fault of the Consultant and/or Principal.

 

6. The term “ Proprietary Rights ” shall mean all inventions, discoveries, ideas, know-how, works of authorship and confidential information, including copyrights, patents and patent applications, trade secrets, trademarks, service marks, design marks, any registrations or applications relating to any of the foregoing, which are in the in the field of medical aesthetic products for the medical/professional markets and explicitly excluding any business Home Skinovations Ltd. does, directly or indirectly with respect to medical/aesthetic products for home-use and the non-professional markets (the foregoing shall be referred to as the " Field ").

 

Inventions, if any, patented or unpatented, made by Consultant and/or Principal prior to his first date of engagement with the Company are excluded from the scope of this Agreement.

 

Consultant and Principal hereby assign and agree to assign in the future (when any such inventions in the Field or Proprietary Rights are first reduced to practice or first fixed in a tangible medium, as applicable) to the Group all their right, title and interest in and to any and all Proprietary Rights whether or not patentable or registrable under copyright or similar statutes, made or conceived or reduced to practice or generated by Consultant and/or Principal, either alone or jointly with others, in the performance of the Services for the Company during the period of the Agreement. Inventions in the Field assigned to the Company, or to a third party as directed by the Company pursuant to this Section 6, are hereinafter referred to as “ Company Inventions .”

 

Consultant and Principal hereby irrevocably waive any right to any additional compensation to which it/he may be entitled with respect to any such assigned Company Inventions pursuant to any applicable law, in any jurisdiction, including (but not limited to) pursuant to the Israeli Patents Law-1967, or any provision that may supersede it.

 

The Consultant and the Principal acknowledge that all original works of authorship which are made by Consultant and/or Principal (solely or jointly with others) in the performance of the Services for the Company and which are protectable by copyright are “works made for hire” and are the property of the Company pursuant to applicable copyright law. Any assignment of copyright hereunder (and any ownership of a copyright as a work made for hire) includes all rights of paternity, integrity, disclosure and withdrawal and any other rights that may be known as or referred to as “moral rights” (collectively “ Moral Rights ”). To the extent such Moral Rights cannot be assigned under applicable law and to the extent the following is allowed by the laws in the various countries where Moral Rights exist, the Consultant and the Principal hereby waive such Moral Rights and consent to any action of the Group that would violate such Moral Rights in the absence of such consent including the right to prevent changes in such works and/or to be named in its/his name.

 

- 7 -  

 

 

Consultant and Principal will assist the Group in every proper way to obtain, and from time to time enforce, any patent rights relating to Company Inventions in any and all countries, at Company’s expense. To that end Consultant and Principal will execute, verify and deliver such documents and perform such other acts (including appearances as a witness) as the Company may reasonably request for use in applying for, obtaining, perfecting, evidencing, sustaining and enforcing such patent rights and the assignment thereof. In addition, Consultant and Principal will execute, verify and deliver such assignments of such patent rights to the Company or its designee as the Company may reasonably request. The Company shall compensate Consultant and/or Principal, as applicable, at a reasonable rate for the time actually spent by Consultant and/or Principal at the Company’s request on such assistance. Consultant's and Principal's obligation to assist the Group with respect to patent rights relating to such Company Inventions in any and all countries shall continue beyond the termination of this Agreement.

 

The Consultant and the Principal hereby agree that it/he shall not be entitled to any additional compensation for the assignments described in this Section 6 above and beyond the consideration set forth in the Agreement. The Consultant and the Principal acknowledge and agree that it/he will not be entitled to additional royalties, consideration or other payments with regard to any of the Proprietary Rights assigned to Company as set forth above, and do hereby explicitly, irrevocably and unconditionally waive the right to receive any such additional royalties, consideration or other payments.

 

7. Neither the Consultant nor the Principal shall use any third party's intellectual property, materials, documents, other resources or confidential information in the performance of the Services.

 

8. The Company hereby irrevocably waives any claim against the Consultant and/or Principal concerning conflict of interests between Consultant's and/or Principal's other business interests and activities and their position as consultant to the Company. Nevertheless, the Parties confirm that Consultant and Principal are active in various other entities in the cosmetic, dermatologic and medical fields and they may continue to be involved therewith, provided that, during the period of this Agreement, they do not hold an executive position in an entity directly competing with the Group's business in the professional medical aesthetic market, without receiving the prior written consent of the Company's Board of Directors

 

The Consultant and/or the Principal, as applicable, shall report to the Company’s Chairman of the Board during the period of the Agreement of their intention to provide services which creates conflict of interest between Consultant's and/or Principal's other business interests and their position as a consultant to the Company. Within ten (10) business days from such notification, the Company shall inform the Consultant and/or Principal, as applicable, whether it agrees or objects to such new engagement by Consultant and/or Principal. In the event that the Company notifies the Consultant and/or Principal that it objects such new engagement, either Party may terminate the Agreement for convenience by giving the other Party a 90 days prior written notice.

 

- 8 -  

 

 

9. Without prejudice to the generality of the foregoing, each of the Consultant and the Principal agrees that during the period of this Agreement and for an additional period of 6 months following termination, the Consultant and the Principal will not, directly or indirectly, for their own account or for the account of others, including without limitation as a stockholder (other than as the holder of not more than 5% of the total outstanding stock of a publicly held company), director, officer, employee/employer, investor, partner, consultant, sole proprietor or independent contractor, do or participate or assist or allow to do any of the following:

 

(a) Directly compete or assist others to compete with the business of the Company in the Field;

 

(b) Request or advise any past, present or future business associate of the Company to decrease or cancel their business with the Company;

 

(c) Cause any employee or consultant of the Company to terminate his relations with the Company or to work for the Consultant and/or Principal or for any party associated with them.

 

The term “business of the Company in the Field” in this Section 9 shall mean developing, producing, marketing or selling products or services of the kind or type developed or currently contemplated to be developed, produced, marketed or sold or contemplated to be developed, produced, marketed or sold, by the Group in the Field.

 

The Parties confirm that during the provision of the Services hereunder, the Consultant and the Principal will be exposed to confidential Proprietary Information of the Company; and that any activity as forbidden under subsections (a), (b) and (c) above is bound to breach the right of the Company to the exclusive use of such Proprietary Information; and therefore the Parties agree that the above post-termination period is intended to ensure such rights of the Company.

 

10. Upon termination of the Agreement, the Consultant and the Principal shall immediately return to the Company or delete from their network all materials of any kind (whether in written or electronic form, computer files or otherwise) concerning the Proprietary Information, including all copies thereof, and they shall not retain any copies of such materials and shall erase such from all of their files and records in any format.

 

11. The provisions of this Appendix B shall apply to the Parties, effective as of their first date of engagement on January 9, 2008.

 

And in Witness hereof the Parties sign this Appendix B effective as of August 1, 2018

 

/s/ Rafael Lickerman          /s/ Nir Malkah   /s/ Mr. Moshe Mizrahy
InMode Ltd.   M.N. Business Strategy Ltd.
By: Rafael Lickerman and Nir Malkah   By: Mr. Moshe Mizrahy
       
/s/ Mr. Moshe Mizrahy    
Mr. Moshe Mizrahy    
     

 

 

- 9 -  

 

Exhibit 10.6

 

Employment Agreement

 

This Employment Agreement (the “ Agreement ”) is entered into by and between:

 

Invasix Corp., a company incorporated under the laws of Canada, whose head office address is: 30 East Beaver Creek Road, Unit 115, Richmond Hill Ontario, Toronto Canada (the “ Company ”);

 

And

 

Dr. Michael Kreindel, Canadian Passport Number 918328121, of 20 Sorrento Dr., Richmond Hill, Canada L4C 0J8 (the “ Employee ”).

 

(Each a " Party " and together the " Parties ")

 

Whereas the Employee is an investor and shareholder of the Company's parent company Invasix Ltd. (the “ Parent ”) and has been providing the Group (as defined below) with various management services and acting as the CTO of the Group since the incorporation of the Parent in January 2008 and up until the Effective Date (as defined below) for no consideration received; and

 

Whereas as of the Effective Date the Parties wish to establish the terms and basis of continuous engagement of the Employee as the CTO of the Company and the Group, and to retain the Employee as an employee of the Company.

 

Now, therefore , in consideration of the employment of the Employee by the Company and the mutual covenants and promises contained in this Employment Agreement (the “ Agreement ”), the Company and the Employee agree as follows:

 

1. Employment. Effective as of July 1, 2017 (the “ Effective Date ”), the Company employs the Employee in the capacity of the Chief Technology Officer of the Group, and the Employee accepts such employment under and subject to the terms and conditions of this Agreement. In this Agreement, the term " Group " shall include the Company, its Parent and any of its present or future subsidiaries and affiliated entities in which the Parent is a shareholder, directly or indirectly, as currently exist and as may exist in the future. Certain provisions of this Agreement will apply to the relations between the Employee and the Group. Nothing in this Agreement will create the relationship of employer and employee between the Employee and any member of the Group except the Company.

 

Scope of employment: Full time position.

 

2. Duties. The place of work of the Employee shall be Toronto, Canada. The Employee shall perform his duties as the CTO of the Group and such additional duties consistent with his position as may from time to time be assigned by the Group. The Employee shall report to Mr. Moshe Mizrahy, CEO of the Group and the Parent's Board of Directors.

 

During the Employee's employment with the Company, except for illness, permitted vacation periods and permitted leaves of absence, the Employee will devote his full business time and best efforts to the faithful performance of such duties and to the promotion and advancement of the business and affairs of the Group.

 

The Employee is not authorized to obligate and/or bind the Company and/or any entity of the Group except in the ordinary course of business to the extent customary for an employee in his position and subject to the policies and directives of the Company and the Group.

 

     

 

 

All reasonable policies, procedures and directives of the Company and/or the Group (present and future) applicable to subjects of work behavior, discipline, privacy, confidentiality, will be considered integral parts of this Agreement. The Employee will on request from time to time sign acknowledgments and agreements to be bound by certain policies applicable to the Group, including without limitation insider trading and reporting requirements, questionable practices, intellectual property and information technology requirements.

 

3. Indemnification, Exemption and D&O Insurance. The Employee shall be entitled to enter into indemnification and exemption agreement with the Group and to be included in the Group's D&O Insurance, once approved and consummated by the Group.

 

4. COMPENSATION

 

(a) Base Salary. In consideration of the services to be rendered by the Employee under this Agreement, the Company will pay the Employee a gross annual salary in the amount of US $120,000 per annum, to be paid by the Company in Canadian Dollars in equal monthly installments in arrears based on the CAD/USD representatives exchange rate applicable on the Effective Date (the “ Base Salary ”). The Employee acknowledges that his position may require extensive travel, overtime work and work at irregular places and hours, and agrees that the Base Salary includes the proper and agreed compensation for all these factors.

 

(b) Payments. The Base Salary shall be paid monthly in arrears or at such other frequency as the Company may establish as its normal payroll practice. All benefits due to the Employee as set forth in this Agreement or by law shall be provided on the Base Salary. Taxes, social security payments, social benefits and other obligatory payments which are to be borne by the Employee according to applicable laws and regulations - will be deducted from the Base Salary.

 

(c) Benefits. In addition to the Base Salary, the Employee shall, during the Term, be entitled to participate in the Company's Medical, Dental, life and disability insurance plans, as customary in the Company for employees at the same rank as the Employee and subject to the terms and conditions of such plans.

 

(d) Vacation. The Employee shall be entitled to 15 annual paid vacation days. vacation entitlement shall be calculated and vacations shall be taken in accordance with the Company's vacation policy as in effect from time to time.

 

(e) Expenses. The Company shall reimburse the Employee for all reasonable expenses actually incurred by the Employee in connection with the business affairs of the Company and the Group and the performance of his duties. The Employee shall comply with such reasonable policies, limitations and reporting requirements with respect to such expenses as the Company may establish from time to time.

 

5. Secrecy, Non-Compete and Other Intellectual Property Issues

 

The Employee undertakes to execute, perform and abide by the Secrecy, Non-Compete and Intellectual Property Undertakings as attached hereto as Exhibit A.

 

6. PERIOD OF EMPLOYMENT

 

(a) Term. Subject to termination provisions set out in this Section 4, the Employee will be employed for a term commencing on the Effective Date and continuing until is terminated by either Party (the “ Term ”).

 

     

 

 

(b) At Will Employment. Employee further understands that this Agreement is not for a set term and that no particular length of employment has been expressed or implied, and that no circumstances arising out of Employee's employment will alter his "at will" employment relationship unless expressed in writing signed by the Employee and the Company. Employee's employment with the Company is "at will" and can be terminated at any time, at the option of either the Company or the Employee, by providing a 90 days prior notice if termination is provided by either Party at will, or immediately – if termination is made for cause.

 

The term “ cause ” in this Agreement shall be defined as any of the following events or acts of the Employee: (a) self-dealing, embezzlement or misappropriation of the Company’s and or the Group's property or serious damage to the Company’s and/or the Group's property which is intentionally caused, (b) gross negligence or gross misconduct which represents also a breach of duty of loyalty as defined in the Israeli Companies Law, (c) criminal behavior as determined by a court of law, except as for traffic violations.

 

The Company shall have the right to terminate this Agreement immediately without cause, provided however that it pays to the Employee the entire amount due to the Employee for the entire notice period due on the termination date.

 

(c) Termination Payments and Benefits. Upon termination of this Agreement all payments, salary and other banafits hereunder shall cease at the effective date of termination. The Employee shall be entitled to receive all payments and benefits accrued hereunder, and reimbursement of all expenses incureed, through the effective date of termination. Except as provided by law, termination of this Agreement is without liability of the Company for any claims or payments beyond those earned or accrued in the course of the employment hereunder; and the Employee hereby waives any and all such claims towards the Company and any other entity in the Group.

 

7. No Conflicting Obligations. The Employee represents and warrants to the Company that the execution and delivery of this Agreement and the fulfillment of its terms (a) will not constitute a default under or breach of any agreement or other instrument to which he is a party or by which he is bound, including, without limitation, any confidentiality or non-competition agreement, (b) do not require the consent of any person or entity, and (c) the Employee shall not utilize, during the Term of his employment, any proprietary information of any third party, including, without limitation, former employers of the Employee.

 

8. Severable Provisions. The provisions of this Agreement are severable and the invalidity of any one or more provisions shall not affect the validity of any other provision.

 

9. No Waiver or Default. No failure by any of the Parties to insist on strict performance of any covenant, agreement, term or condition (the " Provision ") of this Agreement, or to exercise any right or remedy consequent on the breach of any Provision, and no acceptance of partial payment during the continuance of any such breach, shall constitute a waiver of any such breach or of such Provision. No waiver of any breach shall affect or alter this Agreement, but each and every provision of this Agreement shall continue in full force and effect with respect to any other existing or subsequent breach of such provision.

 

10. Notices. All notices under this Agreement, to be effective, shall be in writing and shall be delivered by hand, by mail, by certified mail, postage and fees prepaid, or by facsimile or e-mail to the Company and to the Employee at the addresses set out above in this Agreement, or to such other address as a Party may notify the other party from time to time.

 

11. MISCELLANEOUS

 

(a) Modifications. This Agreement, including the attached Exhibits, constitute the entire agreement between the Parties with regard to the subject matter hereof, superseding any and all prior understandings and agreements, whether written or oral. This Agreement may not be amended or revised except by a written document signed by the Parties.

 

     

 

 

(b) Captions. Captions herein have been inserted solely for convenience of reference and in no way define, limit or describe the scope or substance of any provision of this Agreement.

 

(c) Independent Advice. The Employee acknowledges and agrees that: (i) the Employee has not relied upon the advice of the Company or any of its officers, directors, employees or agents, nor has he relied on te advice of the Company's solicitors or agents in connection with this Agreement, and (ii) the Employee has been advised and has had the opportunity to seek independent legal, tax, and financial advice in connection with this Agreement.

 

(d) Governing Law. This Agreement is deemed to be made in the Province of Ontario and for purposes of all legal proceedings shall be deemed to have been performed in the Province of Ontario. This Agreement, and the rights and remedies provided hereunder, and all claims, disputes and controversies arising hereunder or related thereto, shall be governed by and construed under and enforced in accordance with the laws of the Province of Ontario, without reference to choice of law or conflicts of law principles. The Employee consents to the jurisdiction of any court located within the Province of Ontario, and further waives any objection to jurisdiction and venue of any action instituted hereunder, and further agrees not to assert any defense based on lack of jurisdiction or venue, including forum non convenience. Personal service of any summons, complaint or other process may be made by any means permitted by law. Any action brought to enforce or relating to this Agreement shall, subject to the next sentence, be brought exclusively in the courts in the Province of Ontario. Nothing in this Section will prevent the Company from suing the Employee in any other jurisdiction in which the Employee may reside or be physically present at the time of commencement of such litigation.

 

(e) Counterparts. This Agreement may be executed by the Parties in separate counterparts, each of which shall be deemed an original, but all of which together shall constitute one and the same instrument.

 

And in Witness, the Parties sign and execute this Agreement, on this    1     day of      7       2017 effective as of the Effective Date

 

/s/ Moshe Mizrahy   /s/ Michael Kreindel
Invasix Corp.   Dr. Michael Kreindel
       
By: Moshe Mizrahy    

 

     

 

 

APPENDIX A

SECRECY; INTELLECTUAL PROPERTY AND NON-COMPETE UNDERTAKINGS

 

In consideration of the disclosure by the Company to the Employee of information relating to his services to the Group and the compensation as set out in the Agreement, the Employee agrees as follows:

 

1. In this Appendix A, the term “ Group ” shall include the Company, its Parent and any of its present or future subsidiaries and affiliated entities in which the Parent is a shareholder, directly or indirectly, as currently exist and as may exist in the future.

 

2. The term “ Proprietary Information ” means any and all confidential and/or proprietary knowledge, data or information of the Group or of any third party which is disclosed to Employee or which he otherwise obtains or generates as a result of his engagement (including the implications, results and applications of his services and any knowhow, intellectual property and other rights relating to the results of the services), including without limitation technical, business, marketing, financial, administrative, management and commercial information related to the Group, its products, current or prospective, knowhow, technology, trade secrets, software, copyright, process, commercial relations, actual and potential clients and suppliers, business or other plans, and any other information of a proprietary or confidential nature. Without derogating from the generality of the above said, information which by nature is deemed to be proprietary and non-public information and any information discussed and presented at any meeting of the Group in which the Employee attended shall also be recognized as Proprietary Information.

 

3. The term “Proprietary Information” does not include information (i) which is, at the date of signature hereof or thereafter, enters the public domain, through no act or omission by the Employee, (ii) information which was known to Employee prior to its disclosure (in the case of information disclosed by Group) or prior to its generation (in the case of Proprietary Information generated by Employee), as evidenced by his written records at the time of disclosure or generation (as applicable), (iii) which reflects information generally known in the industries or trades in which the Company operates, (iv) received by the Employee at any time from other sources that were legally entitled to receive and transfer such information without any obligation of confidentiality to the Group.

 

4. Proprietary Information and any part thereof are recognized by the Employee as being confidential and the exclusive and sole property of the Group.

 

5. The Employee undertakes to maintain the confidentiality of the Proprietary Information, not to disclose or make available to any third party any of the Proprietary Information nor to make any use or enable others to make any use thereof other than for purposes of performing his duties as required for his position in the Company, without the express prior written approval of the Company.

 

If required by law or pursuant to discovery requirements of a stock exchange or pursuant to securities laws and regulations, if applicable to the Company, the Employee may disclose Proprietary Information to a governmental authority and/or stock exchange or by order of a court of competent jurisdiction, provided that: (a) unless restricted by such authority, the Employee shall immediately notify Company and take reasonable steps to assist Company in contesting such request, requirement or order or otherwise protecting Company’s rights; and (b) the Employee shall limit the scope of such disclosure only to such portion of the Proprietary Information that he is legally required to disclose.

 

The confidentiality and non-use obligations contained herein will remain valid and binding regardless of the termination of the Agreement and shall survive for a period of seven (7) years from the date of termination of this Agreement, and with respect to technological and technical information of the Group including trade secrets, the post termination period of compliance shall remain until said information comes into the public domain through no fault of the Employee.

 

     

 

 

6. The term “ Proprietary Rights ” shall mean all inventions, discoveries, ideas, know-how, works of authorship and confidential information, including copyrights, patents and patent applications, trade secrets, trademarks, service marks, design marks, any registrations or applications relating to any of the foregoing, which are in the field of medical aesthetic products for the medical/professional markets (the foregoing shall be referred to as the " Field ").

 

Inventions, if any, patented or unpatented, made by the Employee prior to his first date of engagement with the Company are excluded from the scope of this Agreement.

 

The Employee hereby assigns and agrees to assign in the future (when any such inventions in the Field or Proprietary Rights are first reduced to practice or first fixed in a tangible medium, as applicable) to the Group all his right, title and interest in and to any and all Proprietary Rights whether or not patentable or registrable under copyright or similar statutes, made or conceived or reduced to practice or generated by the Employee, either alone or jointly with others, in the performance of his services for the Company during the period of the Agreement. Inventions in the Field assigned to the Company, or to a third party as directed by the Company pursuant to this Section 6, are hereinafter referred to as “ Company Inventions .”

 

The Employee hereby irrevocably waives any right to any additional compensation to which he may be entitled with respect to any such assigned Company Inventions pursuant to any applicable law, in any jurisdiction, including (but not limited to) pursuant to the Israeli Patents Law-1967, or any provision that may supersede it.

 

The Employee acknowledges that all original works of authorship which are made by Employee (solely or jointly with others) in the performance of his services for the Company and which are protectable by copyright are “works made for hire” and are the property of the Company pursuant to applicable copyright law. Any assignment of copyright hereunder (and any ownership of a copyright as a work made for hire) includes all rights of paternity, integrity, disclosure and withdrawal and any other rights that may be known as or referred to as “moral rights” (collectively “ Moral Rights ”). To the extent such Moral Rights cannot be assigned under applicable law and to the extent the following is allowed by the laws in the various countries where Moral Rights exist, the Employee hereby waives such Moral Rights and consent to any action of the Group that would violate such Moral Rights in the absence of such consent including the right to prevent changes in such works and/or to be named in his name.

 

The Employee will assist the Group in every proper way to obtain, and from time to time enforce, any patent rights relating to Company Inventions in any and all countries, at Company’s expense. To that end the Employee will execute, verify and deliver such documents and perform such other acts (including appearances as a witness) as the Company may reasonably request for use in applying for, obtaining, perfecting, evidencing, sustaining and enforcing such patent rights and the assignment thereof. In addition, the Employee will execute, verify and deliver such assignments of such patent rights to the Company or its designee as the Company may reasonably request. The Company shall compensate the Employee at a reasonable rate for the time actually spent by Employee at the Company’s request on such assistance. The Employees' obligation to assist the Group with respect to patent rights relating to such Company Inventions in any and all countries shall continue beyond the termination of this Agreement.

 

The Employee hereby agrees that he shall not be entitled to any additional compensation for the assignments described in this Section 6 above and beyond the compensation set forth in the Agreement. The Employee acknowledges and agrees that he will not be entitled to additional royalties, consideration or other payments with regard to any of the Proprietary Rights assigned to Company as set forth above, and do hereby explicitly, irrevocably and unconditionally waives the right to receive any such additional royalties, consideration or other payments.

 

7. The Employee shall not use any third party's intellectual property, materials, documents, other resources or confidential information in the performance of his services.

 

     

 

 

8. The Company hereby irrevocably waives any claim against the Employee concerning conflict of interests between Employee's other business interests and activities and his position as an employee of the Company. Nevertheless, the Parties confirm that the Employee is active in various other entities in the cosmetic, dermatologic and medical fields and he may continue to be involved therewith, provided that, during the period of this Agreement, he does not hold an executive position in an entity directly competing with the Group's business in the professional medical aesthetic market, without receiving the prior written consent of the Company's Board of Directors.

 

The Employee shall report to the Company’s Chairman of the Board during the period of the Agreement of his intention to provide services which creates conflict of interest between Employee's other business interests and his position as an employee of the Company. Within ten (10) business days from such notification, the Company shall inform the Employee whether it agrees or objects to such new engagement by the Employee. In the event that the Company notifies the Employee that it objects such new engagement, either Party may terminate the Agreement for convenience by providing the other Party with a 90 days prior written notice.

 

9. Without prejudice to the generality of the foregoing, the Employee agrees that during the period of this Agreement and for an additional period of 6 months following termination, the Employee will not, directly or indirectly, for his own account or for the account of others, including without limitation as a stockholder (other than as the holder of not more than 5% of the total outstanding stock of a publicly held company), director, officer, employee/employer, investor, partner, consultant, sole proprietor or independent contractor, do or participate or assist or allow to do any of the following:

 

(a) Directly compete or assist others to compete with the business of the Company in the Field;

 

(b) Request or advise any past, present or future business associate of the Company to decrease or cancel their business with the Company;
(c) Cause any employee or consultant of the Company to terminate his relations with the Company or to work for the Employee or for any party associated with him.

 

The term “business of the Company in the Field” in this Section 9 shall mean developing, producing, marketing or selling products or services of the kind or type developed or currently contemplated to be developed, produced, marketed or sold or contemplated to be developed, produced, marketed or sold, by the Group in the Field.

 

The Parties confirm that during the Employee's employment hereunder, the Employee will be exposed to confidential Proprietary Information of the Company; and that any activity as forbidden under subsections (a), (b) and (c) above is bound to breach the right of the Company to the exclusive use of such Proprietary Information; and therefore the Parties agree that the above post-termination period is intended to ensure such rights of the Company.

 

10. Upon termination of the Agreement, the Employee shall immediately return to the Company or delete from his network all materials of any kind (whether in written or electronic form, computer files or otherwise) concerning the Proprietary Information, including all copies thereof, and they shall not retain any copies of such materials and shall erase such from all of his files and records in any format.

 

11. The provisions of this Appendix A shall apply to the Parties, effective as of their first date of engagement on January 9, 2008.

 

And in Witness hereof the Parties sign this Appendix A on         1/7      , 2017

 

/s/ Moshe Mizrahy   /s/ Michael Kreindel
Invasix Corp.   Mr. Michael Kreindel
       
By: Moshe Mizrahy    

   

     

 

Exhibit 10.7

 

AWARD AGREEMENT

 

This Award Agreement (this “ Award Agreement ”) is entered into as of the date hereof, by between InMode Ltd., a private company No. 514073618 of Tavor Building, Sha’ar Yokneam, P.O. Box 533, Yokneam 20692, Israel (the “ Company ”) and [____________________], [______] Passport / Israeli ID Number [___________], of [_________________________________________________] (the “ Participant ”) (the Company and the Participant, shall be referred collectively, as “ Parties ”, or individually, a “ Party ”).

 

Whereas , On June 17, 2018, the Company adopted the InMode Ltd. 2018 Incentive Plan, a copy of which is attached as Exhibit A hereto, forming an integral part hereof (the “ Plan ”); and

 

Whereas , Pursuant to the Plan, the Board of Directors of the Company has decided to grant the Participant, options (the “ Options ”) to purchase the number of shares of the Company’s ordinary shares, par value NIS 0.01 each (the “ Shares ”) as specified in Exhibit B hereto, subject to all terms and conditions set forth in the Plan, in the Company's Articles of Association (the “ AoA ”) and as provided herein;

 

NOW, THEREFORE, the Parties to this Agreement hereby agree as follows:

 

1. Preamble and Definitions

 

1.1. The preamble to this agreement constitutes an integral part hereof.

 

1.2. Unless otherwise stated, all capitalized terms in this Award Agreement shall be interpreted as defined in the Plan.

 

2. Grant of Options

 

2.1. The Company hereby grants to the Participant the number of Options as set forth in Exhibit B hereto, each Option shall be exercisable for one Share, upon payment of the Exercise Price as set forth in Exhibit B, subject to the terms and the conditions as set forth in the Plan, and as provided herein.

 

2.2. The Participant is aware that the Company intends in the future to issue additional shares and to grant additional options to various entities and individuals, as the Company in its sole discretion shall determine.

 

3. Period of Option and Conditions of Exercise

 

3.1. The terms of the Award shall commence on the Date of Grant and terminate at the Expiration Date, or at the time at which the Option expires pursuant to the terms of the Plan or pursuant to this Award Agreement unless determined otherwise in this Award Agreement.

 

3.2. Options may be exercised only to purchase whole Shares, and in no case may a fraction of a Share be purchased.

 

 

 

 

4. Vesting; Period of Exercise

 

4.1. Subject to the provisions of the Plan, Options shall vest and become exercisable according to the Vesting Period set forth in Exhibit B hereto. any period in which the Participant shall not be employed by the Group, or in which the Participant shall have taken an unpaid leave of absence (excluding a maternity leave determined by law), or in which the Participant shall cease to serve as Employee, Director or Consultant of the Group, shall not be included in the Vesting Period.

 

4.2. All unexercised Options granted to the Participant shall terminate and shall no longer be exercisable on the Expiration Date, as described in Section 8.4 of the Plan.

 

5. Exercise of Options

 

5.1. Once the Options may be exercised (subject to the provisions hereto) and all other conditions for exercising the Options are fulfilled, the Participant is entitled to notify the Company and/or to any third party designated by the Company, by delivering a “Notice of Exercise” (in the form attached hereto as Exhibit C ), that he or she wishes to exercise a certain number of Options (but not more than the number of Options that have become exercisable until such date). The Notice of Exercise shall be accompanied by payment for the Shares, equal to the product of (x) the number of Options the Participant wishes to exercise, and (y) the Exercise Price.

 

5.2. In order for the Company to issue Shares upon the exercise of any of the Options, the Participant hereby agrees to sign any and all documents required by any applicable law and/or by the Board and/or by the Committee and/or according to the AoA and the Plan.

 

5.3. Pursuant to Section 6.2 of the Plan and as a condition precedent to the Company’s issuance of Options and Exercised Shares under the Plan, the Participant is required to execute and deliver to the Company an irrevocable proxy and power of attorney in the form attached hereto as Exhibit D , appointing as his/her proxy, attorney and agent the Chairman of the Board or any other person designated by the Committee formed by the Board for such purpose. The Exercised Shares will be voted in the same proportion as the result of the shareholders vote, in respect of which such Exercised Shares are being cast. Such proxy shall terminate and be of no further force and effect upon the consummation of an IPO.

 

5.4. The Company shall not be obligated to issue any Shares upon the exercise of an Option if such issuance, in the opinion of the Company, might constitute a violation by the Company of any provision of law.

 

5.5. Pursuant to Section 9 of the Plan, Options may be exercised after the date of Termination of Service during an additional period of time following the date of such termination. In such event Participant shall be allowed to exercise only the amount of Options that are vested as such amount may be at the time of such termination according to the Vesting Period, specified in Exhibit B. However, if the Termination of Service is for Cause (as defined in the Plan), any and all Options granted to such Participant shall immediately expire upon written notice by the Company to the Participant.

 

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6. Limitations of Transfer

 

6.1. The Options are not transferable, except for transfer by will or by laws of descent or distribution. In addition, the rights to sell Exercised Shares are subject to limitations as provided by Section 11 of the Plan, and as imposed by applicable law (including the AoA), and to any request made by the Company or its underwriters, if applicable (including a lock-up period), from time to time, or upon a specific occurrence, and the Participant hereby unconditionally agrees and accepts any such limitations. For the avoidance of doubt the Participant may not sell, assign, convey, transfer by gift, encumber, pledge, hypothecate or otherwise transfer or dispose any of the Options, except as specifically allowed under the Plan.

 

6.2. The Participant acknowledges that in the event Company's shares shall be registered for trading in any public market, the Participant’s right to sell Shares may be subject to limitations (including a lock-up period), as will be requested by the Company or its underwriters, and the Participant unconditionally agrees and accepts any such limitations.

 

6.3. The Participant acknowledges that in order to enforce the above restriction, the Company may impose stop-transfer instructions with respect to securities the exercised Shares.

 

6.4. The Participant agrees that the Company shall have the authority to endorse upon the certificate or certificates representing the Participant's Shares such legends referring to the foregoing restrictions, and any other applicable restrictions as it may deem appropriate (which do not violate the Participant's rights according to this Award Agreement).

 

7. Taxes; Indemnification

 

7.1 All Tax consequences and obligations arising from the grant, vesting, or exercise of any Award (as applicable), or the subsequent disposition of, Shares subject thereto or from any other event or act (of the Group or of the Participant) hereunder, shall be borne solely by the Participant, and the Participant shall indemnify the Group and hold it harmless against and from any and all liability for any such Tax, including without limitation, monetary liabilities relating to the necessity to withhold, or to have withheld, any such Tax payment from any payment made to the Participant. Notwithstanding the above, the Company's obligation to deliver Shares upon the exercise or vesting of any Awards granted under the Plan shall be subject to the satisfaction of all applicable Tax withholding requirements as governed by Applicable Laws or practice. No Shares will be delivered to the Participant or other person pursuant to the exercise of the Award until the Participant or other person has made arrangements acceptable to the Company for the satisfaction of applicable income tax and employment tax withholding obligations, including, without limitation, such other tax or benefit obligations incident to the receipt of Shares (whether such tax or benefit is the obligation of the Participant or the employer or the Company). Upon exercise of the Award, the Company or the Participant’s employer may offset or withhold (from any amount owed by the Company or the Participant’s employer to the Participant) or collect from the Participant or other person an amount sufficient to satisfy such tax obligations.

 

7.2. The Participant will not be entitled to receive from the Company any Shares allocated or issued upon the exercise of Options prior to the full payments of the Participant’s tax liabilities arising from Options which were granted to him and/or Shares issued upon the exercise of Options. For the avoidance of doubt, the Group shall not be required to deliver any Shares (or Share certificate) to a Participant until all required payments have been fully made or secured.

 

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7.3. The receipt of the Options and the acquisition of the Participant's Shares to be issued upon the exercise of the Options may result in tax consequences. THE PARTICIPANT IS ADVISED TO CONSULT A TAX ADVISER WITH RESPECT TO THE TAX CONSEQUENCES OF RECEIVING OR EXERCISING THIS OPTION OR DISPOSING OF THE SHARES.

 

8. Miscellaneous

 

8.1. No Obligation to Exercise Options . The grant and acceptance of these Options imposes no obligation on the Participant to exercise it.

 

8.2. Confidentiality . The Participant shall regard the information in this Award Agreement and its exhibits attached hereto as confidential information and the Participant shall not reveal its contents to anyone except when required by law or for the purpose of gaining legal or tax advice.

 

8.3. The Participant acknowledges that: (i) in granting the Participant the Option under this Award Agreement the Company has taken into account Participant's non-competition and confidentiality obligations (including without limitation such obligations specified under the employment or service agreement with the Company); (ii) that the Options issued hereby shall be deemed to include, inter alia, proper compensation for the prospect of the Participant's compliance with such non-competition and confidentiality obligations; and (iii) the aforementioned non-competition and confidentiality obligations are fundamental elements of the bargain between the parties.

 

8.4. Continuation of Employment or Service . Neither the Plan nor the Award Agreement with the Participant shall impose any obligation on the Company or an affiliate thereof, to continue any Participant in its employ or service, and nothing in the Plan or in any Award granted pursuant thereto shall confer upon any Participant any right to continue in the employ or service of the Company or an affiliate thereof or restrict the right of the Company or an affiliate thereof to terminate such employment or service at any time.

 

8.5. Entire Agreement . Subject to the provisions of the Plan, this Award Agreement, together with the exhibits hereto, constitute the entire agreement between the Participant and the Company with respect to Options granted hereunder, and supersedes all prior agreements, understandings and arrangements, oral or written, between the Participant and the Company with respect to the subject matter hereof.

 

8.6. Failure to Enforce - Not a Waiver . The failure of any party to enforce at any time any provisions of this Award Agreement or the Plan shall in no way be construed to be a waiver of such provision or of any other provision hereof.

 

8.7. Provisions of the Plan . The Options provided for herein are granted pursuant to the Plan and said Options and this Award Agreement are in all respects governed by the Plan and subject to all of the terms and provisions of the Plan.

 

8.8. Interpretation . Any interpretation of this Award Agreement will be made in accordance with the Plan but in the event there is any contradiction between the provisions of this Award Agreement and the Plan, the provisions of the Award Agreement will prevail. In the event there is any contradiction between the provisions of this Award Agreement and the provisions of any of the Participant's employment or service agreement with the Group, the provisions of the Award Agreement will prevail.

 

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8.9. Binding Effect . The Plan and this Award Agreement shall be binding upon the heirs, executors, administrators and successors of the parties hereof.

 

8.10. Notices . All notices or other communications given or made hereunder shall be in writing and shall be delivered or mailed by registered mail or delivered by email or facsimile with written confirmation of receipt to the Participant and/or to the Company at the addresses shown on the letterhead above, or at such other place as the Company may designate by written notice to the Participant. The Participant is responsible for notifying the Company in writing of any change in the Participant’s address, and the Company shall be deemed to have complied with any obligation to provide the Participant with notice by sending such notice to the address indicated below

 

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

 

Company’s Signature: InMode Ltd. (No. 514073618)  
     
Name: Moshe Mizrahy  
     
Position: CEO  
     
Signature:    

 

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I, the undersigned understand that the Plan and this Award Agreement, constitute the entire agreement between me and the Company with respect to the Options granted hereunder and supersede in their entirety all prior undertakings and agreements of the Company and myself, both written and oral, with respect to the Options granted hereunder (including the shares underlying such Options). I have reviewed the Plan and this Award Agreement in their entirety, and had an opportunity to obtain the advice of counsel prior to executing this Award Agreement and fully understand all provisions of this Award Agreement.

 

   
  Participant’s Signature

 

Attachments :

 

Exhibit A: InMode Ltd. 2018 Incentive Plan.

 

Exhibit B: Terms of the Award.

 

Exhibit C: Form of Notice of Exercise.

 

Exhibit D: Irrevocable Proxy.

 

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EXHIBIT B

TERMS OF THE OPTION

 

1. Name of the Participant: [_______________].
     
2. Date of Grant: [_______________].
     
3. Type of Grant: [Ordinary Income Option] or [3(i) Award] or [ISO] or [NSO]
     
4. Number of Awards granted: [________] each to purchase one Ordinary Share.
     
5. Vesting Commencement Date: [________________]
     
6. Vesting Schedule: [___________________________].
     
7. Exercise Price (per share): USD [________].
     
8. Expiration Date: As determined in the Plan.

 

     
Participant   Company

 

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EXHIBIT C

FORM OF EXERCISE NOTICE

 

To:

 

InMode Ltd.

 

Dear Sirs,

 

Re: Exercise of Options - InMode Ltd. (the “Company”)

 

I am the holder of ______ options (the “Options” ), which are exercisable into Ordinary Shares of the Company, par value of NIS 0.01 each (the “Shares” ) that were granted to me under the “InMode Ltd. 2018 Incentive Plan”.

 

I know that the vesting schedule of the Options is as detailed in the “Award Agreement”, which was signed by me on _______.

 

I would like to exercise ____ Options into ___ Shares, in consideration for an aggregate Exercise Price of USD _________.

 

A confirmation of the transfer of the Exercise Price with respect to the above exercised Options and a scanned copy of a duly notarized copy of the passport picture page of the undersigned are attached hereto. Original copy of the duly notarized copy of the passport picture page of the undersigned will be followed by mail.

 

  Yours Truly,
     
  Name:  
     
  Signature:  

 

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EXHIBIT D

IRREVOCABLE PROXY

 

I, the undersigned, hereby irrevocably appoint the Chairman of the Board of InMode Ltd., an Israeli company (the " Board " and the “ Company ”, respectively) or any other person designated by the Committee formed by the Board for such purpose (with the power of delegation) as my proxy (the “ Agent ”) to represent me and to vote in my name and on my behalf at all annual or special meetings of the shareholders of the Company (including class meetings) in the same way as the result of the Board's vote in respect of the issue being voted upon, to sign on my behalf any written consents of shareholders of the Company, and to receive all notices with respect to the above, with respect to the number of shares of all classes of the Company registered in my name at any time and from time to time. Until the consummation of the Company’s Initial Public Offering (the “ IPO ”), any and all voting rights the undersigned may have with respect to the shares of the Company shall be exercised exclusively by this Proxy and Power of Attorney.

 

I, the undersigned, hereby irrevocably authorize and grant power of attorney to the Agent, in respect of any shares of all classes of the Company registered in my name at any time and from time to time, until the consummation of the IPO, to exercise every right, power and authority with respect to the shares and to sign in my name and on my behalf any agreement, document and/or instrument, and any affidavit or approval with respect to the shares or to the rights which they represent in the Company in as much as the Agent shall deem it necessary or desirable to do so. In addition and without derogating from the generality of the foregoing, I hereby irrevocably authorize and grant power of attorney to the Agent to sign any agreement, document and/or instrument as aforesaid and any affidavit or approval and/or to make and execute any undertaking in my name and on my behalf if the Proxy shall, at his sole discretion, deem it is necessary or desirable for purposes of any placement of securities of the Company, whether private or public (including lock-up arrangements and undertakings), for purposes of a merger of the Company with another entity, whether the Company is the surviving entity or not, for purposes of any reorganization or recapitalization of the Company or for purposes of any purchase or sale of assets or shares of the Company.

 

I, the undersigned, hereby further undertake to cooperate with the Agent, and to sign, if so requested by the Agent any additional document and/or instrument which the Agent might, from time to time, consider necessary or desirable in order to perform this Proxy and Power of Attorney.

 

This Proxy and Power of Attorney shall expire automatically and be of no further force or effect immediately upon the consummation of the IPO, and shall be irrevocable until such time. The expiration of this Proxy and Power of Attorney shall in no manner effect the validity of any action taken hereunder or of any agreement, document, instrument, affidavit or approval which has been signed or given as aforesaid prior to the expiration hereof and in accordance herewith.

 

The proxy granted hereby: (i) is a special proxy and power of attorney coupled with an interest and is irrevocable; (ii) shall survive the bankruptcy, death, adjudication of incompetence or insanity or dissolution of the undersigned and its transferees, (iii) shall survive the transfer of the Shares, until duly replaced by a similar Proxy executed by the transferee; and (iv) is perpetual except that it shall terminate upon the effective date of an IPO.

 

IN WITNESS WHEREOF, I have executed this Irrevocable Proxy and Power of Attorney on the __ day of _________, 201_.

 

  Participant:
     
  Name:  
     
  Signature:  

 

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AWARD AGREEMENT

 

This Award Agreement (this “ Award Agreement ”) is entered into as of the date hereof, by between InMode Ltd., a private company No. 514073618 of Tavor Building, Sha’ar Yokneam, P.O. Box 533, Yokneam 20692, Israel (the “ Company ”) and [___________], I.D Number [_______], of [_________], Israel (the “ Participant ”) (the Company and the Participant, shall be referred collectively, as “ Parties ”, or individually, a “ Party ”).

 

Whereas , On June 17, 2018, the Company adopted the InMode Ltd. 2018 Incentive Plan, a copy of which is attached as Exhibit A hereto, forming an integral part hereof (the “ Plan ”); and

 

Whereas , Pursuant to the Plan, the Board of Directors of the Company has decided to grant the Participant, options (the “ Options ”) to purchase the number of shares of the Company’s ordinary shares, par value NIS 0.01 each (the “ Shares ”) as specified in Exhibit B hereto, subject to all terms and conditions set forth in the Plan, in the Company's Articles of Association (the “ AoA ”) and as provided herein;

 

NOW, THEREFORE, the Parties to this Agreement hereby agree as follows:

 

1. Preamble and Definitions

 

1.1. The preamble to this agreement constitutes an integral part hereof.

 

1.2. Unless otherwise stated, all capitalized terms in this Award Agreement shall be interpreted as defined in the Plan.

 

2. Grant of Options

 

2.1. The Company hereby grants to the Participant the number of Options as set forth in Exhibit B hereto, each Option shall be exercisable for one Share, upon payment of the Exercise Price as set forth in Exhibit B, subject to the terms and the conditions as set forth in the Plan, and as provided herein.

 

2.2. The Participant is aware that the Company intends in the future to issue additional shares and to grant additional options to various entities and individuals, as the Company in its sole discretion shall determine.

 

3. Period of Option and Conditions of Exercise

 

3.1. The terms of the Award shall commence on the Date of Grant and terminate at the Expiration Date, or at the time at which the Option expires pursuant to the terms of the Plan or pursuant to this Award Agreement unless determined otherwise in this Award Agreement.

 

3.2. Options may be exercised only to purchase whole Shares, and in no case may a fraction of a Share be purchased.

 

4. Vesting; Period of Exercise

 

4.1. Subject to the provisions of the Plan, Options shall vest and become exercisable according to the Vesting Period set forth in Exhibit B hereto. any period in which the Participant shall not be employed by the Group, or in which the Participant shall have taken an unpaid leave of absence (excluding a leave for military reserves duty or the mandatory maternity leave determined by law), or in which the Participant shall cease to serve as Employee, Director or Consultant of the Group, shall not be included in the Vesting Period.

 

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4.2. All unexercised Options granted to the Participant shall terminate and shall no longer be exercisable on the Expiration Date, as described in Section 8.4 of the Plan.

 

5. Exercise of Options

 

5.1. Once the Options may be exercised (subject to the provisions hereto) and all other conditions for exercising the Options are fulfilled, the Participant is entitled to notify the Company and/or to any third party designated by the Company, by delivering a “Notice of Exercise” (in the form attached hereto as Exhibit C ), that he or she wishes to exercise a certain number of Options (but not more than the number of Options that have become exercisable until such date). The Notice of Exercise shall be accompanied by payment for the Shares, equal to the product of (x) the number of Options the Participant wishes to exercise, and (y) the Exercise Price.

 

5.2. In order for the Company to issue Shares upon the exercise of any of the Options, the Participant hereby agrees to sign any and all documents required by any applicable law and/or by the Board and/or by the Committee and/or according to the AoA and the Plan.

 

5.3. Pursuant to Section 6.2 of the Plan and as a condition precedent to the Company’s issuance of Options and Exercised Shares under the Plan, the Participant is required to execute and deliver to the Company an irrevocable proxy and power of attorney in the form attached hereto as Exhibit D , appointing as his/her proxy, attorney and agent the Chairman of the Board or any other person designated by the Committee formed by the Board for such purpose. The Exercised Shares will be voted in the same proportion as the result of the shareholders vote, in respect of which such Exercised Shares are being cast. Such proxy shall terminate and be of no further force and effect upon the consummation of an IPO.

 

5.4. The Company shall not be obligated to issue any Shares upon the exercise of an Option if such issuance, in the opinion of the Company, might constitute a violation by the Company of any provision of law.

 

5.5. Pursuant to Section 9 of the Plan, Options may be exercised after the date of Termination of Service during an additional period of time following the date of such termination. In such event Participant shall be allowed to exercise only the amount of Options that are vested as such amount may be at the time of such termination according to the Vesting Period, specified in Exhibit B. However, if the Termination of Service is for Cause (as defined in the Plan), any and all Options granted to such Participant shall immediately expire upon written notice by the Company to the Participant.

 

6. Limitations of Transfer

 

6.1. The Options are not transferable, except for transfer by will or by laws of descent or distribution. In addition, the rights to sell Exercised Shares are subject to limitations as provided by Section 11 of the Plan, and as imposed by applicable law (including the AoA), and to any request made by the Company or its underwriters, if applicable (including a lock-up period), from time to time, or upon a specific occurrence, and the Participant hereby unconditionally agrees and accepts any such limitations. For the avoidance of doubt the Participant may not sell, assign, convey, transfer by gift, encumber, pledge, hypothecate or otherwise transfer or dispose any of the Options, except as specifically allowed under the Plan.

 

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6.2. With respect to any 102 Award, subject to the provisions of Section 102 of the Ordinance and the 102 Rules promulgated thereunder, the Participant shall not sell or release from trust any Share received upon the exercise of an 102 Award and/or any share received subsequently following any realization of rights, including without limitation, bonus shares, until the lapse of the Trust Period required under Section 102 of the Ordinance. Notwithstanding the above, if any such sale or release occurs during the Trust Period, the sanctions under Section 102 of the Ordinance and the 102 Rules promulgated thereunder shall apply to and shall be borne by such Participant.

 

6.3. With respect to 102(c) Award, if the Participant’s employment or service is terminated for any reason, such Participant shall provide the Group, to its full satisfaction, with a guarantee or collateral securing the future payment of all Taxes required to be paid upon the sale of the Exercised Shares received upon exercise of such 102(c) Award, all in accordance with the provisions of Section 102 of the Ordinance and the 102 Rules promulgated thereunder.

 

6.4. The Participant acknowledges that in the event Company's shares shall be registered for trading in any public market, the Participant’s right to sell Shares may be subject to limitations (including a lock-up period), as will be requested by the Company or its underwriters, and the Participant unconditionally agrees and accepts any such limitations.

 

6.5. The Participant acknowledges that in order to enforce the above restriction, the Company may impose stop-transfer instructions with respect to securities the exercised Shares.

 

6.6. The Participant agrees that the Company shall have the authority to endorse upon the certificate or certificates representing the Participant's Shares such legends referring to the foregoing restrictions, and any other applicable restrictions as it may deem appropriate (which do not violate the Participant's rights according to this Award Agreement).

 

7. Taxes; Indemnification

 

7.1 All Tax consequences and obligations arising from the grant, vesting, or exercise of any Award (as applicable), or the subsequent disposition of, Shares subject thereto or from any other event or act (of the Group or of the Participant) hereunder, shall be borne solely by the Participant, and the Participant shall indemnify the Group and/or the Trustee and hold them harmless against and from any and all liability for any such Tax, including without limitation, monetary liabilities relating to the necessity to withhold, or to have withheld, any such Tax payment from any payment made to the Participant. Notwithstanding the above, the Company and Trustee’s obligation to deliver Shares upon the exercise or vesting of any Awards granted under the Plan shall be subject to the satisfaction of all applicable Tax withholding requirements as governed by Applicable Laws or practice. No Shares will be delivered to the Participant or other person pursuant to the exercise of the Award until the Participant or other person has made arrangements acceptable to the Company for the satisfaction of applicable income tax and employment tax withholding obligations, including, without limitation, such other tax or benefit obligations incident to the receipt of Shares (whether such tax or benefit is the obligation of the Participant or the employer or the Company). Upon exercise of the Award, the Company or the Participant’s employer may offset or withhold (from any amount owed by the Company or the Participant’s employer to the Participant) or collect from the Participant or other person an amount sufficient to satisfy such tax obligations.

 

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7.2. The Participant will not be entitled to receive from the Company and/or the Trustee any Shares allocated or issued upon the exercise of Options prior to the full payments of the Participant’s tax liabilities arising from Options which were granted to him and/or Shares issued upon the exercise of Options. For the avoidance of doubt, neither the Group nor the Trustee shall be required to deliver any Shares (or Share certificate) to a Participant until all required payments have been fully made or secured.

 

7.3. The receipt of the Options and the acquisition of the Participant's Shares to be issued upon the exercise of the Options may result in tax consequences. THE PARTICIPANT IS ADVISED TO CONSULT A TAX ADVISER WITH RESPECT TO THE TAX CONSEQUENCES OF RECEIVING OR EXERCISING THIS OPTION OR DISPOSING OF THE SHARES.

 

7.4. With respect to 102 Award, the Participant hereby acknowledges that he or she is familiar with the provisions of Section 102 and the regulations and rules promulgated thereunder, including without limitations the type of Option granted hereunder and the tax implications applicable to such grant. The Participant accepts the provisions of the trust agreement signed between the Company and the Trustee, attached as Exhibit E hereto, and agrees to be bound by its terms.

 

8. Miscellaneous

 

8.1. No Obligation to Exercise Options . The grant and acceptance of these Options imposes no obligation on the Participant to exercise it.

 

8.2. Confidentiality . The Participant shall regard the information in this Award Agreement and its exhibits attached hereto as confidential information and the Participant shall not reveal its contents to anyone except when required by law or for the purpose of gaining legal or tax advice.

 

8.3. The Participant acknowledges that: (i) in granting the Participant the Option under this Award Agreement the Company has taken into account Participant's non-competition and confidentiality obligations (including without limitation such obligations specified under the employment or service agreement with the Company); (ii) that the Options issued hereby shall be deemed to include, inter alia, proper compensation for the prospect of the Participant's compliance with such non-competition and confidentiality obligations; and (iii) the aforementioned non-competition and confidentiality obligations are fundamental elements of the bargain between the parties.

 

8.4. Continuation of Employment or Service . Neither the Plan nor the Award Agreement with the Participant shall impose any obligation on the Company or an affiliate thereof, to continue any Participant in its employ or service, and nothing in the Plan or in any Award granted pursuant thereto shall confer upon any Participant any right to continue in the employ or service of the Company or an affiliate thereof or restrict the right of the Company or an affiliate thereof to terminate such employment or service at any time.

 

8.5. Entire Agreement . Subject to the provisions of the Plan, this Award Agreement, together with the exhibits hereto, constitute the entire agreement between the Participant and the Company with respect to Options granted hereunder, and supersedes all prior agreements, understandings and arrangements, oral or written, between the Participant and the Company with respect to the subject matter hereof.

 

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8.6. Failure to Enforce - Not a Waiver . The failure of any party to enforce at any time any provisions of this Award Agreement or the Plan shall in no way be construed to be a waiver of such provision or of any other provision hereof.

 

8.7. Provisions of the Plan . The Options provided for herein are granted pursuant to the Plan and said Options and this Award Agreement are in all respects governed by the Plan and subject to all of the terms and provisions of the Plan.

 

8.8. Interpretation . Any interpretation of this Award Agreement will be made in accordance with the Plan but in the event there is any contradiction between the provisions of this Award Agreement and the Plan, the provisions of the Award Agreement will prevail. In the event there is any contradiction between the provisions of this Award Agreement and the provisions of any of the Participant's employment or service agreement with the Group, the provisions of the Award Agreement will prevail.

 

8.9. Binding Effect . The Plan and this Award Agreement shall be binding upon the heirs, executors, administrators and successors of the parties hereof.

 

8.10. Notices . All notices or other communications given or made hereunder shall be in writing and shall be delivered or mailed by registered mail or delivered by email or facsimile with written confirmation of receipt to the Participant and/or to the Company at the addresses shown on the letterhead above, or at such other place as the Company may designate by written notice to the Participant. The Participant is responsible for notifying the Company in writing of any change in the Participant’s address, and the Company shall be deemed to have complied with any obligation to provide the Participant with notice by sending such notice to the address indicated below

 

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

 

Company’s Signature: InMode Ltd. (No. 514073618)  
     
Name: Moshe Mizrahy  
     
Position: CEO  
     
Signature:    

 

  - 14 -  

 

 

I, the undersigned understand that the Plan and this Award Agreement, constitute the entire agreement between me and the Company with respect to the Options granted hereunder and supersede in their entirety all prior undertakings and agreements of the Company and myself, both written and oral, with respect to the Options granted hereunder (including the shares underlying such Options). I have reviewed the Plan and this Award Agreement in their entirety, and had an opportunity to obtain the advice of counsel prior to executing this Award Agreement and fully understand all provisions of this Award Agreement.

 

I hereby approve and agree to all the aforesaid in this Award Agreement and the Trust Agreement and I declare that I am familiar with the provisions of Section 102 and the Capital Gains Route. I hereby undertake not to sell or transfer the Options and/or the Exercised Shares prior to the lapse of the Trust Period, unless I pay all taxes, which may arise in connection with such sale and/or transfer.

 

   
   
  Participant’s Signature

 

Attachments :

 

Exhibit A: InMode Ltd. 2018 Incentive Plan.

 

Exhibit B: Terms of the Award.

 

Exhibit C: Form of Notice of Exercise.

 

Exhibit D: Irrevocable Proxy.

 

Exhibit E: Trust Agreement.

 

  - 15 -  

 

 

EXHIBIT B

TERMS OF THE OPTION

 

1. Name of the Participant: [_______________].
     
2. Date of Grant: [_______________].
     
3. Type of Grant: 102 Award (Capital Gain Option).
     
4. Number of Awards granted: [________] each to purchase one Ordinary Share.
     
5. Vesting Commencement Date: [________________]
     
6. Vesting Schedule: ___________________________.
     
7. Exercise Price (per share): USD ________.
     
8. Expiration Date: As determined in the Plan.

 

     
Participant   Company

 

  - 16 -  

 

 

EXHIBIT C

FORM OF EXERCISE NOTICE

 

To:

 

Altshuler Shaham Benefits Ltd. InMode Ltd.

 

Dear Sirs,

 

Re: InMode Ltd. (the “Company”)

 

I am the beneficiary of ______ options (the “Options” ), which are exercisable into Ordinary Shares of the Company, par value of NIS 0.01 each (the “Shares” ) that were granted to you on my behalf and are held by you according to Section 102 of the Income Tax Ordinance, pursuant to the Trust Agreement that was signed between yourself and the Company, and according to the “InMode Ltd. 2018 Incentive Plan”.

 

I know that the vesting schedule of the Options is as detailed in the “Award Agreement”, which was signed by me on _______.

 

I would like to exercise ____ Options into ___ Shares.

 

  Yours Truly,
     
  Name:  
     
  Signature:  

 

     

 

Approval of InMode Ltd.

 

We hereby confirm that _________ is entitled to exercise ___ Options into ___ Shares (as defined above).

 

We hereby confirm that the exercise price of the Options in the amount of NIS _____ (NIS ___ per Option) was paid to us directly by Mr. / Ms. _______.

 

Enclosed is a share certificate of ____ Shares, which derived from the exercise of the Options.

 

   
  InMode Ltd.

 

  - 17 -  

 

 

EXHIBIT D

IRREVOCABLE PROXY

 

I, the undersigned, hereby irrevocably appoint the Chairman of the Board of InMode Ltd., an Israeli company (the " Board " and the “ Company ”, respectively) or any other person designated by the Committee formed by the Board for such purpose (with the power of delegation) as my proxy (the “ Agent ”) to represent me and to vote in my name and on my behalf at all annual or special meetings of the shareholders of the Company (including class meetings) in the same way as the result of the Board's vote in respect of the issue being voted upon, to sign on my behalf any written consents of shareholders of the Company, and to receive all notices with respect to the above, with respect to the number of shares of all classes of the Company registered in my name at any time and from time to time. Until the consummation of the Company’s Initial Public Offering (the “ IPO ”), any and all voting rights the undersigned may have with respect to the shares of the Company shall be exercised exclusively by this Proxy and Power of Attorney.

 

I, the undersigned, hereby irrevocably authorize and grant power of attorney to the Agent, in respect of any shares of all classes of the Company registered in my name at any time and from time to time, until the consummation of the IPO, to exercise every right, power and authority with respect to the shares and to sign in my name and on my behalf any agreement, document and/or instrument, and any affidavit or approval with respect to the shares or to the rights which they represent in the Company in as much as the Agent shall deem it necessary or desirable to do so. In addition and without derogating from the generality of the foregoing, I hereby irrevocably authorize and grant power of attorney to the Agent to sign any agreement, document and/or instrument as aforesaid and any affidavit or approval and/or to make and execute any undertaking in my name and on my behalf if the Proxy shall, at his sole discretion, deem it is necessary or desirable for purposes of any placement of securities of the Company, whether private or public (including lock-up arrangements and undertakings), for purposes of a merger of the Company with another entity, whether the Company is the surviving entity or not, for purposes of any reorganization or recapitalization of the Company or for purposes of any purchase or sale of assets or shares of the Company.

 

I, the undersigned, hereby further undertake to cooperate with the Agent, and to sign, if so requested by the Agent any additional document and/or instrument which the Agent might, from time to time, consider necessary or desirable in order to perform this Proxy and Power of Attorney.

 

This Proxy and Power of Attorney shall expire automatically and be of no further force or effect immediately upon the consummation of the IPO, and shall be irrevocable until such time. The expiration of this Proxy and Power of Attorney shall in no manner effect the validity of any action taken hereunder or of any agreement, document, instrument, affidavit or approval which has been signed or given as aforesaid prior to the expiration hereof and in accordance herewith.

 

The proxy granted hereby: (i) is a special proxy and power of attorney coupled with an interest and is irrevocable; (ii) shall survive the bankruptcy, death, adjudication of incompetence or insanity or dissolution of the undersigned and its transferees, (iii) shall survive the transfer of the Shares, until duly replaced by a similar Proxy executed by the transferee; and (iv) is perpetual except that it shall terminate upon the effective date of an IPO.

 

IN WITNESS WHEREOF, I have executed this Irrevocable Proxy and Power of Attorney on the __ day of _________, 201_.

 

  Participant:  
     
  Name:  
     
  Signature:  

 

  - 18 -  

 

 

Exhibit 10.8

 

Investment by

 

Guangzhou Sino-Israel Bio-Industry Investment

 

Fund (LLP)

 

In

 

Invasix Ltd.

 

Closing Date: Jan. 11, 2017

 

 

 

  

Table of Contents

 

#   Exhibit No.   Title
         
1   -   Equity Joint Venture Agreement
         
2   19.1.3   Business License
         
3   19.1.7   Amended and Restated Articles of Association of the Company
         
4   19.1.9   Indemnification Agreement
         
5   19.1.11   License Agreement
         
6   19.1.12   Resolution of the Company Approving the Agreement
         
7   19.2.1   Non-competition Agreement
         
8   19.2.2   Resolution of Invasix Approving the Agreement
         
9   19.2.3   Bring-down Certificate of CEO of Invasix
         
10   19.2.4   Invasix’s Product Liability Insurance
         
11   19.2.5   Consent of Invasix for Disposition of Company Shares of Investor
         
12   19.2.6   Proxy Signed by Company Directors Appointed on behalf of Invasix
         
13   19.3.2   Resolution of Investor Approving the Agreement
         
14   19.3.3   Consent of Investor for Disposition of Company Shares by Invasix
         
15   19.3.4   Proxy Signed by Company Directors Appointed on behalf of Investor
         
16   23   Invasix Disclosure Schedule
         
17   23.1.3.1   A List of Invasix’s Intellectual Property
         
18   33.2   Conversion Formula

 

 

 

  

Equity Joint Venture Agreement

 

 

 

 

Guangzhou Sino-Israel Bio-Industry Investment

Fund (LLP)

 

And

 

Invasix Ltd.

 

Contract for the

 

Establishment of Guangzhou InMode Medical

Technology Ltd.

 

1

 

 

Chapter 1

 

General Provisions

 

Animated by the purpose of facilitating the cooperation in the investment in the Bio-industry by the parties to this contract, in accordance with the “Law of the People’s Republic of China on Chinese-Foreign Equity Joint Ventures”, its detailed rules and other relevant laws and regulations of China, based on the principle of equality and mutual benefits, through friendly and candid consultation, all parties agree to jointly form, effective as of Closing, a Chinese Equity Joint Venture company in the Guangzhou Development District (the “ GDD ”)/Bio-Island which will be engaged in the territory of the mainland of People’s Republic of China, Hong Kong, Taiwan and Macau, in the (i) importation, distribution, marketing and sale of devices and certain products manufactured by Party B, and (ii) development, performance of clinical trials, design and manufacturing of devices and products, distribution, marketing and sale, support and provision of warranty based on Party B’s technology. In this respect, the above parties hereof unanimously agree to conclude this Agreement for the compliance of all parties.

 

Chapter 2

 

Equity Joint Venture Parties

 

1. The Equity Joint Venture Parties to this Agreement are:

 

Party A : Guangzhou Sino-Israel Bio-Industry Investment Fund (LLP), acting by its general partner Guangzhou Elim Biotech Industrial Venture Capital Management Company (“ GIBF ”),

 

whose legal address is at: 6/F No.6 of Luoxuansi Road, International Bio-island, Guangzhou

 

Legal Representative: Yehoshua Jacob Gleitman, of Israeli nationality, with Israeli passport # 29012531,

 

title: GIBF Chairman,

 

e-mail address: (shuki@gibf-bio.com)

 

(“ Party A ”)

 

2

 

   

Party B : Invasix Ltd., Registered nu# 51-407361-8 whose legal address is at: Tavor Building, Sha’arYokneam, P.O. Box 533, Yokneam 20692, Israel

 

Legal Representative: Mr. Moshe Mizrahy, of Israeli nationality, withIsraeli passport #39008840

 

title: Invasix Chairman and CEO

 

e-mail address:( moshem@invasix.com )

 

(“ Party B ”)

 

Party C : Guangzhou InMode Medical Technology Ltd.

 

(a company in formation) (InMode-China) whose legal address will be at: Unit 103-1 1/F, No.6 Luoxuan 3rd., Bio-Island, Guangzhou , and its Legal Representative: Moshe Mizrahy, of Israeli nationality, with passport # 39008840

 

title: InMode-China Chairman

 

e-mail address: (moshem@invasix.com)

 

(“ Company ”).

 

3

 

 

Each of the “Party A” and “Party B” shall be referred to hereinafter, as a “ Party ” or a “ Shareholder ” and together, the “ Parties ” or the “ Shareholders ”).

 

2. All Parties (including the Company) shall strictly comply with all provisions of this Agreement, fulfil all obligations in this Agreement, and enjoy all rights and interests in this Agreement.

 

Chapter 3

 

Definitions

 

3. In this Agreement, the following terms or jargons shall have the meanings as set out below, unless the context otherwise requires:

 

(1) “ China ” or “ PRC ” is the abbreviation of the People’s Republic of China.

 

(2) “ Chinese Law ” shall mean all laws, decrees, rules and regulations, standard documents, judicial interpretation, and other universal binding resolutions and orders formulated and promulgated by all levels of legislative institutions, government and its comprising departments, Supreme People’s Court, Supreme People’s Procuratorate, excluding internal documents not to be disclosed to external parties.

 

(3) “ This Agreement ” shall mean the content prescribed in this document, that is the Agreement on the equity joint venture and management of the Company and its appendices, after the examination and approval from the relevant authorities in China and deemed effective, including all written amendments, supplements or eliminations agreed upon and after examined and approved by all Parties (including the Company).

 

4

 

  

(4) ‘ ‘Equity Joint Venture Company ” shall mean the Company, that at Closing will be transformed from a WFOE into a Chinese foreign equity joint venture enterprise referred to as in Section 5 of this Agreement, held jointly by Party A and by Party B, and operated by the Parties pursuant to the provisions of this Agreement.

 

(5) “ Amended and Restated Articles of Association ” shall mean the Amended and Restated Articles of Association as concluded by all Parties in accordance with this Agreement (and shall replace the first articles of association that have been filed by Party B upon incorporation of the Company and reflect its transformation from a wholly foreign owned enterprise to an Equity Joint Venture Company), and as examined and approved by the relevant authorities, including all written amendments, supplements or eliminations agreed by all Parties and examined and approved.

 

(6) “ Working day ” shall mean any day which is not Friday, Sunday or Saturday or a statutory holiday in either China or Israel.

 

(7) “ United States Dollar ” shall mean the legal currency of the United States of America.

 

(8) “ Territory ” shall mean the territory of People’s Republic of China, Hong Kong, Taiwan and Macau.

 

(9) “ Party B Products ” shall mean all devices produced by Party B or InMode Ltd., unless otherwise specifically stated in this Agreement.

 

(10) “ InMode Ltd. ” – an Israeli established company, fully owned by Party B.

 

(11) “ WFOE ” shall mean the Chinese ‘foreign wholly owned enterprise’ referred to as in Section 5 of this Agreement established prior to the date hereof by Party B, pursuant to Chinese Law.

 

5

 

  

(12) “ Business License ” shall mean a business license issued to the Company, pursuant to Chinese Law, following the date of incorporation of the Company and prior to Closing, by the company registration authority of China.

 

(13) “ Company ” shall mean initially the WFOE, which at the Closing will be transformed into an Equity Joint Venture Company.

 

(14) “ Equity Rights ” or “ Company Equity Rights ” shall mean the Company’s share capital or any other equity interest as stipulated under Chinese Law.

 

(15) “ Intellectual Property ” shall mean all intellectual property belonging to Party B or to Inmode Ltd. (including, directly and indirectly, any and all future developments and rights), except with respect to the intellectual property of the BodyTite platform.

 

(16) “ BodyTite Platform ” shall mean the BodyTite platform produced by Party B which intellectual property rights are not part of the License described in Section 11.2 of this Agreement .

 

4. Interpretations:

 

The interpretations of the provisions in this Agreement, unless the context otherwise requires, shall follow the rules herein:

 

(1) Words importing the singular include the plural and vice-versa;

 

(2) Words importing a gender include any gender and the neutral.

 

6

 

  

(3) In the event that the date of deadline stipulated in this Agreement is not a Working Day, the deadline shall be automatically extended to the next Working Day.

 

(4) All amounts of money referred to in this Agreement, unless otherwise specified, are quoted in Renminbi.

 

(5) Any responsibilities in this Agreement, if specified as undertaken by one Party (including the Company), that Party shall take up all associated responsibilities and individual responsibilities.

 

(6) Headings of clauses and chapters are for the sake of convenience alone and shall not be relied upon in construing this Agreement.

 

(7) The Appendices attached to this Agreement constitute an integral part hereof.

 

(8) Drafts of this Agreement shall not be admissible as evidence before any judicial or quasi-judicial entity including any arbitrators or adjudicator, and shall not be used in the interpretation of this Agreement nor of any of its conditions.

 

Chapter 4

 

Establishment of Equity Joint Venture Company

 

5. In accordance with the “Law of the People’s Republic of China on Wholly Foreign-Owned Enterprises” and the “Law of the People’s Republic of China on Chinese-Foreign Equity Joint Ventures”, and their respective detailed rules and other related laws and regulations of China, Party B has established, prior to the date hereof, the Company as a WFOE, which the Parties will transform, to facilitate the investment contemplated hereunder, to a Chinese Equity Joint Venture Company - in the GDD/Bio-Island as set out below:

 

Chinese name:

 

English name: “Guangzhou InMode Medical Technology Ltd.”, or a similar name to be agreed upon by the Parties.

 

Residential Address: Unit 103-1 1/F, No.6 Luoxuan 3rd., Bio-Island, GuangzhouGuangzhou, Guangdong, China.

 

7

 

   

6. The Company has the status of a legal person and is subject to the jurisdiction and protection of Chinese Law. All activities of the Company shall abide by the Chinese Law and related rules and regulations.

 

7. Effective as of Closing, the Company is an Equity Joint Venture Enterprise between the Chinese and foreign Parties with the organization structure of Limited Liability Company. The Company is liable to all responsibilities against external parties as limited by the total assets of the Company. On Closing, each of the Parties shall take up limited liability of the Company according to its respective investment in the equity joint venture. The Parties shall share the profit, undertake the risk and loss as stipulated in the regulations of this Agreement, in accordance with the pro-rated holdings of each of the Parties in the Company (subject to the provisions of Section 32 hereunder). Between the Parties and the Company, each Party shall not mutually undertake any associated responsibilities of the other Party and shall not bind the other Party.

 

Chapter 5

 

Purpose of Equity Joint Venture, Joint Venture Project and Scope of Business

 

8. Purpose of the Company:

 

8.1 The Company will be engaged in the importation into the Territory, marketing and sale therein, of all party b products.

 

8.2 Furthermore, the Company shall have the right, effective as of the Closing, to independently develop, design and manufacture products and devices that are based on the Party B’s intellectual property (as defined hereunder) and technology and to operate a manufacturing line (or lines) for said purpose, do clinical trials and regulatory activities, sell and market, distribute, support and provide warranty to said products.

 

8

 

 

8.3 The Company will be based in the gdd/bio-island in Guangzhou, China.

 

8.4 The Company’s business strategy is set out in a business plan, mutually agreed by the party a and party b and which includes a five (5) year model. The business plan shall be reviewed by the Parties at least annually. The business plan will cover the following activities of the Company: incorporation, regulatory approvals, market penetration, constructing of manufacturing facilities, production, product adaptation, marketing, maintenance and support, etc.

 

Chapter 6

 

WFOE’s Registered Capital, Total Investment, Registered Capital and the

Transaction

 

9. WFOE’s Registered Capital

 

9.1. Prior to the date hereof, the Company has been formed by Party B as a WFOE, with a total investment in the Company’s registered capital of 100,000 RMB.

 

9.2. Party B has granted, on the date hereof, to the Company the Party B License (as further described in Section 12.2 hereunder).

 

10. Registered Capital of the Equity Joint Venture Company at the Closing

 

The Company intends to increase its registered capital from 100,000 RMB to 196,078 RMB. Party A agrees to contribute 50,000,000 RMB, among which 49,903,922 RMB shall be invested as capital reserve of the Company, to subscribe for the increased registered capital in an amount of 96,078 RMB. At the Closing the subscribed registered capital of the Company shall be 196,078 RMB.

 

9

 

 

        Amount of            
    Deadline for   Capital     Ratio for     Form of
Shareholder   Capital   Contribution     Capital     Capital
Name   Contribution   in RMB     Contribution     Contribution
                     
Party B   Upon incorporation of the WFOE     100,000       51 %   Cash
                         
Party A   At Closing     96,078       49 %   Cash
                         
TOTAL   At Closing     196,078       100 %   Cash

 

11. Total Investment Amount of the Equity Joint Venture Company after the Closing

 

The total investment amount of the Equity Joint Venture Company after the Closing shall be RMB 280,000.

 

12. The Transaction

 

12.1. Advancing of Funds

 

12.1.1. Party A hereby irrevocably agrees to pay to the Company, at the Closing, by way of a capital contribution, a total amount in cash of 96,078RMB and be issued with 49% of the registered capital (after the issuance of the Equity Rights to Party A) of the Company ( “ Initial Contribution ”).

 

12.1.2. At the Closing the Company will transform from a WFOE to an Equity Joint Venture Company, and the holdings in the Company shall be as follows: Party B will hold 51% of Equity Rights of the Company and Party A will be issued with 49% of the Equity Rights of the Company.

 

10

 

 

12.1.3. Additionally, after the Closing, Party A shall be required to provide funding to the Company of an additional aggregate amount, in cash, of 49,903,922 RMB, upon the achievement of such targets and on such dates as further described in Exhibit 11.1.3 hereto (said amounts, together with the Party A’s Initial Contribution – the “ Contribution Amount ” and “ Milestones ” or “ Milestone Payments ”, respectively).The total Contribution Amount by Party A shall be 50,000,000 RMB.

 

12.1.4. Upon fulfillment of each Milestone, the chairperson of the Board of the Company will submit a call notice to the Party A ( “ Call Notice ”), to make payment of the relevant Milestone Payment.

 

12.1.5. Party A will make payment of the relevant Milestone Payment (except for the Closing milestone) within ninety (90) days of receipt of the Call Notice (“ Milestone Payment Period ”). If however, any Milestone Payment is not paid to the Company within the Milestone Payment Period, despite the relevant Milestone having been achieved, Party A will be in a payment default which will result in the following ( “ Payment Defaul t”):

 

12.1.5.1. Subject to the approval of relevant authority, Party B shall hold, at no cost, such percentage of Company Equity Rights as would dilute Party A’s equity holding in the Company by the same ratio as the ratio between the amount in Payment Default and the Contribution Amount (e.g. if the Payment Default is with regard to 5,000,000 RMB, representing 10% of the Contribution Amount, Party A’s equity will be diluted by 10%, from 49% to 44.1%) (“ Dilution Penalty ”). The Dilution Penalty of Party A’s Equity Rights upon an event of a Payment Default will be achieved by way of a reduction of the Company’s registered capital, and shall enter into effect following the 90-day curing period described in Section 12.1.6 below. The Shareholders undertake, upon a Payment Default, to adopt all resolutions and execute any documents required under PRC Law that will result in the dilution of Party A, in accordance with the ratio described above.

 

11

 

 

12.1.5.2. Party A shall lose one Board seat (or two, if the amount in Payment Default is more than 2/3 of the Contribution Amount); and

 

12.1.5.3. Party A shall not be entitled to the Protective Provisions (as set forth in Section 25.5 below), except for certain protective provisions as follows: 25.5.1(iii) (Guarantee any Indebtedness), 25.5.1(iv) (inconsistent investment), 25.5.1(vi) (Related Parties Transactions), 25.5.1(vii) (Change of Business), 25.5.1(viii) (Assignment of Company IP), 25.5.1.(ix) (corporate strategic relationship) 25.5.1(xi)(Liquidation), 25.5.1(xiv) (Dividend Payment), 25.5.1(xv) (Create Capital in Subsidiary) and 25.5.1(xvii) (Approve IPO).

 

12.1.6. Notwithstanding the aforesaid, if Party A cures the Payment Default within ninety (90) days following the Milestone Payment Period, then Party A’s Dilution Penalty will not be exercised, and all its rights will be fully reinstated (including with regard to nomination of Board members and with regard to all the Protective Provisions listed in Section 25.5 below).

 

12.1.7. For any Party investment in cash, the date of receipt of the amount (e.g. the Initial Contribution or any Milestone Payment) will be the date the remitted amount of the invested cash is actually received at the designated bank account of the Company.

 

12.1.8. After each injection of the funding from the Parties to the Company, the Company shall issue receipts to the respective Party within five (5) working days after the date of injection. Within ten (10) working days after injections of any amount of equity investment to its capital, the Company shall employ a Chinese registered accountant to verify the capital contribution and issue a capital investment auditing report. Within ten (10) working days after receiving the capital investment auditing report from the Chinese registered accountant, the Company shall issue capital investment certificates to the Parties respectively.

 

12

 

 

12.2. License by Party B

 

12.2.1. In order to effectuate the transactions contemplated pursuant to this Agreement and the contemplated business activities of the Company, prior to Closing, Invasix will provide the Company with a License according to the License Agreement attached hereto as Exhibit 11.2.1 (the “ License Agreement”) , which also include certain additional undertakings by Invasix and certain other provisions.

 

12.2.2. Following the Closing, Invasix will transfer to the Company five (5) Inmode platforms (three (3) for clinical studies and two (2) for the CFDA lab testing).

 

12.2.3. To the extent applicable, the purchase of raw materials by the Company will be made in the Territory, if so determined under the terms of the Bill of Materials, as shall be determined by the Company.

 

12.2.4. Party B represents, warrants and covenants that to its knowledge, the Intellectual Property shall be sufficient for the Company to conduct its business as contemplated by the business plan and as contemplated by this Agreement and further represents that the Intellectual Property is sufficient for the production of the Party B Devices.

  

13

 

 

12.3. Services by Party A.

 

Party A undertakes to grant the Company following the commencement of production of Party B Devices by the Company and the sale thereof within the Territory with certain administrative and facilitating services in the Territory (including, facilitation of certain regulatory issues, workforce, administration, and the like), for which Party A will be entitled to a management fee from the Company, at fair market value and on such terms as shall be determined by the Company and the Party A, and on such date in which the Company is capable of making payment from distributable earnings.

 

Chapter 7

 

Preparation work of the Company

 

13. All Parties shall endeavour in employing the most effective and economic ways in actualizing the implementation and business mission and purpose of the Company. Other than complying with the other provisions and stipulations of this Agreement, the Parties shall jointly pay close attention to the following work:

 

(1) the submission and handling of the approval process for this Agreement and the Amended and Restated Articles of Association, handling the industry and commerce registration of the Company, application and collection of Business License and other matters from the relevant responsible authorities;

 

(2) handling of the tax, foreign exchange registration and application of tax, foreign exchange preferential treatment and other preferential treatment eligible for the Company from the relevant tax, foreign exchange control authorities and other relevant authorities;

 

(3) assist the Company to plan the purchase, rent and leasing, arrangement of the office for the Company, place of work and accommodation for the staff and workers and the essential office facilities and equipment;

 

(4) assist the Company to open foreign exchange and Renminbi account from banks engaged in the foreign exchange business in China;

 

14

 

 

(5) obtaining the approval from the relevant responsible government authorities in the name of the Company, and obtaining all approval, consensus, reference for file, permits, and etc. on the operation of the business activities and the rights to charge;

 

(6) handling any other matters as required for the transformation of the Company to an Equity Joint Venture Company.

 

14. During the course of taking care of the obligations as set above, the reasonable expenses generated shall entirely be shouldered by the Company.

 

Chapter 8

 

The Closing of the Transaction, Conditions to Closing and Deliverables for the

Closing

 

15. Closing

 

The closing (the “ Closing ”), shall be held at the offices of M. Firon & Co., Advocates, Hashlosha 2 St. Adgar 360 Tower, Tel-Aviv, at 10:00, on the third (3rd) Working Day after the satisfaction of all conditions precedent thereto, or the waiver thereof by the Party A or Party B or both (as applicable) (the “ Closing Date ”). The Parties intend for the Closing to take place on or prior to December 31,2016, or at any other time as the Parties may mutually agree upon. If however, the Closing does not take place until December 31, 2016, this Agreement will be subject to termination by either the Party A or Party B, upon delivery of a written notice to the other; provided, however, that the right to so terminate this Agreement shall not be available to a Party whose failure to fulfill any of its obligations under this Agreement has been the cause of the Closing not occurring on or before such date. Upon delivery of such notice, this Agreement shall forthwith be terminated and will be of no further effect, at no expense of any of the Parties, provided, however, that each Party hereto shall remain liable for any breaches of representations, warranties or covenants of this Agreement prior to its termination.

   

15

 

  

 16.

Conditions to the Obligations of the Parties to consummate the Closing

 

16.1. The obligations of the Parties to effect the Closing shall be subject to the fulfillment at or prior to the Closing Date, of the following conditions (all or part of which may be waived by Party A and Party B in writing):

 

16.1.1. The Company has obtained all required approvals, in forms and on terms reasonably acceptable to the Party A, which are necessary for the consummation of the transactions contemplated in this Agreement, including, without limitation, receipt of the Business License and the approval of the Ministry of Commerce (“ MOFCOM ”) of the PRC;

 

16.1.2. Delivery by Company on the Closing Date of all Company’s Deliverables (as defined below);

 

16.1.3. No injunction judgment, order, decree, statute, law, ordinance, rule or regulation, entered, enacted, promulgated, enforced or issued by any court or other competent authority or other similar legal restraint or prohibition, preventing, enjoining, restraining, prohibiting or making illegal the consummation of the transaction contemplated hereby shall be in effect.

 

17. Conditions to the Obligations of Party A to consummate the Closing

 

17.1. The obligations of Party A to effect the Closing shall be subject to the fulfillment at or prior to the Closing Date, of the following conditions (all or part of which may be waived by Party B in writing):

 

17.1.1. The representations and warranties of Party B set forth in this Agreement shall be true and correct in all respects as at the date of this Agreement and as at the Closing Date with the same force and effect as though such representations and warranties had been made on and as at the Closing Date;

 

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17.1.2. Delivery by Party B on the Closing Date of all the Party B’s Deliverables (as defined below);

 

17.1.3. Party B shall have performed and complied with all obligations and covenants required to be performed or complied with by it under this Agreement at or prior to the Closing Date, including grant of the Party B License;

 

17.1.4. No material adverse change has occurred with regard to the contemplated business of the Company.

 

18. Conditions to the Obligations of Party B to Consummate the Closing

 

18.1. The obligations of Party B to effect the Closing shall be subject to the fulfillment at or prior to the Closing Date, of the following conditions (all or part of which may be waived by Party A in writing):

 

18.1.1. The representations and warranties of Party A set forth in this Agreement shall be true and correct in all respects as of the date of this Agreement and as of the Closing Date with the same force and effect as though such representations and warranties had been made on and as of the Closing Date;

 

18.1.2. Delivery by Party A on the Closing Date of all Party A’s Deliverables (as defined below).

 

18.1.3. Party A shall have performed and complied with all obligations and covenants required to be performed or complied with by it under this Agreement at or prior to the Closing Date, including the payment of the Initial Contribution and the Closing Milestone amount.

  

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19. Deliveries at Closing

 

19.1. At the Closing, Party B and Party A shall cause the Company to deliver to Party A and to Party B, the following (“ Company Deliverables ”):

 

19.1.1. A copy of any approvals required under Chinese Law, for the change of status of the Company from a WFOE to an Equity Joint Venture Company;

 

19.1.2. the formal approval of this Agreement and the Amended and Restated Articles of Association issued by the examination and approval authority;

 

19.1.3. a Business License, as required under Chinese Law, with effect at Closing;

 

19.1.4. a valid Certificate of Approval for Establishment of Enterprise with Foreign Investment in the PRC as required under Chinese Law, with effect at Closing;

 

19.1.5. a Tax Registration for Enterprises with Foreign Investment, as required under Chinese Law, with effect at Closing;

 

19.1.6. a Foreign Exchange Certificate for Foreign Investment Enterprises, as required under Chinese Law, with effect at Closing;

 

19.1.7. A copy of the Amended and Restated Articles of Association of the Company, in the form attached as Exhibit 19.1.7 hereto;

 

19.1.8. A directors’ and officers’ insurance policy providing coverage in accordance with the terms set forth in Section 25.3.7 below, effective as of Closing;

 

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19.1.9. A form of an indemnification agreement to all Company directors, in accordance with the terms set forth in Section 25.3.7 below;

 

19.1.10. A copy of the set of policies and procedures, as shall be agreed by Closing;

 

19.1.11. A form of a License Agreement, executed by the Company and Party B, pursuant to Section 11.2.1.1 of this Agreement;

 

19.1.12. Company Board resolution in the form as required by PRC laws, approving, among others, effective as of Closing, the Amended and Restated Articles of Association of the Company, the indemnification agreements to the Directors, Company signatory rights and all agreements and transactions contemplated under this Agreement.

 

19.2. At the Closing, Party B shall deliver or cause to be delivered to Party A the following (“ Party B’s Deliverables ”):

 

19.2.1. Non-competition agreement, executed by the Company, Mr. Moshe Mizrahi and Party B, in the form as shall be agreed by the Parties;

 

19.2.2. A copy of minutes or resolutions of Party B, in a form satisfactory to the Party A, which shall not have been rescinded or modified, approving this Agreement and the transactions contemplated herein;

 

19.2.3. Executed copy of a certificate of the chief executive officer of Party B, in the form as shall be agreed by the Parties prior to Closing;

 

19.2.4. Copy of the Party B product liability insurance, in accordance with the License Agreement.

 

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19.2.5. An executed and undated form of consent of Party B for the Disposition of Company Equity Rights by the Party A, in the form as shall be agreed by the Parties prior to Closing.

 

19.2.6. An executed and undated form of a proxy signed by each of the Directors appointed on behalf of Party B to the Company’s Board, pursuant to Section 25.3.4.

 

19.3. At the Closing, Party A shall deliver or cause to be delivered to Party B, the following (“ Party A’s Deliverables ”):

 

19.3.1. Confirmation of the transfer of the Initial Contribution;

 

19.3.2. A copy of minutes or resolutions of Party A, in a form satisfactory to Party B, which shall not have been rescinded or modified, approving this Agreement and the transactions contemplated herein;

 

19.3.3. An executed and undated form of consent of Party A for the Disposition of Company Equity Rights by Party B, in the form as shall be agreed by the Parties prior to Closing.

 

19.3.4. An executed and undated form of a proxy signed by each of the Directors appointed on behalf of Party A to the Company’s Board, pursuant to Section 25.3.4.

 

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20. All Transactions Simultaneous

 

No document or transaction described in sections 16 - 19 shall be deemed to have been finally executed or delivered until all transactions, payments and documents contemplated in sections 16 - 19 are delivered or completed.

 

21. Further Action

 

The Parties (including the Company) shall execute such documents and other instruments and take such further commercially reasonable actions as may be required or desirable to carry out the provisions hereof and consummate the transactions contemplated by this Agreement.

 

Chapter 9 Representations and Warranties

 

22. Representation and Warranties by the Parties and the Company

 

22.1. Each of the Shareholders and the Company covenants, represents and warrants that, as of the date hereof and as of the Closing:

 

22.2. It has full power and authority to execute and deliver this Agreement and any other agreement contemplated hereby, to carry out its obligations hereunder and to consummate the transactions contemplated on its part. This Agreement has been duly executed and delivered by it and constitutes a legal, valid and binding agreement, enforceable against him in accordance with its terms;

 

22.3. The execution and delivery of this Agreement by it, the performance by it of its obligations hereunder and thereunder and the consummation by it of the transactions contemplated hereby and thereby will not violate any provision of law, rule, regulation, order, writ, judgment, injunction, decree, determination or award applicable to it, or any agreement to which it is a party or any undertaking it undertook towards any third party;

 

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22.4. Compliance with the terms of this Agreement does not require, except as referred to in this Agreement, the consent (or agreement) of any person who is not a party hereto, including any governmental or judicial authority.

 

22.5. Except as set forth in Disclosure Schedule 23 [ , for incorporation costs and costs associated with the actions to be taken by the Company under this Agreement, the Company has not incurred any costs and expenses and has not entered into any commitments resulting in any costs, expenses or liabilities.

 

23. Representations and Warranties by Party B

 

23.1. Party B covenants, warrants and represents that, as of the date hereof and as of the Closing except as provided in the Disclosure Schedule attached hereto as Schedule 23 ] , and the bring down of these warranties and representations to be included in the CEO Certificate, that:

 

23.1.1. No Violation . The execution and delivery by Party B of this Agreement and any other transaction documents, the performance of its respective obligations thereunder and the consummation by it of the transactions contemplated hereby and thereby shall not (a) violate or result in violation of any applicable laws, or (b) require the consent, waiver, approval, license or authorization of or any filing with any person, municipality, governmental or quasi-governmental authority in Israel and any other territory in which Party B conducts its business (other than the Territory) (“ Required Approvals ”), or (c) violate, result (with or without notice or the passage of time, or both) in a breach of or give rise to the right to accelerate, terminate or cancel any obligation under or constitute (with or without notice or the passage of time, or both) a default under, any of the terms or provisions of any charter, certificate of incorporation, articles of association, bylaw, agreement, indenture, mortgage, or encumbrances by which Party B or Inmode Ltd., is bound, nor will it result in the suspension, revocation, impairment, forfeiture, or non-renewal of any permit, authorization or license applicable to Party B’s businesses or operations.

 

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23.1.2. Litigation . Except as set out in the Disclosure Schedule, there is no action, claim, suit, proceeding or investigation (including employee related disputes) pending, or currently threatened, against Party B or any subsidiary thereof, or affecting the Company or Party B or the assets of any of them, or the Company’s, or the Shareholders’ ability to perform or observe any obligation or condition under this Agreement or any other transaction document, and to the best knowledge of Party B or Inmode Ltd. there is no basis for any such action, claim, suit, proceeding or investigation.

 

23.1.3. Intellectual Property .

 

23.1.3.1. A complete and detailed list of the Intellectual Property was provided to Party A as part of the due diligence review conducted by it.

 

23.1.3.2. Party B and its subsidiaries have taken all commercially reasonable measures to protect the confidentiality of the Intellectual Property or any other non-public, proprietary information material to the businesses of Party B or to that of Inmode Ltd. All employees, contractors and agents of Party B or of Inmode Ltd. or any subsidiary or affiliate thereof executed non-disclosure & assignment of invention agreements (or similar agreement relating to the protection, ownership, development, use and transfer of the Intellectual Property and all Party B’s and/or InMode Ltd.’s technology to Party B) in form which is satisfactory and customary. To the best of its knowledge, no employee, contractor or agent of Party B or Inmode Ltd. is in default or breach of any term of any employment agreement, non-disclosure agreement, assignment of invention agreement or similar agreement relating to the protection, ownership, development, use or transfer of the Intellectual Property or any other intellectual property or technology owned by Party B or Inmode Ltd. Except a set out in the Disclosure Schedule, no rights in any Intellectual Property, software or technology have been transferred or granted, with regard to the Territory, by Party B or Inmode Ltd. to any other person.

 

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23.1.3.3. Party B and/or InMode Ltd. is the owner of, or has valid and continuing rights to use the Intellectual Property with respect to the Territory, free and clear of all third party rights. Party B and/or InMode Ltd. has valid and continuing rights to make, sell, license or otherwise use the technology in connection with the conduct of the business of Party B and/or InMode Ltd. as presently conducted and as contemplated hereunder in the Territory. To its knowledge, there is no intellectual property or technology other than Intellectual Property licensed to the Company hereunder that is material to or necessary for the operation of the business of the Company as contemplated to be conducted and, or for the continued operation of the business of the Company as contemplated to be conducted.

 

23.1.3.4. To its knowledge, except as set forth in the Disclosure Schedule with respect to claimed infringement, neither Party B nor any of its subsidiaries or affiliates by virtue of their use of the Intellectual Property (including as contemplated hereunder) infringes upon, misappropriates, make unauthorized use of, or otherwise violate the intellectual property rights of any third party.

 

23.1.3.5. Except as set out in the Disclosure Schedule, neither Party B nor any of its subsidiaries or affiliates is a party to or the subject of any pending or, threatened, legal proceeding (including investigation), which involves a claim (i) against Party B or any of its subsidiaries or affiliates, of infringement, unauthorized use, or violation of any intellectual property or technology of any person, or challenging the ownership, use, validity or enforceability of any Intellectual Property or technology or (ii) contesting, challenging, or seeking to deny or restrict the right of Party B or any of its subsidiaries or affiliates to use, distribute, sell, exercise, lease, license, transfer or dispose of any Intellectual Property or technology. Except as set out in the Disclosure Schedule, neither Party B nor any of its subsidiaries or affiliates have received written notice of such threatened claim of infringement, unauthorized use, violation, misappropriation, or any similar allegation with respect to the Intellectual Property or technology. Neither Party B nor any of its subsidiaries or affiliates are subject to any order that restricts or impairs the use or the right to license or sub-license any of the Intellectual Property in Israel and/ or the Territory.

 

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23.1.3.6. To the knowledge of Party B no person is infringing, violating, misappropriating or otherwise misusing any of the Intellectual Property, and neither Party B or any of its subsidiaries has made in the last five (5) years preceding the date hereof any such claims against any person.

 

23.1.3.7. There are no contracts or arrangements to which Party B or any of its subsidiaries or affiliates is a party under which any governmental authority acquires rights with respect to any Intellectual Property, nor has any governmental authority acquired any rights outside of any such contracts, arrangements or subcontract as the result of providing any funding to Party B or to any of its subsidiaries or affiliates relating to the development of any Intellectual Property, and there are no contracts or arrangements to which Party B or of any of its subsidiaries or affiliates is a party under which any governmental authority acquires rights with respect to any Intellectual Property exclusively licensed to Party B or any of its subsidiaries or affiliates.

 

23.1.4. Complete Disclosure . Neither this Agreement nor any certificate or other document attached hereto or referenced herein, contains an untrue statement of a material fact or omits to state a material fact necessary to make the statements herein or therein not complete or not misleading. Party B has disclosed to Party A all material facts pertaining to its relevant business operations, including without limitation, the Intellectual Property, and the transactions contemplated by this Agreement and all transaction documents. There is no fact or information relating to Party B which could reasonably be expected to be material to the transactions contemplated hereby or to the conduct of the business of the Company relevant to Party B that has not been disclosed to the Party A in full.

 

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Chapter 10

 

Indemnification Undertakings

 

24. Indemnification by Party B

 

24.1. Party B undertakes to indemnify and hold the Party A, and each of its affiliates, officers, directors, agents and employees and anyone on behalf of either of them (each of the foregoing, an “ Party A Indemnified Person ”), completely harmless from and against any and all Losses, arising from to any of the following: (i) any breach of or inaccuracy in any representation or warranty made by Party B in this Agreement or in any transaction document, (ii) any breach of or default in connection with any of the covenants, undertakings or agreements made by Party B in this Agreement or any transaction document.

 

“ Losses ” shall mean, in that regard, any and all direct losses, causes of action, liabilities, costs, damages and expenses. Actions (including, interest, penalties, reasonable attorneys’, consultants’ and experts’ fees and expenses and all amounts paid in investigation, defense or settlement (in accordance herewith) of any of the foregoing) actually incurred. The Definition of Loss specifically excludes indirect, consequential or punitive damages.

 

24.2. Indemnification by the Company or Party B to the Party A shall be limited (and shall serve as sole remedy for any Loss) as follows:

 

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24.2.1. Shall not exceed such Party A’s actual respective Contribution Amount;

 

24.2.2. A claim for Losses shall not be filed after twenty-four (24) months from the Closing.

 

24.2.3. A claim for Losses shall not be filed for damages estimated at less than US$100,000, provided however that if the estimated damages exceed this sum, the claim may include all such damages, including the US$100,000.

 

The aforesaid limitation of this Section 24 shall not apply with respect to any post-Closing obligations or covenants of the Company towards Party A, for payments and other obligations of the Company that are included in the Amended and Restated Articles of Association of the Company.

 

24.3. Whenever a claim arises under this Section 24, Party A Indemnified Person seeking indemnification (the “ Claimant ”) shall notify Party B, in writing of such claim and the facts constituting the basis for such claim, and Party B will indemnify the Party A Indemnified Person with no delay.

 

Chapter 10

 

The Board of Directors and Supervisor of the Joint Venture Equity Company

 

25. The Board of Directors of the Joint Venture Equity Company

 

25.1. Upon the Closing of this Agreement and the transactions contemplated herein, the board of directors of the Company (“ Board ”) shall be responsible for determining the overall policies and objectives of the Company and to supervise the activities of the management of the Company, as further described in this Chapter 10. All rights and powers not otherwise granted to the management under any applicable law or by contract, shall vest with the Board.

 

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25.2. Members of the Board

 

25.2.1. The Board shall consist of up to 6 (six) members, 3 (three) directors appointed by the Party A(the “ Party A Directors ”) and three directors appointed by Party B (all of the above - collectively, the “ Directors ”).

 

25.2.2. Directors shall be appointed, by notice in writing to the Company, by the Shareholder entitled to appoint such Director, as set forth above. Subject to Section 12.1.5 (Payment Default), A Director shall only be dismissed and/or replaced by the Shareholder that appointed him/her. The term of office of the Directors will be renewed every four (4) years.

 

25.2.3. The chairperson of the Board of directors will preside at every meeting of the Board. The Chairperson of the Board will be one of the Directors appointed by Party B, initially Mr. Moshe Mizrahy. The chairperson of the Board will be the legal representative of the Company. The Vice Chairperson of the Board will be appointed by the Party A. If at any meeting the Chairperson is not present within fifteen (15) minutes of the time fixed for the meeting, the Directors present shall choose someone to be the Chairperson of such meeting. Subject to the terms of Section 25.5 below (Protective Provisions), the Chairperson shall be entitled to an additional or casting vote in a Board meeting.

 

25.2.4. A Director may appoint an alternate for a specific matter or for a certain meeting, by issuance of notice in this regard to the Company, at least 2 days prior to the date of the Board meeting. If a Director serves as an alternate for one or more additional directors, he/she shall have the number of votes equal to the number of directors he/she represent.

 

25.2.5. None of the Directors or alternate Directors shall be entitled to receive from the Company any remuneration for their services as Directors.

 

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25.3. Meetings of the Board

 

25.3.1. Meetings of the Board shall be convened by prior written notice of not less than seven (7) working days, specifying the date and time (which must be reasonable to all members of the board taking into consideration different time zones, applicable public holidays and rest days), place and agenda of the meeting, which shall be given to all Directors and their alternates. Said notice may be waived or shortened upon the agreement in writing of all Directors. The Board will convene at least once a year. The chairperson of the Board may convene a meeting of the Board at the request made by more than one-third of the directors. Unless otherwise agreed in writing by all directors, the Board meetings shall be held at the GDD.

 

25.3.2. Any action of the Board consented to in writing (including via facsimile or e-mail) by all the Directors shall be valid as if so voted upon at a Board meeting duly called and held.

 

25.3.3. The Board shall be allowed to hold meetings using any means of telecommunication, provided that all Directors participating in the meeting can speak simultaneously and hear and be heard by all other Directors participating in the meeting, and provided further that the minutes of said meetings are thereafter signed by the Chairperson and Vice Chairman of the meeting.

 

25.3.4. The legal quorum necessary for the holding of a meeting of the Board is the presence, either in person or by proxy, of at least 2/3 of the appointed Directors serving in office at that time.

 

25.3.5. If within half an hour of the time for the scheduled meeting, a legal quorum is not present, the meeting shall be postponed by one (1) working day and shall be held at the same place and time (“ First Adjourned Meeting ”). Quorum for the First Adjourned Meeting of the Board shall be 2/3 of the directors that are present, either in person or by proxy, and in the absence of a quorum, then a second adjourned meeting will be convened, within one (1) working days from the date of the First Adjourned Meeting, and shall be held at the same place and time (“ Second Adjourned Meeting ”). Quorum at the Second Adjourned Meeting shall be 2/3 of the directors that are present, either in person or by proxy. In the absence of a legal quorum at the Second Adjourned Meeting, the absentee director will grant a proxy to one of the directors that is present. A duly form of a proxy by each of the directors will be agreed by the Parties and signed by each of the directors at Closing.

 

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25.3.6. Subject to the terms of Section 25.5 below (Protective Provisions) and the Chairperson’s casting vote, each of the Directors shall have an equal voting right, on every resolution, without regard to whether the vote thereon is conducted by a show of hands, by written ballot or by any other means.

 

25.3.7. At the Closing, the Company will obtain D&O (directors and officers) insurance policy with a carrier and in an amount satisfactory to the Party A. The Company will enter into an indemnification agreement with each Director in a form approved by the Board.

 

25.4. Voting Rules for the Board

 

Subject to Section 25.5 (Protective Provisions) below, and unless otherwise required by applicable laws with respect to issues that require a unanimous vote, any decision, action or resolution of the Company, taken by the Board, shall be taken by a simple majority vote (or Directors subject to the Chairperson’s casting vote, as applicable).

  

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25.5. Protective Provisions

 

25.5.1. Notwithstanding that stated in Section 25.4 above and subject to the provisions in Section 12.1.5 above (Payment Default), any decision, action or resolution of the Company taken by the Board, with respect to the following matters, shall require the affirmative vote or written consent of at least one of Party A Directors, as applicable:

 

(i) make any loan or advance to, or own any stock or other securities of, any subsidiary or other corporation, partnership, or other entity;

 

(ii) make any loan or advance to any person, including, any employee or director, except advances and similar expenditures in the ordinary course of business or under the terms of an employee stock or option plan approved by the board;

 

(iii) guarantee any indebtedness except for trade accounts of the company or any subsidiary arising in the ordinary course of business;

 

(iv) make any investment inconsistent with any investment policy approved by the board;

 

(v) incur any aggregate indebtedness in excess of 25% of the annual budget that is not already included in a board-approved budget;

 

(vi) enter into or be a party to any transaction with any director, officer or employee of the company or any other related party or to any transaction in which a related party has an interest;

 

(vii) change the principal business of the company, enter new lines of business, or exit the current line of business;

 

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(viii) sell, assign, license, pledge or encumber material technology or intellectual property, other than licenses granted in the ordinary course of business; or

 

(ix) enter into any corporate strategic relationship involving the payment contribution or assignment by the company or to the company of assets greater than $1,000,000 (one million);

 

(x) any changes to the company’s signatory rights;

 

(xi) liquidate, dissolve or wind-up the affairs of the company, or effect any merger or consolidation or any other deemed liquidation event (as defined in section 32.2 hereunder);

 

(xii) amend, alter, or repeal any provision of any of the company’s incorporation documents;

 

(xiii) create, authorize the creation of, or issue any other security of the company;

 

(xiv) pay any dividend excluding dividend to be paid in accordance with the dividend policy described below;

 

(xv) create or hold capital stock in any subsidiary that is not a wholly-owned subsidiary or dispose of any subsidiary stock or all or substantially all of any subsidiary assets;

 

(xvi) increase or decrease the size of the board; or

 

(xvii) approve of a reorganization or an IPO of the securities of the company, a sale of all or substantially all of the assets of the company, or a merger of the company or any deemed liquidation event (as such terms are defined in section 32.2 hereunder).

 

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25.6. Supervisory Board of the Joint Venture Equity Company

 

25.6.1. Effective as of Closing, the Company will not have a supervisory committee, but shall appoint a supervisor (the “ Supervisor ”). Dr. Carl Geng will be appointed as the first Company Supervisor. The term of appointment of the Supervisor shall be three (3) years. When the term expires, the Supervisor may be re-elected and reappointed by the Board. Directors and senior management staff shall not assume the position of a Supervisor.

 

25.6.2. The role of the Supervisor shall include the following responsibilities:

 

(i) Check the financial affairs of the Company;

 

(ii) Supervise the acts of senior management personnel, Directors, and recommend to the Board on corrective actions from Directors and senior management personnel;

 

(iii) Propose to convene temporary meetings of the Board, and bring forward proposals at meetings of the Board of Directors.

 

25.6.3. The Supervisor shall be invited to attend all meetings of the Board as a non-voting attendee, and may raise questions or suggestions about the meeting agenda discussed by the Board.

 

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Chapter 11

 

Lock-Up Period; Right of First Refusal, Co-Sale Right,

 

Right of First Offer, Pre-Emptive Rights

 

26. Lockup Period

 

During a period of twenty four (24) months from the Closing (“ Lockup Period ”), but provided that such period shall lapse upon an IPO of the securities of the Company (as defined in Section 27.3 hereunder), the Shareholders shall not sell, transfer, assign, pledge, hypothecate, mortgage or dispose of, by gift or otherwise, or in any way encumber or make any other Disposition any of their Equity Rights in the Company, without the prior written consent of the other Shareholders, provided that a Shareholder shall be entitled to make a Disposition of its fully paid up Equity Rights to its respective Permitted Transferee, and further provided, however, that such transferee shall execute a joinder to this Agreement, consenting to be bound under the same rights and obligations which apply to its respective transferor, as further set in Section 27.3.9 below.

 

For the removal of doubt, the undated consent, executed by each of Party B and Party A, for the Disposition of Equity Rights by the other Shareholder, is attached as Exhibit 19.2.5 and 19.3.3 herein, and will be used by the other Shareholder upon a Disposition, subject to the fulfilment by such other Shareholder, of all the terms set forth in Chapter 11 of this Agreement. Moreover, each of the Parties undertakes to provide all necessary assistance to allow the other Party to exercise its rights under this Chapter 11.

 

27. Right of First Refusal; Co-Sale Right; Right of First Offer

 

Following the Lockup Period and prior to first to occur of: the consummation of an IPO of the securities of the Company or an Exit Event (as such terms are defined in Section 27.3 hereunder), Dispositions of Equity Rights in the Company, other than a transfer to a Permitted Transferee, shall be subject to the following, as applicable:

 

27.1. Party A’s Right of First Refusal

 

27.1.1. Party B shall only sell Equity Rights of the Company further to a Bona Fide Offer (as defined below). If Party B reaches an agreement to sell Company’s Equity Rights further to a Bona Fide Offer, it shall give Party Aa Shareholder Offeror Notice (as defined below) (within ten (10) working days of the receipt of any such Bona Find Offer) giving Party A the opportunity to purchase all of the Equity Rights of the Company identified in any such Shareholder Offeror Notice in accordance with the provisions of Section 27.1 below.

 

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27.1.2. Any election by the Party A to purchase Equity Rights of the Company from Party B pursuant to this Section 27.1.2 shall be made by written notification (an “ Acceptance Notice ”) to be received by Party B within twenty one (21) working days (the “ Acceptance Period ”) after the receipt of the Shareholder Offeror Notice by Party A.

 

27.1.3. The Acceptance Notice shall specify Party A’s consent to purchase the entire amount of the Equity Rights of the Company offered by Party B under the Shareholder Offeror Notice. Failure by the Party A to deliver an Acceptance Notice during the Acceptance Period shall be deemed an irrevocable waiver by Party A of its rights under this Section 27.1 with respect to the Offered Equity Rights in any such Shareholder Offeror Notice (but shall not act as a waiver of such Shareholder’s rights with respect to the Co-Sale Rights set forth in Section 27.2 below).

 

27.1.4. If Party A has issued an Acceptance Notice under this Section 27.1.2, the Offered Equity Rights shall be transferred by Party B to Party A pursuant to the terms identified in the applicable Shareholder Offeror Notice within fourteen (14) working days from the end of the Acceptance Period subject to full payment therefore;

 

27.1.5. Party B shall sell and transfer the Offered Equity Rights to Party A free and clear of any encumbrances, against payment by Party A of the applicable consideration specified in the Shareholder Offeror Notice.

 

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27.1.6. In the event that not all Offered Equity Rights are elected to be purchased by the Party A pursuant to Section 27.1.2 above, then (1) the Acceptance Notice shall be deemed to be null and void and the Shareholder Offeror may, during the seventy (70) - day period following the end of the Acceptance Period, Dispose of such Offered Equity Rights pursuant to the terms of the applicable Shareholder Offeror Notice, provided that ongoing obligations of Party B (i.e. grant of the License) shall continue to bind Party B, and further provided that the purchaser of any such Offered Equity Rights has agree in writing to assume the obligations of Party B under this Agreement, and (2) the Party A may exercise its co-sale rights under Section 27.2 below.

 

27.1.7. In the event that Party B does not consummate the Disposition of the Offered Equity Rights within such seventy (70) day period, any applicable right of right of first refusal provided hereunder shall be reinstated, and any Disposition of any Equity Rights of the Company by Party B shall not be made unless it complies with the provisions of this Section 27.1.

 

27.2. Co-Sale Rights.

 

27.2.1. If Party A does not exercise its right of first refusal as per Section 27.1 above, it may nevertheless provide during the Acceptance Period a Co-Sale Notice in which it may sell, at the price and on the terms stated in such Shareholder Offeror Notice, a pro rata portion of the total number of Offered Equity Rights being sold by Party B equal to the product obtained by multiplying the number of the Offered Equity Rights by a fraction, the numerator of which is the number of Equity Rights of the Company held by Party A and the denominator of which is the sum of the total number of Equity Rights owned by Party B and by Party A. To the extent Party A exercises such right of Co-Sale, the number of Equity Rights from the Offered Equity Rights that Party B may sell shall be correspondingly reduced and Party B shall not sell any of the Offered Equity Rights to the Bona Fide Purchaser unless the Party A is allowed to sell its pro rate share of the Offered Equity Rights as detailed above. If there is no such sale within such seventy (70) calendar days period, then Party B will not sell or transfer the Offered Equity Rights, or any other Equity Rights of the Company, without again complying with the provisions of this Section 27.2.

 

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27.2.2. Any such election by Party A shall be made by a written notice (a “ Co-Sale Notice ”) to Party B, with a copy to the Company, during the Acceptance Period. If Party A does not provide a Co-Sale Notice within the Acceptance Period it shall be deemed to have rejected such offer and waived its co-sale rights under this Section 27.2, and Party B shall be free within seventy (70) calendar days of the date of expiration of the period for submission of a Co-Sale Notice, to sell the Offered Equity Rights at the price and on the terms contained in the Shareholder Offeror Notice, provided that, to the extent approved by the Party A, ongoing obligations of Party B (i.e. grant of the License) shall continue to apply and further provided that the purchaser of any such Offered Equity Rights has agreed in writing to assume the other obligations of Party B under this Agreement. If there is no such sale within such seventy (70) calendar days period, then Party B will not sell or transfer the Offered Equity Rights, or any other Equity Rights of the Company, without again complying with the provisions of this Section 27.2.

 

27.3. Party B’s Right of First Offer

 

27.3.1. If Party A proposes to Dispose of any of its respective Equity Rights in the Company (other than pursuant to a Permitted Transferee) it shall give Party B a Shareholder Offeror Notice (which will only include sub section (2) and (3) of such notice, as the Party A is not required to have a Bona Fide Offer prior to sending such notice) giving Party B the opportunity to purchase all of the Equity Rights of the Company identified in any such Shareholder Offeror Notice in accordance with the provisions of Section 27.1.2-27.1.7 above which will apply, mutatis mutandis. Party A shall not sell any Equity Rights to a direct competitor of the Company and/or Party B without the approval of the Chairman of the Board of Party B.

 

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27.3.2. Defined Terms . The following defined terms used in this Section 27 (Party A’s Right of First Refusal, Co-Sale Right, Party B’s Right of First Offer) and Section 33 (Party A Conversion Right to Party B Equity Rights) have the respective meanings set forth below:

 

27.3.3. A “ Bona Fide Offer ” means a binding valid offer (including all material details and documents pertaining thereto) from a Bona Fide Purchaser (defined below) to purchase some or all of the Equity Rights of the Company owned by a Shareholder.

 

27.3.4. A “ Bona Fide Purchaser ” is any unaffiliated third party that is ready, willing and able to purchase or otherwise acquire any Equity Rights of the Company from a Shareholder.

 

27.3.5. A “ Shareholder Offeror Notice ” is a written notice provided by Party B to the Party A setting forth (1) Party B’s intention to Dispose of its Equity Rights (pursuant to a Bona Fide Offer), (2) the type, class, and number of Equity Rights of the Company proposed to be Disposed of by Party B (the “ Offered Equity Rights ”), (3) the price and all other commercial and payment terms and conditions upon which Party B proposes to Dispose of its Equity Rights, (4) the manner in which the price and such other terms and conditions were or shall be established, and (5) the identity of the Bona Fide Purchaser.

 

27.3.6. An “ IPO ”, an initial public offering of Company’s Equity Rights or of Party B securities or of any other corporation, as the case may be, on any international stock exchange, following the transformation of the Company into a foreign investment company limited by shares, to the extent required under PRC Law;

 

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27.3.7. “ Exit Event ” , means: (i) any merger, reorganization or consolidation of the Company with or into another entity, or the acquisition of the Company by means of any transaction or series of related transactions, following which the existing shareholders of the Company as of immediately prior to such transaction or series of related transactions hold, by virtue of such transaction or series of related transactions, less than 50% of the voting power of the surviving or acquiring entity or less than 50% of the issued and outstanding share capital of the surviving or acquiring entity, or (ii) a sale, transfer, grant of exclusive license or other disposition of all or substantially all of the assets of the Company, in a single transaction or a series of related transactions. “ Party B Exit Event ” shall have the same meaning as the above Exit Event definition referencing Party B instead of the Company where applicable.

 

27.3.8. “ Dispose ” or “ Disposition ” means the sale, assignment, transfer, creation of any liens or encumbrances or other forms of disposition of Equity Rights in the Company (including, without limitation, any Equity Rights in the Company issued pursuant to any employee stock option plan); provided, however, that the term “ Dispose ” or “ Disposition ” will not include any liens or encumbrances made by Party B to any financial institution as security for its debts or obligations, and further provided, that with respect to any Disposition of Party A Equity Rights, it will not include any sale, assignment, transfer, creation of any liens or encumbrances or other forms of disposition to any Competitor of the Company and/or Party B, unless approved in advance by Party B.

 

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27.3.9. “ Permitted Transferee ” means a transfer to (1) any legal entity which controls, is controlled by, or is under common control with such legal entity transferor, (2) in case of a transfer by a legal entity transferor which is a partnership (including a limited partnership) or a limited liability company, to any partners or retired partners, members or retired members, or partnership (including a limited partnership) or limited liability company managed by the same management company (or the same manager of any such limited liability company) or to the partners or members thereof, or (3) in case of a transfer by a legal entity transferor which is a trustee, the beneficial owner of the Equity Rights, all provided that: (A) the provisions of this Agreement shall continue to be applicable to the Equity Rights of the Company following any such transfer, (B) as a condition to any such transfer, the Permitted Transferee/s shall undertake in writing to be bound by the provisions of this Agreement, and (C) the restrictions on the Disposition of Equity Rights of the Company under this Agreement shall apply to any disposition of Equity Rights of the Company held by the Permitted Transferee(s) mutatis mutandis. The term “ Control ” as used herein, means the ability to direct or cause the direction of the activity of a person or entity, directly or indirectly, whether through the ownership of voting securities, by contract or otherwise, and it shall be dee med “ control ” in the event of ownership, solely or jointly with others, of half or more of the voting power, or the ability, solely or jointly with others, to designate a majority of the members of the board of directors or the manager(s) of any limited liability company or the general partner of any general partnership; provided, however, that for the purposes of this Section 1 only, the Disposition of any Equity Rights in a Permitted Transferee which is a legal entity (i.e., incorporated entity, limited liability company, trust or partnership) in which the sole or primary asset is Equity Rights of the Company (such legal entity shall be referred to as a “ Holding Company ”) shall be regarded as a Disposition of the Equity Rights of the Company, and the provisions of this Section 1 will apply accordingly. the Disposition of any Equity Rights in a Permitted Transferee which is a legal entity (i.e., incorporated entity, limited liability company, trust or partnership) in which the sole or primary asset is Equity Rights of the Company (such legal entity shall be referred to as a “ Holding Company ”) shall be regarded as a Disposition of the Equity Rights of the Company, and the provisions of this Section 1 will apply accordingly.

 

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28. Preemptive Rights

 

28.1. Following the Closing, until immediately prior to the consummation of an IPO of the securities of the Company or an Exit Event, in the event that the Company proposes to issue or sell any New Securities (as defined below), the Company shall first offer to each of the Shareholders the right to purchase such number of New Securities reflecting a Shareholder’s Pro -Rata Share (as defined below) of the New Securities.

 

For purposes of this Section 28, a Shareholder’s “ Pro-Rata Share ” shall mean the ratio of the number of issued Equity Rights of the Company owned by such Shareholder immediately prior to the issuance of New Securities, to the total number of Equity Rights of the Company owned by all Shareholders immediately prior to the issuance by the Company of New Securities.

 

“New Securities” shall mean any equity interest (including different classes of Equity Rights and/or preferred Equity Rights and any Equity Rights issued pursuant to an employee stock option plan) in the Company, whether now authorized or not, and grants of any rights, options or warrants to purchase such equity interests, and securities of any type whatsoever that are exercisable for or convertible into equity interests of the Company, other than (i) securities under an employees option plan approved by the Board, (ii) any type or class of Equity Rights issued pro rata to all Shareholders in recapitalization events or as dividend or bonus Equity Rights (including any adjustments made pursuant to such recapitalization), or (iv) securities offered to the public in an IPO.

 

28.2. In the event that the Company proposes to issue New Securities, it shall give each of the Shareholders a written notice (a “ Rights Notice ”) of its intention, describing the type of New Securities, the price, the general terms upon which the Company proposes to issue such New Securities, and the number of New Securities that each Shareholder has the right to purchase hereunder. Pursuant to the purchase mechanics identified in Section 28.3 below, each Shareholder shall have fourteen (14) calendar days from its receipt of a Rights Notice to agree to purchase all or any part of such Shareholder’s Pro Rata Share of such New Securi ties for the price and upon the general terms specified in the applicable Rights Notice, by giving written notice to the Company setting forth the quantity of New Securities to be purchased.

 

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28.3. In the event that any Shareholder fails to exercise in full its respective preemptive right within the fourteen (14) -day period specified above, the Company shall have ninety (90) calendar days after the expiration of such fourteen (14) -day period to enter into an agreement with a third party to sell the New Securities in respect of which the applicable Shareholders’ pre-emptive right set forth in this Section 27.2 is not exercised, at a price and upon general terms no more favorable to the purchasers thereof than specified in the applicable Rights Notice. In the event that the Company has not entered into an agreement to sell such New Securities within such ninety (90) day period, the Company shall not thereafter issue or sell any New Securities without first again offering such New Securities to each of the Shareholders in the manner provided in this Section 28.

 

29. Registration Rights

 

To the extent that Party B is granted with any rights to register its rights in the Company for trade in a stock exchange, as part of an IPO of the Company, then Party A shall have the same registration rights as Party B, on a pro-rata basis.

 

30. Dividend Policy

 

Following the Closing Date, the Company will distribute, in dividends, annually, subject to any legal limitations, 20% (twenty percent) of its distributable profits, taking into account the Company’s operational needs.

 

31. Anti Dilution Provisions

 

In the event that the Company issues additional Company Equity Rights to an independent third party investor in the first equity investment immediately following the Closing of the transactions contemplated herein only, reflecting a purchase price per share that is lower than the price per share reflected by the Contribution Amount contemplated herein, the Party A will be issued additional Equity Rights of the Company, for no consideration (other than the par value), based on a weighted average formula. This mechanism, will be reflected in the Company’s Amended and Restated Articles of Association.

 

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32. Party A’s Liquidation Preference

 

32.1. Upon an event of any liquidation, dissolution or winding up of the Company, and upon a Deemed Liquidation event as defined below, the Party A shall be entitled to be paid out of the assets legally available for distribution to Company shareholders, before any payment to any other shareholder by reason of their ownership thereof, amount in cash equal to that part of the Contribution Amount that was actually transferred to the Company. The remaining assets legally available for distribution to Company shareholders shall be distributed to all Company shareholders in proportion to the number of Company Equity Rights then held by them. The Company and Party B undertake (and in the case of Party B such undertaking will include the use of all its powers in the Company, including the right to appoint and dismiss director and officers) to procure that no such transaction will occur unless Party A’s liquidation preference is observed.

 

32.2. An Exit Event will be treated as a liquidation event thereby triggering payment of the liquidation preference described above (“ Deemed Liquidation Event ”).

 

32.3. In the event that due to Chinese Law, Party A’s preference rights may not be exercised as indicated in this section 32 above, the Parties and the Company undertake to introduce an alternative contractual vehicle that will ensure a similar economic outcome to Party A.

 

33. Party A Conversion Right to Party B Shares

 

33.1. If Party B contemplates an Party B Exit Event or an IPO, it shall give Party Aa notice (the “ Exit Notice ”) giving Party A the opportunity to convert all of the Party A’s Equity Rights into shares of Party B and to sell such shares as part of Party B Exit Event or the public market post the IPO (subject to any standoff and no sale periods applicable to other shareholders of Party B) (“ Conversion Right ”).

 

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33.2. The Conversion Right will be exercised based on the fair value of Party B and the Company, in accordance with the formula, as shall be agreed by the Parties prior to Closing and thereafter attached as Exhibit 33.2 hereto (“ Conversion Formula ”).

 

33.3. Any election by the Party A to exercise the Conversion Right shall be made by written notification (a “ Conversion Notice ”) to be received by Party B within thirty (30) days (the “ Acceptance Period ”) after the receipt of the Exit Notice by Party A.

 

33.4. The Conversion Notice shall specify Party A’s consent to convert the entire amount of the Equity Rights of the Company held at the time by the Party A into Party B shares, immediately prior to Party B Exit Event or to the IPO. Failure by Party A to deliver a Conversion Notice during the Acceptance Period shall be deemed an irrevocable waiver by Party A of its rights to exercise its Conversion Right.

 

33.5. If Party A has issued a Conversion Notice under Section 33.3, Party A’s Equity Rights in the Company will be fully redeemed by the Company at their nominal value, and Party A will be issued with such number of Party B shares, based on the Conversion Formula, all subject to any regulatory approvals that may be required and the Parties undertake to make best efforts in order to obtain any approvals that may be required under Chinese Law to give effect to the Conversion Right.

 

33.6. In the event that Party A has not submitted a Conversion Notice during the Acceptance Period, then Party B may, during the one hundred (100) day period following the end of the Acceptance Period, consummate the Party B Exit Event or the IPO pursuant to the terms of the applicable Exit Notice, without further obligation to re-offer Party A the right to convert.

 

33.7. In the event that Party B does not consummate the Party B Exit Event or the IPO within such one hundred (100) day period, any applicable conversion right of the Party A shall be reinstated, and any Party B Exit Event or the IPO of any shares of Party B shall not be made unless it complies with the provisions of this Section 33.

 

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33.8. The Parties undertake to cooperate with each other to enable Party A to exercise the Conversion Right in accordance with applicable laws.

 

34. Assistance in the Sale of the Party A’s Equity Rights

 

Provided that at that time Party A has paid all Milestone Payments due by such time, at the request of Party A, the Company shall, and Party B shall use reasonable powers (including the right to appoint and dismiss directors and officers) to cause the Company to assist Party A in selling the Party A’s Equity Rights in the Company (or in such other cases as listed below), including by causing the Company to assist in marketing efforts, conducting road-shows or otherwise, providing any reasonable or necessary information to any prospective purchaser, allowing prospective purchasers to meet with the management of the Company, supporting and facilitating any due diligence requirements, etc. Such undertaking will apply to (i) the sale by Party A alone (at a pre-approved cost to be paid by Party A), (ii) the sale of all of the Company’s Equity Rights or assets pursuant to Party A’s right to force such sale; and (iii) an IPO of the securities of the Company, pursuant to Party A’s right to force it.

 

35. Party A Exit Rights

 

35.1. The Party A will have the right to force an IPO of the securities of the Company, provided the underwritten valuation of the Company in such IPO is no less than US$50,000,000, the Company has sufficient operational capital to finance the process and continue its operations as planned and further provided that Party B is not undergoing an IPO during said year. To the extent that the Company has not succeeded in the consummation of an IPO pursuant to the terms of this Section 35.1, the Party A may only force one additional IPO of the securities of the Company, not earlier than eighteen (18) months after the failure of the process.

 

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35.2. Prior to the consummation of an IPO of the securities of the Company, Party A and Party B shall negotiate in good faith and agree on a governance structure and by-laws, but Party A special rights (liquidation preference, anti-dilution, veto rights etc.,) shall expire upon consummation of the Company IPO.

 

35.3. Party A will have the right to force the sale of the Company or, at Party A’s choice, all of Company’s assets, provided the valuation of such transaction is no less than US$ 50,000,000 and further provided that the Chairman of Party B does not object to the sale due to such purchaser being a direct competitor of Party B.

 

35.4. To the extent permitted by law, the Company undertakes to indemnify and hold Party B and each Party A Indemnified Person (as defined above) completely harmless from and against any and all Losses (as defined above) arising from or otherwise related to: (i) any untrue statement of a material fact contained in any prospectus, offering circular, or other offering document relating to any IPO of the securities of the Company; (ii) any failure to state therein a material fact necessary to make the statements therein not misleading; and (iii) any violation of applicable law (including but not limited to, securities laws and exchange requirements applicable to any IPO of the securities of the Company).

 

36. Books and Records; Administration; Access

 

36.1. At all times the Company shall keep proper and complete books of account, in which shall be entered fully and accurately the transactions to which the Company is a party, in accordance with applicable law.

 

36.2. Each Shareholder holding above 15% (“ Major Shareholders ”) will be granted access to the Company facilities and personnel during normal business hours and with reasonable advance notification for the purpose of monitoring such shareholder’s investment in the Company.

 

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36.3. The Company will deliver to each Major Shareholder the following reports:

 

36.3.1. annual audited financial reports, ninety (90) days after the end of every calendar year;

 

36.3.2. quarterly financial reports, within sixty (60) days after the end of every calendar quarter;

 

36.3.3. monthly financial statements, within ten (10) days after the end of every calendar month;

 

36.3.4. any other information as shall be determined from time to time by the Board;

 

36.3.5. Thirty (30) days prior to the end of each fiscal year, a comprehensive operating budget forecasting the Company’s revenues, expenses, and cash position on a month-to-month basis for the upcoming fiscal year and an update to the business plan (including its extension to an additional year); and

 

36.3.6. promptly following the end of each quarter an up-to-date capitalization table.

 

37. Tax

 

37.1. The Company shall pay all categories of taxes in accordance with law and enjoy all preferential treatment of tax reduction or exemption in accordance with the tax law of China and the preferential tax policy as approved by the responsible tax authorities.

 

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37.2. The staff and workers of the Company shall pay on his own the personal income tax in accordance with the “Personal Income Tax Law of the People’s Republic of China”.

 

38. Finance, Accounting and Auditing

 

38.1. The financial and accounting system of the Company shall be in accordance with the “Enterprise Accounting System” and the provisions of this Agreement, and shall be formulated with the integration of the practical situations of the Company, and shall be reported to the relevant financial and tax authorities for filing purpose. The accounting of the Company shall adopt the internationally accepted accrual basis and debit and credit accounting system.

 

38.2. Before the end of January of each fiscal year, the Chief Financial Officer shall according to the audited financial reports compile a report for the distribution of the profit of the preceding fiscal year, and submit to the Board for resolution.

 

38.3. For the last quarter of each fiscal year, the Chief Financial Officer shall compile the financial budget for the coming fiscal year, and submit to the Board for resolution.

 

38.4. The fiscal year of the Company is from the first (1 st ) of January to the thirty-first (31 st ) of December of each calendar year. All the vouchers, receipts, reports and account keeping books shall be written in Chinese.

 

38.5. The Company shall adopt Renminbi as the accounts keeping unit. In case of receipts or payments in foreign currency, it shall concurrently be recorded in foreign currency.

 

38.6. The Company shall employ Chinese registered accountant to undertake financial audit of the Company, and the audited reports of the financial statements for the preceding fiscal year shall be submitted to the Chief Financial Officer by the end of January of each year.

 

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38.7. The Company shall accept the examination and scrutiny of the financial revenues and expenditures, accounting books of the Company by the audit authorities of the government. Any of the Parties shall have the right to recruit auditors to audit the accounting books and operating conditions of the Company at such Party’s own expenses. During the audit, the Company shall provide all necessary assistance.

 

38.8. The Renminbi account and foreign exchange account opened by the Company in the bank in China shall be managed by the Company. The collection, payment and clearance business of the Renminbi and foreign exchange of the Company shall be handled by the adjacent banking institution, and the conditions offered by that bank shall be more preferential or at least equal to the other competitors.

 

38.9. Financial Rules will be mutually agreed by the Parties and adopted by the Company subject to the approval of the Board.

 

38.10. The accountants and auditors of the Company will be mutually agreed by the Parties, provided it is one of the “Big-4” accounting firms (i.e. PWC, Deloitte, EY and KPMG).

 

38.11. At all times the Company shall keep proper and complete books of account, in which shall be entered fully and accurately the transactions of the Company in accordance with applicable law.

 

38.12. As part of its operations the Company will put in place from time to time such procedures and policies (including human resource policy, risk management policy, financial management regulations, foreign exchange matters, Board meeting procedures, etc.) as shall be further expanded by the Board.

 

38.13. Notwithstanding anything to the contrary, the Company shall keep additional books and accounts, follow such additional accounting principals and take all action in order to provide to Party B the needed accounting information in order to be able to fully consolidate the financial results.

 

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39. Equity Share Option Plan

 

It is hereby agreed, that 5% of the Company share capital will be reserved for an employee share option plan. There shall be neither voting rights nor preemptive rights for Equity Rights issued upon exercise of such options (until an IPO).

 

40. Non Compete Undertaking

 

Party B undertakes and agrees not to compete (including non-solicitation and non-circumvention undertakings) with the Company nor with any of its business activities excluding the BodyTite products (whether as employee, officer, director, service provider, partner, shareholder or other similar capacity), in the Territory. Mr. Moshe Mizrahy shall assume a similar personal undertaking, for so long as it holds shares in Party B. Party B and Mr. Moshe Mizrahi will enter, effective at Closing, into a non-competition, non-solicitation and non-circumvention agreement, in the forms as shall be agreed by the Parties by Closing.

 

41. Confidentiality

 

41.1. Each of the Parties (including the Company) undertakes to keep all of the confidential information that it may receive from the other Party with respect to this Agreement and/or the transactions contemplated herein and/or the negotiations leading up to execution of it confidential and/or confidential information of the Company, not to make any use whatsoever of it and not to exploit it other than for the purpose of performance of the contract the subject of this Agreement and not to transfer it to any third party whatsoever. The Company shall keep in confidence and shall not use any and all confidential information disclosed to it by the Parties or which it shall become privy to as a result of the performance of this Agreement or the operation of the Company.

 

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41.2. Confidential information for the purposes of this Agreement shall mean: any information, including this Agreement and the conditions hereof, any data, document, sketch, plan, commercial information, accounting information, professional information, marketing information, scientific information, technical information, commercial information or other information in any form whatsoever and on any medium whatsoever, relating to any of the Parties (including the Company) and/or their businesses, with the exception of information that has come into the public domain other than due to the breach of this undertaking and except for any portion of the information that either of the Parties may be required to disclose under any law or at the demand of any authority, and except for information that the Party (including the Company) bound by confidentiality proves was in its possession prior to it being provided to it by any of the Parties (including the Company) to this Agreement.

 

41.3. Each of the Parties (including the Company) shall cause all of its officers, employees and persons acting on its behalf to keep all confidential information, confidential and shall be liable towards the other Parties (including the Company) for any disclosure of confidential information by any person acting on its behalf.

 

42. Term and Termination

 

42.1. The Company’s term shall be twenty (20) years (the “ Term ”). Subject to the approval of relevant authorities, the term may be extended by consent of all shareholders of the Company.

 

42.2. This Agreement may be terminated by the written notice of a Party to the other Parties of an intention to terminate this Agreement pursuant to the procedure set forth in Section 43 below, if: (i) any Party materially breaches this Agreement, the License Agreement or violates the Articles of Association, and such breach or violation is not cured within three (3) months of written notice to the breaching Party (in such case only the non-breaching Parties may terminate); or (ii) the closing conditions set forth in Sections 14-18 hereof are not fulfilled by the Closing Date and are not extended or waived; or (iii) the Company becomes bankrupt, or is the subject of proceedings for liquidation or dissolution, or ceases or is unable to carry on business in accordance with this Agreement or becomes unable to pay its debts as they come due.

 

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43. Dissolution, Liquidation and Handling of Assets

 

43.1. On the day after obtaining the approval from the original examination and approval authorities for dissolution, the Company shall start the liquidation, and the Board shall organize a Liquidation Committee to undertake liquidation of the debts, rights and assets of the Company. The liquidation of the Company shall be undertaken in accordance with the regulations in this Agreement, the Articles of Association and the related laws.

 

43.2. In case the Company is dissolved pursuant to the provisions of this Agreement, the Board of Directors shall form a Liquidation Committee within fifteen (15) days from the date of dissolution. The members of the Liquidation Committee shall be appointed from the existing Directors or be taken up by professional staff employed. The Liquidation Committee shall exercise the following scope of authorities during the period of liquidation:

 

(1) Clean up the property of the Company, compile the balance sheet and inventory list of the property, and formulate the liquidation plan;

 

(2) Inform the unidentified creditors through announcement in public notice, inform the identified creditors through written notice.

 

(3) Handle the non-ending operation of the Company.

 

(4) Propose the methods of evaluation and handling of the property.

 

(5) Pay outstanding taxes.

 

(6) Clean up the creditors’ rights and debts.

 

(7) Handle the remaining property of the Company after repaying the debts.

 

(8) Represent the Company to participate in civil claims proceedings.

 

(9) Other duties or powers as required or authorized by related laws.

 

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43.3. The liquidation plan formulated by the Liquidation Committee shall be endorsed by the Board, and then submitted to the original examination and approval authorities for record purpose.

 

43.4. After paying the liquidation fee and repaying all outstanding debts, the remaining properties shall be distributed according to the proportion of the investment on the registered capital by Parties, all subject to the provisions of Section 32 (Liquidation Preference) of this Agreement.

 

43.5. After the Liquidation Committee has completed all the tasks as specified in the liquidation plan, it shall compile a liquidation report. After endorsement by the Board, the liquidation report shall be submitted to the original examination and approval authorities for record purpose.

 

43.6. After filing the liquidation report with the original examination and approval authorities, the Liquidation Committee shall be responsible for handling the tax, customs, de-registration of the industry and commerce identity and announce the termination of the Company through public notice.

 

44. Management

 

44.1. Managers

 

44.1.1. The Company shall adopt a management system under which the General Manager shall be responsible to and under the leadership of the Board.

 

44.1.2. The General Manager, the Finance Manager, the Operation Manager and the Technical Manager shall be nominated by Party B, subject to the prior consent of Party A, and appointed by the Board.

 

44.2. Terms of Office and Dismissal . The terms of office of the General Manager and other senior management personnel shall normally be three (3) years, or as otherwise determined by the Board. They may be dismissed at any time by a resolution of the Board, subject to their personal labor agreements.

 

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44.3. Responsibilities and Powers of the General Manager . The duties of the General Manager shall consist of carrying out the decisions of the Board and organising, directing and deciding all matters relating to the day-to-day operation and management of the Company, and achieving the operation target determined by the Board. Within the limitations specified in the restated Articles of Association, this Agreement, and as may be determined by the Board, the General Manager shall represent the Company in all matters concerning its day-to-day operations and management.

 

44.4. Employees and Wages . The employees recruitment, dismissal, wages and salaries, welfare, labor insurance, retirement insurance, labor discipline and other matters of the Company shall be executed in accordance with the “Labor Laws of the People’s Republic of China”, “Labor Contract Laws of the People’s Republic of China” and the implementation practices as formulated by the various levels of the responsible authorities. It shall be autonomously decided by the Company without any interference from external parties. The Company shall sign the labor contract with the employees of the Company on an individual basis, and the labor contract shall be filed with the relevant responsible authorities for record purpose.

 

44.5. The standard of wages and salaries, the form of wages and other systems, and the bonus and subsidies for the staff shall be determined by the Board.

 

44.6. In case the annual executive management fee received by any one of the Executive Management appointed by the Parties of the Company or appointed by any respective parties is eligible for paying any categories of tax (including personal income tax), it shall be the sole responsibility of and paid by such Executive Management.

 

45. Miscellaneous.

 

45.1. Further Assurances . Each of the Shareholders hereto shall perform such further acts and execute such further documents as may reasonably be necessary to carry out and give full effect to the provisions of this Agreement and the intentions of the Shareholders as reflected thereby.

 

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45.2. Costs and Expenses . Except as otherwise expressly agreed to between the Parties in writing, the Company shall bear all costs and expenses associated with this Agreement, including the completion, execution and delivery thereof, costs associated with the formation of the Company and the consummation of the transactions contemplated therein.

 

45.3. Governing Law and Jurisdiction . This Agreement shall be governed by and construed in accordance with the laws of the Republic of China, without regard to its principles concerning conflicts of laws. All disputes, questions or differences whatsoever which shall at any time hereafter arise between the Parties hereto (including the Company) or their respective representatives or any of them, and which the Parties are unable to settle amicably between them, concerning or relating to this Agreement or the validity, construction, meaning, operation or effect thereof, or any clause herein contained, or as to the rights, duties or liabilities of the Parties hereto under or by virtue of this Agreement, shall be finally settled under the Rules of Arbitration of the International Chamber of Commerce by one (1) arbitrator appointed in accordance with the said Rules. Arbitration proceedings shall take place in Israel and be conducted in the English language. Judgment upon any award rendered by the arbitrator may be entered in any court having jurisdiction or application may be made to such court for a judicial acceptance of the award and an order of enforcement as the case may be. As between the Parties, the English version of this Agreement and any other transaction document will prevail.

 

45.4. Prevailing Language of Documents . The English and Chinese versions of this Agreement and all Exhibits shall be of equal effect.

 

45.5. Successors and Assigns; Assignment . Except as otherwise expressly limited herein, the provisions hereof shall inure to the benefit of, and be binding upon, the successors, assigns, heirs, executors, and administrators of the Shareholders. Neither Shareholder may assign its rights or obligations under this Agreement without the prior written consent of the other Shareholder.

 

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45.6. Inconsistency . In any case of inconsistency between the terms and conditions of this Agreement and the Amended and Restated Articles of Association of the Company or any other organizational document of the Company, the terms and conditions of this Agreement, to the extent permitted under applicable law, shall supersede.

 

45.7. Entire Agreement; Amendment and Waiver . This Agreement constitutes the full and entire understanding and agreement between the Parties (including the Company) with regard to the subject matters hereof and thereof and supersedes any prior oral or written agreement concerning the subject matters hereof. Any term of this Agreement may be amended and the observance of any term hereof may be waived (either prospectively or retroactively and either generally or in a particular instance) only with the written consent of all Shareholders.

 

45.8. Notices . Any notices required or permitted to be given hereunder may be sent by registered mail, telex, facsimile or e-mail. Notices sent by mail shall be deemed given seven (7) days after mailing, postage prepaid. Notices by telex, facsimile or e-mail shall be deemed given on the date transmitted with written verification of receipt. Until changed by written notice given by either Shareholder to the other, the addresses of the Shareholders for the purpose of this Agreement are as set forth in the beginning of this Agreement.

 

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

 

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

 

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

 

[The remainder of this page is intentionally left blank]

 

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Guangzhou Sino-Israel Bio-Industry Investment Fund (LLP)

 

By its General Partner, Guangzhou Elim Biotech Industrial Venture Capital Management Company

 

 

By:
     
Name:    
     
Title:         
     
Date:    

 

Invasix Ltd.                    

 

By:  
     
Name:    
     
Title:         
     
Date:    

 

Guangzhou InMode Medical Technology Ltd.

 

By:
     
Name:    
     
Title:         
     
Date:    

 

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Exhibit 11.1.3 - Additional Capital Contribution post Closing

 

Pursuant to Section 11.1.3 of the Agreement, the Party A shall pay the following sums as invested by Party A as a capital reserve:

 

1. 12,403,922RMB within thirty (30) days after Closing (equal to 50M*25%- initial capital contribution made by the Party A at the Closing).17.5 Million RMB (equal to 50M*35%), upon initiating of production and manufacturing line in the Territory.

 

2. 20 Million RMB (equal to 50M*40%), upon completion of sales and positioning of the first 10 InMode platforms in the Territory.

 

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19.1.3

 

Business License

 

 

 

 

Business License

(Duplicate)

 

No. 外 (Foreign) S0802016004703(1-1)

Unified Social Credit Code: 91440101MA59EYWT47

 

Name Guangzhou InMode Medical Sci&Tech Co., Ltd.
Type Limited Liability Company (LLC) (Wholly owned Foreign Enterprise)
Address

Room 103-1, First Floor, No. 6, Luoxuansan Road,

International Bio Island, Guangzhou
Legal Representative MOSHE MIZRAHY
Registered Capital 100,000 RMB
Date of Establishment September 23rd 2016
Term of Operation From September 23rd 2016 to September 23rd 2066
Scope of Business Research and experimental development (For specific items of business scope, please visit the Guangzhou Business Entities Information Platform. The business scope that has been reviewed and approved by examining and approving authorities shall prevail. The types of business which require approval per regulations shall be active only after approval from relevant authorities.)

 

REGISTERED WITH Guangzhou Administration for Industry and Commerce

September 23rd 2016 

 

 

 

 

19.1.7

 

Amended and Restated Articles of Association of the Company

 

 

 

 

Amended and Restated Articles of Association

of

Guangzhou InMode Medical Technology Ltd.

 

Chapter I

 

General Provisions

 

Article 1. General . These Articles of Association are established in accordance with the Company Law of the People’s Republic of China, the Law of the People’s Republic of China on Chinese- Foreign Equity Joint Ventures, and the Contract on Establishment of Guangzhou InMode Medical Technology Ltd. (the “ JV Agreement ”). These Articles of Association shall be the Company’s code of conduct and shall be strictly observed by all equityholders, directors, supervisors and executive management staff of the Guangzhou InMode Medical Technology Ltd (the “ Company ”).

 

Article 2. Company name : Guangzhou InMode Medical Technology Ltd..

 

Article 3. Domicile : Unit 103-1 1/F, No.6 Luoxuan 3rd., Bio-Island, Guangzhou

 

Article 4. The form of the Company : Limited Liability Company (Sino-foreign joint venture).

 

Article 5. The Chairman of the Board of Directors of the Company (the “ Board ”) shall be the legal representative of the Company.

 

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Article 6. Purpose of the Company : The Company will be engaged, inter alia, in the importation, marketing and sale of all Invasix Ltd.’s Products in the Territory (as defined below). The Territory is defined as the People’s Republic of China, Hong Kong, Taiwan and Macau (the “ Territory ” ). The Company may also independently develop, design and manufacture products and devices based on Invasix Ltd.’s intellectual property and technology (as defined in the JV Agreement) and to operate a production line (or lines) for said purpose; also carry out clinical trials and regulatory activities, and the sales, marketing, distribution,support and warranty of the said products.

 

Article 7. Category of core business : Research and testing development.

 

Article 8. Scope of business : Medical research and testing development; Biotechnology research; the sale of non-licensing medical devices; export and import of goods (except for exclusively controlled and sold merchandise) (or other business as may be approved by the Administration of Industry and Commerce). ((Excluding business prohibited by the laws and regulations or is included in the restricted or forbidden categories of the Catalogue of Industries for Guiding Foreign Investment; business shall not involve goods that are subject to the administration of state-run trade, if the business is subject to quota control or licensing administration, quota or license shall be obtained pursuant to the relevant provisions.)

 

Article 9. Authorized business : N/A.

 

Article 10. The total amount of investment into the Company: RMB280,000. The Company’s registered capital: RMB 196,078.

 

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Chapter II

   

Equityholders and Capital Contributions

 

Article 11. Equityholders and Capital Contributions :

 

Equityrightholder’s
Name 		  Date for Capital
Contribution 		  Amount of
Capital
Contribution
(1K RMB) 		  Ratio of
Capital
Contribution 		    Form of
Capital
Contribution

Guangzhou Sino-Israel Bio-Industry Investment Fund (LLP)(“ Party A ”)

 

  Before 1 st May 2017  

96.078K RMB

(“ Investment Amount ”)

    49 %   Cash

Invasix Ltd. (“ Party B ”),

 

Party A and Party B are collectively hereafter referred to as the “ Parties ”

 

Before 1 st Mar. 2017

  100KRMB     51 %   Cash

 

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Chapter III

 

Company’s Equity and Rights of Equityholders

 

Article 12. Definitions. The following terms used herein shall have the meanings defined as follows:

 

a. “ Bona Fide Offer ” means a binding valid offer (including all material details and documents pertaining thereto) from a Bona Fide Purchaser (defined below) to purchase some or all of the Equity rights of the Company owned by an Equity holder.

 

b. “ Bona Fide Purchaser ” is any unaffiliated third party that is ready, willing and able to purchase or otherwise acquire any Equity rights of the Company from an Equity holder.

 

c. “ Dispose ” or “ Disposition ” means the sale, assignment, transfer, creation of any liens or encumbrances or other forms of disposition of Equity rights in the Company (including, without limitation, any Equity rights in the Company issued pursuant to any employee stock option plan); provided, however, that the term “ Dispose ” or “ Disposition ” will not include any liens or encumbrances made by Party B to any financial institution as security for its debts or obligations, and further provided, that with respect to any Disposition of Party A Equity rights, it will not include any sale, assignment, transfer, creation of any liens or encumbrances or other forms of disposition to any Competitor of the Company and/or Party B, unless approved in advance by Party B.

 

d. “ Exit Event ”, means: (i) any merger, reorganization or consolidation of the Company with or into another entity, or the acquisition of the Company by means of any transaction or series of related transactions, following which the existing equityholders of the Company as of immediately prior to such transaction or series of related transactions hold, by virtue of such transaction or series of related transactions, less than 50% of the voting power of the surviving or acquiring entity or less than 50% of the issued and outstanding equity right capital of the surviving or acquiring entity, or (ii) a sale, transfer, grant of exclusive license or other disposition of all or substantially all of the assets of the Company, in a single transaction or a series of related transactions. “ Party B Exit Event ” shall have the same meaning as the above Exit Event definition referencing Party B instead of the Company where applicable.

 

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e. “ Investment Amount ” shall mean the amount of funds actually invested and received by the Company from Party A in exchange for equity rights of the Company as provided in the JV Agreement or otherwise.

 

f. “ IPO ”, an initial public offering of Company’s Equity rights or of Party B securities or of any other corporation, as the case may be, on any international stock exchange.

 

g. “ JV Agreement ” shall mean that agreement entered into by and between Party A, Party B and the Company dated 8 th Oct., 2016 regarding the investment, operations and conversion of the Company into an Equity Joint Venture Company.

 

h. “ New Securities ” shall mean any equity interest (including different classes of ordinary equity rights and/or preferred equity rights and any equity rights issued pursuant to an employee stock option plan) in the Company, whether now authorized or not, and grants of any rights, options or warrants to purchase such equity interests, and securities of any type whatsoever that are exercisable for or convertible into equity interests of the Company, other than (i) securities under an employee’s option plan approved by the Board, (ii) any type or class of equity rights issued pro rata to all Equityholders in recapitalization events or as dividend or bonus equity rights (including any adjustments made pursuant to such recapitalization), or (iv) securities offered to the public in an IPO.

 

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i. “ Permitted Transferee ” means (a) with respect to (1) any legal entity which controls, is controlled by, or is under common control with such legal entity transferor, (2) in case of a transfer by a legal entity transferor which is a partnership (including a limited partnership) or a limited liability company, to any partners or retired partners, members or retired members, or partnership (including a limited partnership) or limited liability company managed by the same management company (or the same manager of any such limited liability company) or to the partners or members thereof, or (3) in case of a transfer by a legal entity transferor which is a trustee, the beneficial owner of the equity rights, all provided that: (A) the provisions of the JV Agreement shall continue to be applicable to the Equity rights of the Company following any such transfer, (B) as a condition to any such transfer, the Permitted Transferee/s shall undertake in writing to be bound by the provisions of the JV Agreement, and (C) the restrictions on the Disposition of Equity rights of the Company under the JV Agreement shall apply to any disposition of Equity rights of the Company held by the Permitted Transferee(s) mutatis mutandis. The term “Control” as used herein, means the ability to direct or cause the direction of the activity of a person or entity, directly or indirectly, whether through the ownership of voting securities, by contract or otherwise, and it shall be deemed “control” in the event of ownership, solely or jointly with others, of half or more of the voting power, or the ability, solely or jointly with others, to designate a majority of the members of the board of directors or the manager(s) of any limited liability company or the general partner of any general partnership; provided, however, that for the purposes of this Article 13 only, the Disposition of any equity rights in a Permitted Transferee which is a legal entity (i.e., incorporated entity, limited liability company, trust or partnership) in which the sole or primary asset is equity rights of the Company (such legal entity shall be referred to as a “ Holding Company ”) shall be regarded as a Disposition of the Equity rights of the Company, and the provisions of this Article 13 will apply accordingly.

 

j. “ Pro-Rata Equity right ” shall mean the ratio of the number of issued Equity rights of the Company owned by such Equityholder immediately prior to the issuance of New Securities, to the total number of Equity rights of the Company owned by all Equityholders immediately prior to the issuance by the Company of New Securities.

 

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k. “ Equityholder Offeror Notice ” is a written notice provided by Party B to the Party A setting forth (1) Party B’s intention to Dispose of its Equity rights (pursuant to a Bona Fide Offer), (2) the type, class, and number of Equity rights of the Company proposed to be Disposed of by Party B (the “ Offered Equity rights ”), (3) the price and all other commercial and payment terms and conditions upon which Party B proposes to Dispose of its Equity rights, (4) the manner in which the price and such other terms and conditions were or shall be established, and (5) the identity of the Bona Fide Purchaser.

 

l. “ Equity rights ” or “ Company Equity rights ” shall mean the Company’s equity right capital or any other security interest as stipulated under Chinese law for an Equity Joint Venture Company.

 

Article 13. Lockup Period . During a period of twenty four (24) months from the Closing (“ Lockup Period ”), but provided that such period shall lapse upon an IPO of the securities of the Company, the Equityholders shall not sell, transfer, assign, pledge, hypothecate, mortgage or dispose of, by gift or otherwise, or in any way encumber or make any other Disposition any of their Equity rights in the Company, without the prior written consent of the other Equityholders, provided that an Equityholder shall be entitled to make a Disposition of its fully paid up Equity rights to its respective Permitted Transferee, and further provided, however, that such transferee shall execute a joinder to the JV Agreement, consenting to be bound under the same rights and obligations which apply to its respective transferor, as further set forth in Article 12.h) above.

 

Article 14. Disposition of Equity rights . Following the Lockup Period and prior to the first to occur of the consummation of an IPO of the securities of the Company or an Exit Event, Dispositions of Equity rights in the Company, other than a transfer to a Permitted Transferee, shall be subject to the following, as applicable:

 

7

 

 

Article 15. Party A’s Right of First Refusal

 

a. Party B shall only sell Equity rights of the Company further to a Bona Fide Offer. If Party B reaches an agreement to sell Company’s Equity rights further to a Bona Fide Offer, it shall give Party A an Equityholder Offeror Notice within ten (10) working days of the receipt of any such Bona Find Offer, giving Party A the opportunity to purchase all of the Equity rights of the Company identified in any such Equityholder Offeror Notice in accordance with the provisions of this Article 15.

 

b. Any election by Party A to purchase Equity rights of the Company from Party B pursuant to this Article 15 shall be made by written notification (an “ Acceptance Notice ”) to be received by Party B within twenty-one (21) working days (the “ Acceptance Period ”) after the receipt of the Equityholder Offeror Notice by Party A.

 

c. The Acceptance Notice shall specify Party A’s consent to purchase the entire amount of the Equity rights of the Company offered by Party B under the Equityholder Offeror Notice. Failure by Party A to deliver an Acceptance Notice during the Acceptance Period shall be deemed an irrevocable waiver by Party A of its rights under this Article 15 with respect to the Offered Equity rights in any such Equityholder Offeror Notice (but shall not act as a waiver of such Equityholder’s rights with respect to the Co-Sale Rights set forth in Article 16 below).

 

d. If Party A has issued an Acceptance Notice under this Article 15, the Offered Equity rights shall be transferred by Party B to Party A pursuant to the terms identified in the applicable Equityholder Offeror Notice within fourteen (14) working days from the end of the Acceptance Period subject to full payment therefore.

 

e. Party B shall sell and transfer the Offered Equity rights to Party A free and clear of any encumbrances, against payment by Party A of the applicable consideration specified in the Equityholder Offeror Notice.

 

8

 

 

f. In the event that not all Offered Equity rights are elected to be purchased by Party A pursuant to Article 15b) above, then (1) the Acceptance Notice shall be deemed to be null and void and the Equityholder Offeror may, during the seventy (70) day period following the end of the Acceptance Period, Dispose of such Offered Equity rights pursuant to the terms of the applicable Equityholder Offeror Notice, provided that ongoing obligations of Party B (i.e. grant of the License) shall continue to bind Party B, and further provided that the purchaser of any such Offered Equity rights has agreed in writing to assume the obligations of Party B under these Articles of Association, and (2) Party A may exercise its co-sale rights under Article 16 below.

 

g. In the event that Party B does not consummate the Disposition of the Offered Shares within such seventy (70) day period, any applicable right of right of first refusal provided hereunder shall be reinstated, and any Disposition of any shares of the Company by Party B shall not be made unless it complies with the provisions of this Article 15.

 

Article 16. Co-Sale Rights

 

a. If Party A does not exercise its right of first refusal as per Article 15 above, it may nevertheless provide during the Acceptance Period a Co-Sale Notice in which it may sell, at the price and on the terms stated in such Equityholder Offeror Notice, a pro rata portion of the total number of Offered Equity rights being sold by Party B equal to the product obtained by multiplying the number of the Offered Equity rights by a fraction, the numerator of which is the number of Equity rights of the Company held by Party A and the denominator of which is the sum of the total number of Equity rights owned by Party B and by Party A. To the extent the Party A exercises such right of Co-Sale, the number of equity rights from the Offered Equity rights that Party B may sell shall be correspondingly reduced and Party B shall not sell any of the Offered Equity rights to the Bona Fide Purchaser unless Party A is allowed to sell its pro rate equity right of the Offered Equity rights as detailed above. If there is no such sale within such seventy (70) calendar days period, then Party B will not sell or transfer the Offered Equity rights, or any other equity rights of the Company, without again complying with the provisions of this Article 16.

 

9

 

 

b. Any such election by Party A shall be made by a written notice (a “ Co-Sale Notice ”) to Party B, with a copy to the Company, during the Acceptance Period. If Party A does not provide a Co-Sale Notice within the Acceptance Period it shall be deemed to have rejected such offer and waived its co-sale rights under this Article 16, and Party B shall be free within seventy (70) calendar days of the date of expiration of the period for submission of a Co-Sale Notice, to sell the Offered Equity rights at the price and on the terms contained in the Equityholder Offeror Notice, provided that, to the extent approved by Party A, ongoing obligations of Party B (i.e. grant of the License) shall continue to apply and further provided that the purchaser of any such Offered Equity rights has agreed in writing to assume the other obligations of Party B under this Articles of Association. If there is no such sale within such seventy (70) calendar days period, then Party B will not sell or transfer the Offered Equity rights, or any other Equity rights of the Company, without again complying with the provisions of this Article 16.

 

Article 17. Party B’ s Right of First Offer

 

If Party A proposes to Dispose of any of its respective Equity rights in the Company (other than pursuant to a Permitted Transferee) it shall give Party B an Equityholder Offeror Notice (which will only include subsection (2) and (3) of such notice, as the Party A is not required to have a Bona Fide Offer prior to sending such notice) giving Party B the opportunity to purchase all of the Equity rights of the Company identified in any such Equityholder Offeror Notice in accordance with the provisions of Article 15 and Article 16 above which will apply, mutatis mutandis. Party A shall not sell any Equity rights to a direct competitor of the Company and/or Party B without the approval of the Chairman of the Board of Party B.

 

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Article 18. Preemptive Rights

 

a. Until immediately prior to the consummation of an IPO of the securities of the Company or an Exit Event, in the event that the Company proposes to issue or sell any New Securities, the Company shall first offer to each of the Equityholders the right to purchase such number of New Securities reflecting a Equityholder’s Pro-Rata Equity right of the New Securities.

 

b. In the event that the Company proposes to issue New Securities, it shall give each of the Equityholders a written notice (a “ Rights Notice ”) of its intention, describing the type of New Securities, the price, the general terms upon which the Company proposes to issue such New Securities, and the number of New Securities that each Equityholder has the right to purchase hereunder. Pursuant to the purchase mechanics identified in Article 18c) below, each Equityholder shall have fourteen (14) calendar days from its receipt of a Rights Notice to agree to purchase all or any part of such Equityholder’s Pro Rata Equity right of such New Securities for the price and upon the general terms specified in the applicable Rights Notice, by giving written notice to the Company setting forth the quantity of New Securities to be purchased.

 

c. In the event that any Equityholder fails to exercise in full its respective preemptive right within the 14-day period specified above, the Company shall have ninety (90) calendar days after the expiration of such 14-day period to enter into an agreement with a third party to sell the New Securities in respect of which the applicable Equityholders’ pre-emptive right set forth in this Article 18 is not exercised, at a price and upon general terms no more favorable to the purchasers thereof than specified in the applicable Rights Notice. In the event that the Company has not entered into an agreement to sell such New Securities within such ninety (90) -day period, the Company shall not thereafter issue or sell any New Securities without first again offering such New Securities to each of the Equityholders in the manner provided in this Article 18.

 

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Article 19. Anti-Dilution Provisions . In the event that the Company issues additional Company Equity rights to an independent third party investor in the first equity investment immediately following the Closing of the JV Agreement only, reflecting a purchase price per equity right that is lower than the price per equity right reflected by the Investment Amount contemplated in the JV Agreement, the Party A shall be issued additional Equity rights of the Company, for no consideration (other than the par value), based on a broad based weighted average formula as follows:

 

For Example:

 

Original Number of Equity rights issued to Party A = 49

 

Original Number of Equity rights issued to all Parties = 100

 

Original Price Per Equity Right paid by Party A = 2

 

New Price Per Equity Right paid by Third Party = 1.75

 

New Number of Equity Rights Issued to Third Party = 50

 

(100X2) + (1.75X50) = 287.5 : (100+50) = 1.916

 

Anti dilution protection for Party A will be:

 

49 x 2 = 98

 

98 : 1.916 = 51.14

 

51.14 : (100+ 50) = 34.09%

 

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Article 20. Party A’s Liquidation Preference

 

a. Upon an event of any liquidation, dissolution or winding up of the Company, and upon a Deemed Liquidation event as defined below, Party A shall be entitled to be paid out of the assets legally available for distribution to Company equityholders, before any payment to any other equityholder by reason of their ownership thereof, an amount in cash equal to that part of the Investment Amount that was actually transferred to the Company. The remaining assets legally available for distribution to Company equityholders shall be distributed to all Company equityholders in proportion to the number of Company Equity rights then held by them. The Company and Party B shall use their best efforts (and in the case of Party B this shall include the use of all its powers in the Company, including the right to appoint and dismiss directors and officers) to procure that no such transaction will occur unless Party A’s liquidation preference is observed.

 

b. An Exit Event will be treated as a liquidation event thereby triggering payment of the liquidation preference described above (“ Deemed Liquidation Event ”).

 

c. In the event that due to Chinese Law, Party A’s preference rights may not be exercised as indicated herein, the Company and its Equityholders shall undertake to introduce an alternative contractual vehicle that will ensure a similar economic outcome to Party A.

 

Article 21. Ratio of Profit Distribution . The Company is liable to all responsibilities against external parties as limited by the total assets of the Company, and each of the Equityholders shall take up limited liability of the Company according to its respective investment in the Company. The Equityholders shall share the profit, undertake the risk and loss as stipulated in these Articles, in accordance with the pro-rated holdings of each of the Equityholders in the Company (subject to any other contractual arrangement between the Equityholders). Between the Equityholders and the Company, each Equityholders shall not mutually undertake any associated responsibilities of the other Equityholders and shall not bind the other Equityholders.

 

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Article 22. Equity right Option Plan . 5% of the Company’s equity right capital will be reserved for an employee equity right option plan. There shall be neither voting rights nor preemptive rights for Equity rights issued upon exercise of such options (until an IPO).

 

Chapter IV

 

The Board and Supervisor of the Company

 

Article 23. The Board . The Board shall be responsible for determining the overall policies and objectives of the Company and to supervise the activities of the management of the Company, as further described herein. All rights and powers not otherwise granted to the management of the Company under any applicable law or by contract, shall vest with the Board.

 

Article 24. Duties of the Board . The duties and powers of the Board include but are not limited to:

 

a. Approve the annual budget and financial statements of the Company;

 

b. Determine the overall policies and objectives of the Company;

 

c. Appoint, dismiss and supervise the management and other personnel of the Company;

 

d. Appoint the accountants and auditors of the Company;

 

e. Take all decisions on behalf of the Company, as specified herein; and

 

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f. Other authorities stipulated by the Articles of Association or by any applicable laws and regulations in China.

 

Article 25. Members of the Board

 

a. The Board consists of six (6) members, three (3) directors to be appointed by the Party A (the “ Party A Directors ”) and three (3) directors to be appointed by Party B (the “ Party B Directors ”) (all of the directors shall be collectively referred to as the “ Directors ”). In the event, however, that Party A fails to pay a portion of the required Milestone Payment, in the event such Milestone Payment has been triggered, and its proportion of equity right ownership of the Company’s Equity rights is reduced accordingly under the JV Agreement, each one-third reduction of such equity right ownership shall cause Party A to forfeit the right to appoint one (1) director, and Party B shall have the right to appoint each such director in its place.

 

b. by notice in writing to the Company by the Equityholder entitled to appoint such Director, as set forth above. A Director shall only be dismissed and/or replaced by the Equityholder that appointed him/her subject to Article 25a) above. The term of office of the Directors will be renewed every three (3) years.

 

c. The Chairperson of the Board shall preside at every meeting of the Board. The Chairperson of the Board shall be one of the Directors appointed by Party B, The Vice Chairperson of the Board shall be appointed by Party A. If at any meeting the Chairperson is not present within fifteen (15) minutes of the time fixed for the meeting, the Directors present shall choose someone to be the Chairperson of such meeting. Subject to the protective provisions set forth in Article 28, the Chairperson shall be entitled to an additional or casting vote in a Board meeting. The duties and responsibilities of the Chairperson and Vice Chairperson, are as further described in this Articles of Association.

 

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d. A Director may appoint an alternate for a specific matter or for a certain meeting by issuance of notice in this regard to the Company at least two (2) days prior to the date of the Board meeting. If a Director serves as an alternate for one or more additional directors, he/she shall have the number of votes equal to the number of directors he/she represents.

 

e. None of the Directors or alternate Directors shall be entitled to receive from the Company any remuneration for their services as Directors.

 

Article 26. Meetings of the Board.

 

a. Meetings of the Board shall be convened by prior written notice of not less than ten(10) days, specifying the date and time (which must be reasonable to all members of the board taking into consideration different time zones, applicable public holidays and rest days), place and agenda of the meeting, which shall be given to all Directors and their alternates. Said notice may be waived or shortened upon the agreement in writing of all Directors. The Board will convene at least once a year. The chairperson of the Board may convene a meeting of the Board at the request made by more than one-third of the directors. Unless otherwise agreed in writing by all directors, the Board meetings shall be held at the GDD.

 

b. Any action of the Board consented to in writing (including via facsimile or e-mail) by all the Directors shall be valid as if so voted upon at a Board meeting duly called and held.

 

c. The Board shall be allowed to hold meetings using any means of telecommunication, provided that all Directors participating in the meeting can speak simultaneously and hear and be heard by all other Directors participating in the meeting, and provided further that the minutes of said meetings are thereafter signed by the Chairperson and Vice Chairperson of the meeting.

 

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d. The legal quorum necessary for the holding of a meeting of the Board is the presence, either in person or by proxy, of at least2/3 of the appointed Directors in office at that time, subject to applicable laws.

 

e. If within half an hour of the time for the scheduled meeting, a legal quorum is not present, the meeting shall be postponed by one (1) working day and shall be held at the same place and time (“ First Adjourned Meeting ”). A quorum for such First Adjourned Meeting of the Board shall be 2/3 of the Directors present either in person or by proxy, and in the absence of a quorum, then a second adjourned meeting will be convened, within one (1) working day from the date of the First Adjourned Meeting, and shall be held at the same place and time (“Second Adjourned Meeting”). Quorum at the Second Adjourned Meeting shall be 2/3 of the Directors that are present, either in person or by proxy. In the absence of a legal quorum at the Second Adjourned Meeting, the absentee Director will grant a proxy to one of the Directors that is present.

 

f. Subject to the protective provisions contained in Article 28below and the Chairperson’s casting vote, each of the Directors shall have an equal voting right, on every resolution, without regard to whether the vote thereon is conducted by a show of hands, by written ballot or by any other means.

 

Article 27. Voting Rules for the Board . Subject to the protective provisions contained in Article 28 below, any decision, action or resolution of the Board, shall be taken by a simple majority vote, subject to the Chairperson’s casting vote, as applicable, provided however, that in accordance with applicable Law, any decisions on the following matters shall be made only after being unanimously agreed upon by the directors present at the Board meeting:(1) Amendment of the Articles;(2) Termination and dissolution of the Company;(3) Increase or reduction of the registered capital of the Company;(4) Merger or division of the Company.

 

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Article 28. Protective Provisions

 

Notwithstanding anything to the contrary stated in these Articles, and subject to the Payment Default provision in JV Agreement Article of 12.1.5, any decision, action or resolution of the Company taken by the Board with respect to the following matters shall require the affirmative vote or written consent of at least one of the Party A Directors, as applicable:

 

a. The making of any loan or advance to, or ownership of any stock or other securities of, any subsidiary or other corporation, partnership, or other entity;

 

b. The making of any loan or advance to any person, including, any employee or director, except advances and similar expenditures in the ordinary course of business or under the terms of an employee stock or option plan approved by the Board;

 

c. A guarantee any indebtedness except for trade accounts of the Company or any subsidiary arising in the ordinary course of business;

 

d. The making of any investment inconsistent with any investment policy approved by the Board;

 

f. The incurring of any aggregate indebtedness in excess of 25% of the annual budget that is not already included in a Board-approved budget;

 

g. The entering into, or becoming a party, to any transaction with any director, officer or employee of the Company or any other related party, or to any transaction in which a related party has an interest;

 

h. The change of the principal business of the Company, entering new lines of business, or exiting the current line of business;

 

i. To sell, assign, license, pledge or encumber material technology or intellectual property, other than licenses granted in the ordinary course of business; or

 

18

 

 

i. The entering into any corporate strategic relationship involving the payment contribution or assignment by the Company or to the Company of assets greater than the equivalent of US$l million;

 

j. Any changes to the Company’s signatory rights;

 

k. liquidate, dissolve or wind up the affairs of the Company, or effect any merger or consolidation or any other Deemed Liquidation Event (as defined herein);

 

l. amend, alter, or repeal any provision of any of the Company’s incorporation documents;

 

m. create, authorize the creation of, or issue any other security of the Company;

 

n. pay any dividend excluding dividend to be paid in accordance with the Dividend Policy described below;

 

o. create or hold capital stock in any subsidiary that is not a wholly-owned subsidiary or dispose of any subsidiary stock or all or substantially all of any subsidiary assets;

 

p. increase or decrease the size of the Board; or

 

q. approve of a reorganization or an IPO of the securities of the Company, a sale of all or substantially all of the assets of the Company, or a merger of the Company or any Deemed Liquidation Event (as such terms are defined herein).

 

Article 29. Committees of the Board . Subject to applicable law, the Board may delegate any or all of its powers to committees, each consisting of two or more persons (all of whose members must be Directors), and it may from time to time revoke such delegation or alter the composition of any such committee. Any committee so formed, shall, in the exercise of the powers so delegated, conform to any regulations imposed on it by the Board. The meetings and proceedings of any such committee shall, mutatis mutandis, be governed by the provisions herein contained for regulating the meetings of the Board, so far as not superseded by any regulations adopted by the Board under this Article 29. Unless otherwise expressly provided by the Board in delegating powers to a committee, such committee shall not be empowered to further delegate such powers.

 

19

 

 

Article 30. Supervisor of the Company

 

a. The Company shall not have a supervisory committee, but shall appoint a supervisor (the “ Supervisor ”). Supervisor shall be appointed by both Party A and Party B. The term of appointment of the Supervisor shall be three (3) years. When the term expires, the Supervisor may be re-elected and reappointed by Party A and Party B. .Directors and senior management staff shall not assume the position of a Supervisor.

 

b. The role of the Supervisor (or supervisors in case more than one is appointed) shall include the following responsibilities:

 

i. Check the financial affairs of the Company.

 

ii. Supervise the acts of senior management personnel, Directors, and recommend to the Board on corrective actions regarding Directors and senior management personnel.

 

iii. Propose to convene temporary meetings of the Board, and bring forward proposals at meetings of the Board.

 

iv. The Supervisor shall be invited to attend all meetings of the Board as a non-voting attendee, and may raise questions or suggestions about the meeting agenda discussed by the Board.

 

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Chapter V

 

Company Employees

 

Article 31. Labor Matters . The employees recruitment, dismissal, wages and salaries, welfare, labor insurance, retirement insurance, labor discipline and other matters of the Company shall be executed in accordance with the “Labor Laws of the People’s Republic of China”, “Labor Contract Laws of the People’s Republic of China and the implementation practices as formulated by the various levels of the responsible authorities. It shall be autonomously decided by the Company without any interference from external parties. The Company shall sign the labor contract with the employees of the Company on an individual basis, and the labor contract shall be filed with the relevant responsible authorities for recording purposes.

 

Article 32. Wages . The standard of wages and salaries, the form of wages and other systems, and the bonus and subsidies for the staff shall be determined by the Board.

 

Article 33. Taxation . In case the annual executive management fee received by any one of the executive management Staff appointed by the Equityholders of the Company or appointed by any respective parties is subject to any tax (including personal income tax), it shall be the sole responsibility of and paid by such executive management personnel.

 

Chapter VI

 

Finance, Accounting and Auditing

 

Article 34. Company Financial and Accounting System . The financial and accounting system of the Company shall be in accordance with the “Enterprise Accounting System”.

 

Article 35. Annual Financial Report . Before the end of January of each fiscal year, the Chief Financial Officer shall according to the audited financial reports compile a report for the distribution of the profit of the preceding fiscal year, in accordance with the dividend policy described below, and submit it to the Board for resolution.

 

21

 

 

Article 36. Annual Budget . During the last quarter of each fiscal year, the Chief Financial Officer shall compile the financial budget for the coming fiscal year, and submit it to the Board for resolution.

 

Article 37. Fiscal Year . The fiscal year of the Company is from the first (1 st ) of January to the thirty-first (31 st ) of December of each calendar year. All the vouchers, receipts, reports and account keeping books shall be written in Chinese with an English translation.

 

Article 38. Official Currency for Accounts . The Company shall adopt Renminbi as the accounts keeping unit. In case of receipts or payments in foreign currency, it shall concurrently be recorded in foreign currency.

 

Article 39. Company Auditors . The Company shall employ a Chinese registered accountant to undertake the financial audit of the Company, and the audited reports of the financial statements for the preceding fiscal year shall be submitted to the Chief Financial Officer by the end of January of each year. The Chinese accountants and auditors of the Company will be mutually agreed by the Parties, provided it is one of the Chinese offices of the “Big-4” accounting firms (i.e. PWC, Deloitte, EY and KPMG).

 

Article 40. Review of Company Books and Records . The Company shall accept the examination and scrutiny of the financial revenues and expenditures, and the accounting books of the Company by the auditing authorities of the government. The Equityholders shall have the right to recruit auditors to audit the accounting books and operating conditions of the Company at their own expense. During the audit the Company shall provide all necessary assistance.

 

Article 41. Company Bank Accounts . The Renminbi account and foreign exchange account opened by the Company in the bank in China shall be managed by the Company. The collection, payment and clearance business of the Renminbi and foreign exchange of the Company shall be handled by the relevant banking institution, and the conditions offered by that bank shall be more preferential or at least equal to its competitors.

 

22

 

 

 

Article 42. Complete Books and Records . At all times the Company shall keep proper and complete books of account, in which shall be entered fully and accurately the transactions of the Company in accordance with applicable law.

 

Article 43. Financial Rules . Financial Rules will be mutually agreed by the Parties and adopted by the Company subject to the approval of the Board.

 

Article 44. Equityholders’ Information Rights . Each major Equityholder holding above 15% (“ Major Equityholders ”) will be granted access to the Company facilities and personnel during normal business hours and with reasonable advance notification for the purpose of monitoring such equityholder’s investment in the Company. The Company will deliver to each Major Equityholder the following reports:

 

a. An annual audited financial reports, within [90] days after the end of every calendar year;

 

b. A quarterly financial reports, within [60] days after the end of every calendar quarter;

 

c. A monthly financial statements, within 10 (ten) days after the end of every calendar month;

 

d. Any other information as shall be determined from time to time by the Board;

 

e. Thirty (30) days prior to the end of each fiscal year, a comprehensive operating budget forecasting the Company’s revenues, expenses, and cash position on a month-to-month basis for the upcoming fiscal year and an update to the Business Plan (including its extension to an additional year); and

 

f. Promptly following the end of each quarter, an up-to-date capitalization table.

 

23

 

 

Article 45. Policies and Procedures . As part of its operations the Company will put in place from time to time such procedures and policies (including human resource policy, risk management policy, financial management regulations, foreign exchange matters, Board meeting procedures, etc.) as shall be further expanded by the Board.

 

Chapter VIII

 

Operating Term

 

Article 46. Term of Operations . The Company’s term shall be twenty (20) years (the “Term”).Subject to the approval of relevant authorities, the Term may be extended by consent of all equity rightholders of the Company.

 

Chapter IX

 

Dissolution, Liquidation and Handling of Assets

 

Article 47. On the day after obtaining the approval from the original examination and approval authorities for dissolution, the Company shall start the liquidation, and the Board shall organize a Liquidation Committee to undertake liquidation of the debts, rights and assets of the Company. The liquidation of the Company shall be undertaken in accordance with the regulations in the JV Agreement, these Articles of Association and the related laws.

 

Article 48. In case the Company is dissolved pursuant to the provisions of the JV Agreement, the Board shall form a Liquidation Committee within 15 (fifteen) days from the date of dissolution. The members of the Liquidation Committee shall be appointed from the existing Directors or be taken up by employed professional staff. The Liquidation Committee shall exercise the following scope of authorities during the period of liquidation:

 

24

 

 

a. Clean up the property of the Company, compile the balance sheet and inventory list of the property, and formulate the liquidation plan.

 

b. Inform the unidentified creditors through announcement in public notice, inform the identified creditors through written notice.

 

c. Handle the non-ending operation of the Company.

 

d. Propose the methods of evaluation and handling of the property.

 

e. Pay outstanding taxes.

 

f. Clean up the creditors’ rights and debts.

 

g. Handle the remaining property of the Company after repaying the debts.

 

h. Represent the Company to participate in civil claims proceedings.

 

i. Other duties or powers as required or authorized by related laws.

 

Article 49. The liquidation plan formulated by the Liquidation Committee shall be endorsed by the Board, and then submitted to the original examination and approval authorities for record purpose.

 

Article 50. After paying the liquidation fee and repaying all outstanding debts, the remaining properties shall be distributed according to the proportion of the investment on the registered capital by Parties, all subject to the provisions of Article 20 (Liquidation Preference) of this Articles of Association.

 

Article 51. After the Liquidation Committee has completed all the tasks as specified in the liquidation plan, it shall compile a liquidation report. After endorsement by the Board, the liquidation report shall be submitted to the original examination and approval authorities for record purpose.

 

25

 

 

Article 52. After filing the liquidation report with the original examination and approval authorities, the Liquidation Committee shall be responsible for handling the tax, customs, de-registration of the industry and commerce identity and announce the termination of the Company through public notice.

 

Chapter X

 

Management

 

Article 53. Managers. The Company shall adopt a management system under which the General Manager shall be responsible to and under the leadership of the Board.

 

Article 54. The General Manager, the Finance Manager, the Operation Manager and the Technical Manager shall be nominated by Party B, subject to the prior written consent of Party A, and appointed by the Board.

 

Article 55. Terms of Office and Dismissal. The terms of office of the General Manager and other senior management personnel shall normally be three (3) years, or as otherwise determined by the Board. They may be dismissed at any time by a resolution of the Board, subject to their personal labor agreements.

 

Article 56. Responsibilities and Powers of the General Manager. The duties of the General Manager shall consist of carrying out the decisions of the Board and organising, directing and deciding all matters relating to the day-to-day operation and management of the Company, and achieving the operation target determined by the Board. Within the limitations specified in these Articles of Association, the JV Agreement, and as may be determined by the Board, the General Manager shall represent the Company in all matters concerning its day-to-day operations and management.

 

26

 

 

Article 57. The Company’s Executive Management Staff (the “Executive Management Staff”) may include one Chief Executive Officer, one Deputy CEO, one Chief Financial Officer and, one Managing Director. All appointed candidates of the Equityholders shall be employed by the Board.

 

Article 58. The term of the Executive Management Staff is three (3) years. The Executive Management Staff may, after the expiry of their term of office, hold a consecutive term upon re-employment.

 

Article 59. The Executive Management Staff may concurrently serve as the Directors of the Board.

 

Article 60. The other management staff of the Company other than the Executive Management Staff shall be openly recruited in the local area or from other locations in China, overseas or recommended by the Equityholders.

 

Article 61. For the Executive Management Staff hereof described in this Chapter, in case of abuse of power, pursuit of personal gain, graft and corruption, dereliction of duty or participation in activities detrimental to the benefits of the Company, with resolution of the Board, he shall be dismissed or ceased from duty at any time. In case it causes economic damages to the Company, he shall bear the responsibility of compensation.

 

Article 62. If any Executive Management Staff is dismissed by the Board or ceases to serve as an Executive Management Staff member for any other reason, the original recommending Equityholder shall recommend the successor for the appointment of the Board, and the Board will approve such recommendation.

 

27

 

 

Chapter XI

 

Supplementary Articles

 

Article 63. Amendments to the Articles of Association . The amendment to the Articles of Association shall be unanimously agreed and decided by the Board and submitted to the registeration authority for approval.

 

Article 64. Submission of the Articles of Association . Where the Articles of Association are legally required to be submitted to registration authority, it shall come into force upon obtaining such approval.

 

Article 65. General. Matters uncovered by the Articles of Association shall be governed in accordance with the JV Agreement, resolutions of the Board, and applicable laws and regulations of People’s Republic of China.

 

28

 

 

(Signature Page of the Articles of Association)

 

Guangzhou InMode Medical Technology Ltd.  
     
By:
                       
Name:    
     
Title:    
     
Date:    
   
Signature of equityholders:  
   
Guangzhou Sino-Israel Bio-Industry Investment Fund (LLP)  
   
By its General Partner, Guangzhou Elim Biotech Industrial Venture Capital Management Company  
     
By:
     
Name:    
     
Title:    
   
Invasix Ltd.  
     
By:         
     
Name:    
     
Title:    

 

Signature page AoA

 

29

 

 

19 . 1.9

 

Indemnification Agreement

 

 

 

 

FORM OF DIRECTOR INDEMNIFICATION AGREEMENT

Guangzhou InMode Medical Technology Ltd,

 

 

 

INDEMNIFICATION AGREEMENT

 

This Indemnification Agreement (the “Agreement”) is effective as of January 11, 2017, by and between Guangzhou InMode Medical Technology Ltd., a company incorporated under the laws of the Peoples Republic of China, with its principal offices at Unit 103-1, 1st Floor, No. 6, Luoxuan 3 rd. International Bio-Island, Guangzhou, Guangdong, China (the “Company”), and Mr. Alon Yaari, Nationality its Israeli, I.D. number 032240673, residing at 4/A Hapnina St., Zichron Yaakov, Israel (the “Indemnitee”).

 

Recitals

 

A. The Company and Indemnitee recognize the difficulty in obtaining full and adequate liability insurance for directors, officers, employees, agents and fiduciaries, the significant increases in the cost of such insurance and the general reductions in the coverage of such insurance;

 

B. The Company and Indemnitee further recognize the substantial increase in corporate litigation in general, subjecting directors, officers, employees, agents and fiduciaries to expensive litigation risks at the same time as the availability and coverage of liability insurance have been severely limited;

 

C. The Company desires to attract and retain the services of highly qualified individuals, such as the Indemnitee, to serve the Company and, in part, in order to induce the Indemnitee to continue to provide services to the Company, wishes to provide for the indemnification and advancement of expense to the Indemnitee, to exempt the Indemnitee from liability to the Company, and agree to procure reasonable insurance coverage, all of the foregoing to the Maximum extent permitted by law; and

 

D. In view of the considerations set forth above, the Company desires that Indemnitee shall be indemnified and exempted by the Company, and enjoy appropriate insurance coverage, all as set forth herein.

 

Now, therefore, the Company and the Indemnitee hereby agree as follows:

 

 

 

 

1. Indemnification

 

1.1           Indemnification of Liabilities and Expenses . The Company shall indemnify the Indemnitee to the fullest extent permitted by law and subject to the limitations set forth in paragraph 1.2, with respect to the following liabilities and expenses imposed on or incurred by the Indemnitee due to an act or omission by the Indemnitee in his capacity as a director, of the Company, or any subsidiary thereof (regardless whether it is a subsidiary of the Company at the date hereof), or as a director, officer, employee, agent or fiduciary of another corporation, collaboration, partnership, joint venture, trust or other enterprise, serving at the request of the Company (the “Corporate Capacity”): (i) any financial obligation imposed on the Indemnitee in favor of another person by, or expended by the Indemnitee as a result of, a court judgment, including a settlement or an arbitrator’s award approved by court, by reason of or arising in connection with any Indemnifiable Event (as defined below); (ii) any and all reasonable litigation expenses (including attorneys’ fees) and all other costs, expenses and financial obligations (collectively, “Expenses”) incurred by the Indemnitee or charged to the Indemnitee by court in connection with a proceeding instituted against the Indemnitee by the Company or on its behalf or by another person, or in any criminal proceedings in which Indemnitee is acquitted, or in any criminal proceedings of a crime which does not require proof of mens rea (criminal intent) in which Indemnitee is convicted; and (iii) all Expenses expended by the Indemnitee due to an investigation or a proceeding instituted against the Indemnitee by an authority qualified to conduct such investigation or proceeding, where such investigation or proceeding is concluded without the filing of an indictment against the Indemnitee and without any financial obligation imposed on the Indemnitee in lieu of criminal proceedings, or that is concluded without the Indemnitee’s indictment but with a financial obligation imposed on Indemnitee in lien of criminal proceedings with respect to a crime that does not require proof of mens rea (criminal intent). Such payments of Expenses shall be made by the Company as soon as practicable but in any event no later than fifteen (15) days after written demand by the Indemnitee therefor is presented to the Company.

 

1.2.          Indemnifiable Event; Limit Amounts . For the purpose of this Agreement, an “Indemnifiable Event” shall mean any event or occurrence falling all or in part within any one or more of the categories set forth below. Indemnification pursuant to paragraph 1.1(i) with respect to each such Indemnifiable Events described below is limited to US$1,000,000 (the “Limit Amount”). The Limit Amount shall be subject to continuing review and consideration by the Company, and may be amended, if the Board of Directors determines that such Limit Amount is unreasonable in the circumstances, including if it is less than the financial obligation or Expenses which can be expected to be incurred by the Indemnitee in connection with the corresponding Indemnifiable Event. If the Limit Amount is insufficient to cover all amounts to which the Indemnitee and all other persons to whom the Company has agreed to indemnify for the matters and in the circumstances described herein. then such amount shall be allocated to such persons pro rata according to the percentage of their culpability, as finally determined by a court in the relevant claim, or, absent such determination or in the event such persons are parties to different claims, in equal amounts.

 

 

 

 

The Indemnifiable Events are described as follows:

 

a) Any claim or demand made by customers, suppliers, contractors or other third parties transacting any form of business with the Company or its subsidiaries, in the ordinary course of their respective businesses, relating to the negotiations or performance of such transactions, representations or inducements provided in connection thereto or otherwise,

 

b) Any claim or demand made in connection with any transaction not in the ordinary course of business of either the Company, its subsidiaries or the party making such claim, including the sale, lease or purchase of any assets or business.

 

c) Any claim or demand made by employees, consultants, agents or other individuals or entities employed by or providing services to the Company or its subsidiaries relating to compensation owed to them or damages or liabilities suffered by them in connection with such employment or service.

 

d) Any claim or demand made under any securities laws of any jurisdiction and/or any stock exchange rules and regulations of any jurisdiction or by reference thereto, or related in the failure to disclose any information in the manner or time such information is required to be disclosed pursuant to such laws, or related to inadequate or improper disclosure of information to shareholders, or prospective shareholders, or related to the purchasing, holding or disposition of securities of the company or any other investment activity involving or affected by such securities, including any actions relating to an offer or issuance of securities of the Company or of its subsidiaries to the public by prospectus or privately by private placement, in Israel or abroad, including the details that shall be set forth in the documents in connection with execution thereof,

 

e) Any claim or demand made for actual or alleged infringement, misappropriation or misuse of any third party’s intellectual property rights by the Company or its subsidiaries, including without limitation confidential information, patents, copyrights, design rights, service marks, trade secrets, copyrights, misappropriation of ideas by the Company or its subsidiaries.

 

 

 

 

f) Actions taken in connection with the intellectual property of the Company and any subsidiary, and its protection, including the registration or assertion of rights to intellectual property and the defense of claims relating thereto.

 

g) Any claim or demand made by any lenders or other creditors or for moneys borrowed by, or other indebtedness of, the Company or its subsidiaries.

 

h) Any claim or demand made by any third party suffering any personal injury and/or bodily injury or damage to business or personal property through any act or omission attributed to the Company or its subsidiaries, or their respective employees, agents or other persons acting or allegedly acting on their behalf.

 

i) Any claim or demand made directly or indirectly in connection with complete or partial failure, by the Company or any subsidiary thereof, or their respective directors, officers and employees, to pay, report, keep applicable records or otherwise, of any foreign, federal, state, county, local, municipal or city taxes or other compulsory payments of any nature whatsoever, including, without limitation, income, sales, use, transfer, excise, value added, registration, severance, stamp, occupation, customs, duties, real property, personal property, capital stock, social security, unemployment, disability, payroll or employee withholding or other withholding, including any interest, penalty or addition thereto, whether disputed or not.

 

j) Any claim or demand made by purchasers, holders, lessors or other users of products of the Company, or individuals treated with such products, for damages or losses related to such use or treatment.

 

k) Any administrative, regulatory or judicial actions orders, decrees, suits, demands, demand letters, directives, claims, liens, investigations, proceedings or notices of noncompliance or violation by any governmental entity or other person alleging potential responsibility or liability arising out of, based on or related to (x) the presence of, release, spilt, emission, leaning, dumping, pouring, deposit, disposal, discharge, leaching or migration into the environment (each a “Release”) or threatened Release of, or exposure to, any hazardous, toxic, explosive or radioactive substances, wastes or other pollutants, including petroleum or petroleum distillates, asbestos or asbestos-containing material, polychlorinated biphenyls (“PCBs”) or PCB-containing materials or equipment, radon gas, infectious or medical wastes and all other substances or wastes of any nature regulated pursuant to any environmental law, at any location, whether or not owned, operated, leased or managed by the Company or any of its subsidiaries, or (y) circumstances forming the basis of any violation of any environmental law or environmental permit, license, registration or other authorization required under applicable environmental law.

 

 

 

 

l) Any administrative, regulatory or judicial actions, orders, decrees, suits, demands, demand letters, directives, claims, liens, investigations, proceedings or notices of noncompliance or violation by any governmental entity or other person alleging the failure to comply with any statute, law, ordinance, rule, regulation, order or decree of any governmental entity applicable to the Company or any of its subsidiaries, or any of their respective businesses or operations.

 

m) Participation, and/or non-participation at the Company’s board meetings, incompliance regarding the substance and the process of reaching board resolutions, bona fide expression of opinion and/or voting and/or abstention from voting at the Company’s board meetings.

 

n) Approval of corporate actions including the approval of the acts of the Company’s management, their resolutions, guidance and their supervision.

 

o) Claims of failure to exercise business judgment and a reasonable level of proficiency, expertise, care and other forms of fiduciary duties and duties of loyalty in regard of the Company’s business, as required under applicable laws.

 

p) Resolutions and/or actions relating to a merger of the Company and/or of its subsidiaries, the issuance of shares or securities exercisable into shares of the Company, changing the share capital of the Company, formation of subsidiaries, reorganization, winding up or sale of all or part of the business, operations or shares of the Company.

 

1.3.          Mandatory Payment of Expenses . Notwithstanding any other provision of this Agreement other than Section 7 hereof, to the extent that the Indemnitee has been successful on the merits or otherwise, including, without limitation, the dismissal of an action without prejudice, in defense of any action, suit, proceeding, inquiry or investigation referred to in Section 1.1 hereof or in the defense of any claim, issue or matter therein, the Indemnitee shall be indemnified against all financial obligations and Expenses incurred by the Indemnitee in connection therewith.

 

 

 

 

2 . Indemnification Procedure

 

2.1.          Notice; Cooperation by Indemnitee . The Indemnitee shall, as a condition precedent to the Indemnitee’s right to be indemnified under this Agreement, give the Company notice in writing as soon as practicable of any claim made against the Indemnitee for which indemnification will or could be sought under this Agreement, provided, however, that any failure to provide such notice shall not affect the Indemnitee’s rights to indemnification hereunder unless and to the extent that such failure to provide notice materially and adversely prejudices the Company’s right to defend against such action. Notice to the Company shall be directed to the Chairman of the Company’s Board of Directors at the address shown on the signature page of this Agreement (or such other address as the Company shall designate in writing to the Indemnitee). In addition, the Indemnitee shall give the Company such information and cooperation as it may reasonably require and as shall be within the Indemnitee’s power.

 

2.2.          No Presumptions; Burden of Proof . For purposes of this Agreement, the termination of any claim by judgment, order, settlement (whether without court approval) or conviction, or upon a plea of guilty, shall not create a presumption that the Indemnitee did not meet any particular standard of conduct or have any particular belief or that a court has determined that indemnification is not permitted by applicable law.

 

2.3.          Notice to Insurers . If, at the time of the receipt by the Company of a notice of a claim the Company has liability insurance in effect which may cover such claim, the Company shall give prompt notice of the commencement of such claim to the insurers in accordance with the procedures set forth in the respective policies. The Company shall thereafter take all necessary or desirable action to cause such insurers to pay, on behalf of the Indemnitee, all amounts payable as a result of such action, suit, proceeding, inquiry or investigation in accordance with the terms of such policies.

 

2.4 .          Selection of Counsel . In the event that the Company shall be obligated to indemnify the Indemnitee and/or pay the Expenses of any claim, and the proceedings have not been initiated against the Indemnitee by the Company or on its behalf; then the Company shall be entitled to assume the defense of such claim with counsel selected by the Company, which counsel is reasonably reputable with experience in the relevant field, and the Company will not be liable to the Indemnitee under this Agreement for any fees of counsel subsequently incurred by Indemnitee with respect to the same claim; The Company shall and shall cause the counsel retained by it to take all necessary steps to bring the claim to a close and will keep the Indemnitee informed of key steps in the process. The counsel retained by the Company to conduct the defense pursuant to this Section shall be bound by a fiduciary duty to the Indemnitee and to the Company, The Company shall have the right to conduct such defense as it sees fit in its sole discretion.

 

 

 

 

3.           Additional Indemnification Rights; Non-exclusivity. In the event of any change after the date of this Agreement of any applicable law, statute or rule which expands the right of a corporation of the Company’s state of incorporation to indemnify a member of its board of directors or an officer, employee, agent or fiduciary, it is the intent of the parties hereto that the Indemnitee shall enjoy by this Agreement the greater benefits afforded by such change .

 

4.           No Duplication of Payments. The Company shall not be liable under this Agreement to make any payment in connection with any claim made against Indemnitee to the extent the Indemnitee has otherwise actually received payment (under any insurance policy, the Articles of Association or otherwise) of the amounts otherwise indemnifiable hereunder, except for the difference, if any, between the amounts received by the Indemnitee as aforesaid and the total obligations, liabilities and/or Expenses incurred by the Indemnitee in connection with such claim. The Company will be entitled to receive any amount collected by Indemnitee from a third party in connection with liabilities actually indemnified hereunder, to be transferred by the Indemnitee to the Company within fifteen (15) days following the receipt of said amount. Any amount received from D&O Insurance (as defined below) shall not be deducted from the Limit Amount hereunder.

 

5.           Partial Indemnification. If the Indemnitee is entitled under any provision of this Agreement to indemnification by the Company for some or a portion of the obligations, liabilities and/or Expenses incurred in connection with any claim, but not, however, for all of the total amount thereof, the Company shall nevertheless indemnify the Indemnitee for the portion of such obligations, liabilities, and/or Expenses to which the Indemnitee is entitled.

 

6.           Exemption. To the maximum extent permitted by law, the Company hereby exempts and releases Indemnitee from any and all liability to the Company related to any breach by the Indemnitee of his or her duty of care to the Company, subject to the provisions of Section 7.1 below and provided that in no event shall the Indemnitee be exempted in advance for a breach of his duty of care to the Company in a distribution.

 

7.           Exceptions. Any other provision herein to the contrary notwithstanding, the Company shall not be obligated pursuant to the terms of this Agreement:

 

7.1.          Excluded Acts and Omissions . To the extent it is prohibited under applicable law, to indemnify, insure or exempt Indemnitee from or against any liability arising out of: (i) the Indemnitee’s breach of fiduciary duty (other than, in case of insuring the Indemnity, a breach of fiduciary duty to the Company, provided that the Indemnitee has acted or omitted to act in good faith and had reasonable ground to believe such action will not prejudice the Company’s interests), (ii) intentional or reckless beach by the Indemnitee of his or her duty of care to the Company , but other than if done in negligence only, or (iii) the indemnitee’s action taken with the intention to unduly profit therefrom, and (iv) any fine or penalty payment to propitiate an offense imposed on the Indemnitee.

 

 

 

 

7.2.           Claims Initiated by Indemnitee . To indemnify or advance expenses to Indemnitee with respect to claims initiated or brought voluntarily by the Indemnitee and not by way of defense, except: (i) with respect to proceedings brought to establish or enforce a right to indemnification under this Agreement or any other agreement or insurance policy or under the Company’s Articles of Association now or hereafter in effect relating to claims for indemnification, release, exemption or insurance of the Indemnitee by reason of his Corporate Capacity, (ii) in specific cases if the Board of Directors has approved the initiation or bringing of such suit, or (iii) as otherwise required under the laws of the Company’s place of incorporation, regardless of whether the Indemnitee ultimately is determined to be entitled to such indemnification, advance expense payment of insurance recovery, as the case may be;

 

8.            Required Approvals. If for the validation of any of the undertakings in this Agreement any act, resolution, approval or other procedure is required, the Company undertakes to cause them to be done or adopted in a manner which will enable the Company to fulfill all its undertakings as aforesaid.

 

9.            Post Factum Indemnity. Nothing contained in this Agreement derogates from the Company’s right to indemnify the Indemnitee post factum for any amounts which the Indemnitee may be obligated to pay as set forth in Section 1.1 above without the limitations set forth in Section 1.2 above.

 

10.          Counterparts. This Agreement may be executed in one or more counterparts, each of which shall constitute an original.

 

11.          Binding Effect; Successors and Assigns. This Agreement shall be binding upon and inure to the benefit of and be enforceable by the parties hereto and their respective successors, assigns, including any direct or indirect successor by purchase, merger, consolidation or otherwise) to all, or substantially all the business and/or assets of the Company, spouses, heirs, personal and legal representative, executors and administrators.

 

12.          Notice. All notices and other communications required or permitted hereunder shall be in writing, shall be effective when given and shall in any event be deemed to be given: (a) five (5) business days after deposit with the applicable postal service, if delivered by first class mail, postage prepaid, (b) upon delivery, if delivered by hand, (c) one business day after the business day of deposit with EMS or similar overnight courier, freight prepaid, or (d) one day after the business day of delivery by facsimile transmission, if delivered by facsimile transmission, with copy by first class mail, postage prepaid, and shall be addressed if to Indemnitee, at the Indemnitee’s address as set forth beneath Indemnitee’s signature to this Agreement and if to the Company at the address of its principal corporate offices or at such other address as such party may designate by ten days’ advance written notice to the other party hereto.

 

 

 

 

13.         Consent to Jurisdiction. The Company and Indemnitee each hereby irrevocably consent to the arbitration procedures, in accordance with the terms of the joint venture agreement between the Company and its shareholders, dated September 23, 2016, mutatis mutandis.

 

14.         Severability. The provisions of this Agreement shall be severable in the event that any of the provision hereof (including any provision within a single section, paragraph or sentence) are held by a court of competent jurisdiction to be invalid, void or otherwise unenforceable, and the remaining provisions shall remain enforceable, to the fullest extent permitted by law. Furthermore, to the fullest extent possible, the provisions of this Agreement (including, without limitations, each portion of this Agreement containing any provision held to be invalid, void or otherwise unenforceable that is not itself invalid, void or unenforceable) shall be construed so as to give effect to the intent manifested by the provision held invalid, illegal or unenforceable.

 

15.          Choice of Law. This Agreement shall be governed by and its provisions construed and enforced in accordance with the laws of the Peoples Republic of China without regard to the conflict of laws principles thereof or of any other jurisdiction.

 

16.          Subrogation. In the event of payment under this Agreement, the Company shall be subrogated to the extent of such payment to all of the rights of recovery of the Indemnitee, who shall execute all documents required and shall do all acts that may be necessary to secure such rights and to enable the Company effectively to bring suit to enforce such lights.

 

17.          Amendment and Termination. No amendment, modification, termination or cancellation of this Agreement shall be effective unless it is in writing signed by both the parties hereto. No waiver of any of the provisions of this Agreement shall be deemed or shall constitute a waiver of any other provisions hereof (whether or not similar) nor shall such waiver constitute a continuing waiver.

 

18.          Integration and Entire Agreement. This Agreement sets forth the entire understanding between the parties hereto and supersedes and usages all previous written and oral negotiations, commitments, understandings and agreements relating to the subject matter hereof between the parties hereto.

 

 

 

 

Exhibit - Indemnification Agm - 06092016

 

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

 

GUANGZHOU INMODE MEDICAL TECHNOLOGY LTD.
   
By: Mr. Moshe Mizrahy  
   
Title: Chairman of the Board  
     
Signature: /s/ Moshe Mizrahy  

 

AVRAHAM KARASSIK  
Name    
     
Signature: /s/ AVRAHAM KARASSIK  
     
Nationality: Israeli  
     
I .D. #: 0516656  

 

 

 

 

FORM OF DIRECTOR INDEMNIFICATION AGREEMENT

Guangzhou InMode Medical Technology Ltd.

 

 

 

INDEMNIFICATION AGREEMENT

 

This Indemnification Agreement (the “Agreement”) is effective as of January 11, 2017 , by and between Guangzhou InMode Medical Technology Ltd., a company incorporated under the laws of the Peoples Republic of China, with its principal offices at Unit 103-1, 1st Floor, No. 6, Luoxuan 3 rd. International Bio-Island, Guangzhou, Guangdong, China, (the “Company”), and Mr. Alon Yaari, Nationality as Israeli, I.D. number 032240673, residing at 4/A Hapnina St., Zichron Yaakov, Israel (the “Indemnitee”).

 

Recitals

 

A. The Company and Indemnitee recognize the difficulty in obtaining full and adequate liability insurance for directors, officers, employees, agents and fiduciaries, the significant increases in the cost of such insurance and the general reductions in the coverage of such insurance;

 

B. The Company and Indemnitee further recognize the substantial increase in corporate litigation in general, subjecting directors, officers, employees agents and fiduciaries to expensive litigation risks at the same time as the availability and coverage of liability insurance have been severely limited;

 

C. The Company desires to attract and retain the services of highly qualified individuals, such as the Indemnitee, to serve the Company and, in part, in order to induce the Indemnitee to continue to provide services to the Company, wishes to provide for the indemnification and advancement of expense to the Indemnitee, to exempt the Indemnitee from liability to the Company, and agree to procure reasonable insurance coverage, all of the foregoing to the maximum extent permitted by law; and

 

D. In view of the considerations set forth above, the Company desires that Indemnitee shall be indemnified and exempted by the Company, and enjoy appropriate insurance coverage, all as set forth herein.

 

Now, therefore, the Company and the Indemnitee hereby agree as follows:

 

 

 

 

1. Indemnification

 

1.1           Indemnification of Liabilities and Expenses . The Company shall indemnify the Indemnitee to the fullest extent permitted by law and subject to the limitations set forth in paragraph 1.2, with respect to the following liabilities and expenses imposed on or incurred by the Indemnitee due to an act or omission by the Indemnitee in his capacity as a director, of the Company, or any subsidiary thereof (regardless whether it is a subsidiary of the Company at the date hereof), or as a director, officer, employee, agent or fiduciary of another corporation, collaboration, partnership, joint venture, trust or other enterprise, serving at the request of the Company (the “Corporate Capacity”): (i) any financial obligation imposed on the Indemnitee in favor of another person by, or expended by the Indemnitee as a result of, a court judgment, including a settlement or an arbitrator’s award approved by court, by reason of or arising in connection with any Indemnifiable Event (as defined below); (ii) any and all reasonable litigation expenses (including attorneys’ fees) and all other costs, expenses and financial obligations (collectively, “Expenses”) incurred by the Indemnitee or charged to the Indemnitee by court in connection with a proceeding instituted against the Indemnitee by the Company or on its behalf or by another person, or in any criminal proceedings in which Indemnitee is acquitted, or in any criminal proceedings of a crime which does not require proof of mens rea (criminal intent) in which Indemnitee is convicted; and (iii) all Expenses expended by the Indemnitee due to an investigation or a proceeding instituted against the Indemnitee by an authority qualified to conduct such investigation or proceeding, where such investigation or proceeding is concluded without the filing of an indictment against the Indemnitee and without any financial obligation imposed on the Indemnitee in lieu of criminal proceedings, or that is concluded without the Indemnitee’s indictment but with a financial obligation imposed on Indemnitee in lien of criminal proceedings with respect to a crime that does not require proof of mens rea (criminal intent). Such payments of Expenses shall be made by the Company as soon as practicable but in any event no later than fifteen (15) days after written demand by the Indemnitee therefor is presented to the Company.

 

1.2.          Indemnifiable Event; Limit Amounts . For the purpose of this Agreement, an “Indemnifiable Event” shall mean any event or occurrence falling all or in part within any one or more of the categories set forth below. Indemnification pursuant to paragraph 1.1(i) with respect to each such Indemnifiable Events described below is limited to US$1,000,000 (the “Limit Amount”). The Limit Amount shall be subject to continuing review and consideration by the Company, and may be amended, if the Board of Directors determines that such Limit Amount is unreasonable in the circumstances, including if it is less than the financial obligation or Expenses which can be expected to be incurred by the Indemnitee in connection with the corresponding Indemnifiable Event. If the Limit Amount is insufficient to cover all amounts to which the Indemnitee and all other persons to whom the Company has agreed to indemnify for the matters and in the circumstances described herein. then such amount shall be allocated to such persons pro rata according to the percentage of their culpability, as finally determined by a court in the relevant claim, or absent such determination or in the event such persons are parties to different claims, in equal amounts.

 

 

 

  

The Indemnifiable Events are described as follows:

 

a) Any claim or demand made by customers, suppliers, contractors or other third parties transacting any form of business with the Company or its subsidiaries, in the ordinary course of their respective businesses, relating to the negotiations or performance of such transactions, representations or inducements provided in connection thereto or otherwise,

 

b) Any claim or demand made in connection with any transaction not in the ordinary course of business of either the Company, its subsidiaries or the party making such claim, including the sale, lease or purchase of any assets or business.

 

c) Any claim or demand made by employees, consultants, agents or other individuals or entities employed by or providing services to the Company or its subsidiaries relating to compensation owed to them or damages or liabilities suffered by them in connection with such employment or service.

 

d) Any claim or demand made under any securities laws of any jurisdiction and/or any stock exchange rules and regulations of any jurisdiction or by reference thereto, or related in the failure to disclose any information in the manner or time such information is required to be disclosed pursuant to such laws, or related to inadequate or improper disclosure of information to shareholders, or prospective shareholder, or related to the purchasing, holding or disposition of securities of the company or any other investment activity involving or affected by such securities, including any actions relating to an offer or issuance of securities of the Company or of its subsidiaries to the public by prospectus or privately by private placement, in Israel or abroad., including the details that shall be set forth in the documents in connection with execution thereof.

 

e) Any claim or demand made for actual or alleged infringement, misappropriation or misuse of any third party’s intellectual property rights by the Company or its subsidiaries, including without limitation confidential information, patents, copyrights, design rights, service marks, trade secrets, copyrights, misappropriation of ideas by the Company or its subsidiaries.

 

 

 

  

f) Actions taken in connection with the intellectual property of the Company and any subsidiary, and its protection, including the registration or assertion of rights to intellectual property and the defense of claims relating thereto.

 

g) Any claim or demand made by any lenders or other creditors or for moneys borrowed by, or other indebtedness of, the Company or its subsidiaries.

 

h) Any claim or demand made by any third party suffering any personal injury and/or bodily injury or damage to business or personal property through any act or omission attributed to the Company or its subsidiaries, or their respective employees, agents or other persons acting or allegedly acting on their behalf.

 

i) Any claim or demand made directly or indirectly in connection with complete or partial failure, by the Company or any subsidiary thereof, or their respective directors, officers and employees, to pay, report, keep applicable records or otherwise, of any foreign, federal, state, county, local, municipal or city taxes or other compulsory payments of any nature whatsoever, including, without limitation, income, sales, use, transfer, excise, value added, registration, severance, stamp, occupation, customs, duties, real property, personal property, capital stock, social security, unemployment, disability, payroll or employee withholding or other withholding, including any interest, penalty or addition thereto, whether disputed or not.

 

j) Any claim or demand made by purchasers, holders, lessors or other users of products of the Company, or individuals treated with such products, for damages or losses related to such use or treatment.

 

k) Any administrative, regulatory or judicial actions orders, decrees, suits, demands, demand letters, directives, claims, liens, investigations, proceedings or notices of noncompliance or violation by any governmental entity or other person alleging potential responsibility or liability arising out of, based on or related to (x) the presence of, release, spilt, emission, leaning, dumping, pouring, deposit, disposal, discharge, leaching or migration into the environment (each a “Release”) or threatened Release of, or exposure to, any hazardous, toxic, explosive or radioactive substances, wastes or other pollutants, including petroleum or petroleum distillates, asbestos or asbestos-containing material, polychlorinated biphenyls (“PCBs”) or PCB-containing materials or equipment, radon gas, infectious or medical wastes and all other substances or wastes of any nature regulated pursuant to any environmental law, at any location, whether or not owned, operated, leased or managed by the Company or any of its subsidiaries, or (y) circumstances forming the basis of any violation of any environmental law or environmental permit, license, registration or other authorization required under applicable environmental law.

 

 

 

 

l) Any administrative, regulatory or judicial actions, orders, decrees, suits, demands, demand letters, directives, claims, liens, investigations, proceedings or notices of noncompliance or violation by any governmental entity or other person alleging the failure to comply with any statute, law, ordinance, rule, regulation, order or decree of any governmental entity applicable to the Company or any of its subsidiaries, or any of their respective businesses or operations.

 

m) Participation, and/or non-participation at the Company’s board meetings, incompliance regarding the substance and the process of reaching board resolutions, bona fide expression of opinion and/or voting and/or abstention from voting at the Company’s board meetings.

 

n) Approval of corporate actions including the approval of the acts of the Company’s management, their resolutions, guidance and their supervision.

 

o) Claims of failure to exercise business judgment and a reasonable level of proficiency, expertise, care and other forms of fiduciary duties and duties of loyalty in regard of the Company’s business, as required under applicable laws.

 

p) Resolutions and/or actions relating to a merger of the Company and/or of its subsidiaries, the issuance of shares or securities exercisable into shares of the Company, changing the share capital of the Company, formation of subsidiaries, reorganization, winding up or sale of all or part of the business, operations or shares of the Company.

 

1.3.          Mandatory Payment of Expenses . Notwithstanding any other provision of this Agreement other than Section 7 hereof, to the extent that the Indemnitee has been successful on the merits or otherwise, including, without limitation, the dismissal of an action without prejudice, in defense of any action, suit, proceeding, inquiry or investigation referred to in Section 1.1 hereof or in the defense of any claim, issue or matter therein, the Indemnitee shall be indemnified against all financial obligations and Expenses incurred by the Indemnitee in connection therewith.

 

 

 

   

2. Indemnification Procedure

 

2.1.          Notice; Cooperation by Indemnitee . The Indemnitee shall, as a condition precedent to the Indemnitee’s right to be indemnified under this Agreement, give the Company notice in writing as soon as practicable of any claim made against the Indemnitee for which indemnification will or could be sought under this Agreement, provided, however, that any failure to provide such notice shall not affect the Indemnitee’s rights to indemnification hereunder unless and to the extent that such failure to provide notice materially and adversely prejudices the Company’s right to defend against such action. Notice to the Company shall be directed to the Chairman of the Company’s Board of Directors at the address shown on the signature page of this Agreement (or such other address as the Company shall designate in writing to the Indemnitee). In addition, the Indemnitee shall give the Company such information and cooperation as it may reasonably require and as shall be within the Indemnitee’s power.

 

2.2.          No Presumptions; Burden of Proof . For purposes of this Agreement, the termination of any claim by judgment, order, settlement (whether without court approval) or conviction, or upon a plea of guilty, shall not create a presumption that the Indemnitee did not meet any particular standard of conduct or have any particular belief or that a court has determined that indemnification is not permitted by applicable law.

 

2.3.          Notice to Insurers . If, at the time of the receipt by the Company of a notice of a claim the Company has liability insurance in effect which may cover such claim, the Company shall give prompt notice of the commencement of such claim to the insurers in accordance with the procedures set forth in the respective policies. The Company shall thereafter take all necessary or desirable action to cause such insurers to pay, on behalf of the Indemnitee, all amounts payable as a result of such action, suit, proceeding, inquiry or investigation in accordance with the terms of such policies.

 

2.4 .           Selection of Counsel . In the event that the Company shall be obligated to indemnify the Indemnitee and/or pay the Expenses of any claim, and the proceedings have not been initiated against the Indemnitee by the Company or on its behalf; then the Company shall be entitled to assume the defense of such claim with counsel selected by the Company, which counsel is reasonably reputable with experience in the relevant field, and the Company will not be liable to the Indemnitee under this Agreement for any fees of counsel subsequently incurred by Indemnitee with respect to the same claim; The Company shall and shall cause the counsel retained by it to take all necessary steps to bring the claim to a close and will keep the Indemnitee informed of key steps in the process. The counsel retained by the Company to conduct the defense pursuant to this Section shall be bound by a fiduciary duty to the Indemnitee and to the Company. The Company shall have the right to conduct such defense as it sees fit in its sole discretion.

 

 

 

  

3.            Additional Indemnification Rights; Non-exclusivity . In the event of any change after the date of this Agreement of any applicable law, statute or rule which expands the right of a corporation of the Company’s state of incorporation to indemnify a member of its board of directors or an officer, employee, agent or fiduciary, it is the intent of the parties hereto that the Indemnitee shall enjoy by this Agreement the greater benefits afforded by such change .

 

4.           No Duplication of Payments. The Company shall not be liable under this Agreement to make any payment in connection with any claim made against Indemnitee to the extent the Indemnitee has otherwise actually received payment (under any insurance policy, the Articles of Association or otherwise) of the amounts otherwise indemnifiable hereunder, except for the difference, if any, between the amounts received by the Indemnitee as aforesaid and the total obligations, liabilities and/or Expenses incurred by the Indemnitee in connection with such claim. The Company will be entitled to receive any amount collected by Indemnitee from a third party in connection with liabilities actually indemnified hereunder, to be transferred by the Indemnitee to the Company within fifteen (15) days following the receipt of said amount. Any amount received from D&O Insurance (as defined below) shall not be deducted from the Limit Amount hereunder.

 

5.           Partial Indemnification. If the Indemnitee is entitled under any provision of this Agreement to indemnification by the Company for some or a portion of the obligations, liabilities and/or Expenses incurred in connection with any claim, but not, however, for all of the total amount thereof, the Company shall nevertheless indemnify the Indemnitee for the portion of such obligations, liabilities, and/or Expenses to which the Indemnitee is entitled.

 

6.           Exemption. To the maximum extent permitted by law, the Company hereby exempts and releases Indemnitee from any and all liability to the Company related to any breach by the Indemnitee of his or her duty of care to the Company, subject to the provisions of Section 7.1 below and provided that in no event shall the Indemnitee be exempted in advance for a breach of his duty of care to the Company in a distribution.

 

7.           Exceptions. Any other provision herein to the contrary notwithstanding, the Company shall not be obligated pursuant to the terms of this Agreement:

 

7.1.          Excluded Acts and Omissions . To the extent it is prohibited under applicable law, to indemnify, insure or exempt Indemnitee from or against any liability arising out of: (i) the Indemnitee’s breach of fiduciary duty (other than, in case of insuring the Indemnity, a breach of fiduciary duty to the Company, provided that the Indemnitee has acted or omitted to act in good faith and had reasonable ground to believe such action will not prejudice the Company’s interests), (ii) intentional or reckless beach by the Indemnitee of his or her duly of care to the Company, but other than if done in negligence only, or (iii) the indemnitee’s action taken with the intention to unduly profit therefrom, and (iv) any fine or penalty payment to propitiate an offense imposed on the Indemnitee.

 

 

 

  

7.2.          Claims Initiated by Indemnitee . To indemnify or advance expenses to Indemnitee with respect to claims initiated or brought voluntarily by the Indemnitee and not by way of defense, except: (i) with respect to proceedings brought to establish or enforce a right to indemnification under this Agreement or any other agreement or insurance policy or under the Company’s Articles of Association now or hereafter in effect relating to claims for indemnification, release, exemption or insurance of the Indemnitee by reason of his Corporate Capacity, (ii) in specific cases if the Board of Directors has approved the initiation or bringing of such suit, or (iii) us otherwise required under the laws of the Company’s place of incorporation, regardless of whether the Indemnitee ultimately is determined to be entitled to such indemnification, advance expense payment of insurance recovery, as the case may be;

 

8.           Required Approvals. If for the validation of any of the undertakings in this Agreement any act, resolution, approval or other procedure is required, the Company undertakes to cause them to be done or adopted in a manner which will enable the Company to fulfill all its undertakings as aforesaid.

 

9.           Post Factum Indemnity. Nothing contained in this Agreement derogates from the Company’s right to indemnify the Indemnitee post factum for any amounts which the Indemnitee may be obligated to pay as set forth in Section 1.1 above without the limitations set forth in Section 1.2 above.

 

10.         Counterparts. This Agreement may be executed in one or more counterparts, each of which skill constitute an original.

 

11.         Binding Effect; Successors and Assigns. This Agreement shall be binding upon and inure to the benefit of and be enforceable by the parties hereto and their respective successors, assigns, including any direct or indirect successor by purchase, merger, consolidation or otherwise) to all, or substantially all the business and/or assets of the Company, spouses, heirs, personal and legal representative, executors and administrators.

 

12.         Notice. All notices and other communications required or permitted hereunder shall be in writing, shall be effective when given and shall in any event be deemed to be given: (a) five (5) business days after deposit with the applicable postal service, if delivered by first class mail, postage prepaid, (b) upon delivery, if delivered by hand, (c) one business day after the business day of deposit with EMS or similar overnight courier, freight prepaid, or (d) one day after the business day of delivery by facsimile transmission, if delivered by facsimile transmission, with copy by first class mail, postage prepaid, and shall be addressed if to Indemnitee, at the Indemnitee’s address as set forth beneath indemnitee’s signature to this Agreement and if to the Company at the address of its principal corporate offices or at such other address as such party may designate by ten days’ advance written notice to the other party hereto.

 

 

 

  

13.         Consent to Jurisdiction. The Company and Indemnitee each hereby irrevocably consent to the arbitration procedures, in accordance with the terms of the joint venture agreement between the Company and its shareholders, dated September 23, 2016, mutatis mutandis.

 

14.         Severability. The provisions of this Agreement shall be severable in the event that any of the provision hereof (including any provision within a single section, paragraph or sentence) are held by a court of competent jurisdiction to be invalid, void or otherwise unenforceable, and the remaining provisions shall remain enforceable, to the fullest extent permitted by law. Furthermore, to the fullest extent possible, the provisions of this Agreement (including, without limitations, each portion of this Agreement containing any provision held to be invalid, void or otherwise unenforceable that is not itself invalid, void or unenforceable) shall be construed so as to give effect to the intent manifested by the provision held invalid, illegal or unenforceable.

 

15.         Choice of Law. This Agreement shall be governed by and its provisions construed and enforced in accordance with the laws of the Peoples Republic of China without regard to the conflict of laws principles thereof or of any other jurisdiction.

 

16.         Subrogation. In the event of payment under this Agreement, the Company shall be subrogated to the extent of such payment to all of the rights of recovery of the Indemnitee, who shall execute all documents required and shall do all acts that may be necessary to secure such rights and to enable the Company effectively to bring suit to enforce such lights.

 

17.         Amendment and Termination. No amendment, modification, termination or cancellation of this Agreement shall be effective unless it is in writing signed by both the parties hereto. No waiver of any of the provisions of this Agreement shall be deemed or shall constitute a waiver of any other provisions hereof (whether or not similar) nor shall such waiver constitute a continuing waiver.

 

18.         Integration and Entire Agreement. This Agreement sets forth the entire understanding between the parties hereto and supersedes and usages all previous written and oral negotiations, commitments, understandings and agreements relating to the subject matter hereof between the parties hereto.

 

 

 

  

Exhibit - Indemnification Agm - 06092016

 

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

 

GUANGZHOU INMODE MEDICAL TECHNOLOGY LTD.
     
By: Mr. Moshe Mizrahy  
     
Title: Chairman of the Board  

 

Signature: /s/ Moshe Mizrahy  

 

ALON YAARI    
Name    

Signature: /s/ Alon Yaari  
     
Nationality: Israeli  
     
I.D. #: 032240673  

 

 

 

 

FORM OF DIRECTOR INDEMNIFICATION AGREEMENT

Guangzhou InMode Medical Technology Ltd.

 

 

 

INDEMNIFICATION AGREEMENT

 

This Indemnification Agreement (the “Agreement”) is effective as of January 11, 2017 , by and between Guangzhou InMode Medical Technology Ltd., a company incorporated under the laws of the Peoples Republic of China, with its principal offices at Unit 103-1, 1st Floor, No. 6, Luoxuan 3 rd. International Bio-Island, Guangzhou, Guangdong, China, (the “Company”), and Mr. Moshe Mizrahy, Nationality as Israeli, I.D. number 051825396, residing at 2 Yatziz St, Tel Aviv, Israel (the “Indemnitee”).

 

Recitals

 

A. The Company and Indemnitee recognize the difficulty in obtaining full and adequate liability insurance for directors, officers, employees, agents and fiduciaries, the significant increases in the cost of such insurance and the general reductions in the coverage of such insurance;

 

B. The Company and Indemnitee further recognize the substantial increase in corporate litigation in general, subjecting directors, officers, employees, agents and fiduciaries to expensive litigation risks at the same time as the availability and coverage of liability insurance have been severely limited;

 

C. The Company desires to attract and retain the services of highly qualified individuals, such as the Indemnitee, to serve the Company and, in part, in order to induce the Indemnitee to continue to provide services to the Company, wishes to provide for the indemnification and advancement of expense to the Indemnitee, to exempt the Indemnitee from liability to the Company, and agree to procure reasonable insurance coverage, all of the foregoing to the maximum extent permitted by law; and

 

D. In view of the considerations set forth above, the Company desires that Indemnitee shall be indemnified and exempted by the Company, and enjoy appropriate insurance coverage, all as set forth herein.

 

Now, therefore, the Company and the Indemnitee hereby agree as follows:

 

 

 

 

1. Indemnification

 

1.1           Indemnification of Liabilities and Expenses . The Company shall indemnify the Indemnitee to the fullest extent permitted by law and subject to the limitations set forth in paragraph 1.2, with respect to the following liabilities and expenses imposed on or incurred by the Indemnitee due to an act or omission by the Indemnitee in his capacity as a director, of the Company, or any subsidiary thereof (regardless whether it is a subsidiary of the Company at the date hereof), or as a director, officer, employee, agent or fiduciary of another corporation, collaboration, partnership, joint venture, trust or other enterprise, serving at the request of the Company (the “Corporate Capacity’): (i) any financial obligation imposed on the Indemnitee in favor of another person by, or expended by the Indemnitee as a result of, a court judgment, including a settlement or an arbitrator’s award approved by court, by reason of or arising in connection with any Indemnifiable Event (as defined below); (ii) any and all reasonable litigation expenses (including attorneys’ Fees) and all other costs, expenses and financial obligations (collectively, “Expenses”) incurred by the Indemnitee or charged to the Indemnitee by court in connection with a proceeding instituted against the Indemnitee by the Company or on its behalf or by another person, or in any criminal proceedings in which Indemnitee is acquitted, or in any criminal proceedings of a crime which does not require proof of mens rea (criminal intent) in which Indemnitee is convicted; and (iii) all Expenses expended by the Indemnitee due to an investigation or a proceeding instituted against the Indemnitee by an authority qualified to conduct such investigation or proceeding, where such investigation or proceeding is concluded without the filing of an indictment against the Indemnitee and without any financial obligation imposed on the Indemnitee in lieu of criminal proceedings, or that is concluded without the Indemnitee’s indictment but with a financial obligation imposed on Indemnitee in lien of criminal proceedings with respect to a crime that does not require proof of mens rea (criminal intent). Such payments of Expenses shall be made by the Company as soon as practicable but in any event no later than fifteen (15) days after written demand by the Indemnitee therefor is presented to the Company.

 

1.2.          Indemnifiable Event; Limit Amounts . For the purpose of this Agreement, an “Indemnifiable Event” shall mean any event or occurrence falling all or in part within any one or more of the categories set forth below. Indemnification pursuant to paragraph 1.l(i) with respect to each such Indemnifiable Events described below is limited to US$1,000,000 (the “Limit Amount”). The Limit Amount shall be subject to continuing review and consideration by the Company, and may be amended, if the Board of Directors determines that such Limit Amount is unreasonable in the circumstances, including if it is less than the financial obligation or Expenses which can be expected to be incurred by the Indemnitee in connection with the corresponding Indemnifiable Event, If the Limit Amount is insufficient to cover all amounts to which the Indemnitee and all other persons to whom the Company has agreed to indemnify for the matters and in the circumstances described herein. then such amount shall be allocated to such persons pro rata according to the percentage of their culpability, an finally determined by a court in the relevant claim, or absent such determination or in the event such persons are parties to different claims, in equal amounts.

 

 

 

  

The Indemnifiable Events are described as follows:

 

a) Any claim or demand made by customers, suppliers, contractors or other third parties transacting any form of business with the Company or its subsidiaries, in the ordinary course of their respective businesses, relating to the negotiations or performance of such transactions, representations or inducements provided in connection thereto or otherwise,

 

b) Any claim or demand made in connection with any transaction not in the ordinary course of business of either the Company, its subsidiaries or the party making such claim, including the sale, lease or purchase of any assets or business.

 

c) Any claim or demand made by employees, consultants, agents or other individuals or entities employed by or providing services to the Company or its subsidiaries relating to compensation owed to them or damages or liabilities suffered by them in connection with such employment or service.

 

d) Any claim or demand made under any securities laws of any jurisdiction and/or any stock exchange rules and regulations of any jurisdiction or by reference thereto, or related in the failure to disclose any information in the manner or time such information is required to be disclosed pursuant to such laws, or related to inadequate or improper disclosure of information to shareholders, or prospective shareholder, or related to the purchasing, holding or disposition of securities of the company or any other investment activity involving or affected by such securities, including any actions relating to an offer or issuance of securities of the Company or of its subsidiaries to the public by prospectus or privately by private placement, in Israel or abroad, including the details that shall be set forth in the documents in connection with execution thereof.

 

e) Any claim or demand made for actual or alleged infringement, misappropriation or misuse of any third party’s intellectual property rights by the Company or its subsidiaries, including without limitation confidential information, patents, copyrights, design rights, service marks, trade secrets, copyrights, misappropriation of ideas by the Company or its subsidiaries.

 

 

 

  

f) Actions taken in connection with the intellectual property of the Company and any subsidiary, and its protection, including the registration or assertion of rights to intellectual property and the defense of claims relating thereto.

 

g) Any claim or demand made by any lenders or other creditors or for moneys borrowed by, or other indebtedness of, the Company or its subsidiaries.

 

h) Any claim or demand made by any third party suffering any personal injury and/or bodily injury or damage to business or personal property through any act or omission attributed to the Company or its subsidiaries, or their respective employees, agents or other persons acting or allegedly acting on their behalf.

 

i) Any claim or demand made directly or indirectly in connection with complete or partial failure, by the Company or any subsidiary thereof, or their respective directors, officers and employees, to pay, report, keep applicable records or otherwise, of any foreign, federal, state, county, local, municipal or city taxes or other compulsory payments of any nature whatsoever, including, without limitation, income, sales, use, transfer, excise, value added, registration, severance, stamp, occupation, customs, duties, real property, personal property, capital stock, social security, unemployment, disability, payroll or employee withholding or other withholding, including any interest, penalty or addition thereto, whether disputed or not.

 

j) Any claim or demand made by purchasers, holders, lessors or other users of products of the Company, or individuals treated with such products, for damages or losses related to such use or treatment.

 

k) Any administrative, regulatory or judicial actions orders, decrees, suits, demands, demand letters, directives, claims, liens, investigations, proceedings or notices of noncompliance or violation by any governmental entity or other person alleging potential responsibility or liability arising out of, based on or related to (x) the presence of, release, spilt, emission, leaning, dumping, pouring, deposit, disposal, discharge, leaching or migration into the environment (each a “Release”) or threatened Release of; or exposure to, any hazardous, toxic, explosive or radioactive substances, wastes or other pollutants, including petroleum or petroleum distillates, asbestos or asbestos-containing material, polychlorinated biphenyls (“PCBs”) or PCB-containing materials or equipment, radon gas, infectious or medical wastes and all other substances or wastes of any nature regulated pursuant to any environmental law, at any location, whether or not owned, operated, leased or managed by the Company or any of its subsidiaries, or (y) circumstances forming the basis of any violation of any environmental law or environmental permit, license, registration or other authorization required under applicable environmental law.

 

 

 

 

l) Any administrative, regulatory or judicial actions, orders, decrees, suits, demands, demand letters, directives, claims, liens, investigations, proceedings or notices of noncompliance or violation by any governmental entity or other person alleging the failure to comply with any statute, law, ordinance, rule, regulation, order or decree of any governmental entity applicable to the Company or any of its subsidiaries, or any of their respective businesses or operations.

 

m) Participation, and/or non-participation at the Company’s board meetings, incompliance regarding the substance and the process of reaching board resolutions, bona fide expression of opinion and/or voting and/or abstention from voting at the Company’s board meetings.

 

n) Approval of corporate actions including the approval of the acts of the Company’s management, their resolutions, guidance and their supervision.

 

o) Claims of failure to exercise business judgment and a reasonable level of proficiency, expertise, care and other forms of fiduciary duties and duties of loyalty in regard of the Company’s business, as required under applicable laws.

 

p) Resolutions and/or actions relating to a merger of the Company and/or of its subsidiaries, the issuance of shares or securities exercisable into shares of the Company, changing the share capital of the Company, formation of subsidiaries, reorganization, winding up or sale of all or part of the business, operations or shares of the Company.

 

1.3.          Mandatory Payment of Expenses . Notwithstanding any other provision of this Agreement other than Section 7 hereof, to the extent that the Indemnitee has been successful on the merits or otherwise, including, without limitation, the dismissal of an action without prejudice, in defense of any action, suit, proceeding, inquiry or investigation referred to in Section 1.1 hereof or in the defense of any claim, issue or matter therein, the Indemnitee shall be indemnified against all financial obligations and Expenses incurred by the Indemnitee in connection therewith.

 

 

 

   

2. Indemnification Procedure

 

2.1.          Notice; Cooperation by Indemnitee . The Indemnitee shall, as a condition precedent to the Indemnitee’s right to be indemnified under this Agreement, give the Company notice in writing as soon as practicable of any claim made against the Indemnitee for which indemnification will or could be sought under this Agreement, provided, however, that any failure to provide such notice shall not affect the Indemnitee’s rights to indemnification hereunder unless and to the extent that such failure to provide notice materially and adversely prejudices the Company’s right to defend against such action. Notice to the Company shall be directed to the Chairman of the Company’s Board of Directors at the address shown on the signature page of this Agreement (or such other address as the Company shall designate in writing to the Indemnitee). In addition, the Indemnitee shall give the Company such information and cooperation as it may reasonably require and as shall be within the Indemnitee’s power,

 

2.2.          No Presumptions; Burden of Proof . For purposes of this Agreement, the termination of any claim by judgment, order, settlement (whether without court approval) or conviction, or upon a plea of guilty, shall not create a presumption that the Indemnitee did not meet any particular standard of conduct or have any particular belief or that a court has determined that indemnification is not permitted by applicable law.

 

2.3.          Notice to Insurers . If, at the time of the receipt by the Company of a notice of a claim the Company has liability insurance in effect which may cover such claim, the Company shall give prompt notice of the commencement of such claim to the insurers in accordance with the procedures set forth in the respective policies. The Company shall thereafter take all necessary or desirable action to cause such insurers to pay, on behalf of the Indemnitee, all amounts payable as a result of such action, suit, proceeding, inquiry or investigation in accordance with the terms of such policies

 

2.4 .           Selection of Counsel . In the event that the Company shall be obligated to indemnify the Indemnitee and/or pay the Expenses of any claim, and the proceedings have not been initiated against the Indemnitee by the Company or on its behalf; then the Company shall be entitled to assume the defense of such claim with counsel selected by the Company, which counsel is reasonably reputable with experience in the relevant field, and the Company will not be liable to the Indemnitee under this Agreement for any fees of counsel subsequently incurred by Indemnitee with respect to the same claim; The Company shall and shall cause the counsel retained by it to take all necessary steps to bring the claim to a close and will keep the Indemnitee informed of key steps in the process. The counsel retained by the Company to conduct the defense pursuant to this Section shall be bound by a fiduciary duty to the Indemnitee and to the Company. The Company shall have the right to conduct such defense as it sees fit in its sole discretion.

 

 

 

  

3.           Additional Indemnification Rights; Non-exclusivity. In the event of any change after the date of this Agreement of any applicable law, statute or rule which expands the right of a corporation of the Company’s state of incorporation to indemnify a member of its board of directors or an officer, employee, agent or fiduciary, it is the intent of the parties hereto that the Indemnitee shall enjoy by this Agreement the greater benefits afforded by such change .

 

4.           No Duplication of Payments. The Company shall not be liable under this Agreement to make any payment in connection with any claim made against Indemnitee to the extent the Indemnitee has otherwise actually received payment (under any insurance policy, the Articles of Association or otherwise) of the amounts otherwise indemnifiable hereunder, except for the difference, if any, between the amounts received by the Indemnitee as aforesaid and the total obligations, liabilities and/or Expenses incurred by the Indemnitee in connection with such claim. The Company will be entitled to receive any amount collected by Indemnitee from a third party in connection with liabilities actually indemnified hereunder, to be transferred by the Indemnitee to the Company within fifteen (15) days following the receipt of said amount. Any amount received from D&O Insurance (as defined below) shall not be deducted from the Limit Amount hereunder.

 

5.           Partial Indemnification. If the Indemnitee is entitled under any provision of this Agreement to indemnification by the Company for some or a portion of the obligations, liabilities and/or Expenses incurred in connection with any claim, but not, however, for all of the total amount thereof, the Company shall nevertheless indemnify the Indemnitee for the portion of such obligations, liabilities, and/or Expenses to which the Indemnitee is entitled.

 

6.           Exemption. To the maximum extent permitted by law, the Company hereby exempts and releases Indemnitee from any and all liability to the Company related to any breach by the Indemnitee of his or her duty of care to the Company, subject to the provisions of Section 7.1 below and provided that in no event shall the Indemnitee be exempted in advance for a breach of his duty of care to the Company in a distribution.

 

7.           Exceptions. Any other provision herein to the contrary notwithstanding, the Company shall not be obligated pursuant to the terms of this Agreement:

 

7.1.          Excluded Acts and Omissions . To the extent it is prohibited under applicable law, to indemnify, insure or exempt Indemnitee from or against any liability arising out of: (i) the Indemnitee’s breach of fiduciary duty (other than, in case of insuring the Indemnity, a breach of fiduciary duty to the Company, provided that the Indemnitee has acted or omitted to act in good faith and had reasonable ground to believe such action will not prejudice the Company’s interests), (ii) intentional or reckless beach by the Indemnitee of his or her duty of care to the Company, but other than if done in negligence only, or (iii) the indemnitee’s action taken with the intention to unduly profit therefrom, and (iv) any fine or penalty payment to propitiate an offense imposed on the Indemnitee.

 

 

 

  

7.2.          Claims Initiated by Indemnitee . To indemnify or advance expenses to Indemnitee with respect to claims initiated or brought voluntarily by the Indemnitee and not by way of defense, except: (i) with respect to proceedings brought to establish or enforce a right to indemnification under this Agreement or any other agreement of insurance policy or under the Company’s Articles of Association now or hereafter in effect relating to claims for indemnification, release, exemption or insurance of the Indemnitee by reason of his Corporate Capacity, (ii) in specific cases if the Board of Directors has approved the initiation or bringing of such suit, or (iii) us otherwise required under the laws of the Company’s place of incorporation, regardless of whether the Indemnitee ultimately is determined to be entitled to such indemnification, advance expense payment of insurance recovery, as the case may be;

 

8.           Required Approvals. If for the validation of any of the undertakings in this Agreement any act, resolution, approval or other procedure is required, the Company undertakes to cause them to be done or adopted in a manner which will enable the Company to fulfill all its undertakings as aforesaid.

 

9.           Post Factum Indemnity. Nothing contained in this Agreement derogates from the Company’s right to indemnify the Indemnitee post factum for any amounts which the Indemnitee may he obligated to pay as set forth in Section 1.1 above without the limitations set forth in Section 1.2 above.

 

10.         Counterparts. This Agreement may be executed in one or more counterparts, each of which shall constitute an original.

 

11.         Binding Effect; Successors and Assigns. This Agreement shall be binding upon and inure to the benefit of and be enforceable by the parties hereto and their respective successors, assigns, including any direct or indirect successor by purchase, merger, consolidation or otherwise) to all, or substantially all the business and/or assets of the Company, spouses, heirs, personal and legal representative, executors and administrators.

 

12.         Notice. All notices and other communications required or permitted hereunder shall be in writing, shall be effective when given and shall in any event be deemed to be given: (a) five (5) business days after deposit with the applicable postal service, if delivered by first class mail, postage prepaid, (b) upon delivery, if delivered by hand, (c) one business day after the business day of deposit with EMS or similar overnight courier, freight prepaid, or (d) one day after the business day of delivery by facsimile transmission, if delivered by facsimile transmission, with copy by first class mail, postage prepaid, and shall be addressed if to Indemnitee, at the Indemnitee’s address as set forth beneath indemnitee’s signature to this Agreement and if to the Company at the address of its principal corporate offices or at such other address as such party may designate by ten days’ advance written notice to the other party hereto.

 

 

 

  

13.         Consent to Jurisdiction. The Company and Indemnitee each hereby irrevocably consent to the arbitration procedures, in accordance with the terms of the joint venture agreement between the Company and its shareholders, dated September 23, 2016, mutatis mutandis.

 

14.         Severability. The provisions of this Agreement shall be severable in the event that any of the provision hereof (including any provision within a single section, paragraph or sentence) are held by a court of competent jurisdiction to be invalid, void or otherwise unenforceable, and the remaining provisions shall remain enforceable, to the fullest extent permitted by law. Furthermore, to the fullest extent possible, the provisions of this Agreement (including, without limitations, each portion of this Agreement containing any provision held to be invalid, void or otherwise unenforceable that is not itself invalid, void or unenforceable) shall be construed so as to give effect to the intent manifested by the provision held invalid, illegal or unenforceable.

 

15.         Choice of Law. This Agreement shall be governed by and its provisions construed and enforced in accordance with the laws of the Peoples Republic of China without regard to the conflict of laws principles thereof or of any other jurisdiction.

 

16.         Subrogation. In the event of payment under this Agreement, the Company shall be subrogated to the extent of such payment to all of the rights of recovery of the Indemnitee, who shall execute all documents required and shall do all acts that may be necessary to secure such rights and to enable the Company effectively to bring suit to enforce such lights.

 

17.         Amendment and Termination. No amendment, modification, termination or cancellation of this Agreement shall be effective unless It is in writing signed by both the parties hereto. No waiver of any of the provisions of this Agreement shall be deemed or shall constitute a waiver of any other provisions hereof (whether or not similar) nor shall such waiver constitute a continuing waiver.

 

18.         Integration and Entire Agreement. This Agreement sets forth the entire understanding between the parties hereto and supersedes and usages all previous written and oral negotiations, commitments, understandings and agreements relating to the subject matter hereof between the parties hereto.

 

 

 

  

Exhibit - Indemnification Agm - 06092016

 

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

 

GUANGZHOU INMODE MEDICAL TECHNOLOGY LTD.
     
By: Mr. Moshe Mizrahy  
     
Title: Chairman of the Board  

 

Signature: /s/ Moshe Mizrahy  

 

MOSHE MIZRAHY    
Name    

Signature: /s/ Moshe Mizrahy  
     
Nationality:   Israeli  
     
I.D. #: 051825396  

 

 

 

 

FORM OF DIRECTOR INDEMNIFICATION AGREEMENT

Guangzhou InMode Medical Technology Ltd.

 

 

 

INDEMNIFICATION AGREEMENT

 

This Indemnification Agreement (the “Agreement”) is effective as of January 11, 2017 , by and between Guangzhou InMode Medical Technology Ltd., a company incorporated under the laws of the Peoples Republic of China, with its principal offices at Unit 103-1, 1st Floor, No.6, Luoxuau 3 rd. International Bio-Island, Guangzhou, Guangdong, China, (the “Company”), and Mr. Avner Lushi, Nationality as Israeli, I.D. number 022840607, residing at 36 Smadar St., Ramat Gan, Israel (the “Indemnitee”).

 

Recitals

 

A. The Company and Indemnitee recognize the difficulty in obtaining full and adequate liability insurance for directors, officers, employees, agents and fiduciaries, the significant increases in the cost of such insurance and the general reductions in the coverage of such insurance;

 

B. The Company and Indemnitee further recognize the substantial increase in corporate litigation in general, subjecting directors, officers, employees, agents and fiduciaries to expensive litigation risks at the same time as the availability and coverage of liability insurance have been severely limited;

 

C. The Company desires to attract and retain the services of highly qualified individuals, such as the Indemnitee, to serve the Company and, in part, in order to induce the Indemnitee to continue to provide services to the Company, wishes to provide for the indemnification and advancement of expense to the Indemnitee, to exempt the Indemnitee from liability to the Company, and agree to procure reasonable insurance coverage, all of the foregoing to the maximum extent permitted by law; and

 

D. In view of the considerations set forth above, the Company desires that Indemnitee shall be indemnified and exempted by the Company, and enjoy appropriate insurance coverage, all as set forth herein.

 

Now, therefore, the Company and the Indemnitee hereby agree as follows:

 

 

 

 

1. Indemnification

 

1.1           Indemnification of Liabilities and Expenses . The Company shall indemnify the Indemnitee to the fullest extent permitted by law and subject to the limitations set forth in paragraph 1.2, with respect to the following liabilities and expenses imposed on or incurred by the Indemnitee due to an act or omission by the Indemnitee in his capacity as a director, of the Company, or any subsidiary thereof (regardless whether it is a subsidiary of the Company at the date hereof), or as a director, officer, employee, agent or fiduciary of another corporation, collaboration, partnership, joint venture, trust or other enterprise, serving at the request of the Company (the “Corporate Capacity”): (i) any financial obligation imposed on the Indemnitee in favor of another person by, or expended by the Indemnitee as a result of, a court judgment, including a settlement or an arbitrator’s award approved by court, by reason of or arising in connection with any Indemnifiable Event (as defined below); (ii) any and all reasonable litigation expenses (including attorneys’ fees) and all other costs, expenses and financial obligations (collectively, “Expenses”) incurred by the Indemnitee or charged to the Indemnitee by court in connection with a proceeding instituted against the Indemnitee by the Company or on its behalf or by another person, or in any criminal proceedings in which Indemnitee is acquitted, or in any criminal proceedings of a crime which does not require proof of mens rea (criminal intent) in which Indemnitee is convicted; and (iii) all Expenses expended by the Indemnitee due to an investigation or a proceeding instituted against the Indemnitee by an authority qualified to conduct such investigation or proceeding, where such investigation or proceeding is concluded without the filing of an indictment against the Indemnitee and without any financial obligation imposed on the Indemnitee in lieu of criminal proceedings, or that is concluded without the Indemnitee’s indictment but with a financial obligation imposed on Indemnitee in lieu of criminal proceedings with respect to a crime that does not require proof of mens rea (criminal intent). Such payments of Expenses shall be made by the Company as soon as practicable but in any event no later than fifteen (15) days after written demand by the Indemnitee therefor is presented to the Company.

 

1.2.          Indemnifiable Event; Limit Amounts . For the purpose of this Agreement, an “Indemnifiable Event” shall mean any event or occurrence falling all or in part within any one or more of the categories set forth below. Indemnification pursuant to paragraph 1.l(i) with respect to each such Indemnifiable Events described below is limited to US$1,000,000 (the “Limit Amount”). The Limit Amount shall be subject to continuing review and consideration by the Company, and may be amended, if the Board of Directors determines that such Limit Amount is unreasonable in the circumstances, including if it is less than the financial obligation or Expenses which can be expected to be incurred by the Indemnitee in connection with the corresponding Indemnifiable Event. If the Limit Amount is insufficient to cover all amounts to which the Indemnitee and all other persons to whom the Company has agreed to indemnify for the matters and in the circumstances described herein, then such amount shall be allocated to such persons pro rata according to the percentage of their culpability, as finally determined by a court in the relevant claim, or absent such determination or in the event such persons are parties to different claims, in equal amounts.

 

 

 

  

The Indemnifiable Events are described as follows:

 

a) Any claim or demand made by customers, suppliers, contractors or other third parties transacting any form of business with the Company or its subsidiaries, in the ordinary course of their respective businesses, relating to the negotiations or performance of such transactions, representations or inducements provided in connection thereto or otherwise.

 

b) Any claim or demand made in connection with any transaction not in the ordinary course of business of either the Company, its subsidiaries or the party making such claim, including the sale, lease or purchase of any assets or business.

 

c) Any claim or demand made by employees, consultants, agents or other individuals or entities employed by or providing services to the Company or its subsidiaries relating to compensation owed to them or damages or liabilities suffered by them in connection with such employment or service.

 

d) Any claim or demand made under any securities laws of any jurisdiction and/or any stock exchange rules and regulations of any jurisdiction or by reference thereto, or related in the failure to disclose any information in the manner or time such information is required to be disclosed pursuant to such laws, or related to inadequate or improper disclosure of information to shareholders, or prospective shareholders, or related to the purchasing, holding or disposition of securities of the company or any other investment activity involving or affected by such securities, including any actions relating to an offer or issuance of securities of the Company or of its subsidiaries to the public by prospectus or privately by private placement, in Israel or abroad, including the details that shall be set forth in the documents in connection with execution thereof.

 

e) Any claim or demand made for actual or alleged infringement, misappropriation or misuse of any third party’s intellectual property rights by the Company or its subsidiaries, including without limitation confidential information, patents, copyrights, design rights, service marks, trade secrets, copyrights, misappropriation of ideas by the Company or its subsidiaries.

 

 

 

  

f) Actions taken in connection with the intellectual property of the Company and any subsidiary, and its protection, including the registration or assertion of rights to intellectual property and the defense of claims relating thereto.

 

g) Any claim or demand made by any leaders or other creditors or for moneys borrowed by, or other indebtedness of, the Company or its subsidiaries.

 

h) Any claim or demand made by any third party suffering any personal injury and/or bodily injury or damage to business or personal property through any act or omission attributed to the Company or its subsidiaries, or their respective employees, agents or other persons acting or allegedly acting on their behalf.

 

i) Any claim or demand made directly or indirectly in connection with complete or partial failure, by the Company or any subsidiary thereof, or their respective directors, officers and employees, to pay, report, keep applicable records or otherwise, of any foreign, federal, state, county, local, municipal or city taxes or other compulsory payments of any nature whatsoever, including, without limitation, income, sales, use, transfer, excise, value added, registration, severance, stamp, occupation, customs, duties, real property, personal property, capital stock, social security, unemployment, disability, payroll or employee withholding or other withholding, including any interest, penalty or addition thereto, whether disputed or not.

 

j) Any claim or demand made by purchasers, holders, lessors or other users of products of the Company, or individuals treated with such products, for damages or losses related to such use or treatment.

 

k) Any administrative, regulatory or judicial actions orders, decrees, suits, demands, demand letters, directives, claims, liens, investigations, proceedings or notices of noncompliance or violation by any governmental entity or other person alleging potential responsibility or liability arising out of, based on or related to (x) the presence of, release, spill, emission, leaning, dumping, pouring, deposit, disposal, discharge, leaching or migration into the environment (each a “Release”) or threatened Release of; or exposure to, any hazardous, toxic, explosive or radioactive substances, wastes or other pollutants, including petroleum or petroleum distillates, asbestos or asbestos-containing material, polychlorinated biphenyls (“PCBs”) or PCB-containing materials or equipment, radon gas, infectious or medical wastes and all other substances or wastes of any nature regulated pursuant to any environmental law, at any location, whether or not owned, operated, leased or managed by the Company or any of its subsidiaries, or (y) circumstances forming the basis of any violation of any environmental law or environmental permit, license, registration or other authorization required under applicable environmental law.

 

 

 

 

l) Any administrative, regulatory or judicial actions, orders, decrees, suits, demands, demand letters, directives, claims, liens, investigations, proceedings or notices of noncompliance or violation by any governmental entity or other person alleging the failure to comply with any statute, law, ordinance, rule, regulation, order or decree of any governmental entity applicable to the Company or any of its subsidiaries, or any of their respective businesses or operations.

 

m) Participation, and/or non-participation at the Company’s board meetings, incompliance regarding the substance and the process of reaching board resolutions, bona fide expression of opinion and/or voting and/or abstention from voting at the Company’s board meetings,

 

n) Approval of corporate actions including the approval of the acts of the Company’s management, their resolutions, guidance and their supervision.

 

o) Claims of failure to exercise business judgment and a reasonable level of proficiency, expertise, care and other forms of fiduciary duties and duties of loyalty in regard of the Company’s business, as required under applicable laws.

 

p) Resolutions and/or actions relating to a merger of the Company and/or of its subsidiaries, the issuance of shares or securities exercisable into shares of the Company, changing the share capital of the Company, formation of subsidiaries, reorganization, winding up or sale of all or part of the business, operations or shares of the Company.

 

1.3.          Mandatory Payment of Expenses . Notwithstanding any other provision of this Agreement other than Section 7 hereof, to the extent that the Indemnitee has been successful on the merits or otherwise, including, without limitation, the dismissal of an action without prejudice, in defense of any action, suit, proceeding, inquiry or investigation referred to in Section 1.1 hereof or in the defense of any claim, issue or matter therein, the Indemnitee shall be indemnified against all financial obligations and Expenses incurred by the Indemnitee in connection therewith.

 

 

 

   

2. Indemnification Procedure

 

2.1.          Notice; Cooperation by Indemnitee . The Indemnitee shall, as a condition precedent to the Indemnitee’s right to be indemnified under this Agreement, give the Company notice in writing as soon as practicable of any claim made against the Indemnitee for which indemnification will or could be sought under this Agreement, provided, however, that any failure to provide such notice shall not affect the Indemnitee’s rights to indemnification hereunder unless and to the extent that such failure to provide notice materially and adversely prejudices the Company’s right to defend against such action. Notice to the Company shall be directed to the Chairman of the Company’s Board of Directors at the address shown on the signature page of this Agreement (or such other address as the Company shall designate in writing to the Indemnitee), In addition, the Indemnitee shall give the Company such information and cooperation as it may reasonably require and as shall be within the Indemnitee’s power.

 

2.2.          No Presumptions: Burden of Proof . For purposes of this Agreement, the termination of any claim by judgment, order, settlement (whether without court approval) or conviction, or upon a plea of guilty, shall not create a presumption that the Indemnitee did not meet any particular standard of conduct or have any particular belief or that a court has determined that indemnification is not permitted by applicable law.

 

2.3.          Notice to Insurers . If, at the time of the receipt by the Company of a notice of a claim the Company has liability insurance in effect which may cover such claim, the Company shall give prompt notice of the commencement of such claim to the insurers in accordance with the procedures set forth in the respective policies. The Company shall thereafter take all necessary or desirable action to cause such insurers to pay, on behalf of the Indemnitee, all amounts payable as a result of such action, suit, proceeding, inquiry or investigation in accordance with the terms of such policies.

 

2.4 .           Selection of Counsel . In the event that the Company shall be obligated to indemnify the Indemnitee and/or pay the Expenses of any claim, and the proceedings have not been initiated against the Indemnitee by the Company or on its behalf; then the Company shall be entitled to assume the defense of such claim with counsel selected by the Company, which counsel is reasonably reputable with experience in the relevant field, and the Company will not be liable to the Indemnitee under this Agreement for any fees of counsel subsequently incurred by Indemnitee with respect to the same claim; The Company shall and shall cause the counsel retained by it to take all necessary steps to bring the claim to a close and will keep the Indemnitee informed of key steps in the process. The counsel retained by the Company to conduct the defense pursuant to this Section shall be bound by a fiduciary duty to the Indemnitee and to the Company. The Company shall have the right to conduct such defense as it sees fit in its sole discretion.

 

 

 

  

3.           Additional Indemnification Rights; Non-exclusivity. In the event of any change after the date of this Agreement of any applicable law, statute or rule which expands the right of a corporation of the Company’s state of incorporation to indemnify a member of its board of directors or an officer, employee, agent or fiduciary, it is the intent of the parties hereto that the Indemnitee shall enjoy by this Agreement the greater benefits afforded by such change .

 

4.           No Duplication of Payments. The Company shall not be liable under this Agreement to make any payment in connection with any claim made against Indemnitee to the extent the Indemnitee has otherwise actually received payment (under any insurance policy, the Articles of Association or otherwise) of the amounts otherwise indemnifiable hereunder, except for the difference, if any, between the amounts received by the Indemnitee as aforesaid and the total obligations, liabilities and/or Expenses incurred by the Indemnitee in connection with such claim. The Company will be entitled to receive any amount collected by Indemnitee from a third party in connection with liabilities actually indemnified hereunder, to be transferred by the Indemnitee to the Company within fifteen (15) days following the receipt of said amount. Any amount received from D&O Insurance (as defined below) shall not be deducted from the Limit Amount hereunder.

 

5.           Partial Indemnification. If the Indemnitee is entitled under any provision of this Agreement to indemnification by the Company for some or a portion or the obligations, liabilities and/or Expenses incurred in connection with any claim, but not, however, for all of the total amount thereof, the Company shall nevertheless indemnify the Indemnitee for the portion of such obligations, liabilities, and/or Expenses to which the Indemnitee is entitled.

 

6.           Exemption. To the maximum extent permitted by law, the Company hereby exempts and releases Indemnitee from any and all liability to the Company related to any breach by the Indemnitee of his or her duly of care to the Company, subject to the provisions of Section 7.1 below and provided that in no event shall the Indemnitee be exempted in advance for a breach of his duty of care to the Company in a distribution.

 

7.           Exceptions. Any other provision herein to the contrary notwithstanding, the Company shall not be obligated pursuant to the terms of this Agreement:

 

7.1.          Excluded Acts and Omissions . To the extent it is prohibited under applicable law, to indemnify, insure or exempt indemnitee from or against any liability arising out of: (i) the Indemnitee’s breach of fiduciary duty (other than, in case of insuring the Indemnity, a breach of fiduciary duty to the Company, provided that the Indemnitee has acted or omitted to act in good faith and had reasonable ground to believe such action will not prejudice the Company’s interests), (ii) intentional or reckless beach by the Indemnitee of his or her duly of care to the Company, but other than if done in negligence only, or (iii) the Indemnitee’s action taken with the intention to unduly profit therefrom, and (iv) any line or penalty payment to propitiate am offense imposed on the Indemnitee.

 

 

 

  

7.2.          Claims Initiated by Indemnitee . To indemnify or advance expenses to Indemnitee with respect to claims initiated or brought voluntarily by the Indemnitee and not by way of defense, except: (i) with respect to proceedings brought to establish or enforce a right to indemnification under this Agreement or any other agreement of insurance policy or under the Company’s Articles of Association now or hereafter in effect relating to claims for indemnification, release, exemption or insurance of the Indemnitee by reason of his Corporate Capacity, (ii) in specific cases if the Board of Directors has approved the initiation or bringing of such suit, or (iii) us otherwise required under the laws of the Company’s place of incorporation, regardless of whether the Indemnitee ultimately is determined to be entitled to such indemnification, advance expense payment of insurance recovery, as the case may be;

 

8.           Required Approvals. If for the validation of any of the undertakings in this Agreement any act, resolution, approval or other procedure is required, the Company undertakes to cause them to be done or adopted in a manner which will enable the Company to fulfill all its undertakings as aforesaid.

 

9.           Post Factum Indemnity. Nothing contained in this Agreement derogates from the Company’s right to indemnify the Indemnitee post factum for any amounts which the Indemnitee may he obligated to pay as set forth in Section 1.1 above without the limitations set forth in Section 1.2 above.

 

10.         Counterparts. This Agreement may be executed in one or more counterparts, each of which shall constitute an original.

 

11.         Binding Effect; Successors and Assigns. This Agreement shall be binding upon and inure to the benefit of and be enforceable by the parties hereto and their respective successors, assigns, including any direct or indirect successor by purchase, merger, consolidation or otherwise) to all, or substantially all the business and/or assets of the Company, spouses, heirs, personal and legal representative, executors and administrators.

 

12.         Notice. All notices and other communications required or permitted hereunder shall be in writing, shall be effective when given and shall in any event be deemed to be given: (a) five (5) business days after deposit with the applicable postal service, if delivered by first class mail, postage prepaid, (b) upon delivery, if delivered by hand, (c) one business day after the business day of deposit with EMS or similar overnight courier, freight prepaid, or (d) one day after the business day of delivery by facsimile transmission, if delivered by facsimile transmission, with copy by first class mail, postage prepaid, and shall be addressed if to Indemnitee, at the Indemnitee’s address as set forth beneath indemnitee’s signature to this Agreement and if to the Company at the address of its principal corporate offices or at such other address as such party may designate by ten days’ advance written notice to the other party hereto.

 

 

 

  

13.         Consent to Jurisdiction. The Company and Indemnitee each hereby irrevocably consent to the arbitration procedures, in accordance with the terms of the joint venture agreement between the Company and its shareholders, dated September 23, 2016, mutatis mutandis .

 

14.         Severability. The provisions of this Agreement shall be severable in the event that any of the provision hereof (including any provision within a single section, paragraph or sentence) are held by a court of competent jurisdiction to be invalid, void or otherwise unenforceable, and the remaining provisions shall remain enforceable, to the fullest extent permitted by law. Furthermore, to the fullest extent possible, the provisions of this Agreement (including, without limitations, each portion of this Agreement containing any provision held to be invalid, void or otherwise unenforceable that is not itself invalid, void or unenforceable) shall be construed so as to give effect to the intent manifested by the provision held invalid, illegal or unenforceable.

 

15.         Choice of Law. This Agreement shall be governed by and its provisions construed and enforced in accordance with the laws of the Peoples Republic of China without regard to the conflict of laws principles thereof or of any other jurisdiction.

 

16.         Subrogation. In the event of payment under this Agreement, the Company shall be subrogated to the extent of such payment to all of the rights of recovery of the Indemnitee, who shall execute all documents required and shall do all acts that may be necessary to secure such rights and to enable the Company effectively to bring suit to enforce such lights.

 

17.         Amendment and Termination. No amendment, modification, termination or cancellation of this Agreement shall be effective unless It is in writing signed by both the parties hereto. No waiver of any of the provisions of this Agreement shall be deemed or shall constitute a waiver of any other provisions hereof (whether or not similar) nor shall such waiver constitute a continuing waiver.

 

18.         Integration and Entire Agreement. This Agreement sets forth the entire understanding between the parties hereto and supersedes and usages all previous written and oral negotiations, commitments, understandings and agreements relating to the subject matter hereof between the parties hereto.

 

 

 

  

Exhibit - Indemnification Agm - 06092016

 

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

 

GUANGZHOU INMODE MEDICAL TECHNOLOGY LTD.
     
By: Mr. Moshe Mizrahy  
     
Title: Chairman of the Board  

 

Signature: /s/ Moshe Mizrahy  

 

AVNER LUSHI    
Name    

Signature: /s/ Avner Lushi  
     
Nationality: Israeli  
     
I.D. #: 022840607  

 

 

 

 

FORM OF DIRECTOR INDEMNIFICATION AGREEMENT

Guangzhou InMode Medical Technology Ltd.

 

 

 

INDEMNIFICATION AGREEMENT

 

This Indemnification Agreement (the “Agreement”) is effective as of January 11, 2017 , by and between Guangzhou InMode Medical Technology Ltd., a company incorporated under the laws of the Peoples Republic of China, with its principal offices at Unit 103-1, 1st Floor, No. 6, Luoxuan 3 rd. International Bio-Island, Guangzhou, Guangdong, China, (the “Company”), and Mr. Rafael Lickerman, Nationality as Israeli, I.D. number 024070658, residing at 7 Oren St., Haifa 34731 Israel (the “Indemnitee”).

 

Recitals

 

A. The Company and Indemnitee recognize the difficulty in obtaining full and adequate liability insurance for directors, officers, employees, agents and fiduciaries, the significant increases in the cost of such insurance and the general reductions in the coverage of such insurance;

 

B. The Company and Indemnitee further recognize the substantial increase in corporate litigation in general, subjecting directors, officers, employees, agents and fiduciaries to expensive litigation risks at the same time as the availability and coverage of liability insurance have been severely limited;

 

C. The Company desires to attract and retain the services of highly qualified individuals, such as the Indemnitee, to serve the Company and, in part, in order to induce the Indemnitee to continue to provide services to the Company, wishes to provide for the indemnification and advancement of expense to the Indemnitee, to exempt the Indemnitee from liability to the Company, and agree to procure reasonable insurance coverage, all of the foregoing to the maximum extent permitted by law; and

 

D. In view of the considerations set forth above, the Company desires that Indemnitee shall be indemnified and exempted by the Company, and enjoy appropriate insurance coverage, all as set forth herein.

 

Now, therefore, the Company and the Indemnitee hereby agree as follows:

 

 

 

 

1. Indemnification

 

1.1           Indemnification of Liabilities and Expenses . The Company shall indemnify the Indemnitee to the fullest extent permitted by law and subject to the limitations set forth in paragraph 1.2, with respect to the following liabilities and expenses imposed on or incurred by the Indemnitee due to an act or omission by the Indemnitee in his capacity as a director, of the Company, or any subsidiary thereof (regardless whether it is a subsidiary of the Company at the date hereof), or as a director, officer, employee, agent or fiduciary of another corporation, collaboration, partnership, joint venture, trust or other enterprise, serving at the request of the Company (the “Corporate Capacity”): (i) any financial obligation imposed on the Indemnitee in favor of another person by, or expended by the Indemnitee as a result of, a court judgment, including a settlement or an arbitrator’s award approved by court, by reason of or arising in connection with any Indemnifiable Event (as defined below); (ii) any and all reasonable litigation expenses (including attorneys’ fees) and all other costs, expenses and financial obligations (collectively, “Expenses”) incurred by the Indemnitee or charged to the Indemnitee by court in connection with a proceeding instituted against the Indemnitee by the Company or on its behalf or by another person, or in any criminal proceedings in which Indemnitee is acquitted, or in any criminal proceedings of a crime which does not require proof of mens rea (criminal intent) in which Indemnitee is convicted; and (iii) all Expenses expended by the Indemnitee due to an investigation or a proceeding instituted against the Indemnitee by an authority qualified to conduct such investigation or proceeding, where such investigation or proceeding is concluded without the filing of an indictment against the Indemnitee and without any financial obligation imposed on the Indemnitee in lieu of criminal proceedings, or that is concluded without the Indemnitee’s indictment but with a financial obligation imposed on Indemnitee in lieu of criminal proceedings with respect to a crime that does not require proof of mens rea (criminal intent). Such payments of Expenses shall be made by the Company as soon as practicable but in any event no later than fifteen (15) days after written demand by the Indemnitee therefor is presented to the Company.

 

1.2.          Indemnifiable Event; Limit Amounts . For the purpose of this Agreement, an “Indemnifiable Event” shall mean any event or occurrence falling all or in part within any one or more of the categories set forth below. Indemnification pursuant to paragraph 1.l(i) with respect to each such Indemnifiable Events described below is limited to US$1,000,000 (the “Limit Amount”). The Limit Amount shall be subject to continuing review and consideration by the Company, and may be amended, if the Board of Directors determines that such Limit Amount is unreasonable in the circumstances, including if it is less than the financial obligation or Expenses which can be expected to be incurred by the Indemnitee in connection with the corresponding Indemnifiable Event, If the Limit Amount is insufficient to cover all amounts to which the Indemnitee and all other persons to whom the Company has agreed to indemnify for the matters and in the circumstances described herein. then such amount shall be allocated to such persons pro rata according to the percentage of their culpability, as finally determined by a court in the relevant claim, or absent such determination or in the event such persons are parties to different claims, in equal amounts.

 

 

 

  

The Indemnifiable Events are described as follows:

 

a) Any claim or demand made by customers, suppliers, contractors or other third parties transacting any form of business with the Company or its subsidiaries, in the ordinary course of their respective businesses, relating to the negotiations or performance of such transactions, representations or inducements provided in connection thereto or otherwise,

 

b) Any claim or demand made in connection with any transaction not in the ordinary course of business of either the Company, its subsidiaries or the party making such claim, including the sale, lease or purchase of any assets or business.

 

c) Any claim or demand made by employees, consultants, agents or other individuals or entities employed by or providing services to the Company or its subsidiaries relating to compensation owed to them or damages or liabilities suffered by them in connection with such employment or service.

 

d) Any claim or demand made under any securities laws of any jurisdiction and/or any stock exchange rules and regulations of any jurisdiction or by reference thereto, or related in the failure to disclose any information in the manner or time such information is required to be disclosed pursuant to such laws, or related to inadequate or improper disclosure of information to shareholders, or prospective shareholder, or related to the purchasing, holding or disposition of securities of the company or any other investment activity involving or affected by such securities, including any actions relating to an offer or issuance of securities of the Company or of its subsidiaries to the public by prospectus or privately by private placement, in Israel or abroad, including the details that shall be set forth in the documents in connection with execution thereof,

 

e) Any claim or demand made for actual or alleged infringement, misappropriation or misuse of any third party’s intellectual property rights by the Company or its subsidiaries, including without limitation confidential information, patents, copyrights, design rights, service marks, trade secrets, copyrights, misappropriation of ideas by the Company or its subsidiaries.

 

 

 

  

f) Actions taken in connection with the intellectual property of the Company and any subsidiary, and its protection, including the registration or assertion of rights to intellectual property and the defense of claims relating thereto.

 

g) Any claim or demand made by any leaders or other creditors or for moneys borrowed by, or other indebtedness of, the Company or its subsidiaries.

 

h) Any claim or demand made by any third party suffering any personal injury and/or bodily injury or damage to business or personal property through any act or omission attributed to the Company or its subsidiaries, or their respective employees, agents or other persons acting or allegedly acting on their behalf.

 

i) Any claim or demand made directly or indirectly in connection with complete or partial failure, by the Company or any subsidiary thereof, or their respective directors, officers and employees, to pay, report, keep applicable records or otherwise, of any foreign, federal, state, county, local, municipal or city taxes or other compulsory payments of any nature whatsoever, including, without limitation, income, sales, use, transfer, excise, value added, registration, severance, stamp, occupation, customs, duties, real property, personal property, capital stock, social security, unemployment, disability, payroll or employee withholding or other withholding, including any interest, penalty or addition thereto, whether disputed or not.

 

j) Any claim or demand made by purchasers, holders, lessors or other users of products of the Company, or individuals treated with such products, for damages or losses related to such use or treatment.

 

k) Any administrative, regulatory or judicial actions orders, decrees, suits, demands, demand letters, directives, claims, liens, investigations, proceedings or notices of noncompliance or violation by any governmental entity or other person alleging potential responsibility or liability arising out of, based on or related to (x) the presence of, release, spill, emission, leaning, dumping, pouring, deposit, disposal, discharge, leaching or migration into the environment (each a “Release”) or threatened Release of; or exposure to, any hazardous, toxic, explosive or radioactive substances, wastes or other pollutants, including petroleum or petroleum distillates, asbestos or asbestos-containing material, polychlorinated biphenyls (“PCBs”) or PCB-containing materials or equipment, radon gas, infectious or medical wastes and all other substances or wastes of any nature regulated pursuant to any environmental law, at any location, whether or not owned, operated, leased or managed by the Company or any of its subsidiaries, or (y) circumstances forming the basis of any violation of any environmental law or environmental permit, license, registration or other authorization required under applicable environmental law.

 

 

 

 

l) Any administrative, regulatory or judicial actions, orders, decrees, suits, demands, demand letters, directives, claims, liens, investigations, proceedings or notices of noncompliance or violation by any governmental entity or other person alleging the failure to comply with any statute, law, ordinance, rule, regulation, order or decree of any governmental entity applicable to the Company or any of its subsidiaries, or any of their respective businesses or operations.

 

m) Participation, and/or non-participation at the Company’s board meetings, incompliance regarding the substance and the process of reaching board resolutions, bona fide expression of opinion and/or voting and/or abstention from voting at the Company’s board meetings.

 

n) Approval of corporate actions including the approval of the acts of the Company’s management, their resolutions, guidance and their supervision.

 

o) Claims of failure to exercise business judgment and a reasonable level of proficiency, expertise, care and other forms of fiduciary duties and duties of loyalty in regard of the Company’s business, as required under applicable laws.

 

p) Resolutions and/or actions relating to a merger of the Company and/or of its subsidiaries, the issuance of shares or securities exercisable into shares of the Company, changing the share capital of the Company, formation of subsidiaries, reorganization, winding up or sale of all or part of the business, operations or shares of the Company.

 

1.3.          Mandatory Payment of Expenses . Notwithstanding any other provision of this Agreement other than Section 7 hereof, to the extent that the Indemnitee has been successful on the merits or otherwise, including, without limitation, the dismissal of an action without prejudice, in defense of any action, suit, proceeding, inquiry or investigation referred to in Section 1.1 hereof or in the defense of any claim, issue or matter therein, the Indemnitee shall be indemnified against all financial obligations and Expenses incurred by the Indemnitee in connection therewith.

 

 

 

 

2. Indemnification Procedure

 

2.1.          Notice; Cooperation by Indemnitee . The Indemnitee shall, as a condition precedent to the Indemnitee’s right to be indemnified under this Agreement, give the Company notice in writing as soon as practicable of any claim made against the Indemnitee for which indemnification will or could be sought under this Agreement, provided, however, that any failure to provide such notice shall not affect the Indemnitee’s rights to indemnification hereunder unless and to the extent that such failure to provide notice materially and adversely prejudices the Company’s right to defend against such action. Notice to the Company shall be directed to the Chairman of the Company’s Board of Directors at the address shown on the signature page of this Agreement (or such other address as the Company shall designate in writing to the Indemnitee). In addition, the Indemnitee shall give the Company such information and cooperation as it may reasonably require and as shall be within the Indemnitee’s power.

 

2.2.          No Presumptions; Burden of Proof . For purposes of this Agreement, the termination of any claim by judgment, order, settlemant (whether without court approval) or conviction, or upon a plea of guilty, shall not create a presumption that the Indemnitee did not meet any particular standard of conduct or have any particular belief or that a court has determined that indemnification is not permitted by applicable law.

 

2.3.          Notice to Insurers . If, at the time of the receipt by the Company of a notice of a claim the Company has liability insurance in effect which may cover such claim, the Company shall give prompt notice of the commencement of such claim to the insurers in accordance with the procedures set forth in the respective policies. The Company shall thereafter take all necessary or desirable action to cause such insurers to pay, on behalf of the Indemnitee, all amounts payable as a result of such action, suit, proceeding, inquiry or investigation in accordance with the terms of such policies.

 

2.4.          Selection of Counsel . In the event that the Company shall be obligated to indemnify the Indemnitee and/or pay the Expenses of any claim, and the proceedings have not been initiated against the Indemnitee by the Company or on its behalf; then the Company shall be entitled to assume the defense of such claim with counsel selected by the Company, which counsel is reasonably reputable with experience in the relevant field, and the Company will not be liable to the Indemnitee under this Agreement for any fees of counsel subsequently incurred by Indemnitee with respect to the same claim; The Company shall and shall cause the counsel retained by it to take all necessary steps to bring the claim to a close and will keep the Indemnitee informed of key steps in the process. The counsel retained by the Company to conduct the defense pursuant to this Section shall be bound by a fiduciary duty to the Indemnitee and to the Company. The Company shall have the right to conduct such defense as it sees fit in its sole discretion.

 

 

 

  

3.           Additional Indemnification Rights; Non-exclusivity. In the event of any change after the date of this Agreement of any applicable law, statute or rule which expands the right of a corporation of the Company’s state of incorporation to indemnify a member of its board of directors or an officer, employee, agent or fiduciary, it is the intent of the parties hereto that the Indemnitee shall enjoy by this Agreement the greater benefits afforded by such change.

 

4.           No Duplication of Payments. The Company shall not be liable under this Agreement to make any payment in connection with any claim made against Indemnitee to the extent the Indemnitee has otherwise actually received payment (under any insurance policy, the Articles of Association or otherwise) of the amounts otherwise indemnifiable hereunder, except for the difference, if any, between the amounts received by the Indemnitee as aforesaid and the total obligations, liabilities and/or Expenses incurred by the Indemnitee in connection with such claim. The Company will be entitled to receive any amount collected by Indemnitee from a third party in connection with liabilities actually indemnified hereunder, to be transferred by the Indemnitee to the Company within fifteen (15) days following the receipt of said amount. Any amount received from D&O Insurance (as defined below) shall not be deducted from the Limit Amount hereunder.

 

5.           Partial Indemnification. If the Indemnitee is entitled under any provision of this Agreement to indemnification by the Company for some or a portion of the obligations, liabilities and/or Expenses incurred in connection with any claim, but not, however, for all of the total amount thereof, the Company shall nevertheless indemnify the Indemnitee for the portion of such obligations, liabilities and/or Expenses to which the Indemnitee is entitled.

 

6.           Exemption. To the maximum extent permitted by law, the Company hereby exempts and releases Indemnitee from any and all liability to the Company related to any breach by the Indemnitee of his or her duty of care to the Company, subject to the provisions of Section 7.1 below and provided that in no event shall the Indemnitee be exempted in advance for a breach of his duty of care to the Company in a distribution.

 

7.           Exceptions. Any other provision herein to the contrary notwithstanding, the Company shall not be obligated pursuant to the terms of this Agreement:

 

7.1.          Excluded Acts and Omissions . To the extent it is prohibited under applicable law, to indemnify, insure or exempt indemnitee from or against any liability arising out of: (i) the Indemnitee’s breach of fiduciary duty (other than, in case of insuring the Indemnity, a breach of fiduciary duty to the Company, provided that the Indemnitee has acted or omitted to act in good faith and had reasonable ground to believe such action will not prejudice the Company’s interests), (ii) intentional or reckless beach by the Indemnitee of his or her duty of care to the Company, but other than if done in negligence only, or (iii) the indemnitee’s action taken with the intention to unduly profit therefrom, and (iv) any line or penalty payment to propitiate an offense imposed on the Indemnitee.

 

 

 

  

7.2.          Claims Initiated by Indemnitee . To indemnify or advance expenses to Indemnitee with respect to claims initiated or brought voluntarily by the Indemnitee and not by way of defense, except: (i) with respect to proceedings brought to establish or enforce a right to indemnification under this Agreement or any other agreement of insurance policy or under the Company’s Articles of Association now or hereafter in effect relating to claims for indemnification, release, exemption or insurance of the Indemnitee by reason of his Corporate Capacity, (ii) in specific cases if the Board of Directors has approved the initiation or bringing of such suit, or (iii) as otherwise required under the laws of the Company’s place of incorporation, regardless of whether the Indemnitee ultimately is determined to be entitled to such indemnification, advance expense payment of insurance recovery, as the case may be;

 

8.           Required Approvals. If for the validation of any of the undertakings in this Agreement any act, resolution, approval or other procedure is required, the Company undertakes to cause them to be done or adopted in a manner which will enable the Company to fulfill all its undertakings as aforesaid.

 

9.           Post Factum Indemnity. Nothing contained in this Agreement derogates from the Company’s right to indemnify the Indemnitee post factum for any amounts which the Indemnitee may he obligated to pay as set forth in Section 1.1 above without the limitations set forth in Section 1.2 above.

 

10.         Counterparts. This Agreement may be executed in one or more counterparts, each of which shall constitute an original.

 

11.         Binding Effect; Successors and Assigns. This Agreement shall be binding upon and inure to the benefit of and be enforceable by the parties hereto and their respective successors, assigns, including any direct or indirect successor by purchase, merger, consolidation or otherwise) to all, or substantially all the business and/or assets of the Company, spouses, heirs, personal and legal representative, executors and administrators.

  

12.         Notice. All notices and other communications required or permitted hereunder shall be in writing, shall be effective when given and shall in any event be deemed to be given: (a) five (5) business days after deposit with the applicable postal service, if delivered by first class mail, postage prepaid, (b) upon delivery, if delivered by hand, (c) one business day after the business day of deposit with EMS or similar overnight courier, freight prepaid, or (d) one day after the business day of delivery by facsimile transmission, if delivered by facsimile transmission, with copy by first class mail, postage prepaid, and shall be addressed if to Indemnitee, at the Indemnitee’s address as set forth beneath indemnitee’s signature to this Agreement and if to the Company at the address of its principal corporate offices or at such other address as such party may designate by ten days’ advance written notice to the other party hereto.

 

 

 

  

13.         Consent to Jurisdiction. The Company and Indemnitee each hereby irrevocably consent to the arbitration procedures, in accordance with the terms of the joint venture agreement between the Company and its shareholders, dated September 23, 2016, mutatis mutandis .

 

14.         Severability. The provisions of this Agreement shall be severable in the event that any of the provision hereof (including any provision within a single section, paragraph or sentence) are held by a court of competent jurisdiction to be invalid, void or otherwise unenforceable, and the remaining provisions shall remain enforceable, to the fullest extent permitted by law. Furthermore, to the fullest extent possible, the provisions of this Agreement (including, without limitations, each portion of this Agreement containing any provision held to be invalid, void or otherwise unenforceable that is not itself invalid, void or unenforceable) shall be construed so as to give effect to the intent manifested by the provision held invalid, illegal or unenforceable.

 

15.         Choice of Law. This Agreement shall be governed by and its provisions construed and enforced in accordance with the laws of the Peoples Republic of China without regard to the conflict of laws principles thereof or of any other jurisdiction.

 

16.         Subrogation. In the event of payment under this Agreement, the Company shall be subrogated to the extent of such payment to all of the rights of recovery of the Indemnitee, who shall execute all documents required and shall do all acts that may be necessary to secure such rights and to enable the Company effectively to bring suit to enforce such lights.

 

17.         Amendment and Termination. No amendment, modification, termination or cancellation of this Agreement shall be effective unless it is in writing signed by both the parties hereto. No waiver of any of the provisions of this Agreement shall be deemed or shall constitute a waiver of any other provisions hereof (whether or not similar) nor shall such waiver constitute a continuing waiver.

 

18.         Integration and Entire Agreement. This Agreement sets forth the entire understanding between the parties hereto and supersedes and usages all previous written and oral negotiations, commitments, understandings and agreements relating to the subject matter hereof between the parties hereto.

 

 

 

  

Exhibit - Indemnification Agm - 06092016

 

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

 

GUANGZHOU INMODE MEDICAL TECHNOLOGY LTD.
     
By: Mr. Moshe Mizrahy  
     
Title: Chairman of the Board  

 

Signature: /s/ Moshe Mizrahy  

 

RAFAEL LICKERMAN    
Name    

Signature: /s/ Rafael Lickerman  
     
Nationality: Israeli  
     
I.D. #: 024070658  

 

 

 

 

FORM OF DIRECTOR INDEMNIFICATION AGREEMENT

Guangzhou InMode Medical Technology Ltd.

 

 

 

INDEMNIFICATION AGREEMENT

 

This Indemnification Agreement (the “Agreement”) is effective as of January 11, 2017 , by and between Guangzhou InMode Medical Technology Ltd., a company incorporated under the laws of the Peoples Republic of China, with its principal offices at Unit 103-1, 1st Floor, No. 6, Luoxuan 3 rd. International Bio-Island, Guangzhou, Guangdong, China, (the “Company”), and Mr. Yehoshua Gleilman, Nationality as Israeli, I.D. number 008459828, residing at 64 Pinkas St., Tel Aviv, Israel (the “Indemnitee”).

 

Recitals

 

A. The Company and Indemnitee recognize the difficulty in obtaining full and adequate liability insurance for directors, officers, employees, agents and fiduciaries, the significant increases in the cost of such insurance and the general reductions in the coverage of such insurance;

 

B. The Company and Indemnitee further recognize the substantial increase in corporate litigation in general, subjecting directors, officers, employees. agents and fiduciaries to expensive litigation risks at the same time as the availability and coverage of liability insurance have been severely limited;

 

C. The Company desires to attract and retain the services of highly qualified individuals, such as the Indemnitee, to serve the Company and, in part, in order to induce the Indemnitee to continue to provide services to the Company, wishes to provide for the indemnification and advancement of expense to the Indemnitee, to exempt the Indemnitee from liability to the Company, and agree to procure reasonable insurance coverage, all of the foregoing to the maximum extent permitted by law; and

 

D. In view of the considerations set forth above, the Company desires that Indemnitee shall be indemnified and exempted by the Company, and enjoy appropriate insurance coverage, all as set forth herein.

 

Now, therefore, the Company and the Indemnitee hereby agree as follows:

 

 

 

 

1. Indemnification

 

1.1           Indemnification of Liabilities and Expenses . The Company shall indemnify the Indemnitee to the fullest extent permitted by law and subject to the limitations set forth in paragraph 1.2, with respect to the following liabilities and expenses imposed on or incurred by the Indemnitee due to an act or omission by the Indemnitee in his capacity as a director, of the Company, or any subsidiary thereof (regardless whether it is a subsidiary of the Company at the date hereof), or as a director, officer, employee, agent or fiduciary of another corporation, collaboration, partnership, joint venture, trust or other enterprise, serving at the request of the Company (the “Corporate Capacity”): (i) any financial obligation imposed on the Indemnitee in favor of another person by, or expended by the Indemnitee as a result of, a court judgment, including a settlement or an arbitrator’s award approved by court, by reason of or arising in connection with any Indemnifiable Event (as defined below); (ii) any and all reasonable litigation expenses (including attorneys’ fees) and all other costs, expenses and financial obligations (collectively, “Expenses”) incurred by the Indemnitee or charged to the Indemnitee by court in connection with a proceeding instituted against the Indemnitee by the Company or on its behalf or by another person, or in any criminal proceedings in which Indemnitee is acquitted, or in any criminal proceedings of a crime which does not require proof of mens rea (criminal intent) in which Indemnitee is convicted; and (iii) all Expenses expended by the Indemnitee due to an investigation or a proceeding instituted against the Indemnitee by an authority qualified to conduct such investigation or proceeding, where such investigation or proceeding is concluded without the filing of an indictment against the Indemnitee and without any financial obligation imposed on the Indemnitee in lieu of criminal proceedings, or that is concluded without the Indemnitee’s indictment but with a financial obligation imposed on Indemnitee in lien of criminal proceedings with respect to a crime that does not require proof of mens rea (criminal intent). Such payments of Expenses shall be made by the Company as soon as practicable but in any event no later than fifteen (15) days after written demand by the Indemnitee therefor is presented to the Company.

 

1.2.          Indemnifiable Event; Limit Amounis . For the purpose of this Agreement, an “Indemnifiable Event” shall mean any event or occurrence falling all or in part within any one or more of the categories set forth below. Indemnification pursuant to paragraph 1.l(i) with respect to each such Indemnifiable Events described below is limited to US$1,000,000 (the “Limit Amount”). The Limit Amount shall be subject to continuing review and consideration by the Company, and may be amended, if the Board of Directors determines that such Limit Amount is unreasonable in the circumstances, including if it is less than the financial obligation or Expenses which can be expected to be incurred by the Indemnitee in connection with the corresponding Indemnifiable Event. If the Limit Amount is insufficient to cover all amounts to which the Indemnitee and all other persons to whom the Company has agreed to indemnify for the matters and in the circumstances described herein, then such amount shall be allocated to such persons pro rata according to the percentage of their culpability, an finally determined by a court in the relevant claim, or absent such determination or in the event such persons are parties to different claims, in equal amounts.

 

 

 

  

The Indemnifiable Events are described as follows:

 

a) Any claim or demand made by customers, suppliers, contractors or other third parties transacting any form of business with the Company or its subsidiaries, in the ordinary course of their respective businesses, relating to the negotiations or performance of such transactions, representations or inducements provided in connection thereto or otherwise,

 

b) Any claim or demand made in connection with arty transaction not in the ordinary course of business of either the Company, its subsidiaries or the party making such claim, including the sale, lease or purchase of any assets or business.

 

c) Any claim or demand made by employees, consultants, agents or other individuals or entities employed by or providing services to the Company or its subsidiaries relating to compensation owed to them or damages or liabilities suffered by them in connection with such employment or service.

 

d) Any claim or demand made under any securities laws of any jurisdiction and/or any stock exchange rules and regulations of any jurisdiction or by reference thereto, or related in the failure to disclose any information in the manner or time such information is required to be disclosed pursuant to such laws, or related to inadequate or improper disclosure of information to shareholders, or prospective shareholders, or related to the purchasing, holding or disposition of securities of the company or any other investment activity involving or affected by such securities, including any actions relating to an offer or issuance of securities of the Company or of its subsidiaries to the public by prospectus or privately by private placement, in Israel or abroad, including the details that shall be set forth in the documents in connection with execution thereof,

 

e) Any claim or demand made for actual or alleged infringement, misappropriation or misuse of any third party’s intellectual property rights by the Company or its subsidiaries, including without limitation confidential information, patents, copyrights, design rights, service marks, trade secrets, copyrights, misappropriation of ideas by the Company or its subsidiaries.

 

 

 

  

f) Actions taken in connection with the intellectual property of the Company and any subsidiary, and its protection, including the registration or assertion of rights to intellectual property and the defense of claims relating thereto.

 

g) Any claim or demand made by any leaders or other creditors or for moneys borrowed by, or other indebtedness of, the Company or its subsidiaries.

 

h) Any claim or demand made by any third party suffering any personal injury and/or bodily injury or damage to business or personal property through any act or omission attributed to the Company or its subsidiaries, or their respective employees, agents or other persons acting or allegedly acting on their behalf.

 

i) Any claim or demand made directly or indirectly in connection with complete or partial failure, by the Company or any subsidiary thereof, or their respective directors, officers and employees, to pay, report, keep applicable records or otherwise, of any foreign, federal, state, county, local, municipal or city taxes or other compulsory payments of any nature whatsoever, including, without limitation, income, sales, use, transfer, excise, value added, registration, severance, stamp, occupation, customs, duties, real property, personal property, capital stock, social security, unemployment, disability, payroll or employee withholding or other withholding, including any interest, penalty or addition thereto, whether disputed or not.

 

j) Any claim or demand made by purchasers, holders, lessors or other users of products of the Company, or individuals treated with such products, for damages or losses related to such use or treatment.

 

k) Any administrative, regulatory or judicial actions orders, decrees, suits, demands, demand letters, directives, claims, liens, investigations, proceedings or notices of noncompliance or violation by any governmental entity or other person alleging potential responsibility or liability arising out of, based on or related to (x) the presence of, release, spill, emission, leaning, dumping, pouring, deposit, disposal, discharge, leaching or migration into the environment (each a “Release”) or threatened Release of; or exposure to, any hazardous, toxic, explosive or radioactive substances, wastes or other pollutants, including petroleum or petroleum distillates, asbestos or asbestos-containing material, polychlorinated biphenyls (“PCBs”) or PCB-containing materials or equipment, radon gas, infectious or medical wastes and all other substances or wastes of any nature regulated pursuant to any environmental law, at any location, whether or not owned, operated, leased or managed by the Company or any of its subsidiaries, or (y) circumstances forming the basis of any violation of any environmental law or environmental permit, license, registration or other authorization required under applicable environmental law.

 

 

 

 

l) Any administrative, regulatory or judicial actions, orders, decrees, suits, demands, demand letters, directives, claims, liens, investigations, proceedings or notices of noncompliance or violation by any governmental entity or other person alleging the failure to comply with any statute, law, ordinance, rule, regulation, order or decree of any governmental entity applicable to the Company or any of its subsidiaries, or any of their respective businesses or operations.

 

m) Participation, and/or non-participation at the Company’s board meetings, incompliance regarding the substance and the process of reaching board resolutions, bona fide expression of opinion and/or voting and/or abstention from voting at the Company’s board meetings.

 

n) Approval of corporate actions including the approval of the acts of the Company’s management, their resolutions, guidance and their supervision.

 

o) Claims of failure to exercise business judgment and a reasonable level of proficiency, expertise, care and other forms of fiduciary duties and duties of loyalty in regard of the Company’s business, as required under applicable laws.

 

p) Resolutions and/or actions relating to a merger of the Company and/or of its subsidiaries, the issuance of shares or securities exercisable into shares of the Company, changing the share capital of the Company, formation of subsidiaries, reorganization, winding up or sale of all or part of the business, operations or shares of the Company.

 

1.3.          Mandatory Payment of Expenses . Notwithstanding any other provision of this Agreement other than Section 7 hereof, to the extent that the Indemnitee has been successful on the merits or otherwise, including, without limitation, the dismissal of an action without prejudice, in defense of any action, suit, proceeding, inquiry or investigation referred to in Section 1.1 hereof or in the defense of any claim, issue or matter therein, the Indemnitee shall be indemnified against all financial obligations and Expenses incurred by the Indemnitee in connection therewith.

 

 

 

 

2. Indemnification Procedure

 

2.1.          Notice; Cooperation by Indemnitee . The Indemnitee shall, as a condition precedent to the Indemnitee’s right to be indemnified under this Agreement, give the Company notice in writing as soon as practicable of any claim made against the Indemnitee for which Indemnification will or could be sought under this Agreement, provided, however, that any failure to provide such notice shall not affect the Indemnitee’s rights to indemnification hereunder unless and to the extent that such failure to provide notice materially and adversely prejudices the Company’s right to defend against such action. Notice to the Company shall be directed to the Chairman of the Company’s Board of Directors at the address shown on the signature page of this Agreement (or such other address as the Company shall designate in writing to the Indemnitee). In addition, the Indemnitee shall give the Company such information and cooperation as it may reasonably require and as shall be within the Indemnitee’s power.

 

2.2.          No Presumptions; Burden of Proof . For purposes of this Agreement, the termination of any claim by judgment, order, settlement (whether without court approval) or conviction, or upon a plea of guilty, shall not create a presumption that the Indemnitee did not meet any particular standard of conduct or have any particular belief or that a court has determined that indemnification is not permitted by applicable law.

 

2.3.          Notice to Insurers . If, at the time of the receipt by the Company of a notice of a claim the Company has liability insurance in effect which may cover such claim, the Company shall give prompt notice of the commencement of such claim to the insurers in accordance with the procedures set forth in the respective policies. The Company shall thereafter take all necessary or desirable action to cause such insurers to pay, on behalf of the Indemnitee, all amounts payable as a result of such action, suit, proceeding, inquiry or investigation in accordance with the terms of such policies.

 

2.4.          Selection of Counsel . In the event that the Company shall be obligated to indemnify the Indemnitee and/or pay the Expenses of any claim, and the proceedings have not been initiated, against the Indemnitee by the Company or on its behalf; then the Company shall be entitled to assume the defense of such claim with counsel selected by the Company, which counsel is reasonably reputable with experience in the relevant field, and the Company will not be liable to the Indemnitee under this Agreement for any fees of counsel subsequently incurred by Indemnitee with respect to the same claim; The Company shall and shall cause the counsel retained by it to take all necessary steps to bring the claim to a close and will keep the Indemnitee informed of key steps in the process. The counsel retained by the Company to conduct the defense pursuant to this Section shall be bound by a fiduciary duty to the Indemnitee and to the Company. The Company shall have the right to conduct such defense as it sees fit in its sole discretion.

 

 

 

  

3.           Additional Indemnification Rights; Non-exclusivity, In the event of any change after the date of this Agreement of any applicable law, statute or rule which expands the right of a corporation of the Company’s state of incorporation to indemnify a member of its board of directors or an officer, employee, agent or fiduciary, it is the intent of the parties hereto that the Indemnitee shall enjoy by this Agreement the greater benefits afforded by such change.

 

4.           No Duplication of Payments. The Company shall not be liable under this Agreement to make any payment in connection with any claim made against Indemnitee to the extent the Indemnitee has otherwise actually received payment (under any insurance policy, the Articles of Association or otherwise) of the amounts otherwise indemnifiable hereunder, except for the difference, if any, between the amounts received by the Indemnitee as aforesaid and the total obligations, liabilities and/or Expenses incurred by the Indemnitee in connection with such claim. The Company will be entitled to receive any amount collected by Indemnitee from a third party in connection with liabilities actually indemnified hereunder, to be transferred by the Indemnitee to the Company within fifteen (15) days following the receipt of said amount. Any amount received from D&O Insurance (as defined below) shall not be deducted from the Limit Amount hereunder.

 

5.           Partial Indemnification. If the Indemnitee is entitled under any provision of this Agreement to indemnification by the Company for some or a portion of the obligations, liabilities and/or Expenses incurred in connection with any claim, but not, however, for all of the total amount thereof, the Company shall nevertheless indemnify the Indemnitee for the portion of such obligations, liabilities and/or Expenses to which the Indemnitee is entitled.

 

6.           Exemption. To the maximum extent permitted by law, the Company hereby exempts and releases Indemnitee from any and all liability to the Company related to any breach by the Indemnitee of his or her duly of care to the Company, subject to the provisions of Section 7.1 below and provided that in no event shall the Indemnitee be exempted in advance for a breach of his duty of care to the Company in a distribution.

 

7.           Exceptions. Any other provision herein to the contrary notwithstanding, the Company shall not be obligated pursuant to the terms of this Agreement:

 

7.1.          Excluded Acts and Omissions . To the extent it is prohibited under applicable law, to indemnify, insure or exempt Indemnitee from or against any liability arising out of: (i) the Indemnitee’s breach of fiduciary duty (other than, in case of insuring the Indemnity, a breach of fiduciary duty to the Company, provided that the Indemnitee has acted or omitted to act in good faith and had reasonable ground to believe such action will not prejudice the Company’s interests), (ii) intentional or reckless beach by the Indemnitee of his or her duly of care to the Company, but other than if done in negligence only, or (iii) the Indemnitee’s action taken with the intention to unduly profit therefrom, and (iv) any line or penalty payment to propitiate am offense imposed on the Indemnitee.

 

 

 

  

7.2.          Claims Initiated by Indemnitee . To indemnify or advance expenses to Indemnitee with respect to claims initiated or brought voluntarily by the Indemnitee and not by way of defense, except: (i) with respect to proceedings brought to establish or enforce a right to indemnification under this Agreement or any other agreement of insurance policy or under the Company’s Articles of Association now or hereafter in effect relating to claims for indemnification, release, exemption or insurance of the Indemnitee by reason of his Corporate Capacity, (ii) in specific cases if the Board of Directors has approved the initiation or bringing of such suit, or (iii) us otherwise required under the laws of the Company’s place of incorporation, regardless of whether the Indemnitee ultimately is determined to be entitled to such indemnification, advance expense payment of insurance recovery, as the case may be;

 

8.           Required Approvals. If for the validation of any of the undertakings in this Agreement any act, resolution, approval or other procedure is required, the Company undertakes to cause them to be done or adopted in a manner which will enable the Company to fulfill all its undertakings as aforesaid.

 

9.           Post Factum Indemnity. Nothing contained in this Agreement derogates from the Company’s right to indemnify the Indemnitee post factum for any amounts which the Indemnitee may he obligated to pay as set forth in Section 1.1 above without the limitations set forth in Section 1.2 above.

 

10.         Counterparts. This Agreement may be executed in one or more counterparts, each of which shall constitute an original.

 

11.         Binding Effect; Successors and Assigns. This Agreement shall be binding upon and inure to the benefit of and be enforceable by the parties hereto and their respective successors, assigns, including any direct or indirect successor by purchase, merger, consolidation or otherwise) to all, or substantially all the business and/or assets of the Company, spouses, heirs, personal and legal representative, executors and administrators.

 

12.         Notice. All notices and other communications required or permitted hereunder shall be in writing, shall be effective when given and shall in any event be deemed to be given: (a) five (5) business days after deposit with the applicable postal service, if delivered by first class mail, postage prepaid, (b) upon delivery, if delivered by hand, (c) one business day after the business day of deposit with EMS or similar overnight courier, freight prepaid, or (d) one day after the business day of delivery by facsimile transmission, if delivered by facsimile transmission, with copy by first class mail, postage prepaid, and shall be addressed if to Indemnitee, at the Indemnitee’s address as set forth beneath indemnitee’s signature to this Agreement and if to the Company at the address of its principal corporate offices or at such other address as such party may designate by ten days’ advance written notice to the other party hereto.

 

 

 

  

13.         Consent to Jurisdiction. The Company and Indemnitee each hereby irrevocably consent to the arbitration procedures, in accordance with the terms of the joint venture agreement between the Company and its shareholders, dated September 23, 2016, mutatis mutandis .

 

14.         Severability. The provisions of this Agreement shall be severable in the event that any of the provision hereof (including any provision within a single section, paragraph or sentence) are held by a court of competent jurisdiction to be invalid, void or otherwise unenforceable, and the remaining provisions shall remain enforceable, to the fullest extent permitted by law. Furthermore, to the fullest extent possible, the provisions of this Agreement (including, without limitations, each portion of this Agreement containing any provision held to be invalid, void or otherwise unenforceable that is not itself invalid, void or unenforceable) shall be construed so as to give effect to the intent manifested by the provision held invalid, illegal or unenforceable.

 

15.         Choice of Law. This Agreement shall be governed by and its provisions construed and enforced in accordance with the laws of the Peoples Republic of China without regard to the conflict of laws principles thereof or of any other jurisdiction.

 

16.         Subrogation. In the event of payment under this Agreement, the Company shall be subrogated to the extent of such payment to all of the rights of recovery of the Indemnitee, who shall execute all documents required and shall do all acts that may be necessary to secure such rights and to enable the Company effectively to bring suit to enforce such lights.

 

17.         Amendment and Termination. No amendment, modification, termination or cancellation of this Agreement shall be effective unless it is in writing signed by both the parties hereto. No waiver of any of the provisions of this Agreement shall be deemed or shall constitute a waiver of any other provisions hereof (whether or not similar) nor shall such waiver constitute a continuing waiver.

 

18.         Integration and Entire Agreement. This Agreement sets forth the entire understanding between the parties hereto and supersedes and usages all previous written and oral negotiations, commitments, understandings and agreements relating to the subject matter hereof between the parties hereto.

 

 

 

  

Exhibit - Indemnification Agm - 06092016

 

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

 

GUANGZHOU INMODE MEDICAL TECHNOLOGY LTD.
     
By: Mr. Moshe Mizrahy  
     
Title: Chairman of the Board  

 

Signature: /s/ Moshe Mizrahy  

 

YEHOSHUA GLEILMAN    
Name    

Signature: /s/ Yehoshua Gleilman  
     
Nationality: Israeli  
     
I.D. #: 008459828  

 

 

 

 

19.1.11

 

License Agreement

 

 

 

  

LICENSE AGREEMENT

 

THIS LICENSE AGREEMENT (“ Agreement ”) is made as of this 8 day of SEPTEMBER. 2016 (the “ Effective Date ”) by and among:

 

Guangzhou InMode Medical Technology Ltd. (a company in formation) principal place of business will be at:6/F No.3 Luoxuan 4 Rd. bio-island Guangzhou, Guangdong China (“ Party A ”), and Invasix Ltd., a company incorporated and existing under the laws of Israel, having a principal place of business at: Tavor Building. Sha’ar Yokneam. P.O. Box 533. Yokneam 20692. Israel (“ Party B ”) (each of the above shall be referred to as a “ Party ” and collectively as the “ Parties ”)

 

WHEREAS Party B is the owner of the entire right, title and interest in the Intellectual Property (as defined below):
   
WHEREAS Part B wishes to grant Party A and Party A desires to obtain an exclusive perpetual royalty bearing license to use the Intellectual Property in the Territory (as defined below) subject to the terms herein.

 

NOW, THEREFORE , the parties agree as follows:

 

1. Preamble and Interpretation

 

1.1 The preamble to this License Agreement forms an integral and binding part of this agreement.

 

1.2 “Intellectual Property” shall mean all intellectual property belonging to Party B or to Inmode Ltd. (including, directly and indirectly, any and all future developments and rights), except with respect to the intellectual property of the BodyTite platform (the “ BodyTite ”).

 

1.3 “ Party B Products’ ” shall mean all devices produced by Party B or InMode Ltd.. and/or by any other subsidiary or affiliate of Party B (subject to Section 2.2 with respect to future developments developed jointly with third parties).

 

1.3 “ Territory ” shall mean the territory of People’s Republic of China, Hong Kong, Taiwan and Macau.

 

2. Grant of License; Undertaking of the Parties

 

2.1 Party B hereby grants Party A an exclusive perpetual royalty bearing license, for the Territory, to make use, license, sub-license and transfer the Intellectual Properly (the “ License ”).

 

2.2 The License also includes the right to develop, do clinical studies and regulatory- activities, manufacture, sell, market, distribute, support and provide warranty for all of Party B Products (except for the BodyTite) provided, however, that with respect to future developments jointly developed by Party B with third parties. Party B undertakes to make best reasonable efforts to obtain for Party A a sublicensc allowing it to the same rights granted to Party B by such third party, in the Territory.

 

2.3 Party B represents warrants and undertakes that subject to the terms herein, it does not and will not develop, possess or otherwise own any title, interest or rights to any technology or know-how for the manufacturing sale, market, distribution, support and warranty for all of Party B Products, in any subsidiary or affiliate (including InMode), other than Party B, unless such technology or know-how becomes part of the Intellectual Property.

 

 

 

  

2.4 Party B shall endeavor to assign existing exclusive distribution rights of the BodyTite to Party A (while it is clarified that the BodyTite is independently distributed and sold by Party B and its distributers in the Territory).

 

2.5 Party B shall grant the Party A an exclusive and perpetual right to distribute Party B Products in the Territory (except for the Body Tite), at most favorable conditions for the purchase of Party B Products.

 

2.6 Party B shall provide, free of charge, full support in order to enable Party A to conduct its activity as contemplated to be conducted, including, without limitation, provide with no delay, all necessary assistance by way of knowledge transfer, development of Party A’s manufacturing support and maintenance capabilities, second level support if needed, training of Party A’s employees and managers, etc. The support services will include, among others, assistance in the erection of the production line by Party A, hire local work force and the training thereof, provide know-how and implementation thereof locally, technical support services, etc. For the removal of doubt and notwithstanding the above to the contrary, Party B will be entitled to a one-time payment from Party A, at a total of US$100,000, for all support services granted, which amount will be paid to Party B not earlier than 24 months from the Closing of the Joint Venture Agreement to be entered into between Party B and Guangzhou Sino-Israel Bio-Industry Investment Fund (LLP) (the “ JVA ”).

 

2.7 All Party B Products will be covered by a warranty, as customary by Party B, during which Party B undertakes to replace or remedy any defects in the Party B Products. Moreover, Party B will obtain product liability insurance coverage, in such amount per event, as customary in the industry, which policy will be in effect at the Effective Date and throughout the term of this Agreement.

 

2.8 Royalties . Following commencement of production of Party B Products by Party A and the sale thereof within the Territory. Party B will be entitled to a royalty payment from Party A, at fair market value and on such terms as shall be determined by the Parties.

 

2.9 Party A agrees that this Agreement does not grant it any rights of any nature other than as detailed in this Agreement regarding the Intellectual Property. Except for the express and limited License is granted herein, no other licenses are granted by implication, estoppels or otherwise.

 

3. Additional Terms

 

3.1 Sections 23(indemnification), 40 (Confidentiality) and 44 (Miscellaneous) of the JVA are hereby incorporated by reference to this Agreement and shall apply mutatis mutandis herein.

 

3.2 This License Agreement shall terminate simultaneously with the termination or expiration of the JVA for any reason.

 

3.3. To the extent that any provision or undertaking herein applies to any subsidiary or affiliate of Party B, including In Mode, then Party B shall procure that such subsidiary and/or affiliate, including Inmode, shall perform such provision or undertaking.

 

[Intentionally left blank - Next page Signature Page]

 

2

 

  

[Signature Page - Exhibit 11.2 License Agreement)

 

And in witness the Parties sign this Agreement on this 8 day of September, 2016

 

/s/ Moshe Mizrahy   /s/ Moshe Mizrahy
Invasix Ltd .   Guangzhou InMode
    Medical Technology Ltd.
     
By its authorized signatories:   By its authorized signatories:
Name and title:   Name: Mr. Moshe Mizrahy
Name and title:   Title: Legal Representative

 

 

Execution Copy

 

3

 

   

19.1.12

 

Resolution of the Company Approving the Agreement

 

 

 

  

Guangzhou InMode Medical Technology Ltd.

 

(The “ Company ”)

WRITTEN RESOLUTIONS OF

THE BOARD OF DIRECTORS

 

January 11, 2017

 

The undersigned, being all of the members of the Board of Directors (the “ Board ”) of the Company, acting by unanimous written consent, in accordance with the “Law of the People’s Republic of China on Sino-Foreign Equity Joint Ventures”, the “Regulations for the Implementation of the Law of the People’s Republic of China on Sino-foreign Equity Joint Ventures”, other applicable laws, and the Articles of Association of the Company, waiving any rights to prior notice and consenting to the adoption of the following resolutions without a meeting of the Board, do hereby adopt the following resolutions:

 

WHEREAS , on September [23] , 2016 the Company entered into that certain Joint Venture Agreement with Guangzhou Sino-Israel Bio-Industry Investment Fund (LLP) (“ GIBF ”) and Invasix, Ltd. (“ Invasix ”), including all documents and agreements ancillary thereto, and all transactions contemplated thereby, a copy of which is attached hereto as Exhibit A (the “ JV Agreement ”). Capitalized terms used herein and not otherwise defined shall have the meaning ascribed to them under the JV Agreement;

 

WHEREAS , at the Closing, subject to the approvals of relevant authorities, the Company is willing to change its Articles of Association to the Amended and Restated AOA, a copy of which is attached hereto at Exhibit B (the “ Amended and Restated AOA ”);

 

WHEREAS , at the Closing, the Company shall enter into those certain Indemnification Agreements with each of the Directors, a copy of which is annexed hereto at Exhibit C (the “ Indemnification Agreements ”);

 

NOW THEREFORE IT IS HEREBY RESOLVED,

 

JV Agreement

That the JV Agreement and any and all transactions contemplated therewith (including, without limitation, the License Agreement, the Non-Compete Undertakings and the Closing Protocol) and including all schedules and exhibits ancillary to the foregoing, all in the forms attached as Exhibit A hereto (collectively, the “ Transaction Documents ”), are hereby ratified, approved, authorized and adopted on behalf of the Company;

 

Amended and Restated Articles of Association

IT IS FURTHER RESOLVED , that with effect as of Closing, the Company’s Articles of Association will be amended, and the Amended and Restated AoA, attached as Exhibit B hereto is hereby ratified, approved, authorized and adopted on behalf of the Company;

 

Execution Copy

 

 

 

 

Form of Indemnification Agreements

IT IS FURTHER RESOLVED, that with effect as of Closing, all Company Directors will enter into indemnification agreements with the Company, in such form attached as Exhibit C hereto, all which are hereby ratified, approved, authorized and adopted on behalf of the Company;

 

Transaction Signatory Rights

IT IS FURTHER RESOLVED, to instruct, authorize and empower and direct the Legal Representative of the Company and the Chairman of the Board, Mr. Moshe Mizrahi, to deliver, execute and sign the Transaction Documents and the Indemnification Agreements on behalf of the Company and that, upon such execution, such documents shall bind the Company in all respects.

 

Furthermore, the Legal Representative is hereby authorized and empowered by his sole signature, to do or cause to be done any and all such further acts and things, and to execute and deliver any and all such additional documents that he may deem necessary or appropriate in order to carry into effect the purposes and intent of the foregoing resolutions.

 

Furthermore, the Legal Representative is hereby authorized to perform fully the Company’s obligations under the JV Agreement, the Transaction Documents and the Indemnification Agreements and any such other documents, agreements, instruments or amendments and to engage or enter into on behalf of the Company without limitation in such other transactions, agreements, arrangements or activities (collectively, the “ Activities ”) as are reasonably related or incident to, or which will serve to facilitate or enhance for the benefit of the Company and its subsidiaries, the transactions contemplated by these resolutions, including without limitation any modification, extension or expansion (collectively, the “ Changes ”) of any Activities or of any other transactions, agreements, arrangements or activities resulting from any of the Changes and to enter into such other agreements or understandings as are necessary, appropriate or desirable to effectuate the intent of, or matters reasonably contemplated by, this resolution and each of the foregoing resolutions;

 

Omnibus Resolution

IT IS FURTHER RESOLVED, that all acts and things heretofore done by any of the directors or officers, employees, agents or advisors of the Company on behalf of the Company and in its name, on or prior to the date of the adoption of the foregoing resolutions, in connection with the transactions contemplated by such resolutions and under the JV Agreement and the Transaction Documents and/or any and all of the transactions, instruments and ancillary documents contemplated or otherwise related thereby and hereby, including as set forth in the foregoing resolutions approved by the Board that would have been in conformity with the above resolutions if such resolutions had been in effect at the time of such actions, be, and the same hereby are, in all respects ratified, confirmed, approved, authorized and adopted on behalf of the Company;

 

Execution Copy

 

- 2 -

 

 

IT IS FURTHER RESOLVED, that this Written Resolution may be executed in one or more counterparts, each of which shall be deemed an original but all of which together will constitute one and the same instrument. It is being understood that all Board members need not sign the same counterpart. This Written Resolution or any counterpart may be executed and delivered by facsimile copies or delivered by electronic communications by portable document format (pdf.), each of which shall be deemed an original.

 

[Remainder of this page intentionally left blank,

signature page to follow]

 

Execution Copy

 

- 3 -

 

  

IT IS FURTHER RESOLVED , that this Written Resolution may be executed in one or more counterparts, each of which shall be deemed an original but all of which together will constitute one and the same instrument. It is being understood that all Board members need not sign the same counterpart. This Written Resolution or any counterpart may be executed and delivered by facsimile copies or delivered by electronic communications by portable document format (pdf.), each of which shall be deemed an original.

 

IN WITNESS THEREOF , the undersigned have executed this written consent to be effective as of the date first written above.

 

/s/ Moshe Mizrahy  
Moshe Mizrahy  

 

 

 

Execution Copy

 

- 4 -

 

  

19.2.1

 

Non-competition Agreement

 

 

 

 

Exhibit 18.2.1 (B)

 

Non Competition Undertaking Invasix Ltd.

 

Reference is hereby made to the joint venture agreement executed by and between Gunagzhou Sino-Israel Bio-Industry Investment Fund (LLP) (the “ Fund ”), Invasix Ltd, (“ Invasix ”) and the Company, which provides, amongst others, for the sale and marketing of Invasix products by the Company in the Republic of China, Macau, Taiwan and Hong Kong (the “ Territory ”) (the “ JVA ”),

 

Pursuant to Section 39 of the JVA, the undersigned, hereby agrees and undertakes, effective as of the date of signing of the JVA, and subject to the Closing of the JVA, that it will not, directly or indirectly, on its own behalf and on behalf of any legal entity, owned by Invasix, or any legal entity which is controlled by Invasix through the beneficial ownership of shares, do any of the following in the Territory:

 

i) Engage in any “competing business” activity in the Territory, for its own account or for the account of others, including without limitation as a shareholder, partner, joint venterur, independent contractor, or other similar capacity, “ Competing business ”, shall mean developing, producing (with an intent to sell within the Territory), marketing or selling products or services of the kind or type developed or currently contemplated to be developed, produced, marketed or sold or contemplated to be developed, produced, marketed or sold, by the Company in the field of Medical Aesthetic Products for the Medical/Professional/SPA markets (excluding the BodyTite products, but except for “where such products become part of the Invasix License).

 

ii) as an individual proprietor, partner, stockholder joint venturer, investor, independent contractor or in any other capacity whatsoever (other than as the holder of not more than five percent (5%) of the total outstanding stock of a publicly held company), engage in the business or activity in the Territory of developing, producing, marketing or selling products or services of the kind or type developed or being developed, produced, marketed or sold by the Company, including those products or services contemplated in a plan adopted by the board of directors of the Company, except by or for the Company (excluding the BodyTite products, but except for where such products become part of the Invasix License); or

 

iii) interfere with or disrupt, or attempt to interfere with or disrupt, any business relationship, contractual or otherwise, between the Company and any other party, including clients or prospective clients, suppliers, agents, employees or executives of the Company in the Territory; or

 

iv) recruit, solicit or induce, or attempt to induce, any employee or employees of the Company to terminate their engagement with, or otherwise cease their relationship with, the Company.

 

The term “ Company ” herein, shall include, without limitation, also any legal entity fully owned or controlled by the Company, or any other legal entity which is controlled by the Company through the beneficial ownership of shares.

 

Execution Copy

 

1

 

 

The undersigned acknowledges that the Investor is entering into the JV Agreement in reliance upon the execution, delivery and performance of this Undertaking by Invasix.

 

This Undertaking and any dispute, controversy or claim arising our of, relating to or in connection with this Undertaking, the negotiation, execution, existence, validity, enforceability or performance of this Undertaking, or for the breach or alleged breach thereof (whether in contract, in tort or otherwise) shall be governed by and construed and enforced in accordance with the Laws of the State of Israel, without giving effect to any choice of law or conflict of law provision or rule (whether of the State of Israel or otherwise) that would cause the application of the laws of any other jurisdiction, and the competent courts in Tel-Aviv- Jaffa will have the exclusive jurisdiction.

 

Terms not specifically defined herein will be ascribed with the meaning provided to them under the JV Agreement.

 

And in witness whereof, the undersigned signs this Non-Compete Undertaking effective as of the date of signing of the JV Agreement, and subject to the Closing of the JV Agreement.

 

Invasix Ltd.
     
By: /s/Moshe Mizrahy  
     
Name:    
     
Title:    
     
Date: September 8, 2016  

 

Execution Copy

 

2

 

 

To:

Guangzhou InMode Medical Technology Ltd. (a company in formation) (the “ Company ”)

 

Ladies and Gentlemen,

 

Subject: Non-Compete Undertakings

 

Reference is hereby made to the joint venture agreement executed by and between Gunagzhou Sino-Israel Bio-Industry Investment Fund (LLP) (the “ Fund ”), Invasix Ltd. (“ Invasix ”) and the Company, which provides, amongst others, for the sale and marketing of Invasix products by the Company in the Republic of China, Macau, Taiwan and Hong Kong (the “ Territory ”) (the “ JVA ”).

 

Pursuant to Section 39 of the JVA, I, the undersigned, hereby agree and undertake, effective as of the date of sining of the JV Agreement, and subject to the Closing of the JVA, that I will not, directly or indirectly, do any of the following in the Territory:

 

1. Engage in any “competing business” activity in the Territory, for my own account or for the account of others, including without limitation as a shareholder, director, officer, partner, joint venterur, independent contractor, Consultant or other similar capacity (other than as the holder of not more than 5% of the total outstanding stock of a publicly held company), “ Competing business ”, shall mean developing, producing (with an intent to sell within the Territory), marketing or selling products or services of the kind or type developed or currently contemplated to be developed, produced, marketed or sold or contemplated to be developed, produced, marketed or sold, by the Company in the field of Medical Aesthetic Products for the Medical/Professional/SPA markets (excluding the BodyTile products, but except for where such products become part of the Invasix License). These undertakings explicitly excludes any business Home Skinavtions Ltd. does, directly or indirectly in the Territory with respect to Medical / Aesthetic Products for home use and the non-professional markets.

 

2. Without derogating from my rights to vote and take action in my sole discretion with respect to all Company matters as a director, the Chairman of the Board and the Company representative, I will not:

 

2.1. interfere with or disrupt, or attempt to interfere with or disrupt, any business relationship, contractual or otherwise, between the Company and any of its suppliers, clients or prospective clients (including their soliciation).

 

2.2. Recruit, solicit or induce, or attempt to induce, any employee or employees of the Company to terminate their engagement with, or otherwise cease their relationship with the Company.

 

3. For all purposes relating to this Undertaking, at all times where the name or term “ Company ” is written or referred to herein, it shall also be deemed to include and refer to all any legal entity fully owned or controlled by the Company. I acknowledge that the Investor and Invasix are entering into the JV Agreement in reliance upon the execution, delivery and performance of this Undertaking by me.

 

Execution Copy

 

 

 

 

4. The above Undertakings shall continue until the later of: (i) termination or expiration of any role [ will hold in the Company pursuant to the JV Agreement, and (ii) I am no longer a Sharholder of Invasix or earlier if the Company is dissoled or ceases to do business. For purposes hereof, “ Shareholder of lnvasix ” shall mean being the holder, directly or indirectly, of any equity securities of Invasix, including, without limitation, Ordinary Shares and all options, warrants, restricted stock and other rights to acquire Ordinary Shares, owned directly or indirectly by me.

 

5. This Undertaking and any dispute, controversy or claim arising out of, relating to or in connection with this Undertaking, the negotiation, execution, existence, validity, enforceability or performance of this Undertaking, or for the breach or alleged breach thereof (whether in contract, in tort or otherwise) shall be governed by and construed and enforced in accordance with the Laws of the State of Israel, without giving effect to any choice of law or conflict of law provision or rule (whether of the State of Israel or otherwise) that would cause the application of the laws of any other jurisdiction, and the competent courts in Tel-Aviv-Jaffa will have the exclusive jurisdiction.

 

6. Terms not specifically defined herein will be ascribed with the meaning provided to them under the JV Agreement.

 

And in witness whereof, I sign this Non-Compete Undertaking

 

effective as of the date of signing of the JV Agreement, and subject to the Closing of the JV Agreement.

 

/s/ Moshe Mizrahy  
Moshe Mizrahy  

 

Date: September 8, 2016  

 

Execution Copy

 

- 2 -

 

 

Section 19.2.2

 

Resolution of Invasix approving the Agreement

 

 

 

 

INVASIX LTD.

Israeli company number 514073618

(the “ Company ”)

 

Written Resolution of the Sole Director of the Company

in lieu of a Meeting of the Board of Directors

 

The undersigned, being the sole director of the Company, hereby adopts the following resolutions with the same force and effect as if said resolutions had been duly adopted at a meeting of the board of directors of the Company, and directs that this instrument be filed with the corporate minutes of the Company.

 

WHEREAS, on September 23, 2016 the Company entered into that certain Joint Venture Agreement with Guangzhou Sino-Israel Bio-Industry Investment Fund (LLP) (“ GIBF ”) and Guangzhou InMode Medical Technology Ltd. (“ JV Company ”), including all documents and agreements ancillary thereto, and all transactions contemplated thereby, a copy of which is attached hereto as part of Exhibit A (the “ JV Agreement ”). Capitalized terms used herein and not otherwise defined shall have the meaning ascribed to them under the JV Agreement; and
   
WHEREAS, as part of performing the JV Agreement, the Company is responsible for granting the new JV Company established by the GIBF and the Company under the JV Agreement, the License according to the license agreement attached to the JV Agreement (the “ JV License Agreement ”), and to transfer to the JV Company five (5) Inmode platforms, all in accordance with the terms of the JV Agreement and JV License Agreement.

 

Now, Therefore, It is hereby resolved as follows:

 

1. Approval of JV Agreement

 

1.1 It is hereby resolved to authorize and approve the terms of and the execution, delivery and performance by the Company of the JV Agreement and all ancillary documents and agreements related thereto, including the JV License Agreement, the Non-Compete Undertaking of the Company and the Closing Protocol, all in the forms attached hereto as Exhibit A (collectively, the “ Transaction Documents ”).

 

1.2 It is further resolved to instruct, authorize and empower and direct the sole Director of the Company, Mr. Moshe Mizrahi, to deliver, execute and sign the Transaction Documents on behalf of the Company and that, upon such execution, such documents shall bind the Company in all respects.

 

1.3 It is further resolved to appoint, in addition to Mr. Moshe Mizrahy, Mr. Rafael Lickerman, Israeli passport number 12606408, and Mr. Alon Yaari, Israeli passport number 10942275, to serve as additional members of the Board of Directors of the JV Company, on behalf of the Company.

 

 

 

 

2. General Authority

 

2.1 It is hereby resolved that all actions taken by the sole Director or the Authorized Signatories of the Company on behalf of the Company in furtherance of any of the foregoing resolutions are hereby ratified and confirmed as the acts and deeds of the Company.

 

2.2 It is further resolved that the sole Director is hereby authorized and directed to take all such further action to prepare, execute and deliver, or approve or authorize, as the case may be, the preparation, execution and delivery of all such further agreements, instrurments and documents, in the name of and on behalf of the Company, and to pay all expenses, fees and taxes, as in his judgment shall be necessary, proper or advisable in order to fully carry out the intent and accomplish the purposes of the foregoing resolutions.

 

Date: January 11, 2017  

 

/s/ Mr. Moshe Mizrahy  
Mr. Moshe Mizrahy, Sole Director  

 

2

 

 

19.2.3

 

Bring-down Certificate of CEO of Invasix

 

 

 

 

CEO Certificate

 

To: January 11, 2017

 

Guangzhou Sino-Israel Bio-Industry

Investment Fund (LLP)

Unit 203, 2/F

No. 6 of Luoxiansan

Road, International Bio-island

Guangzhou

 

Dear Sirs,

 

Re: Invasix Ltd. - CEO Certificate

 

Reference is hereby made to that certain Joint Venture Agreement dated September 23, 2016, by and between Guangzhou Sino-Israel Bio-Industry Investment Fund (LLP) (“ GBTF ”), Invasix Ltd. (“ Invasix ”) and Guangzhou InMode Medical Technology Ltd. (the “ Company ”, and the “ JV Agreement ”, respectively).

 

Capitalized terms not otherwise defined herein shall have the meaning ascribed to such terms under the JV Agreement.

 

Pursuant to Section 18.2.3 to the JV Agreement, I the undersigned, Mr. Moshe Mizrahy, the Chief Executive Officer of Invasix, in my capacity as such, hereby certify and confirm to you on behalf of Invasix as follows:

 

(a) All representations and warranties of Invasix set forth in the JV Agreement are true and correct in all material respects at the time of the Closing Date;

 

(b) All Party B’s Deliverables to be delivered by Invasix to GBEF, have been delivered on the Closing Date.

 

(c) All covenants, agreements and conditions contained in the JV Agreement, to be performed by Invasix on or prior to the Closing Date, have been performed or complied with in all material respects.

 

(d) As of the Closing Date, no material adverse change has occurred with regard to the contemplated business of Invasix.

 

  Sincerely yours,
   
 
   
  /s/ Moshe Mizrahy
  Moshe Mizrahy, CEO
   
  Invasix Ltd.

 

 

 

 

19.2.4

 

Invasix’s Product Liability Insurance

 

 

 

 

 
   
 

Howden Insurance Brokers Limited

1 Whittington Ave

London EC3V 1LE

United Kingdom

Tel: +44 (0) 20 7623 3806

Fax: +44 (0) 20 7623 3807

reception@howdengroup.com

www.howdengroup.com

 

Effected through

 

Howden Insurance Brokers Limited

 

1 Whittington Ave

 

London

EC3V 1LE

 

This is to Certify that in accordance with the authorisation granted under Contract Number B0180CTSBI01600 to the undersigned by certain Underwriters at Lloyd’s, whose definitive numbers and the proportions underwritten by them, which will be supplied on application, can be ascertained by reference to the said Contract which bears the Seal of Lloyd’s Policy Signing Office and in consideration of the payment of the premium specified herein, the said Underwriters are hereby bound, severally and not jointly, their Executors and Administrators, to insure in accordance with the terms and conditions contained herein or endorsed hereon.

 

Notwithstanding anything to the contrary contained herein this Certificate does not cover Loss, Damage or Liability directly or indirectly occasioned by, happening through or in consequence of war, invasion, acts of foreign enemies, hostilities (whether war be declared or not), civil war, rebellion, revolution, insurrection, military or usurped power or confiscation or nationalisation or requisition or destruction of or damage to property by or under the order of any government or public or local authority.

 

If the Assured shall make any claim knowing the same to be false or fraudulent, as regards amount or otherwise, this Certificate shall become void and all claim hereunder shall be forfeited.

 

In Witness whereof this Certificate has been signed at the place stated and on the date specified in the Schedule by Howden Insurance Brokers Limited.

 

Authorised Official  

 

Please examine this Document carefully . If it does not meet your needs, return immediately. In all communications the Number appearing in line one of the schedule should be quoted.

 

  A subsidiary of Howden Broking Group Limited, part of the Hyperion Insurance Group. Howden Insurance Brokers Limited is authorised and regulated by the Financial Conduct Authority: Firm reference number 312584. Registered in England and Wales under company registration number 203500. Registered office: 16 Eastcheap, London EC3M 1BD

 

  Page 1 of 40  
 
Forming part of Certificate No. 1600454  

 

IMPORTANT NOTICES FOR THE POLICYHOLDER:

 

It is very important that you read the attached contract fully and with care to ensure you understand all the terms and conditions. We would, however, draw your attention to the following specific matters:

 

Your obligation regarding disclosure of information material to the contract: We wish to draw to your attention the obligation to inform (re)insurers of all material facts prior to the inception of this contract. Any material changes to the risk during the (re)insurance period, at renewal or if the contract is extended or amended must also be disclosed to the (re)insurers. Failure to do so could, depending on the law under which this contract is interpreted, result in the contract being made void from its inception or cancelled and liability in respect of claims being repudiated by the (re)insurers. A material fact is a fact which may influence a (re)insurer’s judgement in their assessment of a risk, including its terms and pricing. If you have any doubt as to whether information is material or not, you should disclose it.

 

Warranties: Warranties are important provisions contained in your insurance contract and must be exactly complied with at all times. Breach of a warranty may, depending on the law under which the contract is interpreted, entitle (re)insurers to terminate the contract from the date of that breach, and in some instances may mean that the contract does not come into effect at all. This is the position regardless of whether there is any connection between the warranty breached and any loss which leads to that breach becoming evident. A warranty may exist in the contract using other terminology and without reference to the word “warranty”. For example you may have completed a proposal/application form and deemed to have warranted the accuracy of information provided, such that any inaccuracy will constitute a breach of warranty.

 

Conditions Precedent to (Re)Insurers’ Liability: There are two types of condition precedent. If a condition precedent to the validity of this contract or the commencement of the (re)insurance is not complied with, the insurer will not come on risk. If a condition precedent to the insurer’s liability under this contract is not complied with, the insurer will not be liable for the loss in question. A condition precedent may exist in the contract using other terminology and without reference to the words “condition precedent”.

 

Subjectivities: Should this (re)insurance be subject to any specific conditions being complied with or information being provided to (re)insurers by a certain date, they will be detailed under the heading “Subjectivities”. Please ensure you comply with any requirements appearing there within the stated timescale as failure to do so may prejudice your coverage. If you cannot comply with the terms, you must notify us in good time.

 

Notification of any claims.

All claims or circumstances which may potentially lead to a claim must be notified promptly. The prompt notification of claims is a requirement of all insurance contracts. Please ensure you are familiar with the claims notification procedure contained in this contract and in particular any time constraints as failure to comply with this might prejudice your position should a claim occur.

 

  Page 2 of 40  
      Authorised Signatory 
 
Forming part of Certificate No. 1600454  

 

COMBINED PUBLIC & PRODUCTS LIABILITY (INCLUDING HUMAN CLINICAL TRIALS EXTENSION)

 

SCHEDULE

 

Policy No: 1600454
   
Policyholder: Invasix Ltd
   
Address: Tavor Building, Yokheam Illit, Israel
   
Insured’s Business Activity: As per submission and information seen and agreed by Underwriters & www.invasix.com
   
Insured: Invasix Ltd and/or Inmode M.D. Ltd and/or Invasix, Inc. and/or Invasix Corporation and/or Invasix UK Ltd and/or Inmode Japan and/or Inmode France and/or Guangzhou Inmode Medical Technology Ltd
   
Broker name and address: Howden Israel, Adgar Tower, 35 Efal Street, Petah Tikva, 49511 Israel
   
Period of Insurance: From: 28 th October 2016) both days inclusive Local Standard Time at To: 27 th April 2018) the address of the Policyholder
   
Limit of Liability: Section 1 Public Liability:
  USD   5,000,000 any one Occurrence
  USD   5,000,000 For all the compensation payable under this policy
   
  Section 2 Products Liability:
  USD   5,000,000 any one Loss
  USD   5,000,000 For all the compensation payable under this policy
   
  The Limits of Indemnity are inclusive of the Deductible, pre-judgment interest and claimants’ costs and expenses, unless stated otherwise. Express Warranties:

 

Conditions: - USA/Canada conditions clause, as attached
  - Interlocking clause, as attached
  - Master policy clause, as attached
  - Medical payments, as attached
  - Professional Services for Medical Products Sales and Service Personnel - The policy will cover product training and sales support in connection with the sale, loan, lease or delivery of your products is insured. Your medical staff members are insured for liability arising from their providing or failing to provide supervisory or instructional services.
  - The definition of Product is amended to include the following: “Medical Professional Services including all bodily injury caused by an occurrence consisting of a negligent act, error or omission in the rendering or failure to render medical professional services whether committed by you or by any person(s) or organization(s) acting under your direction, control or supervision or whose negligent acts, errors or omissions you are legally responsible for in connection with any medical, dental or surgical devices, equipment or appliances, medications, drugs, biologics, blood or blood products which is manufactured, sol or distributed by you. However, medical professional services does not include:
    a. Liability resulting from a criminal act by any health care provider;

 

  Page 3 of 40  
      Authorised Signatory 
 
Forming part of Certificate No. 1600454  

 

 

    b. Any liability your employee may have as a proprietor, hospital administrator, officer, stockholder, or member of the board of directors, trustees, or governors of any:
    (1) Hospital, nursing home or sanitarium; or
    (2) Clinic with bed and board facility; or
    (3) Laboratory or other business
  - Post marketing clinical trials and data analysis is covered
  - Optional extended reporting period, as attached
  - It is understood and agreed that the insurer’s right of cancellation will be strictly limited to the reasons of non-payment of premium, or fraud on behalf of the policyholder, as detailed in the Insurance Contract Law, 5741-1981
  - “Change of Risk” sub sections will be amended as follows: sub section 1: will be deleted
  - Flat clinical trials cover - Blanket coverage is provided in respect of clinical trials, except were a local policy is required by law. The Underwriter will request the Protocol & Informed Consent for each Clinical trial
  - It is hereby noted and agreed that exclusion 16 of the attached Public liability wording and exclusion 19 of the attached Products liability wording are deleted in their entirety
  - The definition of Product is amended by the addition of the following:
    ‘It is hereby understood and agreed that advice given in connection with the product supplied is covered’
  - Professional Indemnity – sub-limited to USD 1,000,000, as attached
  - Libel and Slander – sub-limited to USD 250,000, as attached
  - Loss of Documents – sub-limited to USD 250,000, as attached
  - As an extension to Extension 1 of the attached Public Liability wording, it is agreed that this policy will cover regulatory investigation up to the amount of USD 250,000
  - HIPPA Proceedings endorsement – sub-limited to USD 500,000 in the aggregate, as attached
  - Cyber Liability Extension Endorsement, as attached
  - Advertising Liability, as attached
  - Primary and Non-Contributory Endorsement, as attached
  - Waiver of Subrogation, as attached

 

Express Warranties

None other than any which may be included in the contract wording. Please read your contract carefully. Breach of a warranty could result in termination of this contract.

 

Conditions Precedent:

None other than any which may be included in the contract wording. Please read your contract carefully. Breach of a “condition precedent to liability” may entitle Insurers to reduce indemnity for or even reject a claim. Breach of a “condition precedent to contract” entitles an insurer to avoid the contract entirely.

 

Premium: USD 127,500 In Full Non-Adjustable
   
Payment Terms: 90 days in accordance with the Premium Payment Clause
   
Territorial Limits: Worldwide including the USA and Canada
   
Governing Law & Jurisdiction: Israel as per the attached wording
   
Deductible: USD 5,000    Each and every Loss in respect of General Liability

 

  Page 4 of 40  
      Authorised Signatory 
 
Forming part of Certificate No. 1600454  

 

  USD 100,000    Each and every Loss in respect of Product Liability Coverage but USD 1,000,000 in annual aggregate
   
Retroactive Date
(Section 2 only): 		13th January 2009 but 15th October 2010 in respect of USA/Canada
   
Order hereon: 100% of above limits and premium
   
Insurers: 100.00% Syndicate NWL 1218 at Lloyd’s as per Contract No. B0180CTSBIO1600
   
RISK TRANSFER          Yes

 

Risk Transfer (definition):

Some Insurers, as an added protection to our clients, have agreed that monies collected by us from Clients and held to the account of Insurers (or claims monies held for payment to our Clients) will be considered by those Insurers as their money (‘Risk Transfer’). This does mean however that in the case of insolvency of the Insurer we may be required to remit premiums to the Administrator or Liquidator and may be prevented from passing claims monies received to Clients.

 

Where we act as agents of Insurers for the purposes of holding or receiving claim payments or return premiums we will remit them to such parties as Insurers direct us to pay.

 

Please refer to your Terms of Business Agreement.

 

Recording, Transmitting and Storing Information

 

Where the broker maintains risk and claim data/information/documents the broker may hold data/information/documents electronically.

 

Dated in London: 3 rd November 2016

 

  Page 5 of 40  
      Authorised Signatory 
 
Forming part of Certificate No. 1600454  

 

SEVERAL LIABILITY:

 

The liability of an insurer under this contract is several and not joint with other insurers party to this contract. An insurer is liable only for the proportion of liability it has underwritten. An insurer is not jointly liable for the proportion of liability underwritten by any other insurer. Nor is an insurer otherwise responsible for any liability of any other insurer that may underwrite this contract. The proportion of liability under this contract underwritten by an insurer (or, in the case of a Lloyd’s syndicate, the total of the proportions underwritten by all the members of the syndicate taken together) is shown in this contract.

 

In the case of a Lloyd’s syndicate, each member of the syndicate (rather than the syndicate itself) is an insurer. Each member has underwritten a proportion of the total shown for the syndicate (that total itself being the total of the proportions underwritten by all the members of the syndicate taken together). The liability of each member of the syndicate is several and not joint with other members. A member is liable only for that member’s proportion. A member is not jointly liable for any other member’s proportion. Nor is any member otherwise responsible for any liability of any other insurer that may underwrite this contract. The business address of each member is Lloyd’s, One Lime Street, London EC3M 7HA. The identity of each member of a Lloyd’s syndicate and their respective proportion may be obtained by writing to Market Services, Lloyd’s, at the above address.

 

Although reference is made at various points in this clause to “this contract” in the singular, where the circumstances so require this should be read as a reference to contracts in the plural.

 

07/03/08

LMA5096

 

  Page 6 of 40  
      Authorised Signatory 
 
Forming part of Certificate No. 1600454  

 

CERTIFICATE MEMORANDUM

 

It is hereby understood and agreed that:

 

(i) Wherever the term “Policy” appears herein, it is deemed to read “Certificate”.

 

(ii) All claims, disputes and enquiries regarding this Certificate shall be addressed to:

 

Howden Insurance Brokers Ltd.

1 Whittington Ave

London

EC3V 1LE

 

(iii) All complaints must be made in the first instance to Howden Insurance Brokers but if no satisfaction is received they can be referred to:

 

Policyholder and Market Assistance

Lloyd’s Market Services

One Lime Street

London

EC3M 7HA

 

Email: complaints@lloyds.com

Telephone: +44 (0)20 7327 5693

Fax:              +44 (0)20 7327 5225

 

(iv)

Lloyd’s is regulated by the Financial Conduct Authority (FCA)

25 The North Colonnade

Canary Wharf

London E14 5HS

 

(v) In respect of any claims referred by the Insured to the Coverholder, the Coverholder acts as agent for the Underwriters and not the Insured;

 

All other terms and conditions of this Policy remain unchanged

 

  Page 7 of 40  
      Authorised Signatory 
 
Forming part of Certificate No. 1600454  

 

PREMIUM PAYMENT CLAUSE

 

Notwithstanding any provision to the contrary within this contract or any endorsement hereto, in respect of non payment of premium only the following clause will apply.

 

The (Re)Insured undertakes that premium will be paid in full to (Re)Insurers within 60 days of inception of this contract (or, in respect of instalment premiums, when due).

 

If the premium due under this contract has not been so paid to (Re)Insurers by the 60th day from the inception of this contract (and, in respect of instalment premiums, by the date they are due) (Re)Insurers shall have the right to cancel this contract by notifying the (Re)Insured via the broker in writing. In the event of cancellation, premium is due to (Re)Insurers on a pro rata basis for the period that (Re)Insurers are on risk but the full contract premium shall be payable to (Re)Insurers in the event of a loss or occurrence prior to the date of termination which gives rise to a valid claim under this contract.

 

It is agreed that (Re)Insurers shall give not less than 15 days prior notice of cancellation to the (Re)Insured via the broker. If premium due is paid in full to (Re)Insurers before the notice period expires, notice of cancellation shall automatically be revoked. If not, the contract shall automatically terminate at the end of the notice period.

 

If any provision of this clause is found by any court or administrative body of competent jurisdiction to be invalid or unenforceable, such invalidity or unenforceability will not affect the other provisions of this clause which will remain in full force and effect.

 

30/09/08

LSW3001

 

  Page 8 of 40  
      Authorised Signatory 
 
Forming part of Certificate No. 1600454  

 

UNITED STATES OF AMERICA/CANADA CONDITIONS CLAUSE

 

Notwithstanding anything to the contrary contained in this Policy

 

(A) This Policy does not include as an Insured nor indemnify/pay on behalf of any company domiciled and/or registered in any Specified Territory other than any party which has been added as an Insured or Additional Insured to the Policy with the Insurers’ authorisation or any Vendor of the Insured’s Products.

 

(B) As far as concerns legal liability arising from any claim

 

(i) which is made in any Specified Territory

 

(ii) in respect of which action or litigation is brought in a court of law within any Specified Territory or where action or litigation is brought in a court of law outside such Territory to enforce a judgement therein

 

(1) The Underwriters shall not be liable for punitive or exemplary damages

 

(2) The Limits of Indemnity specified in the Schedule are each deemed to be inclusive of all Legal Costs

 

(3) This Policy does not cover any liability for:

 

(a) Bodily Injury Property Damage or Other Contingencies directly or indirectly caused by seepage pollution or contamination

 

(b) The cost of removing nullifying or cleaning-up seeping polluting or contaminating substances

 

(c) Fines or penalties

 

(d) Uninsured Motorists coverage Underinsured Motorists coverage or any obligation of the Insured under “No-Fault” state law

 

(4) A Deductible of USD 100,000 each and every claim shall apply but USD 1,000,000 in the annual aggregate

 

For the purposes of this Memorandum “Specified Territory” shall mean the United States of America, Canada and any territory within the jurisdiction thereof

 

  Page 9 of 40  
      Authorised Signatory 
 
Forming part of Certificate No. 1600454  

 

“MASTER POLICY” CLAUSE

(in respect of Human Clinical Trials)

 

This policy is a “Master Policy” which, together with one or more policies issued by Newline or any other insurer to the Insured and/or the Insured’s subsidiary(ies) anywhere in the world (such policies being referred to as “ the Local Policy or Policies”), form a multinational programme of insurance.

 

Accordingly:

 

Difference in Conditions (DIC)

 

The Master Policy is extended to provide cover where the Insured or the Insured’s subsidiary company(ies) make a claim under a Local Policy but that claim is rejected as falling outside the terms of the Local Policy, in which event the Master Policy shall pay on behalf of the Insured or the Insured’s subsidiary company(ies) to the extent that such a claim would have been covered if made under this Master Policy.

 

Difference in Limits (DIL)

 

The Master Policy is extended to provide cover where the Insured or the Insured’s subsidiary company(ies) make a claim under a Local Policy but that claim is in excess of the level of cover provided by the Local Policy, in which event the Master Policy shall pay on behalf of the Insured or the Insured’s subsidiary company(ies) on a follow form basis as per Local Policy terms and conditions.

 

Where any claim arises from an Occurrence where the Underwriters are by law or circumstance prevented from indemnifying the Insured locally, the Insured will be required to handle the defence and investigation of any such claim and the Underwriters will reimburse the Insured accordingly in any other permitted territory where permissible by law.

 

Notwithstanding the law & jurisdiction clauses contained in the Local Policies, in any dispute under this Master Policy, the law of Israel shall apply and the Israeli courts will have sole judgment.

 

EXTENDED REPORTING PERIOD (ERP)

 

This Master Policy provides automatic cover of up to 5 years ERP where the ERP under the Local Policy is less than 5 years, subject to the terms of the ERP under this Master Policy and subject to a maximum of 5 years ERP in total, or 7 years in respect of Israeli policies.

 

  Page 10 of 40  
      Authorised Signatory 
 
Forming part of Certificate No. 1600454  

 

MEDICAL PAYMENTS

 

It is hereby noted that the policy is extended to cover Medical Payments in respect of each Research subject who sustains Bodily injury arising out of their participation in a Clinical Trial when such injury was incurred during the Period of Insurance.

 

The Research subject must submit to medical examination, at the Insurer’s expense and by physicians of its choice, as often as is reasonably required.

 

A limit of USD 10,000 applies to each and every person. These payments will not exceed the applicable Limits of Liability.

 

It is hereby noted and agreed that the Insurer will make these payments regardless of fault.

 

A deductible of NIL applies to each and every person.

 

Medical Payments meaning reasonable expenses for:

 

· first aid administered at the time of the Bodily injury; or
· necessary medical, surgical, x-ray and dental services, including prosthetic devices; or
· and necessary ambulance, hospital professional, nursing and funeral expenses.

 

  Page 11 of 40  
      Authorised Signatory 
 
Forming part of Certificate No. 1600454  

 

OPTIONAL EXTENDED REPORTING PERIOD

 

Option 1:

Notwithstanding anything contained herein to the contrary it is agreed that upon the Policy’s expiry, the Insured has the right to purchase an Extended Reporting Period of 1 years and the Underwriters will indemnify the Insured in respect of any Claim first made in writing against the Insured and notified to the Underwriters during the Extended Reporting Period

 

Provided that

 

(i) such Claim would have been admissible under this Policy had such Claim been made in accordance with Insuring Agreements of the Cover

 

(ii) the incident giving rise to such Claim occurred after the Retroactive Date and before the end of the Period of Insurance

 

(iii) such Claim shall for the purposes of this Policy be deemed to have been made on the last day of the Period of Insurance

 

(iv) the Extended Reporting Period shall not reinstate or increase the Limits of Indemnity or extend the Period of Insurance

 

(v) The right to purchase the above Extended Reporting Period is conditional upon payment of an additional premium calculated at 0% of the annual premium for the Period of Insurance.

 

Option 2:

Notwithstanding anything contained herein to the contrary it is agreed that upon the Policy’s expiry, the Insured has the right to purchase an Extended Reporting Period of 7 years and the Underwriters will indemnify the Insured in respect of any Claim first made in writing against the Insured and notified to the Underwriters during the Extended Reporting Period

 

Provided that

 

(i) such Claim would have been admissible under this Policy had such Claim been made in accordance with Insuring Agreements of the Cover

 

(ii) the incident giving rise to such Claim occurred after the Retroactive Date and before the end of the Period of Insurance

 

(iii) such Claim shall for the purposes of this Policy be deemed to have been made on the last day of the Period of Insurance

 

(iv) the Extended Reporting Period shall not reinstate or increase the Limits of Indemnity or extend the Period of Insurance

 

(v) The right to purchase the above Extended Reporting Period is conditional upon payment of an additional premium calculated at 180% of the annual premium for the Period of Insurance.

 

  Page 12 of 40  
      Authorised Signatory 
 
Forming part of Certificate No. 1600454  

 

PROFESSIONAL INDEMNITY

 

It is agreed that notwithstanding anything contained herein to the contrary the Insurers will indemnify the Insured against all sums which the Insured shall become legally liable to pay for damages or compensation and claimants’ costs and expenses and legal defence expenses in respect of any claim arising as a direct result of any negligent act, error or omission in their conduct of the Business

 

Provided that

 

(i) such claim is first made in writing against the Insured during any Period of Insurance and is notified to the Insurers during or within 30 days after the expiry of the same Period of Insurance

 

(ii) should the Insured give notice in accordance with any Claims Notification provisions contained herein during the Period of Insurance (or within 30 days in the event of cancellation or non-renewal) of any Occurrence which may subsequently give rise to a claim made against the Insured then such claim shall be deemed to have been made during the Period of Insurance in which notification was given

 

(iii) the Insurers shall not be liable for

 

(a) the amount of the Deductible specified in this Memorandum

 

(b) any claim brought about or contributed to by any dishonest fraudulent criminal or malicious act or omission of the Insured or consequent upon any deliberate conscious or intentional disregard by the Insured of the need to take all reasonable steps to prevent loss

 

(c) any claim where the event giving rise to such claim occurred before the Retroactive Date

 

(d) any claim arising from any cause or circumstances of which the Insured was aware prior to the effective date of this Memorandum

 

(e) any claim for which the Insured are entitled to indemnity under any other insurance or which is insured elsewhere within this policy

 

(f) any claim arising out of any neglect error or omission by the Insured to effect or maintain insurance or to provide finance or advice on financial matters other than arising out of the products or business of the insured as described in the policy

 

(g) any claim arising out of the insolvency of the Insured or any loss sustained by shareholders or stockholders of the Insured in their capacities as such

 

(h) any claim arising out of any neglect error or omission by the Insured in the preparation of estimates of cost

 

(i) any claim in respect of the cost of replacing documents which have been lost mislaid damaged or destroyed

 

(j) any claim in respect of costs in connection with recalling Products

 

( k) any claim arising out of injurious falsehood or infringement of patent or copyright

 

(l) any claim arising out of non-delivery or late delivery of Products or non-completion of works or operations

 

(iv) the liability of the Insurers for all damages compensation claimants’ costs and expenses and Insured’s own legal expenses shall not exceed in the aggregate for any one Period of Insurance the amount stated in the schedule.

 

Deductible: USD 10,000 each and every Loss, however USD 25,000 each and every Loss in the USA and Canada
     
Retroactive Date: 25th February 2009  

 

  Page 13 of 40  
      Authorised Signatory 
 
Forming part of Certificate No. 1600454  

 

LIBEL AND SLANDER

 

Underwriters agree to indemnify the Insured against all sums which the Insured shall become legally liable to pay as damages and claimant’s costs and expenses as a result of any Claim made against the Insured during the Period of Insurance for Libel and Slander by reason of words written or spoken by:

 

(a) the Insured or

 

(b) any employee of the Insured

 

(c) any director of the Insured

  

Cover under this extension is sub-limited to USD 250,000 any one loss and in the aggregate.

 

  Page 14 of 40  
      Authorised Signatory 
 
Forming part of Certificate No. 1600454  

 

LOSS OF DOCUMENTS

 

If during the Period of Insurance the Insured discovers that any Documents entrusted to the Insured, which may now or hereafter be, or be supposed or believed to be, in the custody of the Insured or in the custody of any other person to or with whom such Documents have been entrusted, lodged or deposited by the Insured in the ordinary course of business, have been destroyed or damaged or lost or mislaid and after diligent search cannot be found, the Insurer will indemnify the Insured against any

 

a) legal liability which the Insured may incur to any other person in consequence of such Documents being destroyed, damaged, lost or mislaid,

 

b) cost and expenses incurred by the Insured in replacing or restoring such Documents,

 

c) costs and expenses incurred with the written consent of the Insurer in the defence or settlement of any claim to establish liability as described in a) above.

 

  Page 15 of 40  
      Authorised Signatory 
 
Forming part of Certificate No. 1600454  

 

HIPAA PROCEEDINGS ENDORSEMENT

 

It is understood and agreed as follows:

 

1. Subject to the HIPAA proceeding deductible in the amount of USD 10,000, the maximum limit of liability of the Insurer for all damages and claim expenses related to all HIPAA Proceedings as set forth in paragraphs, shall not exceed USD 500,000, regardless of the number of such proceedings, persons, insureds, claims, or alleged violations.

 

The HIPAA Proceeding Limit of Liability is included within, and is not in addition to the each claim and aggregate limits of liability set forth on the Declarations.

 

HIPAA Proceeding means claim that is an administrative proceeding, complaint, investigation, or hearing instituted by the Department of Health and Human Services or its designee alleging a violation of responsibilities or duties imposed upon the Insured under the Health Insurance Portability and Accountability Act (“HIPAA”) or any rules or regulations promulgated thereunder, with respect to the management and disclosure of confidential health information.

 

HIPAA Proceeding deductible means the amount of the insured’s retained liability for payment of covered damages or claim expenses for HIPAA proceedings as set forth in paragraphs 2. above, the HIPAA Proceeding Limit of Liability.

 

Notification Costs means amounts incurred by the Insured to comply with a statutory mandate requiring notification of an individual in compliance with privacy protection laws regulating the disclosure of confidential health information.

 

  Page 16 of 40  
      Authorised Signatory 
 
Forming part of Certificate No. 1600454  

 

CYBER LIABILITY EXTENSION ENDORSEMENT

(“CLAIMS MADE” BASIS)

 

This endorsement attaches to and forms part of Policy No. 1600454

 

Notwithstanding Section 2 Exclusion 23. the Underwriters shall, subject to the terms, conditions, limitations and exclusions of this Policy , indemnify the Insured against:

 

(1) legal liability for damages in respect of a Claim for:

 

(a) third party financial loss arising directly from a hacking attack or virus that has emanated from or passed through the Insured’s computer systems;

 

(b) third party financial loss arising directly from the third party’s inability to access the Insured’s computer systems in the way in which the Insured have authorised them to as a direct result of the Insured’s computer systems failure or impairment due to a hacking attack or virus; or

 

(c) third party financial loss arising directly from the loss or theft of the Insured’s data or data for which the Insured is responsible or held to be responsible arising directly from a hacking attack or virus.

 

(2) legal liability for claimants’ costs and expenses in connection with paragraph (1) above;

 

(3) Legal Costs arising from a Claim for which there is cover under paragraph (1) above,

 

provided that the Claim is first made against the Insured during the Period of Insurance .

 

Additional Exclusion

 

The Underwriters shall not be liable to indemnify the Insured in respect of any liability, claim or loss arising out of, caused by, resulting from, in consequence of, in connection with or in any way involving any act, error, omission, event, circumstance or occurrence happening, or alleged to have happened, prior to the retroactive date for this endorsement.

 

Limits of liability:

 

(a) USD 100,000 any one Claim (inclusive of Legal Costs ); and

 

(b) USD 100,000 in the aggregate.

 

Deductible: USD 10,000 each and every Loss, however USD 25,000 each and every Loss in the USA and Canada

 

Retroactive date: 28th October 2016

 

The inclusion herein of more than one Insured shall not operate to increase the limit of the Underwriters’ liability.

 

Except as otherwise stated, all other terms, conditions, Limits of Liability and exclusions remain unchanged.

 

  Page 17 of 40  
      Authorised Signatory 
 
Forming part of Certificate No. 1600454  

 

ADVERTISING LIABILITY

 

(a) It is agreed that this Policy is extended to indemnify the Insured for all sums which the Insured shall become legally liable to pay as damages or compensation in respect of Advertising Liability arising out of an Occurrence during the Period of Insurance in connection with the Business

 

(b) “Advertising Liability” shall mean

 

(i) libel slander or defamation

 

(ii) any infringement of copyright or of title or of slogan

 

(iii) piracy or unfair competition or idea misappropriation under an implied contract

 

(iv) any invasion of right of privacy

 

committed or alleged to have been committed in any advertisement publicity article broadcast or telecast and arising out of the Insured’s advertising activities

 

(c) The Underwriters will not indemnify the Insured in respect of claims made for

 

(i) failure of performance of contract except claims for unauthorised appropriation of ideas based upon alleged breach of an implied contract

 

(ii) infringement of registered trade mark service mark or trade name by use thereof as the registered trade mark service mark or trade name of goods or services sold offered for sale or advertised except titles or slogans

 

(iii) incorrect description of any article or commodity

 

(iv) mistake in advertised price

 

(d) For the purpose of this Memorandum the term “Property Damage” where used in this Policy other than in the Definition of “Property Damage” shall be deemed to read “Property Damage or Advertising Liability”

 

  Page 18 of 40  
      Authorised Signatory 
 
Forming part of Certificate No. 1600454  

 

PRIMARY NON-CONTRIBUTORY ENDORSEMENT

 

If coverage is provided to an additional insured under a written contract which requires that this insurance be primary and non-contributory, we will not invoke the Double Insurance policy condition. However, this coverage amendment is subject to the following:

 

1. “Bodily injury” or “property damage” arising out of “your work” was performed after the effective date of this Policy;

 

2. The additional insured damage to which this amendment applies must be covered under this Policy;

 

3. Subject to the policy limits of this Policy, the most we will pay on behalf of the additional insured is the amount of insurance required by the contract.

 

4. This endorsement applies specifically to primary non-contributory additional insured contracts between you and such person or organization that requires this Policy will apply before any other valid and collectible insurance .

 

  Page 19 of 40  
      Authorised Signatory 
 
Forming part of Certificate No. 1600454  

 

WAIVER OF SUBROGATION

 

The Underwriter waives the right of subrogation against persons in the service of the insured, shareholders of the insured, members of the board of directors of the insured, any other individual or entity to who prior to the occurrence of the insured event the insured has undertaken in writing that its insurance covers will contain a waiver of the right of subrogation to their benefit.

 

The Underwriter waives the right of subrogation against:

 

1. Officers employed in accordance with management agreements between the insured and companies under the control of the officers as aforementioned. Similarly, the insurer waives the right of subrogation against the companies which are under the control of the officers as aforementioned.

 

2. Self-employed persons (including former salaried employees) who are employed by the insured and paid by invoice.

 

The right of the insured to receive indemnity under this policy will not be detrimentally affected by the fact that the insured, prior to the occurrence of the insured event, provided a hold harmless agreement to any individual and/or entity or undertook in writing to indemnify them, which were it not for the same hold harmless agreement or undertaking, the Underwriter would have had the right of subrogation against the same individual or entity.

 

For the sake of avoidance of doubt, it is agreed that the insurer does not have the right of subrogation against any individual or entity who is included in the named insured.

 

However it is agreed that the aforementioned will not apply to the benefit of any individual who caused the insured event maliciously.

 

The policy is extended to cover officers who are engaged in accordance with management agreements between the insured and companies controlled by officers as aforementioned in respect of liability which is liable to be imposed upon them as part of their duties as officers in the business of the insured.

 

  Page 20 of 40  
      Authorised Signatory 
 
Forming part of Certificate No. 1600454  

 

SECTION 1

 

NEWLINE-HOWDEN PUBLIC LIABILITY INSURANCE POLICY

 

FORM BIT 2011

 

Whereas the Policyholder, whose name, address and business is specified in the schedule (hereinafter “the schedule”) applied to:-

 

NEWLINE UNDERWRITING MANAGEMENT LTD (Hereinafter - “the Insurer”) requesting to effect the insurance specified in this policy;

 

and whereas the Insurer agreed to effect the said insurance in consideration of the Policyholder’s undertaking to pay the premium stated in the schedule;

 

the Insurer undertakes to pay on behalf of the Insured in respect of any amount which the Insured shall have to pay to the third party as compensation under any law applicable within the Territorial Limits in consequence of Bodily Injury or Property Damage arising out of an Occurrence during the Period of Insurance in connection with the business provided that the Occurrence happened within the Territorial Limits

 

LIMITS OF LIABILITY: The Insurer’s liability shall not exceed:

 

a. The amount stated in the schedule as limit of liability for any one Occurrence

 

b. The amount stated in the schedule as limit of liability for all the compensation payable under this policy.

 

EXPENSES:

 

The Insurer shall also pay on behalf of the Insured in respect of the reasonable expenses incurred with his consent for defence against a claim for compensation in respect of an Occurrence.

 

Where for settlement of the claim a sum exceeding the above limits of liability is required, the Insurer’s liability for these expenses shall be limited to such proportion as the limit of liability bears to the total sum paid for settlement of the claim.

 

This policy was issued by the Insurer on reliance of a proposal form and/or any other document and/or information submitted to the Insurer which forms the basis of and is deemed to be an integral part of this policy.

 

DEFINITIONS

 

“Policy Holder” – means: as stated in the schedule

 

“Insurer” – means:

 

The Insurer as stated in the schedule

 

“Insured” – means:

 

The named Insured(s) as stated in the schedule and/or any subsidiary and/or joint venture and/or partnership and/or managers and/or employees and/or directors and/or officers

 

“The Product” - means:

 

Any tangible product including its component and/or article included in the Insured’s business activity as specified in the Schedule manufactured sold supplied distributed altered constructed erected repaired serviced designed tested installed or processed including any advertising, usage instructions, packaging and container and also without derogating from the said generality any product specifically mentioned in the Schedule.

 

“Period of Insurance” – means:

 

The Period of Insurance as stated in the schedule

 

“Occurrence”:

 

Shall mean an accident or event including continuous or repeated injurious exposure to substantially the same general conditions which results during the Period of Insurance in Bodily Injury or Property Damage neither expected nor intended from the standpoint of the Insured

 

  Page 21 of 40  
      Authorised Signatory 
 
Forming part of Certificate No. 1600454  

 

“Deductible” means:

 

The amount to be borne by the insured out of the sum of indemnity and the expenses paid by the Insurer following a loss covered under this policy in respect of each loss separately.

 

“Territorial Limits” - means:

 

Unless otherwise stated in the schedule, the territory of the State of Israel and the Occupied Territories. To avoid any doubt the territory of Israeli settlements and Israeli military bases and/or positions within the “Autonomy” will be regarded as Occupied Territories for the purposes of this policy.

 

“Bodily Injury”:

 

Shall mean personal injury sickness disease or death and shall include but not by way of limitation mental injury anguish shock false arrest or invasion of the right of privacy

 

“Property Damage”:

 

Shall mean damage to loss of or destruction of material property

 

EXCLUSIONS

 

This insurance does not cover any liability in respect of, arising out of, caused by, resulting from, in consequence of, in connection with or in any way involving any of the following:

 

1. Bodily Injury to any person caused in the course of and in consequence of their employment by the Insured.

 

2. Any contract imposing upon the Insured liability which would not attach except for the existence of such contract.

 

3. Any Occurrence arising out of or in connection with the Products

 

4. Damage to property owned by the Insured.

 

5. Any nuclear material, ionizing radiation, radioactive pollution or from nuclear fuel of any sort or from nuclear waste of any sort and/or from the combustion of nuclear fuel of any sort. For the purpose of this clause, combustion shall include any process of self-sustaining fission.

 

This clause shall not apply to the use of x-rays or to the use of radioactive materials in research laboratories and hospitals and for the purposes of carrying out non-destructive examinations in industry.

 

Notwithstanding the aforementioned work with or use of nuclear fuel is excluded.

 

6. Damage directly or indirectly occasioned by war, invasion, act of foreign enemies, hostilities (whether war be declared or not), acts of sabotage and terrorism, civil war, rebellion, revolution, insurrection, military or usurped power, military regime or plunder, looting, robbery connected therewith, confiscation or destruction by any government or public authority.

 

For the purpose of this exclusion - “Terrorism” shall mean - the use of violence for political purposes, including the use of violence with a purpose to terrify the public or any part thereof by a person or persons acting on behalf of or in connection with any hostile organization.

 

In respect of “terrorism” as defined above within the territories of the State of Israel and/or the Occupied Territories, only an explicit certificate of the Israeli Police or the Ministry of Defence or the Manager of the Property Tax and Compensation Fund as defined by the Law of Property Tax and Compensation Fund 1961 with all its amendments, certifying that the Loss has been caused directly by an act of terrorism, shall serve as cause for repudiation of a Claim for terrorism Losses.

 

7. Any event of which the Insured was aware or should have been aware before the inception of this insurance that such event may cause a Claim against them under this policy, and of which they have not notified the Insurer in writing.

 

  Page 22 of 40  
      Authorised Signatory 
 
Forming part of Certificate No. 1600454  

 

8. Where the Insured is an entity, awareness of the events as defined above shall be considered to be as soon as possible after the moment when the Policyholder’s managers become aware thereof

 

9. Any fines, penalties, punitive damages, exemplary damages, aggravated damages, liquidated damages, treble damages or any other damages resulting from the multiplication of compensatory damages.

 

10. Pollution:

 

(a) In respect of events in the United States of America &/or Canada: Air pollution, water pollution or land pollution.

 

(b) In respect of events anywhere else: Air pollution, water pollution or land pollution other than pollution in consequence of an accidental sudden and unforeseen event.

 

11. This insurance does not cover liability of any sort which is liable to apply to the Insured for damage whose origin or cause arises directly and/or indirectly and/or which is connected in any way to asbestos or materials which contain asbestos in any form or amount provided that the loss arises or is influenced by the dangerous attributes of asbestos.

 

12. Aircraft and/or their parts.

 

13. Motor vehicles used in circumstances in respect of which insurance is necessary to meet the requirements of Road Traffic legislation other than liability consequent upon the use of plant and loading and unloading of a vehicle where no cover is provided by any motor insurance

 

14. Transmissible Spongiform Encephalopathy (TSE), Creutzfeldt-Jakob Disease, variant or new variant Creutzfeldt-Jakob Disease (CJD), (‘Mad Cow Disease’)

 

15. Damage caused due to a Product involving genetic engineering.

 

16. Electromagnetic fields and/or radiation.

 

17. Financial pecuniary damage which is not a direct consequence of physical damage to third party property which has been damaged.

 

18. Breach of patent or copyright.

 

19. Property Damage to property owned or leased or rented to or in the care custody or control of the Insured other than:

 

(i) employees’ directors’ partners’ and/or visitors’ property

 

(ii) premises not owned by or leased or rented to the Insured at which the Insured is undertaking work in connection with the business

 

20. Losses which would or could be covered under a Directors’ and Officers’ liability insurance policy

 

  Page 23 of 40  
      Authorised Signatory 
 
Forming part of Certificate No. 1600454  

 

EXTENSIONS

 

1. DEFENCE IN CRIMINAL PROCEEDINGS.

 

The policy is extended to indemnify the Insured in respect of Criminal Proceedings’ costs as follows:

 

The Insurer at his own expense will provide the Insured and/or any of the Insured’s employees a lawyer to handle the defence of Criminal Proceedings, brought against any of them following a covered insured event occurring during the Period of Insurance. The Insurer will also at his own expense provide the Insured and/or any of his employees a lawyer to handle any appeal proceedings and to represent them until the highest appellate level in respect of any decision and/or judgment imposed on them in the Criminal Proceedings and will also bear the expenses of the appeal.

 

A condition precedent to providing a lawyer for the appeal as mentioned above will be a statement of opinion from the lawyer advising that there are good prospects of a successful appeal. If the Insured does not want the lawyer provided by the Insurer he may choose a lawyer of his own, in which case, the Insurer will pay on behalf of the Insured for the fees and defense cost paid by him, all these subject to the Insurer’s limit of liability. The Insurer will pay the fees and the defence costs and/or appeal costs at the end of the criminal proceedings or the appeal as the case may be.

 

Definitions for this extension

 

“Criminal Proceedings” - means:

 

Proceedings where there is a lodging of an indictment by the state of Israel or on its behalf, including death investigation filed against the Insured or any of his employees following an insured event covered under this policy.

 

“Defence Costs” (including an appeal) - means:

 

Fees, duties, documents, stamps, fees, protocols, copying fees, witnesses and experts’ fees as decided by the court or according to the “criminal procedure”, but excluding any fine, compensation or penalties given under court decision.

 

“Fees” - means:

 

Lawyers’ fees for criminal proceedings’ handling as stipulated under the regulation of the Bar Association (the minimum tariff) or the minimum tariff of lawyers’ fees as regulated by the law.

 

Exclusions to this extension:

 

The Insurer shall not be obliged to provide a lawyer for defence or bear any payments if:

 

1. the indictment and/or death investigation are in respect of an occurrence which is specifically excluded in the policy.

 

2. the indictment and/or the death investigation are in respect of an occurrence which the Insured or any of his employees took part (whether by action or omission) with intention to cause the insured event.

 

3. the indictment and or death investigation are in respect of contractors and/or subcontractors of the Insured.

 

4. The Insured’s maximum limit of liability for this extension shall not exceed USD 100,000 for one occurrence and for all occurrences during the Period of Insurance.

 

It is a condition precedent to the Insurer’s obligation for indemnification as above, that no other insurance was in force covering the Insured’s liability in respect of the same Claims.

 

2. OVERSEAS LIABILITY

 

This policy is extended to pay on behalf of the Insured in respect of liability arising out of business visits anywhere in the world by directors or employees of the Insured who are not ordinarily resident in the territory visited

 

  Page 24 of 40  
      Authorised Signatory 
 
Forming part of Certificate No. 1600454  

 

3. SPORTS AND SOCIAL EXTENSION

 

This policy is extended to cover the Insured’s employees, their families and other invitees whilst participating in social events, including sporting activities organized by the Insured, participation in exhibitions or trade shows.

 

4. OTHER CONTINGENCIES EXTENSION

 

This policy is extended to cover nuisance trespass or interference with any easement right of air light water or way.

 

5. INDEMNITY TO PRINCIPALS EXTENSION

 

This policy is extended as far as is necessary to meet the requirements regarding the indemnification of Principals of any contract or agreement entered into by the Insured with any Principal The Principal will be treated as though they were an Insured in respect of any liability (as provided for herein) they may incur but only in respect of liability (as provided for herein) which arises out of the performance of the contract by the Insured provided the Principal shall observe fulfill and be subject to the terms of this Policy

 

  Page 25 of 40  
      Authorised Signatory 
 
Forming part of Certificate No. 1600454  

 

SPECIAL CONDITIONS

 

1. INSURED’S DUTY TO TAKE CARE

 

The Insured shall fulfill any legislative duty intended to defend the public against safety deficiencies arising out of faults in products which the Insured manufactures and shall take all reasonable precautions to ensure that the products manufactured by him are proper and safe.

 

POLICY CONDITIONS

 

1. DOUBLE INSURANCE

 

Where liability against one risk has been insured with more than one insurer for coinciding periods the Policyholder shall notify same to the Insurer as soon as possible after the double insurance was effected or after he became aware thereof.

 

2. POLICYHOLDER’S DUTIES

 

The Policyholder shall notify the Insurer as soon as possible of any Occurrence which may cause a claim against them covered under this policy or of the receipt of any request or claim in respect of such event.

 

3. NOTICE OF PROCEEDINGS

 

The Policyholder shall notify the Insurer as soon as possible of a Police investigation, or investigation of a cause of death, or of any other investigation instituted or to be instituted, or of charge filed against him, if they are aware thereof in connection with any Occurrence in respect of which a claim may arise under this policy.

 

4. DELIVERY OF DOCUMENTS FROM THE INSURED TO THE INSURER

 

The Policyholder shall deliver to the Insurer, immediately on receipt, any letter, summons, writ, order and notification of any process with an indemnity claim arising out of a Product for which the Insured is liable

 

5. PROHIBITION OF ADMISSION

 

No admission, offer, promise, obligation or indemnity shall be made or given by the Insured or on his behalf, without the written consent in advance of the Insurer.

 

The provisions of this clause do not apply to reporting of the facts of the event to the Police or to any competent authority by any law as requested and to giving evidence in a criminal trial.

 

For sake of good order the Insured’s handling of customer service and/or complaints in the normal scope of business including replacement of Products and/or providing solution to client’s satisfaction shall not be considered as prohibition of admission.

 

6. LITIGATION CONSENT

 

The choice of law firm which will represent the Insured in all procedures of a claim will be jointly chosen by the Insurer and the Insured (or in the absence of an agreement between them, an independent advocate nominated by the head of the Israel bar Association, at the request of any one party). In the event that there is a conflict of interests between one Insured and another Insured, a different law firm will be appointed for that Insured.

 

The Insured shall not be requested to contest any claim against him, unless that chosen law firm shall conclude, within 30 days from date of such request in writing that based on the facts of the event, contesting the claim has a fair probability of success

 

7. PAYMENT OF AN AMOUNT OF THE LIMIT OF LIABILITY

 

Prior to or in the course of the conduct of proceedings or compromise negotiations in connection with any claim or series of claims, the Insurer is entitled to pay the amount of the relevant limit or limits of liability, after deducting any amount or amounts already paid as compensation, in which case the Insurer shall relinquish the conduct and control of such claim or claims and will be free from any further liability thereof.

 

8. HANDLING OF CLAIMS

 

Where the Insurer has admitted its liability under the policy, it shall be entitled, at its discretion, to take over and conduct in the name of the Insured, the defense or settlement of any claim and to prosecute and receive in the name of the Insured any indemnity, compensation, contribution, damages. The Insurer shall have absolute discretion concerning the conduct of all proceedings or with regard to the settlement of any claim and the Insured shall give all such information and assistance as the Insurer may require regarding the matters mentioned herein. It is also agreed that the Insurer shall to the best of its ability cooperate with the Insured in order not to prejudice the Insured’s reputation or cause him any damage.

 

  Page 26 of 40  
      Authorised Signatory 
 
Forming part of Certificate No. 1600454  

 

9. RIGHT OF SUBROGATION

 

Where a payment was made in consequence of a claim under this policy, the Insured’s right of indemnity against any person or other body, shall pass to the Insurer, but the Insurer undertakes not to exercise such right against any person in the employment of the Insured or acting on his behalf, unless such claim did not result from a bona fide act.

 

The Insurer will also waive the right of recovery that the Insurers would otherwise have had against any other person or organization, for loss to which this insurance applies, provided the Insured has waived their rights of recovery against such person or organization in a contract or agreement that is executed before such loss.

 

To the extent that the Insured’s rights to recover all or part of any payment made under this insurance have not been waived, those rights are transferred to the Insurer.

 

10. CHANGE OF RISK

 

This policy was issued by the Insurer on reliance on a proposal form and/or any other document and/or information submitted to the Insurer which, together, form the basis of, and are deemed to be an integral part of, this policy.

 

Any unintentional error or omission of the Insured, in respect of any information submitted by the Insured, shall not void or impair the insurance coverage under this policy, provided the Insured reports such error or omission as soon as reasonably possible after discovery and pays an additional premium (if required) thereon as the Insurer may reasonably require.

 

The Policy Holder shall notify the Insurer, as soon as possible, of any material change of the risk/s. A material change for the purpose of this clause means:

 

1. Any changes to the answers given to the questions put to the Insured in the insurance proposal which the Insured submitted.

 

2. Production or marketing of new kinds of Products.

 

3. Export abroad which did not exist at the time of effecting the insurance.

 

4. Export to or work in the U.S.A and/or Canada.

 

11. CROSS LIABILITY

 

Where the name of the Insured includes more than one person or legal entity, the cover under this policy shall apply to each of the Insured individuals, separately as if this policy, subject to its terms, conditions and exclusions, was issued in his name only, being independent and separate from the existence of the other Insureds, however the liability of the Insurer to pay on behalf of each of the Insureds shall not exceed the limit of liability specified in the schedule. Any breach of a term or condition of this policy by any Insured, other than the Policy holder, shall not affect the protection given by this policy to any other Insured

 

12. CANCELLATION OF THE POLICY AND/OR WORSENING OF TERMS AND CONDITIONS

 

A. Without derogating from the Insurer’s rights by law or under any other directive in the policy, the Insurer may cancel the insurance at any time before the expiry of the Period of Insurance, at his discretion, provided that written notice to this effect shall be sent to the Policyholder by registered mail at least 60 days before the date of cancellation and in such case the Policyholder shall be entitled to a return of the premium paid to the Insurer for the period subsequent to the cancellation of the insurance. The same written notice must be given in the event of any worsening of the terms and conditions of the insurance.

 

  Page 27 of 40  
      Authorised Signatory 
 
Forming part of Certificate No. 1600454  

 

B. The Policyholder may cancel the insurance at any time before expiry of the insurance, at his discretion, provided that a notice to this effect is sent to the Insurer by registered mail at least 21 days before the cancellation of the insurance.

 

Notwithstanding the aforementioned if the Policyholder requested the Insurer sign insurance certifications in which there is an undertaking to cancel the insurance only after advance notice to the receiver of the undertaking, the policy shall only be cancelled at the end of the period stated in the

 

In the event of cancellation at the Policyholder’s request the Insurer shall retain for himself the Insurer’s customary short-period premium for the time in which the insurance was effective (i.e. 10% of the annual premium for each month or part thereof and a further 10% overall).

 

13. ADJUSTMENT OF PREMIUM

 

This clause shall apply only where it is mentioned in the schedule that the premium of this policy is subject to adjustment.

 

The final premium due under this policy shall be adjusted by applying the rate of premium stated in the schedule to the turnover of the Insured’s income which will be exchanged into US Dollars at the end of the Period of Insurance at the representative rate of exchange of the US Dollar in the Bank of Israel. The Policyholder shall pay to the Insurer and the Insurer shall return to the Policyholder, as the case may be, the difference between the provisional premium and the final premium due subject to the minimum premium, if any, stated in the schedule.

 

14. APPLICATION OF EXCHANGE RATES

 

A.          On the occurrence of an insured event under this policy, the insurance benefits due to the Insured shall be calculated in US Dollars at the representative rate of exchange of the dollar in the Bank of Israel prevailing at the date of the actual payment to the Insured or to the third party.

 

The Deductible shall also be calculated at the representative rate of exchange in the bank of Israel at the above date.

 

B.          Where the limits of liability are denominated in ILS they shall be changed according to the proportion that the consumers price index published immediately before the inception of the insurance bears to the consumers price index published immediately before the date of the claim payment.

 

The Deductible in ILS shall also be changed according to the proportion that the index published immediately before the inception of the insurance bears to the index published immediately before the deduction of the Deductible.

 

15. THE RIGHT TO SET-OFF

 

The Insurer is entitled to set-off against the insurance benefits due to the Insured on the occurrence of the insured event, any amount due from the Insured to the Insurer under this policy.,

 

16. EXTENSION OF THE PERIOD OF INSURANCE

 

Any extension of the insurance under this policy requires the agreement of the Insurer in writing. It is hereby declared that the Period of Insurance shall not be extended automatically and that the Period of Insurance is not extendible by silence or by any other act of the Insurer, other than by written agreement as aforesaid even if the Policyholder has proposed to the Insurer in any manner, or at any time to extend it.

 

17. JURISDICTION CLAUSE

 

This policy is subject to Israeli jurisdiction and the Israeli courts will have the sole judgment in any dispute arising out of this policy.

 

18. ADDRESS FOR NOTICES

 

Notices to the Policyholder:

 

Notice by the Insurer to the Policyholder in connection with this policy shall be sent to his last address known to the Insurer.

 

Notice to the Insurer:

 

  Page 28 of 40  
      Authorised Signatory 
 
Forming part of Certificate No. 1600454  

 

Notice by the Policyholder to the Insurer shall be sent to the broker named in the schedule for this purpose to be forwarded to Insurer. .

 

19. APPLICATION OF LAW

 

This policy is interpreted under Israeli law and the provisions of the Insurance Contract Law - 1981, shall apply to this policy, as the case may require, unless otherwise provided in the Insured’s favour by the policy.

 

20. SERVICE OF SUIT CLAUSE

 

In any action to enforce the obligations of the Insurers liable hereunder they can be designated or named as “Lloyds Underwriters” and such designation shall be binding on the Insurers liable hereunder as if they had each been individually named as defendant. Service of such proceedings may be validly be made upon the Attorney In Fact in Israel for Lloyds Underwriters, whose address for such service is Gross Orad Schlimoff & Co, Gibor Sport Bldg. 7 Menachem Begin Rd. Ramat Gan 52521, Israel

 

  Page 29 of 40  
      Authorised Signatory 
 
Forming part of Certificate No. 1600454  

 

SECTION 2

 

2011 NEWLINE-HOWDEN BIT PRODUCTS LIABILITY INSURANCE

 

INCLUDING HUMAN CLINICAL TRIALS EXTENSION

 

Whereas the Policyholder, whose name, address and business is specified in the schedule (hereinafter “the schedule”) applied to:-

 

NEWLINE UNDERWRITING MANAGEMENT LTD (Hereinafter - “the Insurers”) requesting to effect the insurance specified in this policy;

 

and whereas the Insurer agreed to effect the said insurance in consideration of the Policyholder’s undertaking to pay the premium stated in the schedule;

 

the Insurer undertakes to pay on behalf of the Insured in respect of any amount which the Insured shall have to pay to the third party as compensation under any law applicable within the Territorial Limits in consequence of a Claim made during the Period of Insurance or any applicable extended reporting period in respect of a Loss arising out of a Product for which the Insured is liable, provided that the Product is not in the Insured’s direct possession on their premises at the time of happening of the said Loss and provided that the Loss occurred within the Territorial Limits and after the date mentioned in the schedule as the Retroactive Date.

 

BASIS OF COVER:

 

Dear Policyholder: Your attention is drawn to the fact that the basis of this policy is “Claims made”. This means that the policy covers solely Claims first served against you during the Period of Insurance detailed in the schedule to the policy.

 

LIMITS OF LIABILITY: The Insurer’s liability shall not exceed:

 

a. The amount stated in the schedule as the limit of liability for one Loss

 

b. The amount stated in the schedule as the limit of liability for all the compensation payable under this policy.

 

EXPENSES:

 

The Insurer shall also pay on behalf of the Insured reasonable expenses incurred with their consent for defence against a Claim for compensation in respect of a Loss. Unless otherwise stated herein such expenses shall be payable in addition to the Limits of Liability

 

Where for settlement of the Claim a sum exceeding the above Limits of liability is required, the Insurer’s liability for these expenses shall be limited to such proportion as the limit of liability bears to the total sum paid for settlement of the Claim.

 

This policy was issued by the Insurer on reliance of a proposal form and/or any other document and/or information submitted to the Insurer which forms the basis of and is deemed to be an integral part of this policy.

 

DEFINITIONS

 

“Policyholder” – means: as stated in the schedule

 

“Insurer” – means:

 

The Insurer as stated in the schedule

 

“Insured” – means:

 

The named Insured(s) as stated in the schedule and/or any subsidiary and/or joint venture and/or partnership and/or managers and/or employees and/or directors and/or officers

 

“The product” - means:

 

Any tangible product including its component and/or article included in the Insured’s business activity as specified in the Schedule manufactured sold supplied distributed altered constructed erected repaired serviced designed tested installed or processed including any advertising, usage instructions, packaging and container and also without derogating from the said generality any product specifically mentioned in the Schedule.

 

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      Authorised Signatory 
 
Forming part of Certificate No. 1600454  

 

“Period of Insurance” – means:

 

The Period of Insurance as stated in the schedule

 

“Loss” - means:

 

1. Death, bodily injury, disease, physical or mental injury of any kind.

 

2. Physical Loss or damage to tangible property belonging to third party including consequential Loss thereof.

 

This definition includes Loss arising out of Products used for demonstration, trial purposes, being rented, leased, loaned, held for sale as well as all activities related directly or indirectly in connection with pre/post sale of Products and for clinical testing as per Clinical Trials extension and post marketing clinical trials conducted by the Insured.

 

If the defect in Products and/or parts thereof which have caused bodily injury or property damage to several claimants arises from one series or cause, all such bodily injury or property damage shall be considered as one Loss for the purpose of this policy.

 

“A Claim” - means:

 

Receipt by the Insured during the Period of Insurance and after the Retroactive Date stated in the schedule of a Claim and/or demand and/or other notice in writing by any third party in respect of a Loss related to the Insured

 

“Deductible” means:

 

The amount to be borne by the Insured out of the Limit of Liability and the Expenses paid by the Insurer following a Loss covered under this policy in respect of each Loss separately.

 

“Retroactive Date” means: the date specified as such in the Schedule

 

“Territorial Limits” - means:

 

Unless otherwise stated in the schedule, the territory of the State of Israel and the Occupied Territories. To avoid any doubt the territory of Israeli settlements and Israeli military bases and/or positions within the “Autonomy” will be regarded as Occupied Territories for the purposes of this policy.

 

EXCLUSIONS

 

This insurance does not cover any liability in respect of, arising out of, caused by, resulting from, in consequence of, in connection with or in any way involving any of the following:

 

1. Any Loss to any person caused in the course of and in consequence of his employment by the Insured.

 

2. Any contract imposing upon the Insured liability which would not attach except for the existence of such contract.

 

3. Any Product contrary to any law, regulation or safety rules on behalf of the Insured’s management other than bona fide errors.

 

4. Any Product that ceased to be in the Insured’s possession known to be defective.

 

5a. Unsuitability of Products to perform their operational purpose. This clause shall not exclude liability arising from Loss in consequence of defects in these Products.

 

5b. The replacement or repair of defective Products and/or their cost. 5c. The cost of sorting and/or recall of Products.

 

To remove doubt it is hereby clarified that damage to the Product itself shall not be considered as a Loss.

 

6. Damage to property owned by the Insured.

 

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      Authorised Signatory 
 
Forming part of Certificate No. 1600454  

 

7. The Insured’s liability as distributor or importer due to incorrect usage instructions or different usage instructions from those of the original manufacturer added by the Insured with a criminal or malicious intent.

 

8. Any nuclear material, ionizing radiation, radioactive pollution or from nuclear fuel of any sort or from nuclear waste of any sort and/or from the combustion of nuclear fuel of any sort. For the purpose of this clause, combustion shall include any process of self-sustaining fission.

 

This clause shall not apply to the use of x-rays or to the use of radioactive materials in research laboratories and hospitals and for the purposes of carrying out non-destructive examinations in industry.

 

Notwithstanding the aforementioned work with or use of nuclear fuel is excluded.

 

9. Damage directly or indirectly occasioned by war, invasion, act of foreign enemies, hostilities (whether war be declared or not), acts of sabotage and terrorism, civil war, rebellion, revolution, insurrection, military or usurped power, military regime or plunder, looting, robbery connected therewith, confiscation or destruction by any government or public authority.

 

For the purpose of this exclusion - “Terrorism” shall mean - the use of violence for political purposes, including the use of violence with a purpose to terrify the public or any part thereof by a person or persons acting on behalf of or in connection with any hostile organization.

 

In respect of “terrorism” as defined above within the territories of the State of Israel and/or the Occupied Territories, only an explicit certificate of the Israeli Police or the Ministry of Defence or the Manager of the Property Tax and Compensation Fund as defined by the Law of Property Tax and Compensation Fund 1961 with all its amendments, certifying that the Loss has been caused directly by an act of terrorism, shall serve as cause for repudiation of a Claim for terrorism Losses.

 

10. Any event of which the Insured was aware or should have been aware before the inception of this insurance that such event may cause a Claim against them under this policy, and of which they have not notified the Insurer in writing.

 

Where the Insured is an entity, awareness of the events as defined above shall be considered to be as soon as possible after the moment when the Policyholder’s managers become aware thereof

 

11. Any fines, penalties, punitive damages, exemplary damages, aggravated damages, liquidated damages, treble damages or any other damages resulting from the multiplication of compensatory damages.

 

12. Pollution:

 

(a) In respect of events in the United States of America &/or Canada: Air pollution, water pollution or land pollution.

 

(b) In respect of events anywhere else: Air pollution, water pollution or land pollution other than pollution in consequence of an accidental sudden and unforeseen event.

 

13. This insurance does not cover liability of any sort which is liable to apply to the Insured for damage whose origin or cause arises directly and/or indirectly and/or which is connected in any way to asbestos or materials which contain asbestos in any form or amount provided that the Loss arises or is influenced by the dangerous attributes of asbestos.

 

14. Aircraft and/or their parts.

 

15. Motor vehicles used in circumstances in respect of which insurance is necessary to meet the requirements of Road Traffic legislation other than liability consequent upon the use of plant and loading and unloading of a vehicle where no cover is provided by any motor insurance

 

16. Transmissible Spongiform Encephalopathy (TSE), Creutzfeldt-Jakob Disease, variant or new variant Creutzfeldt-Jacob Disease (CJD), (‘Mad Cow Disease’)

 

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      Authorised Signatory 
 
Forming part of Certificate No. 1600454  

 

17. Damage caused due to a Product involving genetic engineering.

 

18. Damage caused directly and/or indirectly by the use of a Product manufactured and/or taken from the human body.

 

19. Electromagnetic fields and/or radiation.

 

20. Financial pecuniary damage which is not a direct consequence of physical damage to third party property which has been damaged.

 

21. Breach of patent or copyright.

 

22. Any event before the Retroactive Date

 

23. Any business conducted and / or transacted via the internet, intranet, extranet and / or via the Insured’s own website, internet site, web address and / or via the transmission of electronic mail or documents by electronic means.

 

This exclusion shall not apply where the liability of the Insured would have existed in the absence of the business being conducted and / or transacted via the internet, intranet, extranet and / or via the Insured’s own website, internet site, web address and / or via the transmission of electronic mail or documents by electronic means. The onus of proof in this regard rests with the Insured and not with the Underwriters.

 

EXTENSIONS

 

1. VENDORS EXTENSION

 

It is hereby agreed and declared that the insurance under this policy shall be extended to pay on behalf of any person or entity in respect of liability arising from the marketing, distribution or sale of the Insured’s Products

 

Provided always that

 

1 this insurance shall not pay on behalf of any Vendor in respect of

 

(i) any express warranty unauthorised by the Insured

 

(ii) liability arising out of

 

(a) any physical or chemical change in the form of the Products made intentionally by the Vendor

 

(b) repacking unless unpacked solely for the purpose of inspection demonstration testing or the substitution of parts under instruction from the manufacturer and then replaced in the original container

 

(c) demonstration installation servicing or repair operations except such operations performed at the Vendor’s premise in connection with the sale of the Products or

 

(d) Products which after distribution or sale by the Insured have been labelled or relabelled or used as a container part or ingredient of any other thing or substance by or for the Vendor

 

(e) the fault or negligence of the Vendor

 

2 such Vendor shall observe, fulfil and be subject to the terms, exceptions, limits and conditions of this policy so far as they can apply.

 

2. DISCOVERY PERIOD

 

If in accordance with Insurers’ directives the policy is cancelled or not renewed, other than if the cancellation or non-renewal arose from non-payment of the premium, it is hereby agreed that the Insurer undertakes to pay on behalf of the Insured in respect of Claims submitted against him, for the first time, during the period of six months after the termination of the insurance with the Insurer and that in respect of Products sold or marketed until the above cancellation or non-renewal. A pre-condition to the liability of the Insurer to pay on behalf of as aforementioned is that no other insurance is arranged which could cover the liability of the Insured in respect of the same Claims.

 

  Page 33 of 40  
      Authorised Signatory 
 
Forming part of Certificate No. 1600454  

 

3. DEFENCE IN CRIMINAL PROCEEDINGS.

 

The policy is extended to indemnify the Insured in respect of Criminal Proceedings’ costs as follows:

 

The Insurer at his own expense will provide the Insured and/or any of the Insured’s employees a lawyer to handle the defence of Criminal Proceedings, brought against any of them following a covered insured event occurring during the Period of Insurance. The Insurer will also at his own expense provide the Insured and/or any of his employees a lawyer to handle any appeal proceedings and to represent them until the highest appellate level in respect of any decision and/or judgment imposed on them in the Criminal Proceedings and will also bear the expenses of the appeal.

 

A condition precedent to providing a lawyer for the appeal as mentioned above will be a statement of opinion from the lawyer advising that there are good prospects of a successful appeal. If the Insured does not want the lawyer provided by the Insurer he may choose a lawyer of his own, in which case, the Insurer will pay on behalf of the Insured for the fees and defense cost paid by him, all these subject to the Insurer’s limit of liability. The Insurer will pay the fees and the defence costs and/or appeal costs at the end of the criminal proceedings or the appeal as the case may be.

 

Definitions for this extension

 

“Criminal Proceedings” - means:

 

Proceedings where there is a lodging of an indictment by the state of Israel or on its behalf, including death investigation filed against the Insured or any of his employees following an insured event covered under this policy.

 

“Defence Costs” (including an appeal) - means:

 

Fees, duties, documents, stamps, fees, protocols, copying fees, witnesses and experts’ fees as decided by the court or according to the “criminal procedure”, but excluding any fine, compensation or penalties given under court decision.

 

“Fees” - means:

 

Lawyers’ fees for criminal proceedings’ handling as stipulated under the regulation of the Bar Association (the minimum tariff) or the minimum tariff of lawyers’ fees as regulated by the law.

 

Exclusions to this extension:

 

The Insurer shall not be obliged to provide a lawyer for defence or bear any payments if:

 

1. the indictment and/or death investigation are in respect of an occurrence which is specifically excluded in the policy.

 

2. the indictment and/or the death investigation are in respect of an occurrence which the Insured or any of his employees took part (whether by action or omission) with intention to cause the insured event.

 

3. the indictment and or death investigation are in respect of contractors and/or subcontractors of the Insured.

 

4. The Insured’s maximum limit of liability for this extension shall not exceed USD 100,000 for one occurrence and for all occurrences during the Period of Insurance.

 

It is a condition precedent to the Insurer’s obligation for indemnification as above, that no other insurance was in force covering the Insured’s liability in respect of the same Claims.

 

SPECIAL CONDITIONS

 

1. CESSATION OF PRODUCTION AND RECALL OF DEFECTIVE PRODUCTS

 

If the Insured realized or is aware that a Product has caused or is liable to cause a Loss in consequence of a defect in its composition or process of its Manufacture, the Insured shall immediately stop its production, sale and supply.

 

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      Authorised Signatory 
 
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The Insured shall take reasonable measures to take back any such defective Product which ceased to be under his control and to warn the consumers against its use. The Insured shall bear all expenses and Losses involved in the return of the said Products. The fulfilment and compliance of this clause shall be a condition precedent to the Insurers’ liability under this policy.

 

2. INSURED’S DUTY TO TAKE CARE

 

The Insured shall fulfil any legislative duty intended to defend the public against safety deficiencies arising out of faults in Products which the Insured Manufactures and shall take all reasonable precautions to ensure that the Products Manufactured by him are proper and safe.

 

POLICY CONDITIONS

 

1. DOUBLE INSURANCE

 

Where liability against one risk has been insured with more than one insurer for coinciding periods the Policyholder shall notify same to the Insurer as soon as possible after the double insurance was effected or after he became aware thereof.

 

2. POLICYHOLDER’S DUTIES

 

The Policyholder shall notify the Insurer as soon as possible of any notice that they have received regarding the occurrence of an event which may cause a Claim against them covered under this policy or of the receipt of any request or Claim in respect of such event.

 

The Policyholder shall notify the Insurer as soon as possible in writing of any defect in a Product or circumstances which may cause a Loss.

 

3. NOTICE OF PROCEEDINGS

 

The Policyholder shall notify the Insurer as soon as possible of a Police investigation, or investigation of a cause of death, or of any other investigation instituted or to be instituted, or of charge filed against him, if they are aware thereof in connection with any Loss in respect of which a Claim may arise under this policy.

 

4. DELIVERY OF DOCUMENTS FROM THE INSURED TO THE INSURER

 

The Policyholder shall deliver to the Insurer, immediately on receipt, any letter, summons, writ, order and notification of any process with a Claim arising out of a Product for which the Insured is liable

 

5. PROHIBITION OF ADMISSION

 

No admission, offer, promise, obligation or indemnity shall be made or given by the Insured or on his behalf, without the written consent in advance of the Insurer.

 

The provisions of this clause do not apply to reporting of the facts of the event to the Police or to any competent authority by any law as requested and to giving evidence in a criminal trial.

 

For sake of good order the Insured’s handling of customer service and/or complaints in the normal scope of business including replacement of products and/or providing solution to client’s satisfaction shall not be considered as prohibition of admission.

 

6. LITIGATION CONSENT

 

The choice of law firm which will represent the Insured in all procedures of a Claim will be jointly chosen by the Insurer and the Insured (or in the absence of an agreement between them, an independent advocate nominated by the head of the Israel bar Association, at the request of any one party). In the event that there is a conflict of interests between one Insured and another Insured, a different law firm will be appointed for that Insured.

 

The Insured shall not be requested to contest any Claim against him, unless that chosen law firm shall conclude, within 30 days from date of such request in writing that based on the facts of the event, contesting the Claim has a fair probability of success

 

7. PAYMENT OF AN AMOUNT OF THE LIMIT OF LIABILITY

 

Prior to or in the course of the conduct of proceedings or compromise negotiations in connection with any Claim or series of Claims, the Insurer is entitled to pay the amount of the relevant limit or limits of liability, after deducting any amount or amounts already paid as compensation, in which case the Insurer shall relinquish the conduct and control of such Claim or Claims and will be free from any further liability thereof.

 

  Page 35 of 40  
      Authorised Signatory 
 
Forming part of Certificate No. 1600454  

 

8. HANDLING OF CLAIMS

 

Where the Insurer has admitted its liability under the policy, it shall be entitled, at its discretion, to take over and conduct in the name of the Insured, the defense or settlement of any Claim and to prosecute and receive in the name of the Insured any indemnity, compensation, contribution, damages. The Insurer shall have absolute discretion concerning the conduct of all proceedings or with regard to the settlement of any Claim and the Insured shall give all such information and assistance as the Insurer may require regarding the matters mentioned herein. It is also agreed that the Insurer shall to the best of its ability cooperate with the Insured in order not to prejudice the Insured’s reputation or cause him any damage.

 

9. RIGHT OF SUBROGATION

 

Where a payment was made in consequence of a Claim under this policy, the Insured’s right of indemnity against any person or other body, shall pass to the Insurer, but the Insurer undertakes not to exercise such right against any person in the employment of the Insured or acting on his behalf, unless such Claim did not result from a bona fide act.

 

The Insurer will also waive the right of recovery that the Insurers would otherwise have had against any other person or organization, for Loss to which this insurance applies, provided the Insured has waived their rights of recovery against such person or organization in a contract or agreement that is executed before such Loss

 

To the extent that the Insured’s rights to recover all or part of any payment made under this insurance have not been waived, those rights are transferred to the Insurer.

 

10. CHANGE OF RISK

 

This policy was issued by the Insurer on reliance on a proposal form and/or any other document and/or information submitted to the Insurer which, together, form the basis of, and are deemed to be an integral part of, this policy.

 

Any unintentional error or omission of the Insured, in respect of any information submitted by the Insured, shall not void or impair the insurance coverage under this policy, provided the Insured reports such error or omission as soon as reasonably possible after discovery and pays an additional premium (if required) thereon as the Insurer may reasonably require.

 

The Policy Holder shall notify the Insurer, as soon as possible, of any material change of the risk/s. A material change for the purpose of this clause means:

 

1. Any changes to the answers given to the questions put to the Insured in the insurance proposal which the Insured submitted.

 

2. Production or marketing of new kinds of Products.

 

3. Export abroad which did not exist at the time of effecting the insurance.

 

4. Export to or work in the U.S.A and/or Canada.

 

11. CROSS LIABILITY

 

Where the name of the Insured includes more than one person or legal entity, the cover under this policy shall apply to each of the Insured individuals, separately as if this policy, subject to its terms, conditions and exclusions, was issued in his name only, being independent and separate from the existence of the other Insureds, however the liability of the Insurer to pay on behalf of each of the Insureds shall not exceed the limit of liability specified in the schedule. Any breach of a term or condition of this Policy by any Insured, other than the Policyholder, shall not affect the protection given by this policy to any other Insured

 

12. CANCELLATION OF THE POLICY AND/OR WORSENING OF TERMS AND CONDITIONS

 

A. Without derogating from the Insurer’s rights by law or under any other directive in the policy, the Insurer may cancel the insurance at any time before the expiry of the Period of Insurance, at his discretion, provided that written notice to this effect shall be sent to the Policyholder by registered mail at least 60 days before the date of cancellation and in such case the Policyholder shall be entitled to a return of the premium paid to the Insurer for the period subsequent to the cancellation of the insurance. The same written notice must be given in the event of any worsening of the terms and conditions of the insurance.

 

  Page 36 of 40  
      Authorised Signatory 
 
Forming part of Certificate No. 1600454  

 

B. The Policyholder may cancel the insurance at any time before expiry of the insurance, at his discretion, provided that a notice to this effect is sent to the Insurer by registered mail at least 21 days before the cancellation of the insurance.

 

Notwithstanding the aforementioned if the Policyholder requested the Insurer sign insurance certifications in which there is an undertaking to cancel the insurance only after advance notice to the receiver of the undertaking, the policy shall only be cancelled at the end of the period stated in the schedule.

 

In the event of cancellation at the Policyholder’s request the Insurer shall retain for himself the Insurer’s customary short-period premium for the time in which the insurance was effective (i.e. 10% of the annual premium for each month or part thereof and a further 10% overall).

 

13. ADJUSTMENT OF PREMIUM

 

This clause shall apply only where it is mentioned in the schedule that the premium of this policy is subject to adjustment.

 

The final premium due under this policy shall be adjusted by applying the rate of premium stated in the schedule to the turnover of the Insured’s income which will be exchanged into US Dollars at the end of the Period of Insurance at the representative rate of exchange of the US Dollar in the Bank of Israel. The Policyholder shall pay to the Insurer and the Insurer shall return to the Policyholder, as the case may be, the difference between the provisional premium and the final premium due subject to the minimum premium, if any, stated in the schedule.

 

14. APPLICATION OF EXCHANGE RATES

 

A. On the happening of a Loss under this policy, the insurance benefits due to the Insured shall be calculated in US Dollars at the representative rate of exchange of the dollar in the Bank of Israel prevailing at the date of the actual payment to the Insured or to the third party.

 

The Deductible shall also be calculated at the representative rate of exchange in the bank of Israel at the above date.

 

B. Where the limits of liability are denominated in ILS they shall be changed according to the proportion that the consumers price index published immediately before the inception of the insurance bears to the consumers price index published immediately before the date of the Claim payment.

 

The Deductible in ILS shall also be changed according to the proportion that the index published immediately before the inception of the insurance bears to the index published immediately before the deduction of the Deductible.

 

15. THE RIGHT TO SET-OFF

 

The Insurer is entitled to set-off against the insurance benefits due to the Insured on the occurrence of the insured event, any amount due from the Insured to the Insurer under this policy.,

 

16. EXTENSION OF THE PERIOD OF INSURANCE

 

Any extension of the insurance under this policy requires the agreement of the Insurer in writing. It is hereby declared that the Period of Insurance shall not be extended automatically and that the Period of Insurance is not extendible by silence or by any other act of the Insurer, other than by written agreement as aforesaid even if the Policyholder has proposed to the Insurer in any manner, or at any time to extend it.

 

17. JURISDICTION CLAUSE

 

This policy is subject to Israeli jurisdiction and the Israeli courts will have the sole judgment in any dispute arising out of this policy.

 

  Page 37 of 40  
      Authorised Signatory 
 
Forming part of Certificate No. 1600454  

 

18. ADDRESS FOR NOTICES

 

Notices to the Policyholder:

 

Notice by the Insurer to the Policyholder in connection with this policy shall be sent to his last address known to the Insurer.

 

Notice to the Insurer:

 

Notice by the Policyholder to the Insurer shall be sent to the broker named in the schedule for this purpose to be forwarded to Insurer.

 

19. APPLICATION OF LAW

 

This policy is interpreted under Israeli law and the provisions of the Insurance Contract Law - 1981, shall apply to this policy, as the case may require, unless otherwise provided in the Insured’s favour by the policy.

 

20. SERVICE OF SUIT CLAUSE

 

In any action to enforce the obligations of the Insurers liable hereunder they can be designated or named as “Lloyds Underwriters” and such designation shall be binding on the Insurers liable hereunder as if they had each been individually named as defendant. Service of such proceedings may be validly be made upon the Attorney In Fact in Israel for Lloyds Underwriters, whose address for such service is Gross Orad Schlimoff & Co, Gibor Sport Bldg. 7 Menachem Begin Rd. Ramat Gan 52521, Israel

 

  Page 38 of 40  
      Authorised Signatory 
 
Forming part of Certificate No. 1600454  

 

HUMAN CLINICAL TRIALS ENDORSEMENT EXTENSION

 

The Insurers will pay on behalf of the Insured all sums in excess of the Deductible that the Insured shall become legally liable to pay as damages or compensation and claimants’ costs and expenses in respect of any Claim made by Research Subjects after the Retroactive Date and within the Territorial Limits arising out of a Product or medical procedure or Clinical Trial as herein defined. Where no local policy is required by law, this policy will extend to cover all Clinical Trials carried out by the Insured at no additional premium, subject always to prior notification to Insurers.

 

Definitions shall include the following:

 

The “Insured” shall include

 

(a) any Medical Persons whilst acting within the scope of their duties as laid out in the protocol but excluding liability arising out of the deviation from the protocol and any consequent Medical Malpractice

 

(b) any sub-contractor consultant hospital or contract research organization who will be performing work for the Insured in respect of a Clinical Trial

 

(c) any ethics committee or its members that has approved a Clinical Trial which is the subject of this policy but only in respect of Claims arising out of a Clinical Trial covered by this policy

 

(d) any medical research fund “Medical

 

Persons” – means:

 

Licensed Physicians Doctors Medical Nurses and Dentists

 

“Research Subjects” – means:

 

Any person participating in a Clinical Trial or those involved in pre-screening and their dependants estate or heirs

 

“Clinical Trial” – means:

 

Any testing of material within or upon human beings to establish the effectiveness or safety of such material or the undertaking of a medical procedure

 

“Medical Malpractice” – means:

 

Any negligent act, error or omission committed by the Insured

 

“Protocol” – means:

 

A predefined written procedural method in the design and implementation of experiments

 

Additional Exclusions:

 

23. any Claim made arising from Hepatitis or any condition directly or indirectly caused by or associated with Human T-Cell Lymphotropic Virus Type iii (HTLV iii) or Lymphadenopathy Associated Virus (LAV) or the mutants derivatives or variations thereof or in any way related to Acquired Immune Deficiency Syndrome or any syndrome or condition of a similar kind howsoever it may be named

 

24. any Claim made arising from existing illnesses(es) or the worsening of same other than the exacerbation of such existing illness(es) as a result of participation in a clinical trial that is the subject of this insurance.

 

25. any consequence of the Research Subject knowingly not carrying out the instructions of the Insured

 

26. the Clinical Trial not achieving the requested result

 

27. Medical Malpractice as stated in (a) above

 

  Page 39 of 40  
      Authorised Signatory 
 
Forming part of Certificate No. 1600454  

 

Limit of Liability

 

This extension of cover does not increase the per Claim or aggregate limit of liability as stated herein, which shall be the maximum payable by Insurers, regardless of the number of Insureds, claimants or Claims made during the Period of Insurance.

 

Extension of the Reporting Period (Applicable to Clinical trials in USA only)

 

Subject to the condition that there is no other valid or collectable insurance, agreement, indemnity or entitlement that could have applied to a Claim made, the exclusion from coverage for a Claim made after the Period of Insurance shall not apply provided the Claim would have been covered under this policy had the Claim been made during the Period of Insurance and the Claim has been reported in writing to the Insurer up to 2 years from the date of cancellation or non-renewal

 

Extension of the Reporting Period (Applicable to Clinical trials in Israel only)

 

Subject to the condition that there is no other valid or collectable insurance, agreement, indemnity or entitlement that could have applied to a Claim made, the exclusion from coverage for a Claim made after the Period of Insurance shall not apply provided the Claim would have been covered under this policy had the Claim been made during the Period of Insurance and the Claim has been reported in writing to the Insurer up to 7 years from the date of cancellation or non-renewal or in the case of minors 7 years from the age of majority.

 

This endorsement, policy and schedule shall be read together as one document and any word or expression to which a specific meaning has been attached in any part of this endorsement, policy or schedule shall bear such specific meaning wherever it may appear

 

This policy’s terms and conditions may be changed only by endorsement issued by us to form part of this policy

 

This endorsement is subject to all policy terms and condition unless specifically altered above.

 

  Page 40 of 40  
      Authorised Signatory 

 

19.2.5

 

Consent of Invasix for Disposition of Company

 

Shares by Investor

 

 

 

 

To

Guangzhou Sino-Israel Bio-Industry

Investment Fund (LLP)

Unit 203, 2/F

No.6 of Luoxuansan

Road, International Bio-Island

Guangzhou

 

Dear Sirs,

 

Reference is hereby made to that certain Joint Venture Agreement dated September 23, 2016, by and between Guangzhou Sino-Israel Bio-industry Investment Fund (LLP) (“GBIF”), Invasix Ltd. (“Invasix”) and Guangzhou InMode Medical Technology Ltd. (the “Company”, and the “JV Agreement”, respectively),

 

Capitalized terms not otherwise defined herein shall have the meaning ascribed to such terms under the JV Agreement.

 

Pursuant to Section 25 of the JV Agreement, we, the undersigned, hereby grant our irrevocable and unconditional consent to the Disposition of Equity Rights by GBIF in the Company, subject to the fulfillment by GBIF of all undertaking in connection with a Disposition, as set forth in Chapter XI of the JV Agreement.

 

We further undertake to execute any and all documents, forms, letters and agreements and take any and all actions reasonable required to facilitate such Disposition by GBIF.

 

Sincerely Yours,  
   
 
Invasix Ltd,  

 

 

 

 

19.2.6

 

Proxy signed by Company Directors Appointed

on behalf of Invasix

 

 

 

 

To:

 

Guangzhou Sino-Israel Bio-Industry

Investment Fund (LLP)

Unit 203, 2/F

No.6 of Luoxuansan

Road, International Bio-island

Guangzhou

 

Irrevocable Power of Attorney and Proxy

 

Reference is hereby made to that certain Joint Venture Agreement dated September 23, 2016, by and between Guangzhou Sino-Israel Bio-Industry Investment Fund (LLP) (“GBIF”), Invasix Ltd. (“Invasix”) and Guangzhou InMode Medical Technology Ltd. (the “Company”, and the “JV Agreement”, respectively).

 

Capitalized terms not otherwise defined herein shall have the meaning ascribed to such terms under the JV Agreement.

 

I, the undersigned, serving as a director on behalf of Invasix in the Board of Directors of the Company (“Board”), hereby grant an irrevocable power of attorney and a proxy to each of the directors appointed by GBIF to the Board of the Company (“GBIF Directors”), such that in my abscense at any Second Adjorned Meeting of the Board of the Company, any one of GIBF Directors may participate and vote instead of me, in accordance with Section 24.3.5 of the JV Agreement

 

This Irrevocable Power of Attorney and Proxy shall become effective at the Closing Date and shall continue to be effective until the termination of the JV Agreement.

 

Except as set forth herein, this undertaking may not be revoked, terminated or otherwise canceled.

 

Name of director: Aloo Yaari

 

Signature of director: /s/ Aloo Yaari  

 

Date: January 11, 2017

 

 

 

 

To:

 

Guangzhou Sino-Israel Bio-Industry

Investment Fund (LLP)

Unit 203, 2/F

No.6 of Luoxuansan

Road, International Bio-island 

Guangzhou

 

Irrevocable Power of Attorney and Proxy

 

Reference is hereby made to that certain Joint Venture Agreement dated September 23, 2016, by and between Guangzhou Sino-Israel Bio-Industry Investment Fund (LLP) (“GBIF”), Invasix Ltd. (“Invasix”) and Guangzhou InMode Medical Technology Ltd. (the “Company”, and the “JV Agreement”, respectively).

 

Capitalized terms not otherwise defined herein shall have the meaning ascribed to such terms under the JV Agreement.

 

I, the undersigned, serving as a director on behalf of Invasix in the Board of Directors of the Company (“Board”), hereby grant an irrevocable power of attorney and a proxy to each of the directors appointed by GBIF to the Board of the Company (“GBIF Directors”), such that in my abscense at any Second Adjorned Meeting of the Board of the Company, any one of GIBF Directors may participate and vote instead of me, in accordance with Section 24.3.5 of the JV Agreement.

 

This Irrevocable Power of Attorney and Proxy shall become effective at the Closing Date and shall continue to be effective until the termination of the JV Agreement.

 

Except as set forth herein, this undertaking may not be revoked, terminated or otherwise canceled.

 

Name of director: Rafael Lickerman

 

Signature of director: /s/ Rafael Lickerman  

 

Date: January 11, 2017

 

 

 

 

To:

 

Guangzhou Sino-Israel Bio-Industry

Investment Fund (LLP)

Unit 203, 2/F

No.6 of Luoxuansan

Road, International Bio-island

Guangzhou

 

Irrevocable Power of Attorney and Proxy

 

Reference is hereby made to that certain Joint Venture Agreement dated September 23, 2016, by and between Guangzhou Sino-Israel Bio-Industry Investment Fund (LLP) (“GBIF”), Invasix Ltd. (“Invasix”) and Guangzhou InMode Medical Technology Ltd. (the “Company”, and the “JV Agreement”, respectively).

 

Capitalized terms not otherwise defined herein shall have the meaning ascribed to such terms under the JV Agreement.

 

I, the undersigned, serving as a director on behalf of Invasix in the Board of Directors of the Company (“Board”), hereby grant an irrevocable power of attorney and a proxy to each of the directors appointed by GBIF to the Board of the Company (“GBIF Directors”), such that in my abscense at any Second Adjorned Meeting of the Board of the Company, any one of GIBF Directors may participate and vote instead of me, in accordance with Section 24.3.5 of the JV Agreement.

 

This Irrevocable Power of Attorney and Proxy shall become effective at the Closing Date and shall continue to be effective until the termination of the JV Agreement.

 

Except as set forth herein, this undertaking may not be revoked, terminated or otherwise canceled.

 

Name of director: Moshe Mizrahy

 

Signature of director: /s/ Moshe Mizrahy  

 

Date: January 11, 2017

 

 

 

 

Section 19.3.2

 

Resolution of Investor approving the Agreement

 

 

 

 

RESOLUTION OF A MEETING OF THE INVESTMENT COMMITTEE OF

 

THE GUANGZHOU SINO-ISRAEL BIO-INDUSTRY VENTURE CAPITAL INVESTMENT FUND (LLP)

 

Voting Result of InMode-China Investment Project InMode

 

Dr. Shuki Gleitman proposed to vote regarding the InMode-China deal.

Dr. Shuki Gleitman voted YES.

Prof. Abraham Karasik voted YES.

Prof. Shlomo Noy voted YES.

Mr. Avner Lushi voted YES.

Ms. Jing Zhao voted YES.

Mr. Qiu Zhe voted YES.

Dr. Yingqing Li (on behalf of Mr. Shun-xian Yang) abstained from voting.

All 7 members voted. 6 voting were YES. 1 voting was abstention.

Shuki Gleitman InMode

Shuki Gleitman

Abraham Karasik

Shlomo Noy

Avner Lushi

 

RESOLVED by majority, to approve investment in InMode-China.

 

InMode.

 

 

 

 

Further Resolved , the structure deal of InMode-China will be equity investment. A total aggregate amount of up to 50,000,000RMB in equity investment, divided as follows:

 

· 25% (12,500,000 RMB) as the initial investment 25% (12,500,000)

 

· 35% upon initiating of production and manufacturing line.

 

· The remaining 40% upon completion of sales and positioning of the first 10 InMode platforms by external paying customers.

 

Above the resolution for investment committee meeting of GUANGZHOU SINO-ISRAEL BIO-INDUSTRY VENTURE CAPITAL INVESTMENT FUND (LLP).

 

/s/ Shuki Gleitman
Dr. Shuki Gleitman, Chairman of the meeting
Shuki Gleitman

 

2

 

 

19.3.3

 

Consent of Investor for the Disposition of

Company Shares by Invasix

 

 

 

 

To:

Invasix Ltd.

Tavor Building, Sha’arYokneam

P.O. Box 533, Yokneam 20692

Israel

 

Dear Sirs,

 

Reference is hereby made to that certain Joint Venture Agreement dated September 23, 2016, by and between Guangzhou Sino-Israel Bio-Industry Investment Fund ( LLP ) ( “GBIF” ), Invasix Ltd. ( “Invasix” ) and Guangzhou In Mode Medical Technology Ltd. (the “Company”, and the “JV Agreement”, respectively).

 

Capitalized terms not otherwise defined herein shall have the meaning ascribed to such terms under the JV Agreement.

 

Pursuant to Section 25 of the JV Agreement, we, the undersigned, hereby grant our irrevocable and unconditional consent to the Disposition of Equity Rights by Invasix in the Company, subject to the fulfillment by Invasix of all undertakings in connection with a Disposition, as set forth in Chapter XI of the JV Agreement.

 

We further undertake to execute any and all documents, forms, letters and agreements and take any and all actions reasonable required to facilitate such Disposition by Invasix.

 

Sincerely Yours,

 

 
Guangzhou Sino-Israel Bio-Industry Investment Fund (LLP)

 

By its General Partner

Guangzhou Elim Biotech Industrial Venture Capital

Management Company

 

 

Execution Copy

 

 

 

 

19.3.4

 

Proxy signed by Company Directors Appointed

on behalf of Investor

 

 

 

 

To:

 

____________

 

Irrevocable Power of Attorney and Proxy

 

Reference is hereby made to that certain Joint Venture Agreement dated September 23, 2016, by and between Guangzhou Sino-Israel Bio-Industry Investment Fund (LLP) (“ GBIF ”), Invasix Ltd. (“ Invasix ”) and Guangzhou InMode Medical Technology Ltd. (the “ Company ”, and the “ JV Agreement ”, respectively).

 

Capitalized terms not otherwise defined herein shall have the meaning ascribed to such terms under the JV Agreement.

 

I, the undersigned, serving as a director on behalf of GBIF in the Board of Directors of the Company (“ Board ”), hereby grant an irrevocable power of attorney and a proxy to : (i) each of the directors appointed by GBIF to the Board of the Company (“ GBIF Directors ”) that is present at a given Second Adjourned Meeting; or (ii) if none of the GBIF Directors is present at a given Second Adjourned Meeting, to each of the directors appointed by Invasix to the Board of the Company (“ Invasix Directors ”), such that in my abscense at any Second Adjourned Meeting of the Board of the Company, any one of the GBIF Directors or Invasix Directors, as the case may be pursuant to the above, may participate and vote instead of me, in accordance with Section 24.3.5 of the JV Agreement.

 

This Irrevocable Power of Attorney and Proxy shall become effective at the Closing Date and shall continue to be effective until the termination of the JV Agreement.

 

Except as set forth herein, this undertaking may not be revoked, terminated or otherwise canceled.

 

Name of director:

 

Signature of director:  

 

Date: January 11, 2017

 

Execution Copy

 

 

 

 

To:

 

____________

 

Irrevocable Power of Attorney and Proxy

 

Reference is hereby made to that certain Joint Venture Agreement dated September 23, 2016, by and between Guangzhou Sino-Israel Bio-Industry Investment Fund (LLP) (“ GBIF ”), Invasix Ltd. (“ Invasix ”) and Guangzhou InMode Medical Technology Ltd. (the “ Company ”, and the “ JV Agreement ”, respectively).

 

Capitalized terms not otherwise defined herein shall have the meaning ascribed to such terms under the JV Agreement.

 

I, the undersigned, serving as a director on behalf of GBIF in the Board of Directors of the Company (“ Board ”), hereby grant an irrevocable power of attorney and a proxy to : (i) each of the directors appointed by GBIF to the Board of the Company (“ GBIF Directors ”) that is present at a given Second Adjourned Meeting; or (ii) if none of the GBIF Directors is present at a given Second Adjourned Meeting, to each of the directors appointed by Invasix to the Board of the Company (“ Invasix Directors ”), such that in my abscense at any Second Adjourned Meeting of the Board of the Company, any one of the GBIF Directors or Invasix Directors, as the case may be pursuant to the above, may participate and vote instead of me, in accordance with Section 24.3.5 of the JV Agreement.

 

This Irrevocable Power of Attorney and Proxy shall become effective at the Closing Date and shall continue to be effective until the termination of the JV Agreement.

 

Except as set forth herein, this undertaking may not be revoked, terminated or otherwise canceled.

 

Name of director:

 

Signature of director:  

 

Date: January 11, 2017

 

Execution Copy

 

 

 

 

To:

 

____________

 

Irrevocable Power of Attorney and Proxy

 

Reference is hereby made to that certain Joint Venture Agreement dated September [__], 2016, by and between Guangzhou Sino-Israel Bio-Industry Investment Fund (LLP) (“ GBIF ”), Invasix Ltd. (“ Invasix ”) and Guangzhou InMode Medical Technology Ltd. (the “ Company ”, and the “ JV Agreement ”, respectively).

 

Capitalized terms not otherwise defined herein shall have the meaning ascribed to such terms under the JV Agreement.

 

I, the undersigned, serving as a director on behalf of GBIF in the Board of Directors of the Company (“ Board ”), hereby grant an irrevocable power of attorney and a proxy to : (i) each of the directors appointed by GBIF to the Board of the Company (“ GBIF Directors ”) that is present at a given Second Adjourned Meeting; or (ii) if none of the GBIF Directors is present at a given Second Adjourned Meeting, to each of the directors appointed by Invasix to the Board of the Company (“ Invasix Directors ”), such that in my abscense at any Second Adjourned Meeting of the Board of the Company, any one of the GBIF Directors or Invasix Directors, as the case may be pursuant to the above, may participate and vote instead of me, in accordance with Section 24.3.5 of the JV Agreement.

 

This Irrevocable Power of Attorney and Proxy shall become effective at the Closing Date and shall continue to be effective until the termination of the JV Agreement.

 

Except as set forth herein, this undertaking may not be revoked, terminated or otherwise canceled.

 

Name of director:

 

Signature of director:  

 

Date: January 11, 2017

 

Execution Copy

 

 

 

 

23

 

Invasix Disclosure Schedule

 

 

 

 

DISCLOSURE SCHEDULE

 

In connection with that certain Joint Venture Agreement (the “ JVA ”) by and between Invasix Ltd. (“ lnvasix ”), Guangzhou Sino-Israel Bio-Industry Investment Fund (LLP) (the “ Investor ”) and Guangzhou InMode Medical Technology Ltd. (a company in formation) (the “ Company ”), Invasix hereby delivers this Disclosure Schedule (“ DS ”), which items constitute exceptions to the representations and warranties of Invasix under the JVA.

 

Matters reflected in this DS are not necessarily limited to matters required by the JVA to be reflected in this DS. The inclusion of such additional matters is set forth for informational purposes and does not impose a duty or requirement on Invasix to include other matters of a similar nature.

 

To the extent that any representation or warranty in the JVA is qualified or limited by the materiality of the matter(s) to which such representation or warranty is given, the inclusion of any matter(s) in this DS shall not constitute a determination by Invasix that such matter(s) are material.

 

Nothing in this DS shall constitute an admission of liability or obligation of Invasix to any third party nor an admission against their interest.

 

Capitalized terms used but not otherwise defined herein shall have the same meaning ascribed to them in the JVA. The captions used herein are for convenience purposes only, and will not be used in the construction of this DS.

 

Execution Copy

 

 

 

 

Schedule 22.1.1− No Violation

 

Invasix is a party to the following exclusive distribution agreements in the Territory:

 

1. Distribution Agreement in China: Invasix has granted a Chinese distributor named “Chongquing Gallup Peninsula Biotech Co., Ltd,” (“Peninsula”), an exclusive distribution rights in the territory of the Peoples Republic of China, with respect to Invasix’s “BodyTite” platform and the “Fractora/TiteFX” platform and its disposables (the BodyTite RFAL hand pieces of varying sizes and Fractora treatment tips of varying pin configurations). The distribution agreement is dated June 28, 2014. The distributor has waived rights to distribute the Inmode platforms in an email correspondence between Invasix and Peninsula. The relevant documentation was provided to the Fund. At the Funds request, Invasix shall use reasonable best efforts to receive from Peninsula a signed waiver.

 

The Tornado product by Peninsula, is a BodyTite complementary product and not part of the Inmode Product family. Invasix provides to Peninsula only the metal casing of a product (similar to the BodyTite shape). Peninsula uses this casing for its own product sold solely in China. The Invasix brand name is not used with respect to this product. Peninsula is the manufacturer of this product, not Invasix. There is no written indemnification beyond the obligations set out in the distribution agreement and the rights according to applicable laws.

 

2. Distribution Agreement in Taiwan: Invasix has granted a distributor in Taiwan named “YI CHENG BIOTECH CO., LTD.”, an exclusive distribution rights in the territory of Taiwan, with respect to Invasix’s “BodyTite” and “InMode” platforms (the “ Taiwan DA ”). The Taiwan DA is dated August, 2016. The performance of the Taiwan DA will be made through the Company, by way of assignment to the Company of the Taiwan DA or by actual performance through the Company, as shall be mutually agreed.

 

3. Distribution Agreement in Hong Kong: Invasix has granted a distributor in Hong Kong, an exclusive distribution rights in the territory of Hong Kong (the “ Hong Kong DA ”), Currently, the Hong Kong DA is non-active and Invasix and the Company will mutually agree on future steps with respect thereto (whether to terminate the Hong Kong DA or assign it to the Company). Invasix did not locate a signed copy of the Agreement.

 

Execution Copy

 

- 2 -

 

 

Schedule 22.1.2 − Litigation

 

Syneron Claim

 

On January 28, 2016, Syneron Medical Ltd. (“ Syneron ”) filed a patent infringement complaint against Invasix, Inc. and InMode M.D. Ltd. (collectively, the “ Defendants ”) with respect to Invasix’s Fractora 20 and 60 pins products, to the United States District Court Central District California (the “ Complaint ”).

 

In the framework of the Complaint, Syneron has alleged that the Defendants are infringing five US patents owned by Syneron in the US. There is not litigation concerning the Territory.

 

From a very preliminary review, Invasix searched the reference of the 5 Syneron patents included in the Complaint in SIPO - “State Intellectual Property Office of the R.B.C” website.

 

According to such search one Patent (Count IV) is under application in PRC. Invasix has not reviewed the status of this application, its contents nor any other patents in the field, either by Syneron or others.

 

Syneron
Lawsuit 		  United
States
Patent No. 		  Title   Issued on   Application
No. in China
COUNT I   6,148,232   ‘Transdermal drug delivery and delivery and analyte extraction”   November 14, 2000    
COUNT II   6,615,079   “Transdermal drug delivery and analyte extraction”   September 2, 2003    
COUNT III   8,496,654   “Method and apparatus for fractional skin treatment”   July 30, 2013    
COUNT IV   8,579,896   “Method and system for invasive skin treatment”   November 12, 2013   201080032750
COUNT V   9,108,036   “Method and apparatus for fractional skin treatment”   August 18, 2015    

 

Execution Copy

 

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The Company shall decide post closing, whether or not to sell the Fractora in the territory.

 

Schedule 22.1.3 (including all subsections) − Intellectual Property

 

See description of exclusive distribution agreements in the Territory - Schedule 22.1.1 above.

 

See description of the Syneron Complaint in Schedule 22.1.2 above.

 

 
     
 

 

 

Execution Copy

 

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23.1.3.1

 

A list of Invasix’s Intellectual Property

 

 

 

 

Invasix Ltd. – IP list (product)

 

Product Name   Description
Platforms    
InMode RF platform (AG604881A)   Platform for all RF applicators
Fractora Blue platform (AG601398A)   Platform for all RF applicators
InMode MD platform (AG605893A)   Platform for all RF & IPL applicators (excludes Laser applicator)
InMode platform (AS602099A)   Platform all applicators
     
Applicators    
RF applicators    
Fractora Applicator (AG601261A)   FR energy applicator for skin treatment.
Fractora Forma Applicator (AG603799A)   FR energy applicator for wrinkle treatment
Fractora Plus Applicator (AS601679A)   FR energy applicator for wrinkle treatment, for larger area
     
BodyFX Applicator (AS600874A)   RF energy applicator for reduction, contraction and body shaping
MiniFX Applicator (AG604696A)   RF energy applicator for reduction contraction and body shaping, for smaller area
     
IPL applicators    
Lumecca 515 Applicator (AS601863A)   Intense pulsed light (IPL) applicator for Skin Rejuvenation (facial pigmentation, superficial vessels, skin texture and/or photo-damage), for lighter skin
Lumecca 580 Applicator (AS601864A)   Intense pulsed light (IPL) applicator for Skin Rejuvenation (facial pigmentation, superficial vessels, skin texture and/or photo-damage), for darker skin
Lumecca HR/SR Applicator (AG605876A)   Intense pulsed light (IPL) applicator for hair removal and Skin Rejuvenation,
     
Laser applicator    
Diolaze Applicator (AS602143A)   Laser diode applicator, for hair removal
     
Disposables    
Fractora Tips (disposables)    
20Pin Ablative Fractora 5 pack (AG601259A)   20 pin tips used with the Fractora applicator
24Pin Fractora tip 5 pack (AG602426A)   24 pin tips used with the Fractora applicator
24Pin coated Fractora 5 pack (AG604108A)   24 coated pin tips used with the Fractora applicator
60Pin sublative Fractora 5 pack (AG601674A)   60 sublative pin tips used with the Fractora applicator
60Pin Ablative Fractora 5 pack (AG601260A)   60 ablative pin tips used with the Fractora applicator
126Pin Sublative Fractora 5 pack (AG601819B)   126 sublabive pin tips used with the Fractora applicator
Fractora Initial Tips Kit-Mix (AG604617A)   Initial kit contains a mix to various tips

 

With respect to items above, our files includes DMR (Device Master Record): specifications, drawings, work instructions, training instructions.

 

 
     
   

 

Execution Copy

 

 

 

 

33.2

 

Conversion Formula

 

 

 

 

Exhibit 32.2

 

Conversion Formula

 

In this Exhibit 32.2, the following definitions shall have the following meanings:

 

“GIBF”   Guangzhou Sino-Israel Bio-Industry Investment Fund (LLP)
     
“InMode China”   Guangzhou InMode Medical Technology Ltd.
     
“Invasix”   Invasix Ltd.
     
“Invasix Securities”   The ordinary shares class of securities of Invasix, on a fully diluted and as converted basis, participating in the Party B Exit Event
     
“Offering Document”  

The second draft of the prospectus/registration statement to be filed by Invasix in an IPO process; Or,

 

The substantially advanced draft agreement with the purchaser in the proposed Party B Exit Event.

     
“Valuation Date”  

In an IPO exit event: the date of the Offering Document submission to the relevant Security Exchange authorities.

 

In a Party B Exit Event: the date in which the final agreement draft was executed by the parties.

     
“AAIG”   The aggregate gross amounts extended by GIBF to InMode China (in USD) during the applicable period of time from Closing until the Valuation Date.
     
“CI”   Compounded interest on the AAIG, at an annual rate of 12%, calculated from the date in which each installment out of the AAIG was transferred by GIBF to InMode China until the Valuation Date.
     
“IACV”  

Invasix average (between minimum and maximum valuation) company valuation in USD (fully consolidated, whereby InMode China is deemed fully owned by Invasix), as provided by the Invasix underwriters immediately prior to the Valuation Date in an IPO exit; or

 

In Party B Exit Event: as reflected in the final agreement to be executed by the parties, and subject to any adjustments as agreed by the parties in said agreement.

     
“IH”   GIBF holdings % of Invasix Securities immediately following the conversion.
     
“ICS”   InMode China aggregate gross sales during the full 4 (four) calendar quarters preceding the Valuation Date, as reflected in the applicable audited or reviewed financial statements of InMode China according to the same accounting principles and determinations applied by Invasix.

 

 

 

 

“ISW”   Invasix aggregate consolidated sales worldwide (consolidated to include InMode China sales) during the full 4 (four) calendar quarters preceding the Valuation Date, as reflected in the applicable audited or reviewed consolidated financial statements of Invasix.
     
“GHP”   GIBF holdings percentage in InMode China on the Valuation Date, multiplied by the percentage of the contribution amount actually provided by GIBF as of the Valuation Date out of the full Contribution Amount.

 

Capitalized terms not defined in this Exhibit 32.2 shall have the meaning ascribed to such terms in the JV Agreement.

 

1. In the event that the Party B Exit Event or IPO (as such terms are defined in the JV Agreement), is consummated during the first 5 (five) years from the Closing of the JV Agreement (i.e. prior to or on December 12, 2021), GIBF shall be entitled to participate in the Party B Exit Event or IPO, and to redeem all of its Equity Rights in InMode China for their nominal value, and be issued, at nominal value per share, with such number of Invasix Securities, in accordance with the following conversion formula:

 

IH = (AAIG + CI) / IACV

 

For example:

 

Assuming that on the Valuation Date, the aggregate amounts invested by GIBF in InMode China including compounded interest (AAIG + CI) is US $7,000,000, and the company valuation of Invasix (IACV) is US $200,000,000, then GIBF shall be entitled to participate in the Party B Exit Event, and to redeem its Equity Rights in InMode China for their nominal value, and be issued, at nominal value per share, with such number of Invasix Securities representing 3.5% of the issued and outstanding share capital of Invasix (after the issuance of the Invasix Securities to GIBF) immediately following the conversion.

7,000,000/200,000,000 = 3.5%.

 

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2. In the event that the Party B Exit Event or IPO is consummated at any time following 5 (five) years from the Closing of the JV Agreement (i.e. after December 12, 2021), GIBF shall be entitled to participate in the Party B Exit Event or IPO, and redeem all of its Equity Rights in InMode China for their nominal value, and be issued, at nominal value per share, with such number of Invasix Securities in accordance with the higher from: (i) the conversion formula set forth in Section 1 above (except that the CI shall be at an annual rate of 5%, instead of 12%), and (ii) the following conversion formula:

 

IH = (ICS/ISW) * GHP

 

For example:

Assuming that on the Valuation Date, the ICS equals to US $10,000,000, the ISW equals to US $100,000,000, and GIBF holdings percentage in InMode China (GHP) is 49%, then GIBF shall be entitled to redeem its Equity Rights in InMode China for their nominal value, and be issued, at nominal value per share, with such number of Invasix Securities representing 4.9% of the issued and outstanding share capital of Invasix Securities (after the issuance of the Invasix Securities to GIBF) immediately following the conversion.

(10,000,000/100,000,000) *49% = 4.9%.

 

If, on the Valuation Date, the aggregate amounts invested by GIBF equal to 2/3 of the Contribution Amount, then GIBF shall be entitled to convert its Equity Rights in InMode China into such number of shares representing 3.27% of the issued and outstanding share capital of Invasix Securities (after the issuance of the Invasix Securities to GIBF) immediately following the conversion.

(10,000,000/100,000,000) * 49% * 2/3= 3.27%

 

3. The conversion pursuant to this Exhibit 32.2 shall be deemed as if consummated immediately prior to the Valuation Date subject to (i) the closing of Party B Exit Event or IPO and (ii) the participation by GIBF in the sale of the Invasix Securities in the Party B Exit Event or IPO. In the event that: (a) the Party B Exit Event or IPO is not consummated for any reason whatsoever, or (b) GIBF did not participate in a Party B Exit Event or in an IPO after having notified Invasix that it had elected to convert its holdings in InMode China to Invasix Securities, then the conversion formula shall not be deemed to have been exercised, and GIBF shall be re-issued with Equity Rights in InMode China, in such amount representing the holding percentages that GIBF had prior to the actual conversion and the JV Agreement shall continue to be in full force and effect. It is clarified that GIBF right to participate in an IPO should be subject to Invasix underwriters’ decision and other obligations of Invasix (regulatory or other). In any event, if GIBF is allowed to participate in an IPO, GIBF may be entitled to sell its holdings in Invasix on a pro rata basis to the participation rights of Invasix’ controlling shareholders.

 

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4. In the event that there has been a technical amendment to the issued share capital of Invasix at any time after the exercise of the conversion by GIBF (such as split, bonus shares, subdivision, combination or consolidation of shares), the number of Invasix Securities to be issued to GIBF upon conversion shall be adjusted accordingly.

 

5. Upon conversion and subject to the Closing of the Party B Exit Event or IPO, the JV Agreement shall automatically terminate (provided that the Party B Exit Event or IPO is consummated) and GIBF shall not be entitled to any further rights with respect thereto and according to the Articles of Association of InMode China.

 

The Conversion notice provided by GIBF shall be irrevocable. Invasix undertakes to submit to GIBF, as soon as possible, any and all documents and agreements required in order to effectuate the conversion. Invasixs’ obligation to issue to GIBF the respective number of Invasix Securities shall be subject to GIBF’s timely execution and delivery of all required documents and receipt of any needed approvals for the conversion and the participation in the Party B Exit Event or IPO.

 

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Exhibit 10.9

 

TURN - KEY MANUFACTURING AGREEMENT

 

This Turn - Key Manufacturing Agreement (the “ Agreement ”) is effective as of the 1.4.2011 (the “ Effective Date ”) by and between:

 

INVASIX LTD ., with a principal place of business at Tavor Building, Shaar Yokneam, POB 533, Yokneam 20692, Israel. Hereinafter referred to as “ Customer ”

 

And

 

FLEXTRONICS ISRAEL LTD . with a principal place of business at Industrial Zone Migdal Haemek 23108 P.O.B. 867, Israel. Hereinafter referred to as “ Contractor .”

 

Whereas Customer designs, manufactures and sells the Products as defined in Exhibit A attached hereto, which includes subassemblies components and know- how, that is confidential and proprietary property of Customer;
Whereas Customer desires to buy manufacturing services;
Whereas Contractor is in the business of Turn – Key projects;
Whereas Customer acknowledges that Contractor’s expertise is manufacturing and that Contractor’s responsibility related to the Customer’s Products is limited to this extent;
Whereas Contractor declares that it has all the capabilities to supply manufacturing services for Customer’s Products; and
Whereas Contractor desires to sell and deliver its manufacturing services in accordance with Customer specifications all subject to the terms and conditions contained herein.

 

Now therefore, the parties hereto have agreed and do hereby agree as follows:

 

1. Precedence
1.1 The terms and conditions and appendices herein shall govern all services performed by Contractor pertaining to the subject matter.
1.2 It is the intent of the parties that this Agreement and its appendices represent the entire agreement and prevail over the terms and conditions of any purchase order, acknowledgment form or order instruction.

 

2. Term

This Agreement shall commence on the Effective Date and shall continue for an initial term of year as of the Effective Date. This Agreement shall automatically be renewed for successive one (1) year increments unless either party request in writing, at least ninety (90) days prior to the anniversary date, that this Agreement not to be renewed.

 

3. Scope Of Work

Contractor will, pursuant to the written specifications given by Customer and pre approved by Contractor (“Specifications”), perform manufacturing services on behalf of Customer. These manufacturing services shall include, but not be limited to, labor, materials, testing, packaging and delivery to Customer, all subject to the terms and conditions contained in this Agreement.

 

 

 

 

4. Contractor’s Obligations
4.1 Contractor shall provide Customer with the following services:

-   Material planning

-   Material procurement

-   Incoming Inspection

-   Assembly of printed circuit boards & cables

-   Final assembly & integration of the Product

-   In Circuit test

-   Functional test

-   Packaging and delivery

4.2 Customer’s production facilities

Contractor will be obliged to allocate to Customer, production and storage space as well as trained production and testing personnel as an integral part of this Agreement. Contractor shall apply for and receive the ISO13488 standard for the production facility, by no later than                 . During the term of this Agreement, the manufacturing services provided by the Contractor hereto shall confirm in all material respects with the ISOl3488 standard.

 

5. Customer’s obligations

Customer will provide the following:

-   Technical specifications

-   Standard Operation Procedures

-   Drawings

-   Bill of Materials

-   Approved Vendors list

-   Gerber data, CAD files

-   Quality requirements

-   Technical support, as required

-   Any additional information reasonably requested by Contractor or otherwise required hereunder.

 

6. Material Procurement

The material procurement undertaking, pursuant to this Agreement, will be carried-out by the Contractor.

6.1 Contractor is authorized to purchase materials using standard purchasing practices including, but not limited to acquisition of materials recognizing Economic Order Quantity, ABC buy policy and long lead time components management, in order to meet the requirements of Customer’s orders and forecasts.

 

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6.2 Economic Order Quantity (“EOQ”) for items which are un-returnable to vendor or unusable for other clients of the Contractor must be pre-approved by Customer. For such pre-approved EOQ’s, Customer shall advance to the Contractor sums on account of future deliveries equal to the cost attributed to the quantity ordered exceeding the 3 months forecast.
6.3 Long Lead Items

In order to manage demand fluctuations Contractor shall suggest from time to time a list of LLI’s to be approved by the Customer. Contractor shall maintain in inventory certain quantities of LLI. “LLI” shall mean Long Lead Item materials required in order to complete manufacture and supply of Products. For the avoidance of doubt Customer shall have no additional liability with respect to the holding of LLI other than the liability provided herein below.

The usage of LLI by Contractor for the manufacture of Items shall be by a written order by Customer in accordance with this Agreement, stipulating the quantity Customer wishes Contractor to use. If Contractor holds LLIs based on any written requirement for more than three (3) months, Customer shall be required to purchase such LLIs at their direct costs plus a handling fee of 2% of Product price. The purchase terms of such LLI’s, set forth in Section 8.2 hereof.

6.4 Contractor is responsible for monitoring supplier’s quality, according to the Specifications provided by Customer for all purchased materials.
6.5 In the event of termination of this Agreement or a cancellation of a Purchase Order, and/or discontinuance of a Product, or excess materials created by an Engineering Change, Customer agrees to compensate Contractor for unused material inventory which are affected by such termination, cancellation or discontinuance, as follows:
(i) The cost of material inventory, whether in raw form or work in process, which are not returnable to the vendor without charge (unless the charge was approved by Customer, or usable for other Contractor’s customers, including EOQ of unique parts.
(ii) The cost of materials on order which cannot be cancelled without charge (unless the charge was approved by Customer.
(iii) To the above applicable compensation, the Contractor shall be entitled to a handling fee of 2% of the compensation due. The compensation under this Sub-section shall be the sole compensation due to Contractor with respect to handling the Products/materials.
(v) Payment shall be made to Contractor against delivery of the compensated materials to Customer. The compensation for finished Products is as set out in Section 7.3 below.
6.6 Contractor shall use its commercially reasonable efforts to cancel all applicable materials purchase orders and reduce materials inventory through return for credit programs or allocate materials for alternate programs, if applicable.

Without derogating from the aforesaid, Customer shall pay in advance the same amount it is obligated to pay under this Section 6, on account of such inventory. Such advance shall be non refundable except to the extent such inventory was consumed by Contractor in order to manufacturing Customer’s Products under this Agreement.

 

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7. Forecasts and Purchase Orders
7.1 Customer shall issue to Contractor, on a monthly basis, a six (6) month rolling forecast setting forth projected demand for the Products (the “ Forecast ”).

Contractor shall use all reasonable commercial efforts, including expediting materials and allocating capacity, in order to support Customer’s request for increased production.

7.2 Contractor will supply all orders that do not exceed the forecast at the delivery times set forth in each Purchase Order. In the event Contractor anticipates at any time that it will not deliver Products within the prescribed timetable as set forth in the applicable Purchase Order, Contractor shall promptly so inform Customer by written notice of such delay. Contractor shall submit proposed revisions to the timetable that reflect Contractor’s best estimates of what can realistically be achieved and shall use its best commercial efforts to achieve such timeline, unless otherwise directed by Customer and confirmed by Contractor.
7.3 Purchase Orders. Customer will issue written purchase orders, which specify all Products to be delivered within a minimum three (3) months period commencing on the date of acceptance of the purchase order by Contractor (“ Purchase Order ”). Contractor shall accept or reject (in writing summarizing the rejection causes) each Purchase Order according to its terms (including the delivery date) within five (5) working days of receipt of such order, if an order has not been confirmed within such period it shall be deemed rejected.
7.4 Finished Goods Inventory
7.4.1 In order to manage demand fluctuations, Contractor shall maintain an amount of additional units of each Product as FGI, in a minimum level of two (2) weeks of supply and a maximum of four (4) weeks of supply of each Product set forth in the most recent Customer’s Forecast. “FGI” shall mean rolling finished goods inventory that Contractor shall be obligated to hold in inventory for Customer in addition to any Purchase Order amounts. The actual quantity of FGI required to be held by Contractor will be specified on a monthly basis in a formal document provided by Customer to Contractor for this purpose. For the avoidance of doubt Customer shall have no additional liability with respect to the holding of FGI other than the liability provided in Section 7.4.3 below.
7.4.2 When Customer draws from the FGI, Contractor shall replenish the FGI no later than sixty (60) days from such date that Customer draws from FGI, provided the drawing of FGI shall be by the issuance of a written order by Customer in accordance with this Agreement, stipulating the quantity Customer wishes to withdraw from the FGI.
7.4.3 If Contractor holds any FGI based on any forecast for more than three (3) months from the original delivery date specified in the applicable purchase order, Customer shall be required to purchase any and all such goods from Contractor for 100% of Contract Price of such goods and Section 8.3 below shall not apply.

 

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7.5 Customer tooling, etc.

All Customers’ materials, tooling and equipment furnished to Contractor or paid for by Customer in connection with this Agreement and all paid for Products shall be clearly marked and remain the Customer’s property. Contractor will maintain the tooling as provided in Exhibit B .

 

8. Customer Liability for Forecasts
8.1 Customer’s liability with respect to any and all demand signals provided by Customer, including but not limited to “purchase orders,” “forecasts,” “schedules,” “pick lists,” with respect to any Products manufactured, produced, procured, stored or delivered by Contractor, including, but not limited to, any direct or indirect costs related thereto or related to components, work in progress and/or raw materials shall be limited to the amounts set forth in this Section 8 with respect to finished Products and in Section 6 concerning components, work in progress and/or raw materials.
8.2 In the event that Customer has either cancelled or delayed delivery of a Purchase Order and Customer has not taken delivery of the Products ordered under that Purchase Order within three (3) months from the original delivery date, then; (i) Contractor shall submit a claim for reimbursement for such cancelled or delayed Products within thirty (30) days from the end of such three (3) month period; (ii) Customer shall be liable to pay Contractor 100% of the Contract Price of such cancelled or delayed Products and (iii) Contractor shall hold the cancelled or delayed Products in its inventory and make them available to Customer (upon Customer’s request) for a period of six (6) months from receipt of payment for such Products free of charge. 30 days before the lapse of the 6 month period, the Contractor shall notify the Customer of the upcoming lapse of the term. In the event that Customer, at its sole discretion, decides to repurchase any (or all) of the Products in said Period, and subject to the fulfillment of all Customer’s obligations in this Sections 8.2 (i.e. 100% of the Contract Price has been paid to Contractor), then the price for such repurchase shall be 0% of the Contract Price. Thereafter, the Customer shall pay Contractor all direct costs in connection therewith. Provided Customer hereby authorizes Contractor to transfer such Products to a warehouse operated by Contractor or a third party as instructed by Customer.
8.3 In the event that for any reason whatsoever, Customer has not ordered any Products for a period of three (3) months, then: (i) Contractor shall submit a claim for reimbursement for Products that were forecasted for the upcoming three months in the last Forecast sent three (3) months ago (the “ Last Forecast ”); (ii) Customer shall be liable to pay Contractor: 100% of the Contract Price of the Product s forecasted for days 0-30 in the Last Forecast which were not delivered to Customer; and (iii) Contractor shall hold the Forecasted Products in its inventory and make them available to Customer (upon Customer’s request) for a period of six (6) months of receipt of payment for such Products free of charge. 30 days before the lapse of the 6 month period, the Contractor shall notify the Customer of the upcoming lapse of the term. In the event that Customer at its sole discretion decides to repurchase any (or all) of the Forecasted Products in said Period and subject to the fulfillment of all Customer’s obligations in this Section 8.3 (i.e. 100% of the Contract Price has been paid to Contractor), then the price for such repurchase shall be 0% of the Contract Price. Thereafter, the Customer shall pay Contractor all direct costs in connection therewith. Provided Customer hereby authorizes Contractor to transfer such Products to a warehouse operated by Contractor or a third party as instructed by Customer.

 

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9. Quality
9.1 Contractor shall permit Customer to audit its quality procedures, upon three (3) business day advance written notice to Contractor and shall provide all assistance which is reasonably necessary for Customer to evaluate the quality of the Products.
9.2 Contractor shall maintain quality assurance standards in accordance with ISO 13488, Seller’s Quality Assurance, Control and Inspection shall be in compliance with all material ISO 13488 standards during the Terms of this Agreement.
9.3 If a Product did not pass Customer’s Automatic Test Process then Contractor will perform two rounds of repairs on the Product, if after such two rounds the Product still did not pass the ATP then Contractor will send the Product with a qualified personnel to Customer for repair. If after Customer tried to repair the Product and failed Customer will be obligated to pay for such defected product (if the reason is other than workmanship).

 

10. Express Limited Warranty

For the purpose of this Agreement, “Warranty Period” shall mean twelve (12) months as of the date of delivery to Customer. Contractor represents and warrants that, for the Warranty Period, the Products (i) will be free from defects in workmanship, material (only to the same extent as the original manufacturer of the material warrants the Contractor), and manufacture; (ii) will comply the Specifications IPC610.B standard (in all material respects and unless otherwise was instructed by Customer). Contractor further represents and warrants that the Product will consist of new materials. The warranty provided in this Section shall not apply to (1) Customer’s materials, tooling and equipment (2) Products modified by Customer or any third party without Contractor’s prior written consent, (2) Products installed or operated by Customer or any third party in a manner inconsistent with the Specifications or the terms and conditions of this Agreement, or (3) Products damaged, abused, altered or misused by Customer or any third party, or as the result of fire, casualty, or other external cause (4) defects resulting directly or indirectly, wholly or partially, from Customer’s Specifications or the design of the Products, (5) First articles, prototypes, pre-production units, test units or other similar Products.

Upon any failure of a Product to comply with the above warranty, Contractor’s sole obligation, and Customer’s sole remedy, is for Contractor, at its option, to promptly repair or replace such Product and return it to Customer freight prepaid. Customer shall return Products covered by the warranty freight prepaid after completing a failure report and obtaining a return material authorization number from Contractor to be displayed on the shipping container. Customer shall bear all risks, costs and expenses, associated with Products that have been returned to Contractor for which there is no defect found and/or with Products not covered under the warranty above.

 

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Customer will not pass through to end users or other third parties the warranties made by Contractor under this Agreement. Furthermore, Customer will not make any representations to end users or other third parties on behalf of Contractor, and Customer will expressly indicate that the end users and third parties must look solely to Customer in connection with any problems, warranty claim or other matters concerning the Product.

EXCEPT AS SPECIFICALLY SET FORTH HEREIN, CONTRACTOR MAKES NO OTHER WARRANTIES OR CONDITIONS ON THE PRODUCTS, EXPRESS, IMPLIED, STATUTORY, OR IN ANY OTHER PROVISION OF THIS AGREEMENT OR COMMUNICATION WITH CUSTOMER, AND CONTRACTOR SPECIFICALLY DISCLAIMS ANY IMPLIED WARRANTY OR CONDITION OF MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE.

 

11. Engineering Changes
11.1 Customer may, upon advance written notice to Contractor, submit engineering changes for incorporation into the Products. Contractor will review the engineering change and report to Customer within two (2) working days of any implications of the proposed changes. The report should include all possible implications on materials, delivery schedule, manufacturing process, quality and product cost and shall also quote the Contractors costs for implementing the changes.

Customer and Contractor will agree on all aspects of implications and shall accordingly make revisions in outstanding Purchase Orders – if requested by Customer and subject to Contractor’s consent in writing.

11.2 Contractor shall assure quick implementation of engineering changes.

 

12. Delivery and Inspection, Title and shipping
12.1 Contractor undertakes to report to Customer once (1) a week, or per Customer request, the quantity of Products ready for delivery
12.2 Customer will notify Contractor, from time to time, quantities of Products and destinations to which to ship the Products.
12.3 If the delivery destination is within Israel, excluding port/airport (“ Limited Delivery Territory ”) than the delivery shall be made by Contractor at no additional cost and to such destination of delivery Contractor shall incur insurance transport costs. Upon delivery or the placement of an invoice by Contractor, whichever is earlier, Risk of loss and title will pass to Customer.
12.4 The price for Deliveries to other destinations outside the Limited Delivery Territory, including for export will be agreed by the parties. All risk of loss, responsibility and cost shall be borne by the Customer Ex-Factory.
12.5 To each delivery, Contractor shall include all required documentation (e.g. bill of lading, QA/QC certificate). Upon delivery to Customer, Customer will sign the bill of lading. Such signature shall only be deemed as acknowledgement of receipt of the delivery and not confirmation as to the delivered Products’ condition and quality.

 

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12.6 Subject to the above limitations, the Contractor will ship and deliver the Products according to Customer’s instructions in the best and safest means of transportation, to the extent commercially reasonable.

 

13. Price and Price Reviews
13.1 Pricing conditions for manufacturing services supplied under this Agreement are defined in Appendix C. All prices will be quoted in US Dollars.
13.2 Price Review . Contractor and Customer will meet every three (3) months, during the term of this Agreement to review pricing and determine the actions required by both sides in order to achieve cost reduction. The new prices that will be agreed to and the said new prices will come into effect, will be reflected in the Purchase Orders submitted after such review.
13.3 It is agreed that, for the sake of facilitating uninterrupted manufacturing, Contractor may purchase materials for Customer’s Products at prices higher than those agreed to with the following limitations:
13.3.1 For price change which has a cost impact less than US $200, based on one (1) quarter consumption will not require prior authorization from Customer. Contractor will be obliged to submit comprehensive written report to Customer, subsequent to such event.
13.3.2 For price change which has cost impact greater than US $200, based on one (1) quarter consumption will require prior written authorization from Customer.
13.3.3 Customer shall answer urgent requests for approvals for price change, within three (3) working days.
13.3.4 Maintain Credit Line. Customer agrees to provide all necessary financial information required by Contractor from time to time and as available to Customer in order to make a proper assessment of the creditworthiness of Customer. That includes full annually audited financials statements and, subjected the credit limit analysis request, Quarterly financial statements (P&L, BS and Cash Flow statements). Contractor will, in good faith, review Customer’s creditworthiness periodically and may provide more favorable terms once it feels it is prudent to do so.
13.3.5 Upon Contractor’s request at any time during the term of this Agreement, Customer shall obtain and maintain appropriate securities, such as letter of credit, escrow account, bank guarantees and /or pre-payments in an amount equal to the total value of all risks associated with the performance of any of the services under this Agreement, on an aggregate basis.

 

14. Terms of Payments
14.1 Contractor will invoice Customer per each delivery or as provided in Sections 6 and 8 hereinabove. The invoice shall include all purchase order details. The invoice will be quoted in US Dollars.
14.2 Contractor and Customer agree to terms of payments of current plus thirty (30) days from the date of invoice. Payment shall be affected in US Dollars.

 

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15. Termination
15.1 Termination for cause

If either party fails to meet anyone or more of the terms and conditions as stated in either this Agreement or the Appendices, Contractor and Customer agree to negotiate in good faith to resolve such default. If the defaulting party fails to cure such default or submit an acceptable written plan to resolve such default within thirty (30) days following notice of default, the non-defaulting party shall have the right to terminate this Agreement by furnishing the defaulting party with sixty (60) days written notice of termination.

15.2 Termination without cause

Notwithstanding anything to the contrary stated in this Agreement, either party may terminate this Agreement at any time without cause by giving to the other party, not less than four (4) months written notice.

15.3 A Party may immediately terminate this Agreement should the other party:
(i) become insolvent;
(ii) enter into or filing a petition, arraignment or proceeding seeking an order for relief under the bankruptcy/insolvency laws of its respective jurisdiction;
(iii) enter into a receivership of any of its assets; or
(iv) enter into a dissolution of liquidation of its assets or an assignment for the benefit of its creditors.

 

16. Effect of Termination
16.1 in the case of termination, unless otherwise stipulated and subject to Customer fulfillments of all its payments obligations under this Agreement, Contractor will deliver all Products, materials to Customer and Customer will pay all amounts due under this Agreement, for all Products, materials mentioned on a Purchase Order or Change Order accepted by Contractor before expiration or termination date.
16.2 Except where the termination is a result of Contractor’s material default Customer agrees to compensate Contractor for Products and materials as stipulated in Sections 6 and 8 of this Agreement.
16.3 Each party will promptly return to the other party, all. technical documentation (e.g. drawings, work instructions, data and design sheets) and/or Confidential Documents related to the present Agreement
16.4 Subject to Customer fulfillments of all its obligations under this Agreement, Contractor will return to customer all consigned materials, equipment and tooling stipulated in section 7.5 of this Agreement.

 

17. Dispute Resolutions
17.1 In the spirit of continued cooperation, the parties intend to and hereby establish the following dispute resolution procedure to be utilized in the unlikely event any controversy should arise out of or concerning the performance of this Agreement.
17.2 It is the intent of the parties that any dispute be resolved informally and promptly through good faith negotiations between Contractor and Customer. Either party may initiate negotiation proceedings by written notice to the other party setting forth the particulars of the dispute. The parties agree to meet in good faith to jointly define the scope and method to remedy the dispute. If these proceedings are not productive of a re solution, then senior management of Contractor and Customer are authorized to and will meet personally to confer in a bona fide attempt to resolve the matter.

  

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17.3 Should the foregoing procedure not bring a mutually satisfactory solution within 30 days, each party will be free to proceed according to applicable law.

 

18. Limitation of Liability
18.1 Customer shall defend, indemnify and hold harmless Contractor from all claims, liabilities, costs, damages, judgments and attorney’s fees resulting from or arising out of any alleged and/or actual infringement or other violation of any patents, patent rights, trademarks, trademark rights, trade names, trade name rights, copyrights, trade secrets, proprietary rights and processes or other such rights elated to the Product or claims relating to Customer’s instructions, tooling, specifications and designs (“ Claims ”) provided that: (i) Contractor will provide the Customer with prompt written notice of any Claim no later than three (3) business days following receipt of notice by Contractor; (ii) Contractor will grant Customer sole control of the defense and settlement of Claims, taking into account any reasonable request of Contractor; and (iii) Contractor will provide Customer with reasonable assistance, at Customer’s sole expense. Customer assumes no liability for any Claims made by any third party to the extent that such Claims result from the use of specifications other than the Specification, unaltered by Contractor or anyone on its behalf. If such Claim is brought, or Customer in good faith determines a Claim is likely to be made, Customer shall notify Contractor and either: (1) procure for Contractor the right to continue to perform this Agreement; (2) modify the Specification so that there will no longer be an infringement or misappropriation or (3) terminate this Agreement and pay Contractor the consideration due under this Agreement for all services performed until the date of termination, including all payments set forth in Sections 6 and 8.
18.2 Contractor shall defend, indemnify and hold harmless Customer from all claims, liabilities, costs, damages, judgments and attorney’s fees resulting from or arising out of any alleged and/or actual infringement or other violation of any patents, patent rights, trademarks, trademark rights, trade names, trade name rights, copyrights, trade secrets, proprietary rights and processes or other such rights as a result of the manufacturing methods employed by Contractor but excluding Claims as defined above) (“ Manufacturing Claims ”) provided that: (i) Customer will provide Contractor with prompt written notice of any Manufacturing Claim no later than three (3) business days following receipt of notice by Customer; (ii) Customer will grant Contractor sole control of the defense and settlement of Manufacturing Claims, taking into account any reasonable request of Customer; and (iii) Customer will provide Contractor with reasonable assistance, at Contractor sole expense. If a Manufacturing Claim is brought, or Contractor in good faith determines a Manufacturing Claim is likely to be made, Contractor shall notify Customer and either: (1) procure for Customer the right to continue to perform this Agreement; (2) modify its manufacturing methods so that there will no longer be an infringement or misappropriation or (3) terminate this Agreement.

 

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18.3 THE FOREGOING STATES THE ENTIRE LIABILITY OF THE PARTIES TO EACH OTHER CONCERNING INFRINGEMENT OF PATENT, COPYRIGHT, TRADE SECRET OR OTHER INTELLECTUAL PROPERTY RIGHTS.
18.4 No Other Liability . IN NO EVENT SHALL EITHER PARTY BE LIABLE TO THE OTHER FOR ANY INCIDENTAL, CONSEQUENTIAL, SPECIAL OR PUNITIVE DAMAGES OF ANY KIND OR NATURE ARISING OUT OF THIS AGREEMENT OR THE SALE OF PRODUCTS, WHETHER SUCH LIABILITY IS ASSERTED ON THE BASIS OF CONTRACT, TORT (INCLUDING THE POSSIBILITY OF NEGLIGENCE OR STRICT LIABILITY), OR OTHERWISE, EVEN IF THE PARTY HAS BEEN WARNED OF THE POSSIBILITY OF ANY SUCH LOSS OR DAMAGE. AND EVEN IF ANY OF THE LIMITED REMEDIES IN THIS AGREEMENT FAIL OF THEIR ESSENTIAL PURPOSE. IN ADDITION, NOTWITHSTANDING ANYTHING TO THE CONTRARY HEREIN OR OTHERWISE, THE PARTIES ACKNOWLEDGE THAT AS AN ELECTRONIC MANUFACTURING SERVICES PROVIDER WORKING ON A COST PLUS BASIS SUPPLIER MUST LIMIT ITS LIABILITY IN CONNECTION HEREWITH AND THEREFORE, CONTRACTOR’S LIABILITY IS FURTHER LIMITED IN ANY EVENT, UNDER ANY LAW, RULE OR REGULATION, TO ANY AMOUNT IT ACTUALLY RECEIVED IN CONSIDERATION OF THE MANUFACTURING SUBJECT MATTER OF THE RESPECTIVE CLAIM OR DEMAND BY CUSTOMER OR ANY THIRD PARTY.

 

19. Confidentiality
Customer’s product and designs contain certain elements that are proprietary to Customer. Furthermore, in the course of this agreement, technical and commercial information of the Customer may be revealed or become known to the Contractor. Contractor shall keep in confidence all information relating to the foregoing, shall not use any part of it for any purpose except the performance of this Agreement or in connection therewith, and shall not enable any third party to use ft without the prior written consent of Customer or unless such information becomes public domain. Contractor shall ensure that all employees who directly participate in any of the services performed under this Agreement and may accordingly receive certain confidential information of the Customer are subject to similar non-disclosure and non-use undertakings and are made aware of the proprietary and confidential nature of the information.

The provisions of this Section 19 shall survive termination or expiration of the Agreement.

 

20. Non-Competition
20.1 The Contractor and the Customer will not be allowed to employ employees of the other party, directly or indirectly, for one (1) year from the date the employee has ceased to be employed by the other party. The above mentioned restriction may be waived by either party provided that it is done by a written and specific consent.

 

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20.2 During the Term, of this Agreement and for an additional period of two (2) years from the date of termination of this Agreement, the Contractor undertakes not to develop on its own account any Product.

 

21. General
21.1 Force Majeur. Neither party shall be liable for any failure or delay in its performance under this Agreement due to acts of God, acts of civil or military authority, fires, floods, earthquakes, riots, wars, sabotage, labor disputes, material unavailability due to unwarranted production stoppage by supplier or any other cause beyond the reasonable control of the delayed party provided that the delayed party, (i) gives the other party written notice of such cause, and (ii) uses its reasonable efforts to remedy such delay in its performance.
22.2 Severability. If any provision of this Agreement is held by a court of competent jurisdiction to be unenforceable, such provision shall be deemed null and void, and the remainder of the Agreement shall continue to be in full force and effect, while the parties shall negotiate in good faith to replace the provision with another enforceable one reflecting as closely as possible the parties initial intention.
22.3 Relationship of the Parties. Each of the parties shall at all times during the term of this Agreement act as, and shall represent itself to be, an independent contractor. Neither Party shall have any right or authority to assume or create any obligations or to make any representations or warranties on behalf of the other parry whether express or implied, or to bind the other party in a respect whatsoever.
22.4 Governing Law. The construction, interpretation and performance of this Agreement and all transactions under it shall be governed by the law of the State of Israel, without giving effect to choice of law rules, and both Parties consent to jurisdiction by the courts of the City of Haifa.
22.5 Choice of Language. The original of this Agreement has been written in English. Any notices provided by any party as required by this Agreement shall be written in the English language.
22.6 Notifications. Any and all notices and other communications whatsoever under this Agreement shall be in writing, sent by registered mail or by, email or facsimile to the address set forth above. Notices sent via registered mail shall be deemed to have been delivered within 3 business days after the date posted. With regards to the normal course of business, notices sent via email or facsimile shall be deemed to have been received 1 business day following the date of transmission.
22.7 Entire Agreement. No amendment of this Agreement will be valid unless made in writing signed by a duly authorized representative of both parties. No provision of this Agreement will be deemed waived and breach or default excused unless the waiver or excuse is in writing and signed by the party issuing it. The terms and conditions contained in this Agreement terminate and supersede all prior oral or written understanding between the parties and shall constitute the entire agreement between them concerning the subject matter of this Agreement.
22.8 This Agreement may be executed in one or more counterparts, each of which will be deemed the original, but all of which will constitute but one and the same document.

 

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The parties agree that this Agreement and its appendices may not be modified except in writing, signed by both parties.

22.9 Set-off. Amounts due hereunder may not be set off except with mutual prior written consent.
22.10 Insurance. Customer specifically agrees to maintain insurance coverage for any finished Products or materials which passes to Customer pursuant to this Agreement and which is stored on the premises of Contractor.
22.11 Successors, Assignment. This Agreement shall be binding upon and inure to the benefit of the Parties hereto and their respective permitted successors, permitted assigns and legal representatives. Neither Party shall have the right to assign or otherwise transfer its rights or obligations under this Agreement except with the prior written consent of the other Party, not to be unreasonably withheld or delayed. Notwithstanding the foregoing, Contractor shall be entitled to assign its rights to be paid hereunder to banks or first tier financial institutions.

 

In Witness whereof, the Parties have caused this Agreement to be duly executed for and on behalf of:

  

Flextronics (Israel) Ltd.     INVASIX LTD 514073618
   
Contractor   Customer
           
Date:   Date:
         
Name:   Name: MOSHE MIZRAHY
         
Title:   Title: CEO
         
Signature:   Signature: /s/ Moshe Mizrahy

   

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Exhibit 10.10

 

TUNRKEY MANUFACTURING AGREEMENT

 

This agreement is effective as of the November 7, 2013 (the Effective Date) by and between:

 

INVASIX Ltd., with a principal place of business at Tavor building, POB 533, Yokneam, Israel, Hereinafter referred to as “Customer”

 

And

 

STI Laser Industries Ltd., with a principal place of business at Industrial Zone Or Aqiva 3065001 P.O.B. 34, Israel

 

Hereinafter referred to as “Contractor”

 

Whereas Customer designs, manufactures and sells a medical device for use in the area of liposuction which includes subassemblies, components and know-how that is confidential and proprietary property of Customer; and

 

Whereas Customer desires to buy manufacturing services; and

 

Whereas Contractor is in the business of manufacturing and assemblies; and

 

Whereas Contractor declares that it has an approved enterprise status for the manufacturing and assembly of medical devices, and it has no knowledge of circumstances that should bring to the termination of such status; and

 

Whereas Contractor declares that it has all the capabilities and equipment to supply manufacturing services for Customer’s Products stipulated in Appendix A attached hereto; and

 

Whereas Contractor desires to supply its manufacturing services to Customer and use in accordance with Customer specifications and standards as well as other general commercial practices.

 

Now therefore, the Parties hereto have agreed and do hereby agree as follows:

 

1. Precedence

 

1.1 The terms and conditions and appendices herein shall govern all services performed by Contractor pertaining to the subject matter.

 

1.2 It is the intent of the Parties that this Agreement and its appendices represent the entire agreement and prevail over the terms and conditions of any purchase order, acknowledgment form or order instruction.

 

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2. Term

 

This Agreement shall commence on the Effective Date and shall continue for an initial term until December 2014. This Agreement shall automatically be renewed for successive one (1) year increments unless either Party requests in writing, at least ninety (90) days prior to the anniversary date, that this Agreement not to be renewed.

 

3. Scope of Work

 

Contractor will pursuant to the specifications given by Customer, perform manufacturing services on behalf of Customer on a turnkey basis. These manufacturing services shall include, but not be limited to, labor, materials, testing, packaging and delivery to Customer.

 

4. Contractor’s Obligations

 

4.1 Except as otherwise expressly provided for in this Agreement, Contractor shall furnish all of the personnel, equipment (except for dedicated equipment as listed in Clause 5 below) and any other items that are necessary or appropriate to perform the Work, and will bear all costs and expenses involved in the maintenance, repair and operation of the Equipment and the performance of the Work. The Personnel shall be trained and efficient and qualified to perform the Work and the Equipment shall be adequate, serviceable and maintained in first-class operating condition, to the extent applicable. Contractor shall also, as part of the Work, apply for and obtain all governmental permits and approvals required for the Work.

 

4.2 Contractor shall provide Customer among other with the following services, based on Customers written supplied procedures:

 

-   Material planning

 

-   Material procurement

 

-   Manufacturing quality records

 

-   Final assembly and integration of the Product

 

-   In circuit test

 

-   Functional test

 

-   Packaging and delivery.

 

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4.3 Contractor’s production facilities

 

Contractor will be obliged to allocate to Customer, production and storage space as well as trained production and testing personnel as an integral part of this Agreement.

 

Contractor shall have the EN IS013485 standard for the production facility. During the term of this agreement, the manufacturing services provided by the Contractor hereto shall confirm in all respects with the EN ISO13485 standard.

 

5. Customer’s obligations

 

Customer will provide the following:

 

-  Dedicated Equipment according to the Customer’s assembly instructions (Annex I)

 

Whereas the Contractor shall be responsible for the routine maintenance of Customer’s dedicated equipment (as listed in Annex I), the Customer shall bear all expenses required for annual calibration on a cost + 20% basis.

 

All necessary equipment validations (related to Dedicated Equipment) shall be solely under Customer’s responsibility. Contractor will support such activities as may be requested by Customer but Customer shall bear the responsibility and all related expenses.

 

-  Technical specifications

 

-  Standard Operation Procedures

 

-  Drawings

 

-  Bill of Materials

 

-  Approved Vendors list

 

-  Gerber data, CAD files

 

-  Quality requirements

 

-  All external laboratory tests related to product/process validation shall be carried out by the Customer at his own responsibility. In cases where the Contractor shall be requested to manage such external tests, the Customer shall bear all expenses based on cost + 20%.

 

-  Technical support, as required.

 

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6. Material Procurement

 

The material procurement undertaking, pursuant to this Agreement, will be carried-out by the Contractor. The Contractor carries full responsibility to the material procurement. The Customer will advance 50% of the total value of the manufacturing of the first 2000 units (according to an average price of US$70 per unit) from the Effective Day to finance material procurement.

 

6.1 Contractor is authorized to purchase materials using standard purchasing practices including, but not limited to acquisition of materials recognizing Economic Order Quantity, HSN buy policy and long lead time components management, in order to meet the requirements of Customer’s orders and forecasts.

 

6.2 Economic Order Quantity (“EOQ”) for items which are un-returnable to vendor or unusable for other clients of the Contractor must be pre-approved by Customer. For such pre-approved EOQ’s, Customer shall advance to the Contractor sums on account of future deliveries equal to 125% of the cost attributed to the quantity ordered’ exceeding the 3 months forecast and FGI’s finish goods inventory.

 

6.3 Long Lead Items

 

In order to manage demand fluctuations Contractor shall suggest from time to time a list of LLI’s to be approved by the Customer, based on Customer’s forecast submitted in writing. Contractor shall maintain in inventory certain quantities of LLI. “LLI” shall mean Long Lead Item materials required in order to complete manufacture and supply of Products. For the avoidance of doubt Customer shall have no additional liability with respect to the holding of LLI other than the liability provided herein below.

 

The usage of LLI by Contractor for the manufacture of Products shall be by a written order by Customer in accordance with this Agreement, stipulating the quantity Customer wishes Contractor to use. If Contractor holds LLIs based on any written requirement for more than six (6) months after the last shipment of any Product to Customer, Customer shall be required to purchase such LLIs at 125% of part cost (in case no work done). The purchase terms of such LLI’s, are similar to those set forth in Section 8.2 hereof.

 

6.4 Contractor is responsible for monitoring suppliers’ quality according to the specifications provided by Customer for all purchased materials.

 

6.5 Subject to section 15 hereto, in the event of termination of this Agreement or a cancellation of a Purchase Order, and/or discontinuance of a Product, or excess materials created by an Engineering Change, Customer agrees to compensate Contractor for unused material inventory which are affected by such termination, cancellation or discontinuance, as follows:

 

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(i) The cost+25% of material inventory, whether in raw form or work in process, which are not returnable to the vendor or usable for other Contractor’s customers, including economic order quantities of unique parts.

 

(ii) The cost+25% of materials on order which cannot be cancelled.

 

(iii) Payment shall be made to Contractor against delivery of the compensated materials to Customer. The above compensation shall be the sole compensation due to Contractor as a result thereof. The compensation for finished Products is as set out in Section 8.2 below.

 

6.6 Contractor shall undertake all possible efforts to cancel all applicable materials purchase orders and reduce materials inventory through return for credit programs or allocate materials for alternate programs, if applicable.

 

6.7 Notwithstanding anything to the contrary herein customer shall be initial whenever it is obligated to pay for inventory to contractor, according to part 6 to make an advance in the same amount, on account of such inventory with advanced shell be nonrefundable except to extend to such inventory is consume in manufacturing of products for customer here after.

 

7. Forecasts

 

7.1 Customer shall issue to Contractor, on a monthly basis, a five (5) month rolling forecast setting forth projected demand for Product Products. In the event that the forecast will be delivered after the 15th day of the calendar month, then Customer will provide Contractor with a six (6) month rolling forecast (the “Forecast”).

 

Contractor shall undertake all reasonable efforts, including expediting materials and allocating capacity, in order to support Customer’s request for increased production.

 

7.2 Contractor will supply all orders that do not exceed the forecast at the delivery times set forth in each purchase order. Late deliveries will carry (without prejudice) a late delivery charge at the rate of 0.25% per week for the first 14 days, 0.5% for per week thereafter and not more than 2.5%, to be deducted from the consideration due to the Contractor for labor and mark-ups. To dispel any doubt late deliveries will carry a late delivery charge only if the cause of such late deliveries is due to Contractor negligence.

 

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7.4 Customer tooling, etc.

 

All Customers’ materials, tooling and equipment furnished to Contractor or paid for by Customer in connection with this Agreement and all paid for Products shall:

 

(i) Be clearly marked and remain the Customer’s property.

 

(ii) Be kept free of liens and encumbrances.

 

(iii) Contractor is responsible for the maintenance of the tooling and equipment.

 

8. Customer Liability for Forecasts

 

8.1 Customer’s liability with respect to any and all demand signals provided by Customer, including but not limited to “purchase orders” “forecasts” “schedules” “pick lists” with respect to any Products manufactured, produced, procured, stored or delivered by Contractor, including, but not limited to, any direct or indirect costs related thereto or related to components, work in progress and/or raw materials shall be limited to the amounts set forth in this Section 8 with respect to finished Products and in Section 6 concerning components, work in progress and/or raw materials.

 

9. Quality

 

9.1 Contractor shall permit Customer to audit its quality procedures, upon three (3) working days advance notice to Contractor and shall provide all assistance which is reasonably necessary for Customer to evaluate the quality of the Products.

 

9.2 Contractor shall maintain quality assurance standards in accordance with EN ISO 13488. Contractor’s Quality Assurance, Control and Inspection shall be in full compliance with EN ISO 13485 standards during the Terms of this Agreement.

 

9.3 If a product did not pass Customer’s Test Process then Contractor will perform two rounds of repairs on the Product, if after such two rounds the Product still did not pass the ATP then Contractor will send the Product with a qualified personnel to Customer for repair.

 

9.4 In case of vigilance and recall STI will allow audits of Notified Body when deemed necessary.

 

9.5 Contractor shall establish internal instruction / procedures that conform to Customer Quality System.

 

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10. Warranty

 

For the purpose of this Agreement, “Warranty Period” shall mean twelve (12) months as of the date of delivery to Customer. Contractor represents and warrants that, for the Warranty Period, the Products (i) will be free from defects in workmanship, material (to the same extent as the original manufacturer of the material warrants the Contractor), and manufacture; (ii) will comply with the requirements of this Agreement, including all Specifications; and (iii) all services performed in connection with this Agreement will be performed in a competent, professional and workmanlike manner, free from defects. Contractor further represents and warrants that the Products will consist of new (not used or recycled) material, and the warranty pro vide d in this Section shall not apply to any Products that are (1) modified by Customer or any third party without Contractor’s written consent, (2) installed or operated by Customer or any third party in a manner inconsistent with the Specifications or the terms and conditions of this Agreement, or (3) damaged as the result of any negligence or misuse by Customer or any third party, or as the result of fire, casualty, or other external cause.

 

11. Engineering Changes

 

11.1 Customer may, upon advance written notice to Contractor, submit engineering changes for incorporation into the Products. Contractor will make all efforts to review the engineering change and report to Customer within seven (7) working days of any implications of the proposed changes. The report should include all possible implications on materials, delivery schedule, manufacturing process, quality and product cost and shall also quote the Contractors costs for implementing the changes.

 

Customer and Contractor will agree on all aspects of implications and shall accordingly make revisions in outstanding Purchase Orders - if requested by Customer.

 

11.2 Contractor shall undertake all efforts to assure quick implementation of engineering changes.

 

12. Delivery and Inspection. Title and Shipping

 

12.1 Contractor undertakes to report to Customer once (1) a week, or per Customer request, the quantity of Products ready for delivery.

 

13. Price and Price Reviews

 

13.1 Pricing conditions for manufacturing services supplied under this Agreement are defined in Appendix B. All prices will be quoted in US Dollars.

 

13.2 Price Review : Contractor and Customer will meet every three (3) months, during the term of this Agreement to review pricing and determine the actions required by both sides in order to achieve cost reduction. The new prices that will be agreed to and the said new prices that will come into effect will be reflected in the Purchase Orders submitted after such review.

 

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13.3 It is agreed that, for the sake of facilitating uninterrupted manufacturing, Contractor may purchase materials for Customer’s products at prices higher than those agreed to with the following limitations:

 

13.3.1. For price change which has a cost impact less than US$200, based on one (1) quarter consumption will not require prior authorization from Customer. Contractor will be obliged to submit comprehensive written report to Customer, subsequent to such event.

 

13.3.2 For price change which has cost impact greater than US$200, based on one (1) quarter consumption will require prior written authorization from Customer.

 

13.3.3 Customer shall answer urgent requests for approvals for price change, within three (3) working days.

 

14. Terms of Payments

 

14.1 Contractor will invoice Customer per each delivery. The invoice shall include all purchase order details. The invoice will be quoted in US Dollars. Total invoice amount will be converted to NIS according to official exchange rate published by official authority in Israel pursuant to clause 14.3.

 

Each invoice will be added by official VAT rate according to tax laws of state of Israel.

 

14.2 Contractor and Customer agree to terms of payments of current plus thirty (30) days from the date of invoice.

 

14.3 Prices will be in US$, in any event, the exchange rate would be not less than 3.8 shekels to one US$ for 50% of the total Invoice, whereas the remaining 50% will be based on published official representative exchange rate.

 

14.4 The Customer shall forward to the Contractor a lump sum as an advanced payment equivalent to 50% of the payment due for the first 2000 units for financing initial raw material purchasing. In case of increasing purchase orders the customer will pay advance payment of 50% from total price of increased items for three (3) months.

 

14.5 Delay of payment to Contractor will bear interest according Bank Hapoalim published rate of annual exceptional interest.

 

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14.6 Delay of payment for more than thirty (30) days will be considered breach of Agreement and cause for Termination.

 

15. Termination

 

15.1 Termination for cause

 

If either Party fails to meet any one or more of the terms and conditions as stated in either this Agreement or the Appendices, Contractor and Customer agree to negotiate in good faith to resolve such default. If the defaulting Party fails to cure such default or submit an acceptable written plan to resolve such default within thirty (30) days following notice of default, the non-defaulting Party shall have the right to terminate this Agreement by furnishing the defaulting Party with sixty (60) days written notice of termination.

 

15.2 Termination without cause

 

Notwithstanding anything to the contrary stated in this Agreement, either Party may terminate this Agreement at any time without cause by giving to the other party, not less than four (4) months written notice.

 

15.3 A Party may immediately terminate this Agreement should the other party:

 

(i) become insolvent;

 

(ii) enter into or filing a petition, arraignment or proceeding seeking an order for relief under the bankruptcy/insolvency laws of its respective jurisdiction; (iii) enter into a receivership of any of its assets; or, (iv) enter into a dissolution of liquidation of its assets or an assignment for the benefit of its creditors.

 

16. Effect of Termination

 

16.1 In the case of termination and unless otherwise stipulated, Contractor will deliver all services and/or deliverables and Customer will pay in advance and prior to delivery for all items mentioned on a Purchase Order or Change Order accepted by Contractor before expiration or Termination date.

 

16.2 Except where the termination is a result of Contractor’s default, Customer agrees to compensate Contractor for Products and materials as stipulated in Sections 6 and 8 of this Agreement.

 

16.3 Each Party will promptly return to the other Party, all technical documentation (e.g. drawings, work instructions, data and design sheets) and/or Confidential Documents related to the present Agreement.

 

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16.4 Contractor will return to customer all consigned materials, equipment and tooling stipulated in section 7.4 of this Agreement.

 

17. Dispute Resolutions

 

17.1 In the spirit of continued cooperation, the Parties intend to and hereby establish the following dispute resolution procedure to be utilized in the unlikely event any controversy should arise out of or concerning the performance of this Agreement.

 

17.2 It is the intent of the Parties that any dispute be resolved informally and promptly through good faith negotiations between Contractor and Customer. Either Party may initiate negotiation proceedings by written notice to the other Party setting forth the particulars of the dispute. The parties agree to meet in good faith to jointly define the scope and method to remedy the dispute, If these proceedings are not productive of a resolution, then senior management of Contractor and Customer are authorized to and will meet personally to confer in a bona fide attempt to resolve the matter.

 

17.3 Should the foregoing procedure not bring a mutually satisfactory solution within thirty (30) days, each Party will be free to proceed according to applicable law.

 

18. Limitation of Liability

 

18.1 Neither Party shall be liable to the other for any indirect, incidental, special or consequential damages resulting from this Agreement, including but not limited to loss of profit, loss of production loss of contracts, even if either party or an authorized representative has been advised of the possibility of such damages.

 

18.2 Each Party (“Defaulting Party”) agrees to protect, defend, indemnify and hold harmless the other Party (“Innocent Party”) from all sums, costs, expenses and reasonable attorney’s fees which the Innocent Party may incur or actually be obligated to pay as a result of any or all claims, demands, causes of action or final judgments in favor of any third person that relate to or arise from (i) a breach of the obligations of the Defaulting Party as set forth herein, or (ii) a tort by the Defaulting Party.

 

The Innocent Party undertakes to: (i) give the Defaulting Party prompt notice of any such claims, (ii) render reasonable assistance to the Defaulting Party thereon, and (iii) permit the Defaulting Party to direct the defense of the settlement of such claims, provided, that the Defaulting Party will enable the Innocent Party to be present in meetings with legal counsel to the defense and court hearings, Settlement of claims outside of court will require the approval of the Innocent Party unless as part of the settlement, a full waver is made in favor of such Innocent Party.

 

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19. Patents Copyrights and Trademarks Indemnity

 

19.1 As part of the general indemnification set forth in Section 18.2 above, each Defaulting Party shall defend, indemnify and hold harmless the Innocent Party from any claims by a third party of infringement of intellectual properties resulting from the acts of the indemnifying party pursuant to this Agreement.

 

19.2 Customer’s product and designs contain certain elements that are proprietary to Customer. Furthermore, in the course of this agreement, technical and commercial information of the Customer may be revealed or become known to the Contractor. Contractor shall keep in confidence all information relating to the foregoing, shall not use any part of it for any purpose except the performance of this Agreement and shall not enable any third party to use it, unless such information becomes public domain through no fault of the Contractor. Contractor shall ensure that all employees privy to such proprietary and confidential information of the Customer are subject to similar non-disclosure and non-use undertakings and are made aware of the proprietary and confidential nature of the information.

 

The provisions of this clause 19.2 shall survive termination or expiration of the Agreement.

 

20. Non-competition

 

20.1 The Contractor and the Customer will not be allowed to employ employees of the other Party, directly or indirectly, for one (1) year from the date the employee has ceased to be employed by the other Party. The above mentioned restriction may be waived by either Parties provided that it is done by a written and specific consent.

 

20.2 During the Term of this Agreement and for an additional period of two (2) years from the date of termination of this Agreement, the Contractor undertakes not to produce on its own account and/or render manufacturing services to another customer who’s equipment is in the field of non-invasive devises using light or radio frequency energy for the medical-aesthetic market.

 

Turnkey Agreement November 2013

Page 11

 

 

21. General

 

21.1 Force Majeure . Neither Party shall be liable for any failure or delay in its performance under this Agreement due to acts of God, acts of civil or military authority, fires, floods, earthquakes, riots, wars, sabotage, labor disputes, material unavailability due to unwarranted production stoppage by supplier or any other cause beyond the reasonable control of the delayed party provided that the delayed Party, (i) gives the other Party written notice of such cause, and (ii) uses its reasonable efforts to remedy such delay in its performance.

 

22.2 Severability . If any provision of this Agreement is held by a court of competent jurisdiction to be unenforceable, such provision shall be deemed null and void, and the remainder of the Agreement shall continue to be in full force and effect, while the Parties shall negotiate in good faith to replace the provision with another enforceable one reflecting as closely as possible the Parties initial intention.

 

22.3 Relationship of the Parties . Each of the Parties shall at all times during the term of this Agreement act as, and shall represent itself to be, an independent contractor. Neither Party shall have any right or authority to assume or create any obligations or to make any representations or warranties on behalf of the other Party whether express or implied, or to bind the other party in any respect whatsoever.

 

22.4 Governing Law . The construction, interpretation and performance of this Agreement and all transactions under it shall be governed by the law of the State of Israel, and both Parties consent to jurisdiction by the courts of the City of Haifa.

 

22.5 Choice of Language . The original of this Agreement has been written in English. Any notices provided by any Party as required by this Agreement shall be written in the English language.

 

22.6 Notifications . Any and all notices and other communications whatsoever under this Agreement shall be in writing, sent by registered mail or by email or facsimile to the address set forth above. Notices sent via registered mail shall be deemed to have been delivered within three (3) business days after the date posted. With regards to the normal course of business, notices sent via email or facsimile shall be deemed to have been received one (1) business day following the date of transmission.

 

22.7 Entire Agreement . No amendment of this Agreement will be valid unless made in writing signed by a duly authorized representative of both Parties. No provision of this Agreement will be deemed waived and breach or default excused unless the waiver or excuse is in writing and signed by the Party issuing it. The terms and conditions contained in this Agreement terminate and supersede all prior oral or written understanding between the Parties and shall constitute the entire agreement between them concerning the subject matter of this Agreement.

 

Turnkey Agreement November 2013

Page 12

 

 

22.8 This Agreement may be executed in one or more counterparts each of which will be deemed the original, but all of which will constitute but one and the same document. The Parties agree that this Agreement and its appendices may not be modified except in writing, signed by both Parties.

 

In Witness whereof, the Parties have caused this Agreement to be duly executed for and on behalf of:

 

Contractor:   Customer:
           
Date: 7/11/13   Date: 7/3/13
         
Name: TOVY SIVAN   Name: MOSHE MIZRAHY
         
Title: CEO   Title: CEO
         
Signature: /s/ Tovy Sivan   Signature: /s/ Moshe Mizrahy

 

Turnkey Agreement November 2013

Page 13

 

 

Exhibit 10.11

 

OFFICES LEASE AGREEMENT

 

November 2015 Version

 

InMode Ltd   Sha’ar Yokneam
514073618   Limited Partnership
[Signature]   [Signature]

 

 

TABLE OF CONTENTS

 

Chapter   Description   Page
1.   The Preamble And Appendices   4
2.   Definitions   5
3.   The Lease Transaction   9
4.   The Parties Declarations   9
5.   The Area Of The Premises   10
6.   The Purpose Of The Lease   11
7.   The Lease Period   13
8.   Rent   16
9.   Value Added Tax   18
10.   Additional Payments   19
11.   Cancelled   22
12.   Construction Works In The Complex And In The Premises   22
13.   Deliver Of Possession And Delivery Protocol   28
14.   The Business Activity In The Complex And In The Premises   30
15.   Managing The Complex   32
16.   Advertising   34
17.   Parking Lots And Parking Fee   34
18.   Liability In Torts And Indemnification   36
19.   Insurance   38
20.   Permits   46
21.   Maintaining And Managing The Premises   48
22.   Additions And Changes   51
23.   Conveying Rights   52
24.   Relief And Remedies   56
25.   Vacating The Premises   61
26.   Securities   64
27.   No Tenant Protection Rights   68
28.   Crediting Payments And No Right To Set Off   69
29.   Force Majeure   70
30.   Performing Undertaking Instead Of Other Party   70
31.   Building On The Land   71
32.   Jurisdiction   72
33.   Miscellaneous   72

   

InMode Ltd   Sha’ar Yokneam
514073618   Limited Partnership
[Signature] 2   [Signature]

 

 

UNPROTECTED LEASE CONTRACT

Executed and Signed In Herzliya on __ of February, 2018

 

By

 

  Sha’ar Yokneam,
  Registered Limited Partnership Number 550014666
  “Ofer Sha’ar Yokneam”, Hakidma 28, Yokneam
   
  (Hereinafter: "The Landlord")
  Of 1 Abba Even Blvd.  Herzliya

 

Of the First Part;

 

And Between

 

  InMode Ltd. Private Company 51-407361-8
   
  (Hereinafter: “ The Tenant” )
  (After receiving possession the Tenant’s address will also be the premises in the complex)

 

Of The Second Part ;

 

Whereas The Landlord is the owner of the rights in the complex as defined in Appendix A to this contract and which includes, inter alia , the premises as defined below;
   
And Whereas The Tenant is interested in leasing the premises from the Landlord pursuant to an unprotected lease and to sign, inter alia , the management agreement with the Management Company and the Appendices to this contract, all subject to and in accordance with all the provisions in this contract;

 

InMode Ltd   Sha’ar Yokneam
514073618   Limited Partnership
[Signature] 3   [Signature]

 

 

And Whereas The parties wish to define, organize and incorporate in writing their rights and obligations in connection with leasing the premises, all as detailed in this lease contract below;

 

Therefore, It Is Agreed, Declared And Stipulated Between The Parties As Follows

 

 

1. PREAMBLE AND APPENDICES
   
  The preamble to this contract, the declarations contained herein and the Appendices to this contract, constitute an integral part of the body of the contract.

 

 

  Appendices    
  Appendix A - Completions and Special Terms Appendix
  Appendix B - The blueprint of the Contract and its Surroundings
  Appendix C - Rules to provide electricity
  Appendix D - The Management Agreement
  Appendix E - Bylaws
  Appendix F - Personal Guarantee
  Appendix G - Bank Guarantee
  Appendix H - Promissory Note
  Appendix I1 - Format of the Confirmation pertaining to the Tenant’s works insurance policies
  Appendix I2 - Format of the Tenant’s Permanent Insurance Policies
  Appendix J - Format of the Authorization to Charge Account.
  Appendix K - Format of the Storage Spaces Lease Agreement.
  Appendix L - Format of the Tenant’s Works

 

InMode Ltd   Sha’ar Yokneam
514073618   Limited Partnership
[Signature] 4   [Signature]

 

 

2. DEFINITIONS
   
  In this contract the phrases below will assume the interpretation and meaning stated alongside them:

 

  “The Land” - As defined in Appendix A.
       
 

“The CBP”

(City Building Plan)

- Any master plan and/or leniency and/or permit to make non-conforming use, insofar as approved, from time to time, in relation to the Land.
       
  “The Complex” - The complex, as defined in Appendix A , serving for various and other business designations, including and/or likely to include, inter alia , offices, stores, clinics, academic institutions, embassies, coffee shops, eating establishments and cinemas, all or part of which will be established on the Land and/or will be extended and/or reduced in the future, and which are intended to be leased or for sale, all according to the Landlord’s sole discretion, and which includes public spaces as defined below.
       
  “The Landlord” - Including but not limited to the Landlord’s engineer and including but not limited to whoever is lawfully appointed by the Landlord from time to time to be its agent or representative in general or for a specific matter.
       
  “The Premises” - As defined in Appendix A to this contract and marked with the color red in Appendix B to this contract.  Insofar as the premises also includes a storage space, then the provisions in Appendix K will apply thereto.
       
  “The Area of the Premises” - As defined in Section 5 below and as described and detailed in Appendix A to this contract.

 

InMode Ltd   Sha’ar Yokneam
514073618   Limited Partnership
[Signature] 5   [Signature]

 

 

  “Gallery” -

Any horizontal division creating an interim floor within the premises and separating the floor of the premises and its ceiling.

 

  “The Bank” - A defined in Appendix A .
 

 

“Index”

 

-

 

The Consumer Prices Index – general, including fruits and vegetables, published by the Central Statistics Bureau. In the event this index is no longer published by the Central Statistics Bureau then an identical or similar in nature index replacing it that is published by the Central Statistics Bureau or any other authorized entity.

 

  “The Basic Index” -

As defined in Appendix A to this contract.

 

  “Linked”, “In addition to Linkage Differentials”, “Linkage Differentials”, “Linked Values” and any similar expression. -

Multiplying the relevant amount by the ratio rate between the index recorded at the time the relevant payment was made and the basic index. Or by the ratio rate between other indexes provided that in any case such a ratio is not less than 1 and that a given payment for it the linkage differentials was calculated for a given period will not be less than the payment including the linkage differentials for a given earlier period.

 

 

 

“The Municipality”, “The Local Authority”

 

-

 

The Authority stipulated in Appendix A , which is the local authority within its jurisdiction the Land is located or any other local authority that the Land is within the boundaries of its municipal jurisdiction.

 

  “The Management Company” -

As defined in Section 15 below, including but not limited to whoever duly is appointed by the Management Company to be its agent or representative in general or for a specific matter. Insofar as the Landlord also serves as the Management Company, then anywhere stating the “Management Company” will be replaced with “The Landlord”.

 

 

InMode Ltd   Sha’ar Yokneam
514073618   Limited Partnership
[Signature] 6   [Signature]

 

 

  “Public Areas” -

Unless stated to the contrary – both the internal public areas and the external public areas as defined below.

 

  “Internal Public Areas” -

All the areas within the complex, including but not limited to all the buildings, additions and changes made to it from time to time, and roofs, passageways, entrances and exits, partitions, walls, and columns that do not constitute part of the leased areas, the utility area and rooms, internal streets and/or utility corridors, roads and service roads within the area of the complex. The areas designed and/or to be designed to operate the parking lot, service rooms, technical spaces and such as electricity, air conditioning and systems room, loading and unloading spaces, elevators, escalators, steps and any other area within the complex intended or actually serving the public and/or the customers of the complex and/or a number of tenants in the complex and/or areas serving from time to time or permanently to place booths and/or exhibitions and protected spaces and all to the exclusion of those areas intended to be leased and/or actually leased by the Landlord.

 

  “External Public Areas” -

All the areas outside the area of the complex intended to serve the public at large and/or the customers of the complex and/or a number of tenants in the complex, including areas intended and/or designated to operate parking lots, roads, access ways, steps, gardens, signs, passageways and such like.

 

 

InMode Ltd   Sha’ar Yokneam
514073618   Limited Partnership
[Signature] 7   [Signature]

 

 

  “The Lease Period” -

As defined in Section 7 below and in Appendix A to this contract and if not stated expressly to the contrary – both during the first lease period, as defined in Appendix A and all the additional lease periods, insofar as determined in Appendix A , insofar as applicable.

 

  “Rent” -

As this is defined in this contract and as stipulated in Appendix A .

 

  “Management Fees” -

All the payments the Tenant must pay to the Management Company in accordance with the provisions in this contract and the management agreement.

 

  “The Tenant’s Payments” -

All the payments the Tenant must pay in accordance with the provisions in this contract and the provisions in the law, including but not limited to payments to the Landlord and/or the Management Company and/or any government or municipal authority and/or any other third party.

 

  “Quarter” -

The months of January through to March, April through to June, July through to September and October through to December of each calendar year.

 

  “The Delivery Date” -

The date upon which possession of the premises is delivered to the Tenant in accordance with the provisions in Section 12 below, and as determined in Appendix A to this agreement.

 

  “The Architect” -

Whoever is appointed by the Landlord, from time to time, as the architect responsible for the complex.

 

  “The Contract” or “The Lease Contract” - This lease contract and all of its appendices, including the management agreement, and any addendums and/or corrections thereto, insofar as applicable from time to time.

  

InMode Ltd   Sha’ar Yokneam
514073618   Limited Partnership
[Signature] 8   [Signature]

 

 

3. THE LEASE TRANSACTION

Subject to the correctness of the Tenant’s declarations and fulfillment of all of the Tenant’s undertakings pursuant to this contract, the Landlord hereby undertakes to lease to the Tenant, and the Tenant hereby undertakes to lease from the Landlord the premises as detailed in the terms in this lease contract.

 

4. THE PARTIES DECLARATIONS
4.1. The Landlord hereby declares that it owns the rights in the complex and to the best of its knowledge there is no hindrance preventing it from engaging in this contract with the Tenant subject to all the stipulations, arrangements and provisions detailed in this contract.

 

4.2. The Tenant declares that it saw and inspected the Land and the surroundings in which the Land is located and the complex including but not limited to the premises, and in relation to all of these – their physical, zoning, statutory, records, licensing and legal status, their designation, including but not limited to all the systems and infrastructures of the premises and complex, and examined and inspected the rights associated with all of these and it is aware of the CBP details, and it saw and inspected the complex plans including the plans of the premises and the location of the premises within the complex, the premises suiting the purpose of the lease and the possibility of obtaining the necessary licenses to operate its business from within the premises. It received all the information that it found relevant in connection with the complex and its construction and in connection with the premises and the purpose of the lease and found all of these to be to its complete satisfaction from all aspects and it hereby finally, absolutely and irrevocably waives any allegation of incompatibility and/or defect and/or any demand in connection with any of the said issues.

 

InMode Ltd   Sha’ar Yokneam
514073618   Limited Partnership
[Signature] 9   [Signature]

 

 

4.3. The Tenant declares that it was not given any representations and/or undertakings form the Landlord and/or on its behalf with regard to the chances of the Tenant’s business succeeding in the premises and/or the number of visitors and/or customers and/or mix of the complex and such like, and that it does not and will not have any allegations and/or demands and/or claims toward the Landlord and/or anyone on its behalf in connection with any of these.

 

5. THE AREA OF THE PREMISES

The boundaries of the premises are as marked in Appendix B to this contract.

 

Insofar as payments are concerned that the Tenant must pay the Landlord and/or the Management Company pursuant to this contract, deriving from the area of the premises, the calculation will be done according to the “area of the premises” as stipulated in Appendix A , which is determined as follows:

 

“Area of the Premises” – The measured area of the premises pursuant to the following principles in addition to the load of a relative part of the public areas of a rate of 25% (Hereinafter: “ The Load ”) of the measured area of the premises, whereby the load calculation stated above will be done in the following manner. The measured area of the premises pursuant to the principles detailed below, divided by 0.75. The measured area of the premises is determined and/or will be determined by a survey executed by the architect and/or certified surveyor on the Landlord’s behalf. Upon measuring the area of the premises the contour area of the premises was taken into account, i.e. the area of the floor of the premises including the area of the columns, internal walls, exterior walls (with respect to the area of the walls common to the premises and the other premises in the complex only one half of the area upon which the wall was built will be taken into account), the area of the storage and utilities spaces, the area of the gallery or the second floor of the premises, if applicable, and the area of the balconies if applicable.

 

Signed confirmation by the architect and/or certified surveyor pertaining to the measured area of the premises as determined in such a survey will be considered final and conclusive proof of the area of the premises (before adding the load) for such charges purposes.

 

InMode Ltd   Sha’ar Yokneam
514073618   Limited Partnership
[Signature] 10   [Signature]

 

 

To the measured area, as stated above, the load rate will be added and the total load area is the gross area for the purpose of calculating the Tenant’s charges pursuant to the agreement and its appendices.

 

To avoid doubt, the execution of the loan calculation will not grant the Tenant rights in the public areas.

 

Notwithstanding the above, it is clarified that for the purpose of charging the Tenant the payments to the municipality or the local authority (such as rates) for the premises, the area of the premises will be determined by the municipality or local authority, as applicable, pursuant to its calculations. Additionally the Tenant will be charged the municipality or local authority payments for its share of the premises in the public areas pursuant to that determined in Section 10 below.

 

6. THE PURPOSE OF THE LEASE
6.1. The Tenant declares and undertakes that it is a tenant of the premises solely for the purpose of the lease as detailed and defined in Appendix A to this contract, and solely for this purpose.

 

6.2. The Tenant undertakes to operate its business from the premises solely within the purpose of the lease without any non-conformities or deviations from the purpose of the please and additionally will operate the premises in a manner that complies with the provisions in the law. Any change or broadening of the purpose of the lease is subject to obtaining the Landlord’s written consent in advance, who may refuse to agree to such a change or broadening for any reason of the Landlord’s discretion and without having to reason its refusal. In the event of a doubt or dispute between the parties with regard to that included or not included in the purpose of the lease, the purpose of the lease will be construed narrowly and pursuant to the circumstances that exist and are known on the date this contract is signed and without referring to future changes in the Tenant’s activity and/or the Tenant’s field of business and/or the purpose of the lease.

 

InMode Ltd   Sha’ar Yokneam
514073618   Limited Partnership
[Signature] 11   [Signature]

 

 

6.3. Without prejudicing the generality of the provisions above, the Tenant confirms that it is aware that operating the premises pursuant to a change or nonconformity with the purpose of the lease, other than constituting a material breach of this contract, may cause a breach of other lease contracts between the Landlord and other tenants in the complex, and therefore the Landlord may, without prejudicing its right to any other relief or remedy, in any event of managing a business in the premises pursuant to a nonconforming purpose or deviation from the purpose of the lease, receive an injunction against such operation and/or bring the lease contract to an end after giving notice of 7 days and the Tenant will not have any allegation and demand as a result thereof. Whereupon the lease contract was brought to an end as stated above, the provisions in Section 25 below will apply mutatis mutandis .

 

6.4. The Tenant declares and undertakes that it has the know-how, experience and ability to operate its business as detailed in the purpose of the lease. The Tenant will endeavor, while exploiting all of the resources available to it, for its business in the premises to succeed.

 

6.5. The Tenant is aware of the fact that the Landlord may, if it so chooses, grant uniqueness and/or exclusivity to certain businesses in the complex and/or to prevent the operation of certain businesses and to strike a given business balance to the best of its understanding and sole and absolute discretion in connection with the type of businesses to operate from within the complex and the Tenant hereby waives by a final, absolute and irrevocable waiver any allegation and/or claim and/or demand in connection thereto.

 

6.6. The Tenant further declares that it was not granted nor was it promised any uniqueness and/or exclusivity as stated above in connection with the premises and the business to be run from within and that the Landlord may lease areas in the complex for the purpose of managing similar, parallel and even identical businesses to that of the Tenant, and that it waives, by a final, absolute and irrevocable waiver any allegation and/or claim insofar as such an issue is concerned.

 

InMode Ltd   Sha’ar Yokneam
514073618   Limited Partnership
[Signature] 12   [Signature]

 

 

6.7. Operating the premises by the Tenant and use thereof will only be pursuant to and in accordance with the provisions in the law and none of the provisions in this contract constitute authorization on the Landlord’s part for the Tenant to act in the premises and/or use it in a manner that conflicts with any statutory provisions. It is clarified that without derogating from the provisions in this contract, the Tenant will be exclusively responsible and at its expense to obtain all the licenses and/or permits required to operate its business in the premises.

 

7. THE LEASE PERIOD

 

The first lease period pursuant to this contract is as detailed in Appendix A to this contract (Hereinafter: “ The First Lease Period ”). At the end of the first lease period and subject to the early fulfillment of the provisions in Sections 7.1, 7.2 and 7.3 below, the lease period will be extended by a period/ additional periods, once each time, if and insofar as so determined in Appendix A to this contract (Hereinafter: “ The Additional Lease Period ” or “The Additional Lease Periods” , as applicable) (both the first lease period, as defined in Appendix A and any additional lease period, insofar as determined in Appendix A , and insofar as applicable will be referred to jointly as “ The Lease Period ”).

 

7.1. Subject to the provisions in Section 7.2 below, each lease period as described in Appendix A will automatically be extended by the following lease additional period periods unless the Tenant gives written, unconditional, unreserved and irrevocable notice to be received by the Landlord at least 180 (One Hundred and Eighty) days before the end of the relevant lease period of its wish not to extend the lease (Hereinafter: “ Non-Extending Notice ”).

 

InMode Ltd   Sha’ar Yokneam
514073618   Limited Partnership
[Signature] 13   [Signature]

 

 

7.2. Notwithstanding the provisions in Section 7.1 above, it is agreed that the Landlord may determine, in a notice to be delivered to the Tenant at least 30 days before the closest date to deliver a non-extending notice, that the lease period (or the relevant additional lease period) will not be extended, and this upon the fulfillment of any of these:

 

7.2.1. During the lease period preceding the extension, the Tenant did not fulfill or uphold all of its undertakings pursuant to this contract, in full and on time;

 

7.2.2. Legal proceedings (including but not limited to arbitration or mediation) and/or other disputes and/or were conducted between the Landlord and/or the Management Company and the Tenant.

 

7.3. The Tenant hereby undertakes by an undertaking whereby the breach thereof will constitute a material breach of this contract, to furnish to the Landlord, at least 60 (Sixty) days before the end of the relevant lease period, confirmation pertaining to extending all the insurance policies and securities that the Tenant must execute and maintain pursuant to this contract, thus they will be in full effect during the course of any additional lease period. Nonperformance of the actions listed in this section will grant the Landlord, inter alia , and without derogating form the rest of its rights and relief pursuant to this contract and by law, the right to prevent the Tenant access to the premises until the confirmation is furnished as required.

 

7.4. For the avoidance of doubt, if the Tenant remits a non-extending notice on time as stated in Section 7.1 above and/or the Landlord determined that the lease period will not be extended pursuant to the provisions in Section 7.2 above, then the Tenant will not have a right to extend the relevant lease period, and therefore the lease agreement will come to an end at the end of the relevant lease period, and the Tenant will not have any allegation and/or demand and/or claim against the Landlord in connection with not realizing the additional lease period, and it undertakes to vacate the premises immediately at the end of the relevant lease period, in accordance with the provisions in this contract.

  

InMode Ltd   Sha’ar Yokneam
514073618   Limited Partnership
[Signature] 14   [Signature]

 

 

Whereupon the lease period is not extended in accordance with the provisions above, the Tenant will vacate the premises by the end of the relevant lease period, pursuant to the provisions in Section 25 below.

 

7.5. The Tenant will not be entitled to terminate the lease and/or vacate the premises and/or terminate the management of its business in the premises before the end of the lease period, however the provisions above do not prejudice the Landlord’s rights pursuant to this contract and/or by law to instruct the Tenant to vacate the premises and all this without derogating from the Landlord’s right to any relief and/or remedy reserved to the Landlord, in accordance with the provisions in this contract and/or by law.

 

If, notwithstanding the above, the Tenant vacates the premises before the end of the lease period or ceases to run its business from within the premises, the Tenant will be charged all the payments applicable to it pursuant to this contract, all until the end of the lease period and the Tenant will be seen as having waived all of its rights in accordance with the provisions in this contract, including but not limited to the right to possess the premises and the Tenant will be seen as giving its explicit consent to the Landlord, irrevocably, to take possession back of the premises and do with it as owners are entitled to do and this without derogating from any other right and/or relief available to the Landlord pursuant to this contract and/or by law.

 

The terms in this contract will apply in full during the course of the lease periods and subject to the special provisions in this contract referring to certain lease periods only, and except the Tenant’s right to extend the lease period beyond the additional lease periods determined in Appendix A , insofar as determined.

 

InMode Ltd   Sha’ar Yokneam
514073618   Limited Partnership
[Signature] 15   [Signature]

 

 

8. THE RENT

The Tenant will pay the Landlord for the lease period rent as detailed below.

 

8.1. For each month during the lease period the Tenant will pay the Landlord rent of a sum determined in Appendix A to this contract (Hereinafter: “ The Rent ”), linked to the basic index and VAT stipulated by law will be added thereto. It is clarified that in any event the rent in a given month (in addition to linkage differentials) will not be less than the rent paid (in addition to linkage differentials) for the preceding month.

 

8.2. For each month during the entire additional lease period, as detailed in Appendix A to this contract, the Tenant will pay the Landlord rent in accordance with the rates fixed in Appendix A to this contract in relation to rent for the last month of the previous lease period, in addition to 10% (Ten Percent) thereon and in addition to linkage differentials linked to the basic index.

 

8.3. It is agreed that the Tenant will pay rent for each quarter in advance during the course of the lease period, on the first business day of each quarter by way of an authorization to charge the Tenant’s account as stated in the section below. “ Business Day ” means one of the weekdays – Sunday- Thursday, upon which banks in Israel are actually open for business between the hours of 08:30 -11:00.

 

8.4. To avoid any doubt, linkage differentials will be considered for all senses and purposes as an integral part of the rent.

 

InMode Ltd   Sha’ar Yokneam
514073618   Limited Partnership
[Signature] 16   [Signature]

 

 

8.5. To ease the collection of the rent payments and any other amount owing to the Landlord and/or the Management Company from the Tenant in accordance with this contract, the Tenant undertakes to deliver to the Landlord, upon signing this contract, an authorization to charge its account in the format attached to this contract as Appendix J or in another format acceptable to the bank. The Tenant undertakes that the authorization to charge the Tenant’s account as stated above will be valid for the entire lease period and it is clarified that the Tenant will not be entitled to cancel it for any reason. It is further stressed that the payments deriving from this contract and its appendices will not be paid in any case in cash.

 

8.6. For the avoidance of doubt, it is hereby declared that under no circumstances will the granting of the authorization to charge the account and/or any demand pursuant thereto will not be considered payment until all the payments are paid in full and on time.

 

8.7. If one or more of the rent payments are not paid to the Landlord with 7 (Seven) days of the date fixed for payment thereof in accordance with this contract – including but not limited to not transferring the rent amount in full by the bank to the Landlord pursuant to the authorization to charge the Tenant’s account – then the balance of the rent not yet paid for the rest of the lease period will become payable immediately and this without prejudicing any relief and remedy available to the Landlord due to a material breach of the contract by the Tenant.

 

8.8. For the avoidance of doubt it is hereby declared that the obligation to pay rent and the rest of the payments owing to the Landlord from the Tenant, are imposed upon the Tenant absolutely, even if it did not receive a bill for such rent or the rest of the payments from the Landlord, provided that the Tenant was aware of the payment charge.

 

8.9. The Tenant undertakes to pay the rent to the Landlord and the management fees to the Landlord or the Management Company as stated in Section 15 below for the entire lease period, unconditionally, whether it makes use of the premises or not and whether the premises were made available to it or not, for any reason.

 

InMode Ltd   Sha’ar Yokneam
514073618   Limited Partnership
[Signature] 17   [Signature]

 

 

8.10. The Tenant declares that it is aware that for the purpose of guaranteeing repayment of the loan and/or credit extended by the bank to the Landlord, the Landlord assigned and charged to the bank, by a charge of first degree all of its rights pursuant to this contract or the Landlord will assign or charge its rights to the bank as stated above.

 

Without derogating from the generality of the provisions above, the Tenant undertakes to sign any document it is instructed to sign by the Landlord in connection thereto.

 

By the Tenant merely signing this contract it gives its irrevocable consent to record and/or to correct such a charge in favor of the bank and it may not object to doing so.

 

The Landlord will be entitled to change from time to time the method to make the payment and/or the Landlord’s account details in accordance with the Bank’s written instructions.

 

Additionally, if the Bank so instructs, the monies will be transferred to a different account and/or to a third party or to the bank directly.

 

9. VALUE ADDED TAX

 

For each one of the payments the Tenant is to pay the Landlord and/or the Management Company, in accordance with the provisions in this contract and which is subject to the payment of value added tax, the Tenant will pay, together with that payment, value added tax of the rate in effect from time to time pursuant to the law and/or any tax or levy replacing it and/or any tax which pursuant to the law that is imposed and must be paid by the Tenant in accordance with the provisions in this contract (above and below: “ VAT ” or “ Value Added Tax ”).

 

InMode Ltd   Sha’ar Yokneam
514073618   Limited Partnership
[Signature] 18   [Signature]

 

 

 

For the avoidance of doubt, insofar as the Tenant’s obligation to pay payments in accordance with this contract is concerned, the Value Added Tax or any other tax to apply as stated above is the same as the payment for which it is being paid. A duly issued tax invoice by the Landlord for the payment of the VAT will be delivered to the Tenant just after payment of the payment and the tax amount thereon.

 

10. ADDITIONAL PAYMENTS

 

For the entire lease period the Tenant will pay, in addition to the rent and the management fees, all the payments detailed in all the sub-sections of this Section 10 and the payments, levies, rates, taxes and mandatory payments of any type, municipal and/or governmental or others, including but not limited to any fee, licensing fee and licenses of any type and relating to the premises and/or the operation thereof and/or maintenance thereof and/or use thereof and/or to playback and/or exhibit creations therein, including but not limited to those for which a payment demand was sent to the Landlord and/or the Management Company. Taxes and/or levies and/or fees and/or participation fees in connection with the premises, operation thereof, maintenance, the business being run from within or in connection with the rent imposed in the future and which do not exist on the date this contract is signed will apply to the Tenant, whether these taxes apply by law to owners, a tenant or occupier. The Landlord on its part will bear, in connection with the complex, all the payments of taxes, applicable explicitly by law to owners of real estate properties, as opposed to occupiers.

 

10.1. Without prejudicing the generality of the above the Tenant will bear, during the entire lease period all the payments for the supply of water (including but not limited to the charge for sewerage), electricity, telephone, gas, canaling, rates, business tax, sign fee or any other expense relating to the possession and/or use and/or operation of the premises, whether it actually makes use of the premises or not.

 

InMode Ltd   Sha’ar Yokneam
514073618   Limited Partnership
[Signature] 19   [Signature]

 

 

10.2. The Tenant will bear, for the entire lease period, any tax and/or levy and/or royalties applicable and/or to be imposed in the future on the use of the premises and any activity performed in the premises, including but not limited to tax and/or levy for playing music, royalties to ACUM – The Society of Authors, Composers and Music Publishers in Israel and/or any other entity and any other similar association as well as, any payment for the use of a third party intellectual property and fees to the Broadcasting Authority.

 

10.3. The Tenant will bear, for the entire lease period, payments and/or taxes and/or levies applicable and/or to apply to the public areas in the complex, if applicable, including but not limited to rates, pursuant to its relative share according to the area of the premises of the total leased area in the complex, as determined in accordance with the Landlord’s discretion and/or the Management Company and/or the Authorities, as applicable, insofar as the Management Company bears these payments, the Tenant will pay the Management Company its share thereof and this in addition to the management fees as stated in this contract.

 

10.4. The Tenant will bear for the entire lease period the payments owing for the maintenance and management of the complex as detailed in the provisions in Section 15 below and for the use of the parking areas in accordance with the provisions in Section 17 below.

 

The Tenant undertakes to notify in writing, the local authority, the water corporation and the rest of the bodies relating to the mater about it leasing the premises. Just after the date the lease period begins, the Tenant undertakes that if the Landlord so instructed, to convey to the Tenant’s name the water and/or telephone and/or electricity and/or municipality bills and/or any other bill relating to a payment and/or tax applicable to the premises. At the end of the lease period the Tenant will put the bills back into the Landlord’s name.

 

InMode Ltd   Sha’ar Yokneam
514073618   Limited Partnership
[Signature] 20   [Signature]

 

 

10.5. The Tenant undertakes to make all the payments imposed upon it pursuant to the provisions above, on the lawful date to do so or on the date it is required to do so pursuant to the demand of the relevant authority. Such payments that the Tenant must pay through the Landlord or the Management Company, will be paid by the Tenant on the date stipulated in the payment demand it receives from the Landlord and/or the Management Company for which such a periodic payment was imposed for a whole year. If only part of the year is within the lease period, the Tenant will pay the relative part of such a payment.

 

10.6. Insofar as the supply of electricity to the premises and/or the complex is executed by and/or through the Landlord and/or the Management Company within the framework of a “bulk supply” arrangement with the Management Company, the Tenant will pay the Landlord and/or the Management Company the full payments for the electricity services as stated in Appendix C to this contract, and this by an authorization to charge the Tenant’s account as stated in Section 8.5 above and in any event no later than 7(Seven) days of the date the bill and/or the charge notice was received from the Landlord and/or the Management Company and the Tenant further undertakes to comply with all of its undertakings as stated in Appendix C . alternatively, insofar as the electricity is supplied to the premises directly through the Electricity Corporation, the Tenant will engage with the Electricity Corporation in a consumer contract and will bear at its expense and responsibility all the payments and charges demanded by the Electricity Company from time to time and will pay them directly to the Electricity Corporation, on the date determined to do so. It is clarified that the Landlord may determine, from time to time, of its absolute and sole discretion, the manner the electricity will be supplied to the complex and to the premises therein and the Tenant will not have any allegations and/or demands toward the Landlord and/or anyone on its behalf in connection thereto.

 

InMode Ltd   Sha’ar Yokneam
514073618   Limited Partnership
[Signature] 21   [Signature]

 

 

10.7. The Tenant undertakes not to contact the Local Authority to request a discount on the payments or rates applicable to the premises for the lease period by virtue of Regulation 13 (Discount on Rates for an Empty Property) to the State Economy Arrangements Regulations (Discount on Rates), 5753 – 1993 (or any law or other regulation and/or repealing it). In any event the Tenant contacts the Local Authority to request a discount on the rates payments as stated above, contrary to the provisions above, and such a discount is granted to it, the Landlord will be entitled, without prejudicing any other relief granted to it pursuant to this contract or by law, to receive from the Tenant, upon its first demand and even after the end of the lease period, the discounted amount in addition to linkage differentials and interest in arrears as stated in Section 24.8 below.

 

It is clarified that the provisions in this Section 10 do not derogate form the Tenant’s obligations in accordance with Section 15 below and that all of the payments above will be paid by the Tenant in addition to the payment of the management fees.

 

11. Cancelled.

 

12. CONSTRUCTION WORKS IN THE COMPLEX AND IN THE PREMISES

 

12.1. Commencing from the delivery date, as defined in Appendix A to this agreement, the Tenant will execute all the adjustment works and/or assembly and/or installation works in the internal design of the premises, insofar as required for the purpose of opening the Tenant’s business in the premises, at its sole expense and responsibility. The architect will remit general instructions for the execution and design of stores and the Tenant undertakes to act pursuant thereto and pursuant to any other instruction given to it in this context.

 

InMode Ltd   Sha’ar Yokneam
514073618   Limited Partnership
[Signature] 22   [Signature]

 

 

If the Tenant does not perform any work of any type and kind in the premises other than in accordance with the plans and specifications approved in advance and in writing b the architect and/or the Landlord whereby these plans are coordinated, to the Landlord’s satisfaction, with the complex’s systems plans (all such works as approved by the Architect as stated above will be referred to below as: “ The Tenant’s Works ”).

 

The detailed architectural plans will be furnished by the Tenant to the Landlord by and no later than 21 (Twenty One) days before the delivery date. It is clarified that in the event the Tenant does not furnish the said plans by the aforementioned date the Landlord may (however is not obligated) to rescind this contract within 72 (Seventy Two) hours of delivering a written notice to the Tenant without the Tenant having any allegation and/or demand resulting therefrom and all provided that during the course of the said period the Tenant did not delivery the plans to the Landlord’s satisfaction.

 

The Landlord will be entitled, of its sole discretion, to approve the aforementioned plans and technical specifications, to make corrections thereto, or not approve them. If the specifications and plans are not approved, the Tenant will submit new technical specifications and plans to the Landlord pursuant to the Landlord’s instructions during the course of the period of time stipulated by the Landlord.

 

For the avoidance of doubt, it is clarified that instructions being given and/or the Tenant’s plans being approved and/or approving performance of the Tenant’s works as stated above does not impose upon the Landlord and/or the Management Company and/or the architect and/or anyone on behalf of these, liability of any type and kind in connection with the Tenant’s works, as defined above, and all sole liability to perform the Tenant’s works and/or in connection to all of them and/or deriving from them, will apply exclusively to the Tenant.

 

InMode Ltd   Sha’ar Yokneam
514073618   Limited Partnership
[Signature] 23   [Signature]

 

 

It is clarified that the Tenant releases the Landlord, the Management Company and all those under their service of any liability of any type and kind in connection with performing the Tenant’s works.

 

12.2. The provisions in Appendix L to this contract will apply to the Tenant’s works, and the Tenant undertakes to comply with all of its undertakings as determined in the said appendix.

 

12.3. It is clarified that a condition precedent to starting the performance of any works by the Tenant or for it in the premises is furnishing the Tenant’s works insurance policies confirmation as stated in Section 19.2 below, the authorization to charge the Tenant’s account as stated in Section 8 above and all the securities as stated in section 26 below, and payment in advance for all of the Tenant’s charges for the first month’s rent. Not furnishing any of the above will prevent commencement of any of the works, however will not defer the start of the Tenant making its payments.

 

12.4. The Tenant undertakes to complete the performance of all the Tenant’s works by such a manner that the premises will be ready to open for regular business and customers, as soon as possible, and all by and no later than the date stipulated in Appendix A as the date to complete the Tenant’s Works.

 

If the opening of the premises is deferred due to delays with the Tenant’s works and/or not completing the Tenant’s works by such a date and/or delays in delivering the Tenant’s plans required by the Landlord, this will constitute a material breach of the contract and the following provisions will apply:

 

12.4.1. The Landlord will not be liable for any delay or deferment in completing the premises and the Tenant must indemnify and/or compensate the Landlord and/or the Management Company for any loss, damage or expense sustained due to such a delay.

 

InMode Ltd   Sha’ar Yokneam
514073618   Limited Partnership
[Signature] 24   [Signature]

 

 

The Tenant, and it alone, will be liable for any damage and/or loss it and/or the Landlord and/or the Management Company sustain in the event the Tenant does not complete the performance of the Tenant’s works by the date stipulated to finish the Tenant’s works and/or does not open the premises for business on such a date.

 

Without derogating from any of the provisions above the Tenant will pay the rent and will bear the rest of the payments it must bear pursuant to this contract and will meet all the rest of its undertakings as detailed in this contract, and this commencing from the delivery date as defined in this contract and this whether or not the premises actually opened.

 

12.4.2. In the event the delay by the Tenant in completing the Tenant’s works exceeds 30 (Thirty) days, the Landlord will have the right to rescind this lease contract and the Tenant will not be entitled to any indemnification and/or reimbursement for the works performed and/or facilities added to the premises.

 

Installing Systems and Supplying Electricity

 

12.5. The Tenant is responsible to make any adjustments, insofar as necessary from time to time of the systems existing in the premises to its purposes and for them to be in line with the public systems in the complex, including but not limited to – the cooling tower/s central system and the chilled water system for the premises air conditioning system, the fire alert system, including but not limited to sprinklers and additional systems, all this at the Tenant’s expense. These works will be executed subject to receiving instructions from the Landlord with regard to the systems and early specific coordination, in advance and in writing with the complex’s maintenance manager.

 

12.6. The supply of electricity to the premises and/or the complex will be done pursuant to the method to be determined by the Landlord from time to time, and the supply of electricity to the premises and/or the complex may also be done through the Electricity Company (direct connection to the national grid) and/or other provider and may also be done through the “bulk supply” method by and/or through the Landlord and/or the Management Company – all pursuant to the Landlord’s sole determination from time to time insofar as the Landlord determines that the supply of electricity will be bulk. The provisions in Appendix C to this contract will apply and the Tenant undertakes to act in accordance with the provisions in Appendix C as stated above, any time the Landlord notifies it that the supply of electricity will be through the bulk method.

 

12.7. Insofar as the supply of electricity to the premises and/or complex is through the bulk method then payment for the bulk electricity will be made by way of an authorization to charge the Tenant’s account as stated in Section 8.5 above.

 

12.8. It is agreed that the Landlord will have the right to determine that the electricity supplier will be another entity, instead of the Electricity Corporation, provided that the substitute entity holds a lawful license to supply electricity, and in such a case the provisions in this contract relating to the Electricity Corporation will apply to the substitute entity.

 

12.9. The Tenant confirms that it is aware that the electricity meters are positioned by the Landlord centrally and/or in central areas, of the Landlord’s choice, and the Tenant agrees to the location of the meters and to charge it pursuant to a reading of the meter without questioning the reading or an allegation against it, including but not limited to any change to the location of the Landlord’s choice.

 

InMode Ltd   Sha’ar Yokneam
514073618   Limited Partnership
[Signature] 25   [Signature]

 

 

General Provisions In Connection With Performing Works In The Complex

 

12.10. The Landlord may at any time, without the need for the Tenant’s consent, perform any change or addition or renovation in the complex and/or any part thereof and/or in any premises, of its sole discretion, both before the start of the lease period and thereafter, including but not limited to additions or reductions or splitting areas of any type, joining and building floors, areas or wings in the complex, whether under the complex and/or the premises or above them, adding office buildings, adding parking spaces, turning closed or open public areas into areas for sole use by various users, changing openings and passageways, extensions to various buildings and any other change in a building and/or plans in the complex and/or use of the areas in the complex and/or its surroundings.

 

The Tenant undertakes not to interfere and not to object to any such a change or extension for any reason, including but not limited to interruptions it may sustain, if sustained while the extensions or change is being carried out provided that the change or extension does not cause it a material, continuous and unreasonable interruption to the management of its business in the premises.

 

The Tenant declares that it is aware that the extensions will be added to the complex building. If added they will be part of the complex but not part of the premises or the Tenant’s rights in the premises, and they do not and will not and/or the use thereof and/or the leasing thereof will not derogate from the Tenant’s obligations to fulfill all of its undertakings, in full and on time, in accordance with this contract.

 

InMode Ltd   Sha’ar Yokneam
514073618   Limited Partnership
[Signature] 26   [Signature]

 

 

12.11. The Landlord may, without the any need for the Tenant’s consent to transfer through the complex and through the premises and to install itself or through someone on its behalf or through any authority, institution or other body, all types of pipes, infrastructures, including but not limited to air conditioning ducts, water pipes, gas, cable and electrical wires, cable for television communication and/or telephone and/or other cables whether they serve the Tenant and/or the premises and/or the complex or not, and the Tenant undertakes to allow the Landlord or to whoever on the Landlord’s behalf to enter the premises to perform such works and all associated thereto during the course of the lease period. The Landlord will notify the Tenant of its intention to perform such works a reasonable time in advance pursuant to the circumstances of the matter at hand.

 

12.12. It is clarified that the delivery date as defined in this contract is an estimated date and that it may be deferred due to the premises not being vacated by the current tenant (as defined in Section 13.4 below) and/or for any other reason such as, but not only – a state of war, exceptional reserve duty drafting, extreme and exceptional weather conditions or other natural disasters, orders, regulations or laws that cause a delay in delivery, strikes or go-slows, or any other cause not within the Landlord’s control. In such a case, the delivery date will be deferred without this being considered a breach of the contract by the Landlord, for the period of time necessary based on the foregoing circumstances or any one of them, as applicable and in addition to Twenty One (21) days for organizational purposes.

 

12.13. Any dispute concerning adjustments in the premises to the blueprint and/or the delivery date and/or adjustments of the various plans and/or any matter concerning the existence of an event stated in Section 12.12 above and for the duration of the deferred time deriving therefrom, as applicable and/or any other matter concerning the performance of the construction works in the complex and/or the premises, the architect or whoever is appointed by him, will serve as an expert and not as an arbitrator and his ruling will be final, decisive and binding upon the parties for all senses and purpose as if they had consented from the outset.

 

InMode Ltd   Sha’ar Yokneam
514073618   Limited Partnership
[Signature] 27   [Signature]

 

 

12.14. For the avoidance of doubt, the Tenant and it alone, will be responsible to obtain all the permits and/or licenses required and/or that will be required by law (including but not limited to from the Local Authority and/or the firefighting service and/or any other authorized authority) to perform the Tenant’s works as detailed in this contract, and this before performance begins, and for the purpose of opening the Tenant’s business in the premises and operation thereof, and will bear the expenses associated thereto, including but not limited to complying with any demand by any authority to make adjustments and/or additions to allow for such an authority’s approval to be received as stated above, provided that the Tenant received approval from the Landlord to do so as stated in Section 12.1 above, in advance and in writing. The Tenant undertakes to comply with all the requisite conditions to obtain such permits, to run its business pursuant to their conditions and to maintain the validity thereof during the entire lease period, and not to make any nonconforming use in the premises and not to manage businesses therein that are not permitted by the applicable law or that will apply.

 

 

13. DELIVERY OF POSSESSION AND DELIVERY PROTOCOL
13.1. The Landlord will deliver possession of the premises to the Tenant on the date detailed in Appendix A to this contract hereby determined as an estimated date (Hereinafter: “ The Delivery Date ”). On the delivery date the premises will be delivered to the Tenant in the condition on the date this contract is signed, “As Is”, whereby the standard systems therein, if they exist, operate and are in working order, and free and clear of any person and object to the exclusion of such standard systems and equipment that were agreed to remain in the premises and this without the Landlord being required to execute any renovations and/or adjustment and/or revamping in the premises.

 

InMode Ltd   Sha’ar Yokneam
514073618   Limited Partnership
[Signature] 28   [Signature]

 

 

 

13.2. The Tenant undertakes to sign a delivery protocol and to receive possession on the delivery date and confirms that in any event it does not sign the delivery protocol as stated above and/or does not show up to receive possession on this date, for any reason, it will be seen as having received possession of the premises to its full satisfaction, without any reservations with regard to its condition, totally suited to the provisions in this contract and the obligation to pay rent will apply to the Tenant from the delivery date.

 

13.3. Without derogating from the provisions above, upon delivery the Tenant undertakes to carry out the following actions:

 

13.3.1. To receive possession of the premises. Receipt of possession of the premises by the Tenant will constitute approval on its part that the premises was delivered to it fully suited to the provisions in this contract and to its absolute satisfaction, and that it does not and will not have any claims and/or allegations and/or demands concerning the premises and this contract, subject to the fulfillment of the Landlord’s undertakings pursuant to this contract; and
13.3.2. To furnish to the Landlord the confirmation of the insurance policies as detailed in Section 19 below.

 

13.4. The Tenant declares that it is aware that the premises is not vacant and that the premises is occupied by the current tenant (above and below: “ The Current Tenant ”). It is hereby agreed that insofar as the current tenant does not vacate the premises of any person and object by the date determined in this contract for delivery of possession of the premises to the Tenant, the delivery date will be deferred to such a date that the premises is actually vacated by the current tenant and the rest of the dates stipulated in this contract will be deferred accordingly. Insofar as the delay exceeds more than a month, the Landlord may, (however is not obligated) to rescind the contract. If the Landlord decides to rescind this contract, the Landlord will be released of all of its undertakings pursuant to this contract and the Tenant will not have and hereby waives any allegation, claim and/or demand in connection with this contract.

 

InMode Ltd   Sha’ar Yokneam
514073618   Limited Partnership
[Signature] 29   [Signature]

 

 

14. THE BUSINESS ACTIVITY IN THE COMPLEX AND IN THE PREMISES

 

14.1. The hours of operation of the businesses in the complex will be, subject to the provisions in the law, including and in particular the municipal bylaws and in accordance with the procedures determined from time to time by the Management Company (whether with regard to a specific business or types of businesses). Until a notice is received to the contrary from the Management Company, the hours of operation of the Management Company in the complex are – between 09:00 and 21:00 Sundays through to Thursdays inclusive, and between 09:00 and 15:30 on Fridays and eves of holidays and one hour after the Sabbath or holiday ends and up to 22:30 on Saturdays and holidays.

 

14.2. The Tenant declares and undertakes that it does not and will not have any allegation and/or demand and/or claim against the Landlord and/or anyone on its behalf and/or tenants and/or business establishments in the complex, in connection with the dates and hours of operation of their businesses, including but not limited to operating them on Saturdays and on holidays, insofar as applicable.

 

14.3. The Tenant undertakes to use the premises and its surroundings, by such a manner that does not cause any interruption and/or nuisance to other tenants in the complex and their enjoyment from their premises, while keeping the part adjacent to the premises clean. Without derogating from the provisions above, the Tenant undertakes not to use the premises or any part thereof in a manner whereby as a result thereof noise, odors, pollutions or other hazards are caused exceeding that which is reasonable bearing in mind the nature of the complex in general and the nature of the proximate surroundings of the premises, in particular.

 

InMode Ltd   Sha’ar Yokneam
514073618   Limited Partnership
[Signature] 30   [Signature]

 

 

14.4. The Tenant undertakes to take the measures necessary to prevent any damage or malfunction to the premises and/or any part thereof and/or the proximate surroundings and/or facilities and/or equipment in the premises and to immediately repair and at its expense any damage caused to the premises and/or equipment and/or the facilities therein.

 

14.5. In the event the Tenant does not maintain the premises, including but not limited to the equipment and/or facilities therein or those belonging to it, in a good state of repair and of a high quality, and/or does not immediately repair any disrepair as stated in sub-section 14.4 above, the Landlord may, however is not obligated, to carry out the repair and perform any action, of its discretion to repair the damage and/or put the premises and/or its facilities belonging to it to a high standard and quality, suited to the complex, and this at the Tenant’s expense and the Tenant undertakes to compensate the Landlord for the above and this in accordance with the provisions in Section 30 below. To this end, the Landlord may enter the premises after giving 48 (Forty Eight) hours’ notice.

 

14.6. The Tenant declares that it is aware that in the premises stores, clinics, schools, cinemas, coffee shops, restaurants, kiosks may operate in the complex. Eating establishments of all types, businesses of all types, offices, health clubs, clinics, embassies and cultural, entertainment, music and promotional activities in the public areas, including but not limited to exhibitions, fashion shows, presentations and such like, and it declares and undertakes that it will not have any allegation in connection thereto, whether applicable or not, including but not limited to in connection with the field of activity therein, the hours of operation, entry and exit arrangements, noise crowding, odors nuisances or any other nuisance caused by their activities.

 

InMode Ltd   Sha’ar Yokneam
514073618   Limited Partnership
[Signature] 31   [Signature]

 

 

15. MANAGING THE COMPLEX

 

The Landlord may appoint a corporation to engage in the management of the complex and its maintenance (above and below – “ The Management Company ”). If the appointment of the Management Company ends or so long as a Management Company was not appointed, the Landlord will serve as the Management Company for the purpose of this contract.

 

The Management Company will determine, from time to time arrangements and procedures concerning the management of the complex and the maintenance thereof and will determine bylaws to apply with regard to all the tenants and users of the complex, or the type of businesses therein and will monitor the execution thereof. The Tenant undertakes to sign, on the date this contract is signed, a management agreement with the Management Company attached as Appendix D to this contract and the bylaws attached as Appendix E to this contract. The bylaws will be valid in this format so long as no changes thereto were promulgated by the Management Company. The Tenant undertakes to comply with the management agreement, the bylaws and procedures, including but not limited to changes therein, made from time to time.

 

The Management Company will render services (Hereinafter: “ The Services ”) in the complex whether itself or through sub-contractors as stated in the management agreement.

 

15.1. The Tenant will participate in all the Management Company’s expenses to render the services on the basis of their cost, including but not limited to financing expenses, on the basis of foreign currency linked or index, of the Management Company’s choice and in addition to a fee to the Management Company and VAT stipulated by law. It is clarified that insofar as this contract is used, use of the phrase “ management fees ” – this refers to the Management Company’s expenses and the Management Company’s fee as stated above, as defined in this management agreement.

 

InMode Ltd   Sha’ar Yokneam
514073618   Limited Partnership
[Signature] 32   [Signature]

 

 

For the avoidance of doubt, the Management Company will be entitled to transfer the Management Company’s fee to its parent company, or to whoever the parent company so instructs.

 

15.2. If the Tenant will pay the management fees relative to the area of the premises in relation to the other premises in the complex, in accordance with the dates, rates and defined legends in the management agreement.

 

15.3. The Tenant refusing and/or unwillingness and/or not wishing to receive a given service and/or its wish to stop the rending of all or some of the services will not release the Tenant of its undertakings pursuant to this entire Section 15 and/or pursuant to the management agreement.

 

15.4. The Tenant signing this contract constitutes a direct undertaking toward the Management Company once appointed or established, if established, insofar as things concern it, and the Tenant’s undertaking toward the Landlord to uphold all of its undertakings toward the Management Company, whether specified in this contract or detailed in the management agreement, and a breach of the management agreement will constitute a breach of this contract and accordingly, the Landlord may make use of the securities extended by the Tenant in accordance with the provisions in Section 26 to this contract also to secure the Tenant’s obligations in accordance with the provisions in the management agreement.

 

15.5. The Tenant agrees that it is possible that changes will be made to the format of the management agreement, including but not limited to resulting from changing the Management Company, and in such a case the Tenant will sign a management agreement as prepared and approved by the Landlord and the Management Company, and this immediately upon receiving the Landlord and/or Management Company’s demand to do so.

 

InMode Ltd   Sha’ar Yokneam
514073618   Limited Partnership
[Signature] 33   [Signature]

 

 

 

15.6. For the avoidance of doubt, any allegation the Tenant has against the Management Company, including but not limited to an allegation by virtue of the management agreement, will not constitute a cause of action and/or set off on the Tenant’s part against the Landlord.

 

16. ADVERTISING

 

The Tenant is aware and it agrees to the fact that the Landlord and/or the Management Company will be entitled, however not obligated, to prompt events and actions in the promotion of the complex field and the businesses therein, both within the complex, including but not limited to signs, pamphlets and such like, and external advertising, including but not limited to advertising through the various means of communication, including but not limited to television and/or radio and/or local or general press, all in the manner, of the scope and on the dates of the Landlord and/or Management Company’s sole discretion and the Tenant will not have any allegation in connection thereto, including but not limited to the scope, manner and content of the advertising of the complex and/or businesses in the complex in general, and with regard to the scope of the content and manner the business operating from the premises in particular is advertised.

 

17. PARKING LOTS AND PARKING FEES

 

17.1. It is clarified that within the framework of the complex there are covered and/or open air parking areas that are included and/or will be included (Hereinafter: “ The Parking Lots ”).

 

17.2. The Landlord may, of its absolute discretion and subject to the law, decided from time to time to operate the parking lots as paid parking lots and charge the customers of the complex and its visitors a payment for parking in the parking lots in any manner and according to any method its deems fit (Hereinafter: “ The Parking Fee ”), whether itself or through others, including but not limited to the Management Company, to lease them to sub-contractors to operate as paid parking lots and/or to determine usage, operation, parking, entry and exit arrangements for the parking lots and to change all of these from time to time and the Tenant will not have any allegations in connection thereto. All the revenue from the parking fees will belong solely to the Landlord.

 

InMode Ltd   Sha’ar Yokneam
514073618   Limited Partnership
[Signature] 34   [Signature]

 

  

The Tenant undertakes to comply, from time to time with any such determination and all arrangements and technical procedures to be determined by the Landlord or the Management Company in this regard.

 

17.3. It is agreed that since the parking lots are intended to allow for convenient parking for the customers of the complex with the quickest turnaround possible of users of the parking lots, the Tenant will not be entitled to use them for any of its employees and/or businesses and/or on its behalf for parking, to the exclusion of its customers and to the exclusion of a number of vehicles to be approved by the Landlord and/or the Management Company in advance and in writing, and pursuant to conditions to be approved as stated above, and in consideration of payment of fixed and/or annual and/or monthly and/or ad hoc subscription fees as determined by the Landlord (Hereinafter: “ Parking Subscription Fees ”).

 

17.4. If the Landlord allows the complex customers to park without paying a parking fee for the first two hours at least, the Tenant will pay the Landlord, for the entire lease period, a sum of NIS 5 (Five) in addition to VAT stipulated by law, for each square meter of the area of the premises for each of the months of the lease period (Hereinafter: “ Payment for Parking ”). The payment for parking will be linked to the index published for the month of May 2013 (106.25 points, Base 2010) and will be paid for each month in advance, at the same time as the minimum rent payment for that month.

 

InMode Ltd   Sha’ar Yokneam
514073618   Limited Partnership
[Signature] 35   [Signature]

 

 

The payment for parking will be revised at the beginning of each additional lease period beyond the first lease period, by a rate of 10% (Ten Percent) as opposed to the estimated rate prior to the start of such an additional period.

 

It is clarified that payment for parking is not and will not constitute in any manner and form part of the rent as defined in this contract, or of the management fees.

 

17.5. The provisions in this section constitute direct undertakings of the Tenant toward the Landlord and/or the Management Company and/or any person or other body operating the parking lots from time to time, as applicable.

 

18. LIABILITY IN TORTS AND INDEMNIFICATION

 

18.1. The Landlord, Management Company and anyone under their service will not be liable in any manner for any damage and/or harm the Tenant and/or its business and/or property and/or anyone on its behalf and/or any other person in the premises sustain, including and without prejudicing the generality of the provisions above, damage or harm caused due to the Landlord and/or the Management Company and/or anyone under their service entering the premises, unless the damage is caused maliciously by the Landlord or the Management Company, and the Tenant hereby waives any such claim, allegation and demand against the Landlord and/or the Management Company and/or anyone on their behalf exceeding their liability as stated above.

 

InMode Ltd   Sha’ar Yokneam
514073618   Limited Partnership
[Signature] 36   [Signature]

 

 

18.2. The Tenant will assume liability toward the Landlord and/or the Management Company for any loss and/or damage the premises and/or the complex and/or its contents and/or any person and/or corporation sustains, including but not limited to its employees and/or the Landlord and/or the Management Company and/or anyone on their behalf and/or to the customers and/or the visitors to the complex and/or any other person, caused by it and/or by anyone on its behalf (including but not limited to its employees and/or customers and/or visitors and/or contractors and/or consultants on its behalf) and/or which is its responsibility by virtue of the provisions in this contract and all in connection with the premises, management of its business in the premises and/or possession and/or use of the premises and/or from any other action of the Tenant and/or its employees and/or its visitors and/or vendors and/or anyone on its behalf and/or its customers. The provisions in this section do not derogate from the Tenant’s undertakings toward third parties pursuant to the law.

 

18.3. Any action that is taken in the premises will be done solely at the Tenant’s responsibility and the Landlord and/or the Management Company will not be liable in any manner for such actions. Without derogating from the generality of the provisions above, the Tenant will be exclusively liable for any damage and for any responsibility due to a violation and/or nonfulfillment, in full of the provisions in the law and/or license and/or permit in connection with the use of the premises.

 

18.4. The Tenant undertakes to compensate and/or indemnify the Landlord and/or the Management Company and/or anyone on their behalf for any damage and/or expense and/or charge they are likely to undertake to pay or are forced to pay or paid, including but not limited to within the framework of a civil or criminal claim to be filed against them for any damage within the Tenant’s responsibility pursuant to this contract and/or by law, and for all the expenses the Landlord and/or the Management Company and/or anyone on their behalf incurred to defend such a demand and/or claim, including but not limited to attorneys fees, and all within 30 (Thirty) days of the date the Landlord and/or Management Company’s first written demand is received. The Landlord and/or the Management Company, as relevant, will notify the Tenant of them receiving any claim and/or demand as stated above, just after it is received and will allow the Tenant, insofar as dependent upon them, a reasonable opportunity to defend itself.

 

InMode Ltd   Sha’ar Yokneam
514073618   Limited Partnership
[Signature] 37   [Signature]

 

 

19. INSURANCE

 

19.1. Without derogating from the Tenant’s liability pursuant to this contract and/or pursuant to the law the Tenant undertakes to execute and maintain the insurance policies detailed below with a certified and reputable insurance company.

 

It is agreed that insofar as the Tenant is required to perform protection, defending works against break-ins and/or theft and/or to install a defense system, alarm, alert, smoke and fire detector and such like (Hereinafter: “ The Protection Works ”) for the purpose of complying with the insurance policy terms of any of the insurance policies included in the confirmation pertaining to executing the Tenant’s insurance policies attached as Appendix I2 , the Tenant alone will bear all the costs of the protection works and will not have any allegation in connection thereto against the Landlord.

 

19.2. Subject to the provisions in this contract insofar as receiving authorization to perform works in the premises is concerned, and should any works be performed in the premises by the Tenant and/or someone on its behalf before the premises are first occupied by the Landlord and/or on any date during the course of the lease period, the Tenant undertakes to furnish to the Landlord and to the Management Company the confirmation pertaining to executing the Tenant’s works insurance policy attached to this contract and constituting an integral part hereof and marked as Appendix I1 (respectively below “ The Tenant’s Works Insurance Policies Confirmation ” and “ The Tenant’s Works Insurance Policies ”) signed by the Tenant’s Insurer. The Tenant declares that it is aware that furnishing the Tenant’s works insurance policies is a suspending and preliminary condition to performing any works in the premises, and the Landlord and/or the Management Company will be entitled (however not obligated) to prevent the Tenant from carrying out works in the premises, should such confirmation not be furnished to them before the performance of such works begin.

 

InMode Ltd   Sha’ar Yokneam
514073618   Limited Partnership
[Signature] 38   [Signature]

 

 

19.3. For the entire lease period the Tenant undertakes to execute and maintain the insurance policies detailed in the execution of the insurance policies confirmation attached to this contract and constituting an integral part hereof and marked as Appendix I2 (respectively – Hereinafter: “ The Tenant’s Permanent Insurance Policies Confirmation ’ and “ The Tenant’s Permanent Insurance Policies ”).

 

19.4. Without the need for any demand on the Landlord's part and/or on the Management Company’s part, the Tenant undertakes to furnish to the Landlord and to the Management Company, no later than the date to receive possession of the premises or before the date any properties are placed in the premises, (other than properties that are part of the Insured works pursuant to Section 19.2 above) whichever is earlier - the Tenant’s permanent insurance policies confirmation, signed by its Insurer. The Tenant declares that it is aware that furnishing the Tenant’s Permanent Insurance Policies confirmation is a suspending and preliminary condition to receiving possession of the premises and/or placing any properties (other than properties that are part of the Insured works pursuant to Section 19.2 above) in the premises and the Landlord and/or the Management Company will be entitled (however not obligated) to prevent the Tenant from receiving possession of premises and/or putting any properties as mentioned above in the event the confirmation is not furnished before the date that was mentioned above.

 

InMode Ltd   Sha’ar Yokneam
514073618   Limited Partnership
[Signature] 39   [Signature]

 

 

Without derogating from the provisions above, in any event the Tenant’s permanent insurance policies confirmation and/or confirmation pertaining to it being renewed, is not furnished to the Landlord even 3 (Three) business days after the date a demand is delivered to the Tenant, the Landlord and/or the Management Company may prevent the Tenant from entering the premises, disconnect the supply of electricity to the premises and to take any other action of their discretion to stop the activity in the premises until such confirmation is received, to their satisfaction. Additionally, the Tenant will pay the Landlord a pre-determined and agreed payment of a sum of NIS 2,000 for each day the Tenant’s permanent insurance policies confirmation, valid, is not furnished to the Landlord, without derogating from any right and/or allegation and/or claim of the Landlord. The payment above will be paid in addition to linkage differentials commencing from the date this contract is signed and will be paid in addition to VAT stipulated by law, pursuant to the Landlord’s first written demand.

 

19.5. It is agreed that the Tenant may choose not execute a consequential loss insurance policy, (in full or in part), as detailed in Section (2) to the Tenant’s permanent insurance policies confirmation, however the exemption as detailed in Section 19.8 below will apply as if such policies were executed in full. Similarly, the Tenant may choose not to execute the premises glass breakages insurance policy as detailed in Section (1) to the Tenant’s permanent insurance policies confirmation, however in such a case the Tenant will bear the expenses of replacing the glass in the premises as stated above and the exemption stated in Section 19.8 below will apply.

 

19.6. If in the Tenant’s opinion there is a need to execute an additional and/or complementary insurance policy to the Tenant’s works insurance policies and/or the Tenant’s permanent insurance policies, the Tenant undertakes to execute and maintain such additional and/or complementary policies. In any additional and/or complementary property insurance policy as stated above, a section will be included pertaining to the waiver of the right to subrogation toward the Landlord, the Management Company and toward those acting on their behalf, as well as other tenants, residents and other rights holders in the complex (hereinafter the other tenants, residents and other rights holders as stated above will be referred to jointly as: “ The Other Rights Holders ”) whose property insurance policies as stated above and/or in the property chapter to the contractors works insurance policy executed by them contains a waiver of the right to subrogation toward the Tenant.

 

InMode Ltd   Sha’ar Yokneam
514073618   Limited Partnership
[Signature] 40   [Signature]

 

 

19.7. The Tenant undertakes to revise, from time to time (and at least every insurance period) the insurance amounts for the insurance policies executed by it pursuant to Sections (1) and (2) to the Tenant’s permanent insurance policies confirmation to always reflect the full value of the insured subject pursuant thereto.

 

19.8. The Tenant exempts the Landlord, the Management Company and anyone acting on their behalf and the other rights holders whereby in the other right holders lease agreements or any other agreement granting the other right holders rights in the complex contain a parallel exemption of liability toward the Tenant for damage that it is entitled to indemnification for pursuant to the policies executed in accordance with Section (1) to the Tenant’s works insurance policies confirmation, Sections (1) and (2) to the Tenant’s permanent insurance policies confirmation and the additional property insurance policies that it executed as stated in Section 19.6 above (or would have been entitled to indemnification for but for the deductibles stipulated in such policies), however the exemption from liability as stated above will not apply in favor of a person who maliciously caused damage.

 

19.9. No later than 14 (Fourteen) days before the end of the Tenant’s permanent insurance policies period date, the Tenant undertakes to deposit with the Landlord and with the Management Company the Tenant’s permanent insurance policies confirmation for extending the validity thereof for an additional insurance period. The Tenant undertakes to deposit the Tenant’s permanent insurance policies approval on the stipulated dates, each insurance period as long as this contract is in force.

 

InMode Ltd   Sha’ar Yokneam
514073618   Limited Partnership
[Signature] 41   [Signature]

 

 

19.10. Each time the Tenant’s Insurer notifies the Landlord and/or the Management Company that any one of the Tenant’s permanent insurance policies is about to be cancelled or a detrimental change is about to be made thereto, as stated at the end of Appendices I1 and I2 , as stated above, the Tenant undertakes to renew that insurance policy and to furnish the new insurance policy confirmation 30 (Thirty) days before the cancellation date or the detrimental change in the policy date, as stated above.

 

19.11. For the avoidance of doubt it is clarified that not furnishing the insurance policy confirmations on time, as stated in Sections 19.2, 19.4, 19.9 and 19.10 above, will not prejudice the Tenant’s undertakings pursuant to this contract, including but not limited to and without prejudicing the generality of the provisions above, any payment obligation applicable to the Tenant, and the Tenant undertakes to comply with all of its undertakings pursuant to the agreement even if it shall be prevented from executing works and/or from receiving possession of the premises and/or inserting properties into the premises and/or operating its business in the premises, due to not presenting the confirmations on time.

 

19.12. The Landlord and/or the Management Company may review the insurance policies confirmations furnished by the Tenant as required under Sections 19.2, 19.4, 19.9 and 19.10 above, and the Tenant undertakes to make any change or correction necessary for it to comply with the Tenant’s undertakings stated in this Section 19. The Tenant declares that the Landlord and/or the Management Company's right to inspect the insurance policies confirmations and the right to instruct that they be corrected as specified above, does not impose upon the Landlord and/or the Management Company and/or anyone on their behalf any obligation and/or any liability insofar as the insurance policies confirmations are concerned, the nature, scope and the validity of the insurance policies executed pursuant thereto or regarding the lack thereof, and the right to inspect does not derogate from any duty imposed on the Tenant pursuant to this contract and/or the law.

 

InMode Ltd   Sha’ar Yokneam
514073618   Limited Partnership
[Signature] 42   [Signature]

 

 

19.13. The Tenant undertakes to comply with the terms of the insurance policies executed by it, to pay the premiums on time and in full, and to ensure that the Tenant's permanent insurance policies are renewed from time to time according to need and they will be valid the entire Lease Period.

 

19.14. For the avoidance of doubt it is agreed that the required limits on liability as stated in Appendices I1 and I1 are considered a minimum requirement imposed upon the Tenant. The Tenant declares and confirms that it will be estopped from raising any allegation and/or demand against the Landlord and/or the Management Company and/or anyone on their behalf insofar as such limits on liability are concerned.

 

19.15. Additionally and without derogating from the provisions elsewhere in this contract, at all stages of performing on the agreement the Tenant undertakes to comply with all the requirements and provisions in the National Insurance Law and the National Health La and all orders, regulations and such like enacted pursuant to the foregoing laws, and primarily and without prejudicing the generality of the provisions above, by such a manner that all of its employees, agents and those under its service during the agreement period, including but not limited to those hired incidentally and temporarily, will at all times and during the entire agreement period entitled to all the rights pursuant to the foregoing laws.

 

19.16. The Tenant hereby declares that it is aware that the Landlord and/or the Management Company do not undertake to provide security guards and/or other security means at the complex and/or in the premises, and if they do so this will not create any liability or undertaking toward the Tenant. It is further explicitly agreed that the Keepers Law, 5727 – 1967 does not apply to the agreement and its appendices and under no circumstances will the Landlord and/or the Management Company or anyone on their behalf be considered as paid or non-commissioned security guards.

 

InMode Ltd   Sha’ar Yokneam
514073618   Limited Partnership
[Signature] 43   [Signature]

 

 

19.17. The Landlord undertakes to execute and maintain for the entire lease period, itself or through the Management Company, the insurance policies detailed further on in this section with a duly authorized and reputable insurance company:

 

19.17.1. Insurance insuring those parts of the building in the complex owned by the Landlord or that the Landlord undertook to insure (including but not limited to the premises building), against loss or damage due to the risks that are acceptable in extended fire insurance policies, including but not limited to fire, smoke, lighting, explosions, earthquake, storm and blizzard, flood, liquid damages and burst pipes, damage by vehicles, damage by aircrafts, riots, strikes, malicious damage and any breaking damages. Such insurance will include a section pertaining to the waiver of the right to subrogation toward the Tenant, however such a waiver will not apply in favor of a person who maliciously causes damage. For the avoidance of doubt, it is explicitly agreed that such insurance will not include content and/or additions, improvements or extensions made by and/or on behalf of and/or for the Tenant and/or the other rights holders and will not include glass, windows, partitions from glass and glass door insurance whereby the obligation to insure them is imposed upon the Tenant as stated in Section (1) to the Tenant’s permanent insurance policies confirmation.

 

InMode Ltd   Sha’ar Yokneam
514073618   Limited Partnership
[Signature] 44   [Signature]

 

 

19.17.2. Consequential loss insurance policy insuring loss of rent and loss of management fees due to damage caused to parts of the building in the complex owned by the Landlord or that the Landlord undertook to insure (including but not limited to the premises building) due to the risks detailed in Section 19.17.1 above, and this for an indemnification period of at least 12 (Twelve) months. Such insurance will include a section pertaining to the waiver of the right to subrogation in favor of the Tenant, however such a waiver will not apply in favor of a person maliciously causing damage.

 

It is agreed that the Landlord and/or the Management Company may opt not to execute a consequential loss insurance policy insuring loss of rent and loss of management fees as stated in this Section 19.17.2 above, in full or in part, however the provisions in Section 19.20 below will apply as if such an insurance policy was executed in full.

 

19.18. As stated in Section 3.1.7 to the management agreement, the Landlord may of its sole discretion execute additional insurance policies in addition to those detailed in Section 19.17 above.

 

19.19. It is explicitly agreed that executing the insurance policies detailed in Section 19.17 above doers not add any liability to the Landlord and/or the Management Company beyond that stated in this contract and/or does not derogate from the Tenant’s liability pursuant to the agreement and/or by law (other than as explicitly stated at the end of Section 19.20 below).

 

InMode Ltd   Sha’ar Yokneam
514073618   Limited Partnership
[Signature] 45   [Signature]

 

 

19.20. The Landlord exempts the Tenant of liability for damage it is entitled to indemnification for pursuant to the policies executed in accordance with Sections 19.17.1 and 19.17.2 above (or would have been entitled to indemnification for but for the deductibles stipulated in such policies), however the exemption from liability as stated above will not apply in favor of a person who maliciously caused damage.

 

Notwithstanding the above should an insurance peril manifest that is insured pursuant to Sections 19.17.1. and 19.17.2 above, pursuant to circumstances for which the Tenant is liable under this contract and/or by law, the Tenant will bear the damage and/or loss amount sustained up to the deductible amounts applicable pursuant to such policies; provided that the amount the Tenant bears for each insurance peril is no less than an amount equal to $20 (US) multiplied by the area of the premises in square meters (however no less than a sum of $1,000 (US) and not to exceed a sum of $ 20,000 (US).

 

20. PERMITS

 

20.1. For the entire lease period, the Tenant, and it alone will be responsible to obtain the licenses required by law at any time to run its business from within the premises, to renew them and to ensure they are valid. Should the management of the Tenant’s business in the premises require obtaining a business license and/or any other permit then the Tenant is liable and undertakes to obtain the necessary permit/s, all at its expense. The Tenant declares that it is well versed and experienced in the business it intends to run from within the premises and all the licensing and permits issue that are required to run the business as stated above.

 

20.2. The Landlord undertakes to sign as an “owners signature” as rights holder in the complex, at the Tenant’s request, any document and/or application reasonably required to obtain the business license and/or other permit required to operate the business for the purpose of the lease by virtue of the law and subject to the provisions in this contract and by law, provided that no undertaking, obligation or liability will apply to the Landlord as a result thereof and also that the Landlord will not incur as a result thereof any expenses. For the avoidance of doubt it is clarified that this conduct by the Landlord does not derogate from the Tenant’s liability and undertaking to obtain such a license or permit.

 

InMode Ltd   Sha’ar Yokneam
514073618   Limited Partnership
[Signature] 46   [Signature]

 

 

20.3. Without derogating from the provisions above, the Tenant undertakes to run its business and to comply with all the requirements by virtue of the Business Licensing Law, 5728 – 1968 (Hereinafter in this section: “ The Law ”), to obtain any license and permit required pursuant to the law to run the Tenant’s business from within the premises in accordance with the purpose of the lease, and to renew it from time to time, as required by law and to complete all the works and/or requirements on the authorities behalf to obtain and/or renew any license and permit required by law.

 

20.4. The Tenant and it alone will be responsible for any instance that offenses and/or violations of the law have been committed in the premises and/or by the Tenant, its employees and/or by anyone on the Tenant’s behalf even outside the premises, including but not limited to pursuant to the Prevention of Smoking in Public Places and Exposure to Smoking Law, 5743 – 1983 (Hereinafter: “ The Prevention of Smoking Law ”).

 

20.5. The Tenant undertakes that the design of the premises, the construction and operation thereof will be done in accordance with the statutory requirements, as in effect from time to time, insofar as accessibility is concerned, including but not limited to in accordance with the Equal Rights for Persons with Disabilities Law, 5758 – 1998 and the secondary legislation pursuant thereto, in the format in effect from time to time.

 

20.6. The Tenant will alone pay any fine or punishment imposed for running the business and/or use of the premises by the Tenant and/or its employees and/or agents and/or customers without a permit or nonconforming to a permit, whether imposed upon the Landlord or upon the Management Company or if imposed upon the Tenant. In any event of a violation of the provisions in the Prevention of Smoking Law and/or secondary legislation by virtue thereof, in the premises and/or by the Tenant and/or someone on its behalf, including but not limited to its employees even outside the premises – the Tenant will be liable to bear any fine and/or penalty imposed as a result thereof and undertakes to instruct its employees to avoid violating the provisions in the Prevention of Smoking Law and/or the secondary legislation by virtue thereof.

 

InMode Ltd   Sha’ar Yokneam
514073618   Limited Partnership
[Signature] 47   [Signature]

 

 

20.7. None of the above will be considered authorization by the Landlord to the Tenant to use the premises and/or manage its business without a permit and/or not conforming to the permit. For the avoidance of doubt it is clarified that if and insofar as an order and/or demand and/or directive and/or notice is received from any authorized authority, to shut down and/or stop and/or suspend the activity being conducted from within the premises, the Tenant will act in accordance with such a demand by the authorities and this by the date determined to do so by the authorities and without this being authorization not to uphold the Tenant’s undertakings pursuant to this contract.

 

20.8. It is agreed that not obtaining a license the Tenant needs to manage its business from the premises will not release the Tenant from fulfilling any of its undertakings pursuant to this contract, in the event the Tenant is forced to stop or suspend its activity in the premises in accordance with the provisions in Section 20.7 above and/or in accordance with the provisions in the law.

 

21. MAINTAINING THE PREMISES AND MANAGEMENT THEREOF

 

21.1. The Tenant undertakes to run its business from within the premises in accordance with the provisions in the law applicable to the matter and without causing any nuisance including but not limited to noise, odors (including but not limited to installing and operating fume hoods), pollution and not to cause any interruption or nuisance to occupiers and/or users of the rest of the complex and its surroundings.

 

InMode Ltd   Sha’ar Yokneam
514073618   Limited Partnership
[Signature] 48   [Signature]

 

 

Without prejudicing the generality of the provisions above the Tenant undertakes not to operate in the premises or its surroundings announcement stems and/or speakers and to maintain a high cleanliness and maintenance standard in the premises and in its surroundings.

 

21.2. The Tenant undertakes not to run in the complex outside the premises any activity relating to its business and not to keep any goods and/or equipment and/or inventory and/or other chattels (hereinafter referred to as: “ Chattels ”) outside the premises in the complex unless it receives approval in writing and in advance from the Landlord and the Management Company any time chattels belonging to the Tenant are found outside the premises as stated above. The Landlord or the Management Company may (however are not obligated) to remove them at the Tenant’s expense forthwith without notice and without the Landlord or the Management Company being liable for the completeness thereof or for damages the Tenant sustains as a result thereof, if sustained. Additionally the Tenant will pay the Landlord and/or the Management Company a pre-determined and agreed payment of a sum of NIS 500 (Five Hundred New Shekels) for each hour the chattels are outside the premises without the Landlord and/or the Management Company’s approval as stated above (and the relative part of the aforementioned amount for any part of an hour). The payment stated above will be paid in addition to linkage differentials commencing from the date this contract is signed and will be paid in addition to VAT stipulated by law, immediately upon the Landlord and/or the Management Company’s first written demand.

 

21.3. The Tenant will run its business in the premises while complying with all the procedures and instructions determined by the Management Company by virtue of its power as stated in Section 15 above and all of its sub-sections, including but without prejudicing the generality of the above, the Tenant will ensure to stringently adhere to all of the Management Company and/or the Landlord’s instructions in connection with the days and hours of operation, in connection to hauling, inserting and removing goods and packages into the premise and from it, and in particular in relation to hours and ways of performing these actions. The Tenant undertakes that all those in commercial contact with it, including but not limited to vendors, will adhere to the Management Company’s instructions.

 

InMode Ltd   Sha’ar Yokneam
514073618   Limited Partnership
[Signature] 49   [Signature]

 

 

21.4. The Tenant undertakes to keep the premises, during the entire lease period in a good and proper state of repair, and will fix, without delay and at its expense any malfunction, damage or disrepair that is discovered therein, in its systems and facilities and should the Tenant fail to do so within 7 (Seven) days of the occurrence of the damage and/or malfunction, the Landlord and/or the Management Company may enter the premises and do so instead of the Tenant and the provisions in Section 30 to this contract will apply.

 

21.5. The Landlord and/or the Management Company will be entitled to enter, from time to time, the premises to check if the provisions in this lease contract are being complied with and/or to carry out works and repairs, whether for the premises or for other premises, provided that as little interruption as possible is caused to the Tenant and in the event repairs are being carried out – to return the previous condition, insofar as possible and within reason.

 

The Landlord will notify the Tenant, insofar as possible, of its intention to enter the premises, a reasonable time in advance, pursuant to the circumstances, to the exclusion of emergencies with regard to which the Landlord will not be required to give such early notice.

 

21.6. The Tenant will not affix and/or install signs or notices on the external walls of the premises or the complex and not on the glass doors of the premises on either side (if applicable) without the Landlord and/or the Management Company’s approval in advance and in writing.

 

InMode Ltd   Sha’ar Yokneam
514073618   Limited Partnership
[Signature] 50   [Signature]

 

 

Signs for the premises will only be allowed subject to the architect and/or Management Company’s approval and in accordance with the rules determined by them in this respect, and subject to the fact that the Tenant receives any permit required by law to place signs and complies with the terms thereof and will bear any fee or other charge with respect thereto.

 

Without derogating from the provisions above, it is clarified and agreed that the Landlord and/or the architect and/or the Management Company may, however are not obligated, at any time, to demand from the Tenant, at its expense and responsibility, to change the location of the signs and/or size and/or content and/or shape and/or demand that the Tenant renew it and/or replace the signs with new signs and such like, and all in accordance with their sole discretion and the Tenant will not have any allegation and/or demand toward the Landlord and/or the architect and/or the Management Company in connection thereto.

 

22. ADDITIONS AND CHANGES

 

The Tenant will not be entitled to make any changes, improvements or additions in the premises, whether internal changes or external, without obtaining the Landlord’s consent to do so in advance and in writing (Hereinafter: “ Changes and Additions ”). In the event the Landlord permits the Tenant to make any changes and additions in the premises the provisions in Section 12.3 to this contract will apply.

 

InMode Ltd   Sha’ar Yokneam
514073618   Limited Partnership
[Signature] 51   [Signature]

 

 

Without prejudicing and/or derogating from the provisions above, if and when the Tenant executes and/or carries out in the premises changes and additions and including but not limited to the Tenant’s works in the premises and/or in its systems, then, on the date possession of the premises is returned to the Landlord, for any reason, the Tenant will remove at its expense the changes and additions and will restore the premises to the condition it was in on the day the premises were opened and without the changes and additions, unless the Landlord demands, in writing, that the changes and additions, and/or some of them remain, and in such a case they will become the Landlord’s property and the Tenant will not have any claim and/or demand against the Landlord for the changes and additions and/or for its investment therein.

 

23. CONVEYING RIGHTS

 

23.1. The Tenant will not have a right to convey and/or endorse and/or charge its rights and/or its undertakings pursuant to this contract and/or in connection to all or some, hereof, in any manner unless it obtains the express advance and written consent from the Landlord and in accordance with the terms determined by the Landlord of its sole discretion. The Tenant will not lease the premises or any part thereof pursuant to a sub-lease, will not convey the premises or any part thereof, for consideration or without consideration, will not deliver or part thereof possession to another and will not permit in any part thereof use by another, for consideration or without consideration, not even through a concessionaire, and will not charge or pledge any of its rights pursuant to this contract.

 

Without derogating from the provisions above, conveying of the Tenant’s rights in the premises will be possible only subject to the fulfillment of all the following accumulative terms:

 

23.1.1. All of the Tenant’s debts in connection with the premises and this contract were paid to the Landlord’s satisfaction.

 

InMode Ltd   Sha’ar Yokneam
514073618   Limited Partnership
[Signature] 52   [Signature]

 

 

23.1.2. The Landlord gave its consent in advance and in writing to convey such rights, the identity of the transferee, its financial robustness, the nature of its activity and it fitting in with the mix of the businesses operating in the complex, and to any other parameter that the Landlord deems fitting to approve within the framework of conveying the rights as stated above.

 

23.1.3. The Transferee and the Tenant signed a conveyance of rights instrument, pursuant to the terms and in the format as determined by the Landlord in accordance with its discretion;

 

23.1.4. The Transferee gave the Landlord an authorization to charge its account, deposited all the securities and furnished confirmation pertaining to executing the insurance policies to the Landlord, and all in accordance with the provisions in this contract and the rights conveyance instrument;

 

23.1.5. The Transferee and the Tenant fulfilled all of the conditions and requirements in connection with the conveyance of rights as stated above, as determined by the Landlord, on time and in full.

 

It is clarified to avoid any doubt that the provisions set forth in this Section 23.1 above do not constitute a final and exhaustive list of the conditions to convey such rights and the Landlord reserves the right to determine additional conditions and requirements, of its discretion, as a condition precedent to approving the conveyance of the rights without having to reason its decision.

 

23.2. Cancelled.

 

InMode Ltd   Sha’ar Yokneam
514073618   Limited Partnership
[Signature] 53   [Signature]

 

 

23.3. If the Tenant is a corporation, the Tenant undertakes that during the entire lease period no changes will apply to the controlling shareholders, direct or indirect in the corporation (up to a flesh and blood level), voluntarily or involuntarily and will remain in the hands of the individuals detailed in Appendix A to this contract.

 

“ Control ” for the purpose of this section: holding at least 51% of the shares and rights of any type and kind in the corporation, including but not limited to appointing at least 51% of the directors and the right to appoint the CEO.

 

23.4. If the Tenant is incorporated as a partnership, whether registered or not, it undertakes that during the entire lease period no change of partners and/or adding a partner and/or a partner resigning and/or any other change in the composition of the partnership as in effect on the date this contract is signed will apply. Should a change occur in the composition of the partnership voluntarily or involuntarily, without obtaining the Landlord’s consent thereto or contrary to the conditions determined by the Landlord, the provisions in Section 24.5 below will apply.

 

23.5. The Landlord and/or the Management Company may charge and/or pledge and/or convey and/or endorse, in whole or in part, their rights and/or undertakings in the Land and/or the complex and/or pursuant to this contract, in whole or in part, and/or make any other disposition, and to have any entity or body share in the management and/or ownership of the Land and/or complex and/or in any part thereof, as they deem fit and pursuant to their exclusive and absolute discretion and without any need to obtain the Tenant’s consent.

 

23.6. The Landlord and/or the Management Company will be entitled to charge and/or pledge and/or convey and/or endorse, in whole or in part, their rights and/or obligations pursuant to this contract, in whole or in part, and all provided that the Tenant’s rights under this contract are not prejudiced. The Tenant undertakes to cooperate and sign any document required of it if required by the Landlord to approve and/or perform the provisions in this section.

 

InMode Ltd   Sha’ar Yokneam
514073618   Limited Partnership
[Signature] 54   [Signature]

 

 

The Tenant confirms that it is aware that the rights in the Land upon which the complex was built is pledged and charged in favor of the bank and/or that the Landlord may pledge and charge them again and/or refinance, and that the bank’s rights take priority and will take preference of first degree and exclusively over the Landlord’s rights and/or anyone on its behalf in the Land, including but not limited to the Tenant.

 

The Landlord may give the Tenants an irrevocable instruction to pay all the monies and payments owing to the Landlord from the Tenant pursuant to this contract to a bank account that the Landlord so instructs the Tenant, and to it alone, and the Tenant hereby undertakes irrevocably to comply with this provision.

 

23.7. Without derogating from the provisions in Section 24.5 below, it is hereby declared that the right to the lease pursuant to this contract and all of the rights granted to the Tenant pursuant to this contract – cannot be bequeathed, and in the event, heaven forbid, the Tenant dies – this contract will expire forthwith, and the provisions in this contract pertaining to ending the lease period and vacating the premises will apply.

 

23.8. It is hereby agreed that the Tenant will not be entitled to collect any payment for the conveyance of the lease by it to another entity, including but not limited to the conveyance being executed with the Landlord’s approval (and it is again stressed that the Tenant is prohibited from conveying rights and/or its undertakings pursuant to the lease contract without the Landlord’s consent to be given in advance and in writing and subject to the conditions stipulated by the Landlord, insofar as stipulated), no matter what this “vacating fee” is called or any other name. If the Tenants receives such a payment – it must immediately pay it to the Landlord.

 

InMode Ltd   Sha’ar Yokneam
514073618   Limited Partnership
[Signature] 55   [Signature]

 

 

23.9. Without derogating from the provisions in Section 24.5 below, if the Tenant’s rights pursuant to this contract were conveyed to another, voluntarily or involuntarily, without obtaining the Landlord’s consent in accordance with the provisions in this Section 23 or not in accordance with the conditions stipulated by the Landlord for such a conveyance of rights, then without derogating from any other relief available to the Landlord by law, the Landlord may give notice that the lease period has ended and in such a case this contract will come to an end and the provisions in this contract will apply applicable to the end of the lease period, and inter alia with regard to vacating the premises, and the Tenant will have no allegation and/or demand and/or claim in connection thereto.

 

24. RELIEF AND REMEDIES

 

24.1. Whereupon a party to this contract breaches any of its provisions that injured party will be entitled to all the relief determined in the Contracts Law (Remedies for Breach of Contract), 5731 – 1970, even in the event a specific relief or remedy is granted in this contract for such a breach, and this without derogating from the provisions in this contract or the provisions in the law.

 

24.2. Without derogating from its right to compensation of a higher amount or to any other relief, in the event of a material breach of this contract by the Tenant, the Landlord will be entitled to pre-determined, agreed and estimated compensation of an amount equal to the rent, management fees and VAT thereon, for six months’ rent, whereby this amount will be linked to the Index and up to the index recorded on the date the payment is actually made (Hereinafter: “ The Liquidated Damages ”), and this whether the Landlord opted to uphold the contract or not or opted to rescind it. The parties declare that they view the said amount as agreed and suitable compensation for the damage the parties perceived as a probable result of a material breach of this lease contract by the Tenant.

 

InMode Ltd   Sha’ar Yokneam
514073618   Limited Partnership
[Signature] 56   [Signature]

 

 

24.3. Any breach of any of the provisions detailed below of the contract will be considered a material breach hereof:

 

24.3.1 A breach of any of the provisions in Sections 6, 7, 8, 9, 10, 12, 13, 14, 15, 17, 18, 19, 20, 21, 22, 23, 24, 25 and 26 to this contract, and all of their sub-sections.

 

24.3.2 A delay in making any payment that the Tenant must pay pursuant to the provisions in this contract, for a period exceeding 7 (Seven) days and/or a delay in payment of two consecutive and sequential payments and/or a delay in making 3 (Three) payments that the Tenant must pay during the entire lease period.

 

24.3.4 The provisions above do not derogate from the provisions in Section 24.5 below.

 

24.4. In any event the Tenant stops the operation of the business in the premises or the lease contract for any reason whatsoever, the Tenant must pay all the payments applicable to it by virtue of the provisions in this contract until the end of the lease period and this without derogating from the rest of the Tenant’s obligations pursuant to this contract and/or any of the Landlord’s rights pursuant to the law and pursuant to this contract, including but not limited to the right to receive the liquidated damages.

 

24.5. The Landlord will be entitled to rescind this contract, notwithstanding any provision in the contract in connection with the lease period and demand that the Tenant vacate the premises forthwith in an early notice of Ten (10) days (Hereinafter: “ The Rescission Notice ”) and return possession thereof to it as stated in Section 25.7 below, and this in each one of the following instances:

 

InMode Ltd   Sha’ar Yokneam
514073618   Limited Partnership
[Signature] 57   [Signature]

 

 

24.5.1. The Tenant materially breached this contract or a material provisions herein.

 

24.5.2. The Tenant breached this contract not by a material breach and did not remedy the breach within 14 days of the day it was required to do so or that the Tenant breached the provisions in this contract at least 3 (Three) times, accumulatively, during the course of the entire contract period. To avoid doubt, it is clarified that in regard to the number of breaches by the Tenant as stated above, all of the Tenant’s breaches will be taken into account, including but not limited to breaches that were remedied on the date determined to do so.

 

24.5.3. The Tenant, or any of its individuals or any of the guarantors to this contract, as applicable, died and/or a petition was filed with the authorized court to have it wind up, declare it bankrupt, to appoint a trustee, liquidator, temporary liquidator, pre-liquidator, receiver over a material part of its assets, and/or to impose a lien over a material part of its assets, and an order was issued pursuant to the petition or the petition was cancelled or dismissed within 45 (Forty Five) days of it being filed with the court and/or if the Tenant and/or any one of the guarantors to this contract filed a petition to wind it up and/or declare it bankrupt and/or to execute a creditors arrangement and/or stay of proceedings notwithstanding the above. In the event of one of the foregoing events happening with regard to a guarantor to this contract, the Tenant will be entitled to furnish one guarantor whose identity is agreeable to the Landlord of the Landlord’s sole discretion, and this within 15 (Fifteen) days of the occurrence of that event.

 

InMode Ltd   Sha’ar Yokneam
514073618   Limited Partnership
[Signature] 58   [Signature]

 

 

 

24.5.4. All or some of the other guarantees and/or securities that were given to uphold this contract expired or were cancelled or were declared by the authorized court as void or invalid for any reason, or were forfeited by the Landlord and/or the Management Company without the Tenant complementing them and resubmitting them on time.

 

24.5.5. The Tenant did not give the Landlord any one of the execution of insurance policies confirmation that it is to furnish to the Landlord pursuant to Section 19 above, including but not limited to confirmation that they were renewed.

 

24.6. Whereupon a cancellation notice was given the provisions in Section 25 below will apply and the following provisions:

 

24.6.1. The Landlord and the Management Company will have the right to a lien over all of the Tenant’s equipment and inventory in the premises and/or in the complex as security for payment of all the compensation and monies owing to the Landlord and/or the Management Company in such a case from the Tenant. The Landlord and/or the Management Company will be entitled to forfeit the equipment and the inventory and/or to collect on them by selling them or by any other manner to settle the Tenant’s debts toward them if they are not settled within 15 (Fifteen) days of the date the first written demand is received. It is clarified that the Landlord and/or the Management Company will not be subject to keepers debts whether as a paid keeper or without payment.

 

24.6.2. The Tenant will not have any right to object in any manner and/or to try to delay or prevent the Landlord engaging with any other tenant and/or to try prevent or delay execution of leasing the premises to a substitute tenant. All of the above will apply both to the relations between the Landlord and the Tenant and the relations between the Tenant and the substitute tenant will be considered, inter alia , as contractual provisions in favor of a third party.

 

InMode Ltd   Sha’ar Yokneam
514073618   Limited Partnership
[Signature] 59   [Signature]

 

 

24.7. In any event the Tenant breaches this contract, whether the Landlord chose to rescind this contract or not, the Tenant will be responsible to reimburse the Landlord and the Management Company immediately upon receiving its first written demand, all the expenses, damages and losses they sustain due to a breach of the contract by the Tenant.

 

24.8. A delay on the Tenant’s part in making any payment to the Landlord and/or to the Management Company will accrue interest at the maximum rate permitted by law at that time and if there is no restriction pursuant to the law on the interest rate, interest in arrears at the maximum rate that Bank Leumi Le’Israel Ltd. charges on unauthorized overdrafts at that time for the period in arrears (Hereinafter: “ Interest in Arrears ”), and this without derogating from the Landlord and/or Management Company’s right to compensation at a higher rate or any other relief.

 

Written confirmation by one of the bank branches managers pertaining to said interest rate will constitute determining and sufficient proof of the interest rate as stated above.

 

24.9. Any discount and/or benefit and/or grant and/or consideration in money and/or equivalent and/or exemption from payment of rent and/or management fees and/or participation in investing in the adjustments to the premises, offered to the Tenant by the Landlord and/or the Management Company, insofar as offered during the course of and/or before the lease period, are contingent upon the Tenant fulfilling all of its undertakings pursuant to this contract in full and on time. whereupon the Tenant violates any of its said undertakings and/or does not fulfill them in full and on time then any benefit and/or grant and/or exemption and/or participation amount in adjustment costs as stated above are voided, and the Tenant will be required to reimburse any amount and/or the value of the benefit it received as stated above, and this without derogating from the rest of the Landlord’s relief and remedies pursuant to the law and/or pursuant to this contract.

 

InMode Ltd   Sha’ar Yokneam
514073618   Limited Partnership
[Signature] 60   [Signature]

 

 

25. VACATING THE PREMISES

 

25.1. The Tenant undertakes to vacate the premises at the end of the lease period, or on the earlier date if shortened due to the contract being rescinded or expiring for any reason, all according to the earliest date and as applicable and to return the premises to the exclusive possession of the Landlord whereby the premises will be in the same condition the premises was in on the delivery date, including removal of any object and/or addition and/or permanent facility installed by the Tenant (to the exclusion of the Landlord demanding that they remain in the premises) by such a manner that the removal thereof will not damage the premises and its internal and external appearance, and all subject to reasonable wear and tear, however in any event – the premises must be in good condition, orderly and whitewashed.

 

25.2. The Tenant must return the premises free and clear of any person and object, and in accordance with the provisions in Section 22 above, and all at the Tenant’s expense.

 

25.3. Uninstalling affixtures and/or systems in the premises owned by the Tenant (unless the Landlord demands that they remain in the premises) will be executed in accordance with the engineer’s instructions and by contractors approved to do so by the Landlord only, and in any event, without damaging the building in the complex and/or the premises and/or the systems installed therein and serving them and/or the other tenants and/or the complex’s regular activity and/or that of other tenants therein.

 

25.4. Upon vacating the premises, for any reason, the Tenant will furnish to the Landlord confirmation from all the municipal and/or government and/or other authority and/or from any body that the Tenant undertook in this contract to make various payments directly to it attesting to the Tenant paying all the payments relating to the lease period and that it has no debt or undertaking to any of the said bodies.

 

InMode Ltd   Sha’ar Yokneam
514073618   Limited Partnership
[Signature] 61   [Signature]

 

 

25.5. For the avoidance of doubt, in the event the Tenant does not furnish all the aforementioned approvals on time, it will be seen, with regard to this contract as if it did not pay the said payments and the Landlord will have all the rights in connection thereto, including but not limited to the right to realize the securities given to it to secure the Tenant’s undertakings or any part thereof.

 

25.6. For each day the Tenant is late in vacating the premises the Tenant will pay the Landlord pre-determined, agreed and estimated compensation of a sum equal to the rent owing to the Landlord for the last month’s rent divided by 10 (Ten), and all subject to the linkage provisions in this contract. If the delay in vacating the premises exceeds 30 (Thirty) days, the Tenant will pay the Landlord for each day it is late in vacating the premises pre-determined, agreed and estimated compensation of a sum equal to the rent owing to the Landlord for the last month’s rent as stated above, divided by 6 (Six).

 

The parties declare that the said amount constitutes agreed and appropriate compensation for the damage the parties see as a probable result of a delay in vacating the premises as stated above, and all this without derogating from the Landlord’s right to any other relief and/or compensation at a higher rate, including but not limited to compensation the Landlord is charged, if charges, toward a substitute tenant.

 

25.7. Without derogating from its right to any other relief in the event of the premises not being vacated on time, the Landlord may:

 

25.7.1. Immediately stop supplying to the Tenant and/or premises and/or instruct the Management Company and the latter must comply with such an order, to stop supplying to the Tenant and/or the premises, electricity, water, air conditioning or other services of its discretion and the Tenant will not have any allegation or claim in connection thereto.

 

InMode Ltd   Sha’ar Yokneam
514073618   Limited Partnership
[Signature] 62   [Signature]

 

 

25.7.2. To enter itself and/or through others the premises, including but not limited to by breaking the locks and to this end to use reasonable force and to remove from the premises any belongings or chattels found therein and to change the locks or prevent access to it by the Tenant or someone on its behalf by any method it deems fit and the Tenant will not have any allegation or claim in connection thereto.

 

25.8. The Landlord will be entitled to vacate the premises as stated above at any time it deems fit, after giving a warning in advance and in writing of 7 (Seven) days. The Landlord will be entitled to do with the property and the equipment found in the premises as it pleases according to its absolute discretion and inter alia the Landlord will be entitled to remove the property and equipment from within the premises and may, however is not obligated, to store the property and equipment at a place it deems fitting, and in such a case the Tenant must pay the removal and storage fees and the rend determined by the Landlord of its sole and absolute discretion. And the Landlord may also sell such property and equipment at a price and pursuant to conditions to be determined by the Landlord of its sole discretion, and this to collect on its damages and expenses, and the Tenant waives in advance any allegation and/or demand and/or claim in connection with the Landlord’s said actions as stated in this section.

 

25.9. In any case the Tenant does not vacate the premises on time the Tenant or anyone on its behalf will be considered trespassers and a “new squatter” in the premises, and it will not have any allegation or claim against the Landlord or anyone on its behalf of the damages it sustains or its chattels sustain as a result of such action.

 

InMode Ltd   Sha’ar Yokneam
514073618   Limited Partnership
[Signature] 63   [Signature]

 

 

25.10. To prevent the Tenant and/or any of its individuals and/or any person on its behalf access to the premises or to spend time therein or to use the premises or any part thereof, including but not limited to the facilities, equipment and inventory therein.

 

25.11. The Tenant will be responsible to pay the Landlord all the expenses and/or damages and/or charges the Landlord and/or anyone on its behalf bear with regard to such actions and the provisions in Section 30 below will apply.

 

25.12. The Tenant hereby gives its consent and authorization to the Landlord to perform the actions stipulated in this section above.

 

25.13. The Landlord will not be liable for any damage of any kind the Tenant or its equipment or its property sustain, if caused during or due to performing the actions stipulated in this section by the Landlord and the Tenant will not have any allegation or claim against the Landlord or the Management Company due to performance of such actions.

 

25.14. For the avoidance of doubt, and without derogating from any of the provisions above, the Tenant must pay all the Tenant’s payments for the period it is late in vacating the premises, including and in particular payments for which the Tenant was required to furnish confirmation as detailed in Section 25.4 above.

 

26. SECURITIES

 

As security to ensure fulfillment of all of its undertakings pursuant to this lease contract and pursuant to the management agreement, the Tenant will furnish to the Landlord, on the date this contract is signed, all of the securities detailed below:

 

26.1. A letter of guarantee in the format attached to this contract as Appendix F , signed by two guarantors approved by the Landlord in advance, as guarantors for all of the Tenant’s undertakings, jointly and severally with it (Hereinafter: “ The Personal Guarantee ”).

 

InMode Ltd   Sha’ar Yokneam
514073618   Limited Partnership
[Signature] 64   [Signature]

 

 

26.2. An autonomous, unconditional bank guarantee, that can be endorsed and/or transferred, prepared in favor of the Landlord and the Management Company, as beneficiaries, jointly and severally, and which can be realized in payments, in the format attached to this contract as Appendix G to be valid throughout the entire first lease period, and up to 90 (Ninety) days after the end of the first lease period for the sum stipulated in Appendix A to this contract, whereby the guarantee amount will be linked to the Basic Index (Hereinafter: “ The Bank Guarantee ”).

 

26.3. In the event this contract grants the Tenant a right to extend the lease period, and the Tenant exercises its right to do so, the Tenant will furnish to the Landlord at least 60 (Sixty) days before the start of the additional period a bank guarantee as detailed above valid for up to 90 (Ninety) days after the end of the relevant additional lease period, and this also in accordance with the provisions in Section 7 above.

 

The Tenant will bear all the expenses of the bank guarantee, including but not limited to stamp duty, renewal and the guaranteeing bank’s commission, insofar as applicable.

 

26.4. A deposit of the sum stipulated in Appendix A to this contract (Hereinafter – “ The Deposit ”). It is agreed between the parties that the deposit will not constitute at any stage of the lease period payment for the rent, management fees, parking fee and/or any other payment the Tenant must pay in accordance with the provisions in this contract. Whereupon the Landlord forfeits any amount from the deposit the amount will be credited on account of the debt and/or the charge for which the Landlord chose to forfeit it. It is clarified that insofar as the deposit amount is returned to the Tenant, or any part thereof, it will be returned in nominal values only, without linkage and/or interest. As necessary pursuant to the above, it is clarified that in return for depositing the deposit the Tenant will only be given a receipt.

 

InMode Ltd   Sha’ar Yokneam
514073618   Limited Partnership
[Signature] 65   [Signature]

 

 

26.5. A promissory note linked to the index without filling in the payment date of the note in the format attached as Appendix H to this contract for the sum stipulated in Appendix A to this contract (Hereinafter: “ The Promissory Note ”). The Landlord will be entitled to fill in the payment date on the note of its discretion.

 

The personal guarantee, the bank guarantee, the deposit and the promissory note will be referred to above and below jointly as: “ The Securities ” or “ The Collateral ”.

 

26.6. The Landlord may, at its discretion and after giving a written warning 7 (Seven) days in advance, realize all or some of the securities, in any case of a breach of this lease contract (including but not limited to the management contract) by the Tenant.

 

26.7. After 90 (Ninety) days following the end of the relevant lease period, and after it is proven to the Landlord’s satisfaction that the Tenant fulfilled all of its undertakings in accordance with this contract and the management agreement, all of the securities will be returned to the Tenant.

 

26.8. For the avoidance of doubt, delivery of the said securities or any part thereof and/or realizing them by the Landlord and/or the Management Company does not derogate from the Landlord and/or the Management Company’s right to collect that which they deserve from the Tenant through any other method, or to release the Tenant of any of its undertakings pursuant to this contract or the management agreement, or to limit the compensation amount and/or damages the Landlord and/or the Management Company will be entitled to collect from the Tenant.

 

InMode Ltd   Sha’ar Yokneam
514073618   Limited Partnership
[Signature] 66   [Signature]

 

 

26.9. The Landlord will be entitled to charge the securities in favor of any bank and/or financial institution and/or to assign and/or endorse and/or transfer the securities to substitutes and/or transferees of the Landlord and/or the Management Company (including but not limited to parent companies and/or subsidiaries and/or sister companies and/or affiliated companies and/or integrated companies of the Landlord and/or the Management Company stepping into the Landlord and/or the Management Company’s shoes for all senses and purposes) and/or in favor of any bank and/or financial institution and/or to any third party constituting the Landlord and/or the Management Company and/or who purchases from the Landlord the rights in the premises (Hereinafter in this section: “ The Transferee ”), provided that realizing the securities is done in accordance with the provisions in this contract.

 

It is further agreed that in the event the Landlord and/or the Management Company request to endorse and/or assign to the Transferee the securities in their possession as stated above, the Tenant undertakes to furnish alternative collateral (as defined above) in favor of the Transferee and this within 7 days of the date of the Landlord and/or the Management Company’s demand to do so. In return for receiving the new collateral the Landlord and/or the Management Company will return the previous securities to the Tenant.

 

Insofar as the Tenant does not furnish the new collateral as stated above, this will constitute a material breach of this agreement and the Landlord and/or the Management Company will be entitled to realize the collateral in their possession forthwith and to keep the collateral realization monies as a deposit in accordance with the provisions in this agreement (including but not limited to the Landlord and/or the Management Company being entitled to transfer the said deposit monies to the Transferee). The Tenant undertakes not to object to any realization of the securities proceeding as stated above.

 

InMode Ltd   Sha’ar Yokneam
514073618   Limited Partnership
[Signature] 67   [Signature]

 

 

26.10. For the avoidance of doubt, in any event the rent and/or the management fees and/or payment for the parking is increased, the Tenant must also increase the collateral accordingly. In any event of forfeiture and/or realization of all or some of the securities, for any reason, the Tenant must complement them for the full amount of the securities within 48 (Forty Eight) hours of the time they were forfeited or realized without any need for a demand on the Landlord and/or the Management Company’s part.

 

27. NO TENANT’S PROTECTION RIGHTS

 

It is agreed that the provisions in the Tenant’s Protection Law (Consolidated Version), 5732 – 1972 and/or any other tenant protection laws , including their regulations and orders (hereinafter in this section: “ The Law ”) will not apply to the premises and/or with regard to this lease contract, and that no law granting the Tenant status of a protected tenant or granting the Tenant a right not to vacate the premises in the event and on dates that the Tenant must, pursuant to the contract vacate the premises will apply to the premises.

 

The Tenant confirms its awareness that the premises is located in a building whereby the construction thereof was completed after 20.8.68. The parties declare expressly that this lease was concluded explicitly on the condition that the law will not apply to the lease. The Tenant declares that it did not pay and will not pay the Landlord in connection with this contract any key money or any other consideration other than rent and/or management fees and that the Tenant or anyone acting on its behalf including but not limited to any of its individuals and/or shareholders therein will not be a protected tenant in the premises pursuant to the law and will be estopped from filing any claims and raising any allegations in connection with it being a protected tenant or that it has more rights in the premises than that granted to it explicitly in this contract.

 

InMode Ltd   Sha’ar Yokneam
514073618   Limited Partnership
[Signature] 68   [Signature]

 

 

The Tenant declares that all of the investments to be made by it in the premises and/or the complex including but not limited to the equipment and facilities will be done for its needs and that it is estopped from arguing that these investments constitute key money or a substitute for key money or payment pursuant to Section 82 to the law or any payment granting it rights in the premises and it will be estopped from demanding from the Landlord full or partial contribution to the expenses or reimbursement, for such investments and the provisions in Section 22 above will apply.

 

28. CREDITING PAYMENTS AND NO SET OFF RIGHT

 

28.1. In any event the Tenant owes the Landlord several charges, the Landlord will have the right to determine at the time of payment, of its discretion, the charge to the account the amount paid will be credited. So long as the Landlord does not notify the Tenant to the contrary, the payment will be credited firstly toward linkage differentials and interest and/or interest in arrears, thereafter for the payment for parking, for management fees, for rent for electricity paid to the Landlord (insofar as paid pursuant to this contract) and for the rest of the payments according to their order.

 

28.2. The Tenant will not be entitled to set off from the Tenant’s payments in accordance with this contract, including but not limited from the rent, pecuniary charges that the Landlord and/or the Management Company will owe the Tenant, if at all, whether by virtue of this contract or by virtue of other transactions. The Tenant will not be entitled to delay performance of any of the Tenant’s payments no matter what the circumstances.

 

InMode Ltd   Sha’ar Yokneam
514073618   Limited Partnership
[Signature] 69   [Signature]

 

 

29. FORCE MAJEURE

 

The Tenant declares and undertakes that the Landlord will not be considered as having breached this contract or did not fulfill any of its conditions and the Tenant will not be entitled to any relief toward the Landlord, if the reason for the breach of the contract or nonfulfillment of the condition derived from circumstances that the Landlord has no control over, including but not limited to a fire, explosion, natural disaster, strike, war, act of terrorism, emergency situation or cease works orders on behalf of the authorities, force majeure and/or upon the occurrence of any other event of this type.

 

30. PERFORMANCE OF UNDERTAKINGS INSTEAD OF THE OTHER PARTY

 

So long as an obligation is imposed upon the Tenant pursuant to this contract to perform an action or work or to pay a given payment and the Tenant did not perform the action or the work or the said payment by the date stipulated to do so in the contract or in the law, and if no such date is mentioned – by the date stipulated to do so in a written demand received from the Landlord – then the Landlord and/or the Management Company will be entitled, however not obligated, to perform the action or the work or make the payment instead of the Tenant and at the Tenant’s expense, and this in person or through others. In such a case the Tenant must pay the Landlord, immediately upon its first demand, all the amounts or losses or the damages the Landlord or the Management Company paid or incurred in connection with performance of the action or the work or the said payment, in addition to 15% (Fifteen Percent) of these amounts for general expenses and in addition to index linkage differentials and interest in arrears stipulated in Section 24.8 above, commencing from the date the Landlord and/or the Management Company incurred the expense and until the date the full amount is actually repaid.

 

InMode Ltd   Sha’ar Yokneam
514073618   Limited Partnership
[Signature] 70   [Signature]

 

 

31. BUILDING ON THE LAND

 

31.1. For the avoidance of doubt, it is clarified that the rights granted to the Tenant pursuant to this contract, insofar as they as they are awarded to it, are granted to the Tenant solely in relation to the premises, and the Tenant do not and will not have any right in connection with the existing or additional building rights and/or existing or additional building areas to be approved and will be built by the Landlord or by a given third party, and/or in connection with use of any part of the complex, whether it exists or will exist in the future, not within the confines of the premises including roofs, passageways and such like. The Tenant gives its consent in advance to any such action and/or use and the Tenant undertakes not to interfere, object or interrupt in any manner whatsoever in relation to all planning actions in connection with the land and/or the complex. Similarly, the Tenant undertakes to avoid raising any allegation against the Landlord and/or someone on its behalf in connection thereto.

 

31.2. It is clarified that the Landlord will be entitled, at any time, without the need for the Tenant’s consent, to perform any change or addition or renovation on the land and/or in the complex, of its sole discretion both before the start of the lease period or thereafter, including but not limited to adding and constructing floors to the complex including changing their designations and/or correcting building permits, additional construction of the various kinds including but not limited to adding floors to the complex, turning public areas to areas for exclusive use of various users, change of openings and passageways and any other change in the complex and/or the complex plans, all of its sole discretion.

 

The Tenant undertakes not to interfere and not to object to any such change or addition for any reason, including but not limited to interruptions it will sustain, if sustained while performing the addition or change.

 

31.3. The Tenant is aware that during the course of the lease period, it is possible that additional construction works will continue and/or start on the land and/or in the complex, which may cause noise, dirt, passage for laborers, placing work means and/or work tools, including placing a crane.

 

InMode Ltd   Sha’ar Yokneam
514073618   Limited Partnership
[Signature] 71   [Signature]

 

 

31.4. The Tenant undertakes not to interfere, object, or get involved in any manner with such construction and not to raise any allegation and/or claim against the Landlord and/or anyone on its behalf in connection thereto, subject to the fact that the access ways to the premises are not materially impaired.

 

32. JURISDICTION

 

The unique and exclusive authority to rule on any matter that a dispute and/or differences of opinion arise between the parties relating to any matter concerning the concluding and/or validity or breach and/or performance and/or interpretation of this contract and its appendices will be granted to the authorized court in the city of Tel Aviv-Yafo, and only to this court.

 

33. MISCELLANEOUS

 

33.1. This contract and the appendices hereto formulate and express the rights and obligations between the Landlord and/or the Management Company and the Tenant exclusively and absolutely.

 

33.2. Upon signing this contract constituting the complete and binding contract between the parties, any contract and/or memorandum and/or consent and/or declaration and/or prospect and/or covenant and/or publication made, if made, by the Landlord and/or the Management Company or their representatives or anyone on their behalf are null and void and the Landlord and/or the Management Company will not be bound by any of these.

 

33.3. The Tenant hereby declares that it reached this contract following independent inquiries and inspections and that it did not rely on any information and/or representation made to it, insofar as made.

 

InMode Ltd   Sha’ar Yokneam
514073618   Limited Partnership
[Signature] 72   [Signature]

 

 

33.4. The headings of the sections in this contract are solely for convenience purposes and will not serve as a reference or aid to construe and/or understand this contract. Any reference to a section in this contract is a reference to the section and to all of its sub-sections, unless expressly stated otherwise in the provisions in this contract.

 

33.5. None of the conditions and the provisions contained in this contract and its appendices derogate from any other condition or provision of this contract but rather add to it.

 

33.6. No change and/or waiver and/or deviation from the provisions in this contract will be valid unless made in writing and signed by the parties to the contract.

 

33.7. Consent on behalf of a party hereto to deviate from any condition in this contract in a specific instance will not constitute a precedent and will not infer an analogy to another instance. If a party does not exercise a right granted to it pursuant to this contract in a specific case this will not be seen as a waiver of that right in that case and/or in another similar case or in a different case and a waiver of a right of that party will not be deduced from this. A waiver made with regard to one matter will not infer an analogy to another matter.

 

33.8. This contract does not create a partnership and/or agency relationship between the parties nor does it grant rights to any third party not mentioned in the contract, and this contract does not derogate or prejudice any obligation or undertaking of a third party.

 

33.9. It is further clarified for the avoidance of doubt that the Tenant will not be entitled at any time to record a caveat notice by virtue of its rights pursuant to this contract or in connection with this contract. Should and notwithstanding this provision the Tenant record a caveat or record with the Land Registration Office, this will be considered a material breach of this contract.

 

InMode Ltd   Sha’ar Yokneam
514073618   Limited Partnership
[Signature] 73   [Signature]

 

 

33.10. The parties addresses for the purpose of this contract are as stipulated at the top of this contract and any notice that is sent from one party to the other will be by registered mail pursuant to the aforementioned addresses, unless a party notified the other party in writing of a change of address it will be considered as if it reached its destination and the knowledge of the recipient party within 72 (Seventy Two) hours of it being delivered to be mailed, and if hand delivered, upon delivery.

 

Any notice that is placed in the Tenant’s mail box in the complex and nay notice that is sent by facsimile will be considered as having reached its destination within 24 (Twenty Four) hours of its being placed or transmitted.

 

33.11. For the avoidance of doubt it is clarified that the use of the phrase “complex” in this contract is solely for convenience purposes. The Landlord will be entitled to determine the name of the complex in which the premises is located, as it deems fit and/or to change it from time to time, all of its absolute discretion.

 

33.12. It is hereby agreed between the parties that the provisions in the Rent and Borrowing Law, 5731 – 1971 will not apply to this contract to the exclusion of the provision in the law which cannot be stipulated upon.

 

33.13. By signing this contract the Tenant gives its consent to the fact that its details, including but not limited to the data in this contract will be included in the database of the tenants to be kept by the Landlord and/or the Management Company and/or the Melisron Ltd. Company and/or one of the subsidiary companies of the Melisron Ltd. company, in accordance with the Privacy Protection Law, 5741 – 1981, and this for the purpose and the needs of the Melisron Group, including but not limited to direct mailing of information and content to the Tenant, and delivery of the information to the Management Company and/or partner in the complex and/or vendors and/or third parties who require the data for the purpose of the works in the complex, to manage the center and all associated thereto and such like of the database manager’s discretion.

 

InMode Ltd   Sha’ar Yokneam
514073618   Limited Partnership
[Signature] 74   [Signature]

 

 

In Witness Whereof the Parties Hereto Set Their Hands

At the place and on the date stipulated above:

 

InMode Ltd   Sha’ar Yokneam
514073618   Limited Partnership
[Signature]   [Signature]
     
The Landlord  

The Tenant

 

Through Messr. [Signature]

CEO

 

Tenant’s Attorney’s Confirmation

 

I the undersigned, Adv. Sagi Omer, of 16 Derech Hayam, Haifa , hereby confirm that the Tenant is an existing and operating corporation and that it reached all the resolutions required to engage in this contract pursuant to its incorporation documents. Similarly I hereby confirm that

On 16.4.2018 Messr.:

Moshe Mizrahi I.D. 051825396

The foregoing Messrs. are authorized and entitled to sign this contract and its appendices on the Tenant’s behalf and their signature is binding upon the Tenant for all senses and purposes.

Messrs. Sign this contract and its appendices ____________ binding upon the Tenants pursuant to this contract and appendices ___.

 

In witness whereof I hereto set my hands

Sagi Omer, Adv.

 

Date: 16.4.2018

 

InMode Ltd   Sha’ar Yokneam
514073618   Limited Partnership
[Signature] 75   [Signature]

 

 

APPENDIX “A” - “SHA’AR YOKNEAM”

 

“InMode Ltd”

 

The Landlord: Sha’ar Yokneam,
  Registered Limited Partnership Number 55-001466-6
  “Ofer Sha’ar Yokneam”, Hakidma 28, Yokneam
  (Hereinafter: "The Landlord")
   
The Tenant: InMode Ltd. Private Company 51-407361-8
  “Tavor” Building, Sha’ar Yokneam, P.O. Box 533, Yokneam
  (Hereinafter: “ The Tenant” )

 

The provisions mentioned alongside the sections in this appendix below are in addition to and supplement the provisions in those sections, however do not derogate from them. The Sections that are added and/or amended and/or deleted in this appendix will override the provisions in the contract. The rest of the conditions of the contract will remain intact.

 

By signing this appendix, the Tenant declares and confirms that it read all of the provisions in the lease contract and all of its appendices, including but not limited to the management agreement.

 

After the “first whereas” the following will be added:

 

“And Whereas the Landlord declares that to the best of its knowledge it engaging in this agreement and in the documents mentioned herein, does not conflict or breach any provisions in the law or agreement that it is privy to, or the Landlord’s incorporation documents.

 

And Whereas the Landlord declares that it is the rights holder in the premises and that to the best of its knowledge there is no hindrance preventing it from engaging in this agreement and leasing the premises to the Tenant”.

 

InMode Ltd   Sha’ar Yokneam
514073618   Limited Partnership
[Signature] 76   [Signature]

 

 

Section 2 To The Lease Agreement – Definitions

 

“The Complex” -

The complex, on the land known as the commercial name “Ofer Sha’ar Yokneam”, including ahi-tech industries building called “Beit Tavor” and will be referred to below in this agreement as: “Beit Tavor”.

 

“The Land” -

Parcels known as numbers 33, 34, 3, 37, 40, 41, 42, 43, 44, 45, 46, 47, 48, 49 and 50 (in full) and part (areas) of Parcels of land known as numbers 21, 22, 23, 24, 30, 31, 32, 35, 38, 39, 79, 80 and 82 in Block 11098.

 

“The Premises” - Unit No. 205 on the second floor of the building known as “Beit Tavor” in the complex, and units nos. 305 and 308 on the third floor of the building known as “Beit Tavor” in the complex and 27 parking spaces in the parking lot (Hereinafter: “ The Parking Spaces ”) all as marked and outlined in red in the blueprint attached as Appendix “ B ” to the contract.

 

“Area of the Premises

-

As defined in Appendix A to this contract and marked with the color red in Appendix B to this contract. Insofar as the premises also includes a storage space, then the provisions in Appendix K will apply thereto. 

 

  -

The area of the premises is as follows: 566 gross square meters on the second floor of the building known as “Beit Tavor” in the complex (Hereinafter: “ The Premises Area on the Second Floor ”) and 390 gross square meters on the third floor of the building known as “Beit Tavor” in the complex (Hereinafter: “ The Premises Area on the Third Floor ”).

 

The premises area on the second floor together with the premises area on the third floor will be referred to jointly as the “Area of the Premises” . For the avoidance of doubt, the premises area as defined above includes the loading areas as defined in the agreement.

 

InMode Ltd   Sha’ar Yokneam
514073618   Limited Partnership
[Signature] 77   [Signature]

 

 

 “The Basic Index” - The Consumer Prices Index (General Index) published on 15.1.2018 or a date close to this for the month of December 2017.
     
“The Municipality”, “The Local Authority” -

Yokneam

   
“Linkage Differential” - Will be deleted: “or the ratio between the other indexes”.

 

Section 4 to the Lease Agreement – The Parties Declarations

 

Section 4.1 – at the end, the following will be added:

 

“The signatories on this agreement are authorized to sign on its behalf, and their signatures in addition to the Landlord’s registered name are binding on the Landlord for all senses and purposes., are the owners or entitled to be recorded as the owners or the registered lessor, as applicable, and the exclusive possessor of the land, and is entitled and may lease the premises to the Tenant in the manner and pursuant to the conditions detailed in this contract, and in particular for the entire lease period”.

 

Section 4.2 – at the end of the section the following will be added:

 

“Except in relation to concealed defects or flaws, insofar as applicable”.

 

Section 6 to the Lease Agreement – The Purpose of the Lease

 

Section 6.1 – Subject to the law, the purpose of leasing the premises is solely for hi-tech industry as defined in Plan No. 245/Bat/C, and this alone

 

InMode Ltd   Sha’ar Yokneam
514073618   Limited Partnership
[Signature] 78   [Signature]

 

 

Section 6.2 – Notwithstanding the provisions in this section above, it is clarified that in the event the Tenant wishes to change the purpose of the lease and to operate in the premises and/or in any part hereof a different type of business, it will contact the Landlord and obtain its consent in advance and in writing, and the Landlord will decide whether to affirm the Tenant’s request of the Landlord’s sole discretion.

 

Sections 6.5 and 6.6 will be deleted.

 

Section 6.7 – Notwithstanding the provisions above, it is clarified that the Landlord will cooperate and assist insofar as possible the Tenant to obtain any license and/or permit that is required to operate and manage the Tenant’s business in the premises, including signing, within a reasonable period of time any plan and/or approval and/or document required by the authorized authorities from “owners”, to uphold all the provisions in this agreement, provided this does not impose upon the Landlord any liability of any type including but not limited to pecuniary and/or legal liability that was not explicitly imposed by this agreement.

 

Section 7 to the lease agreement – the lease period

 

“The First Lease Period” – a period of 45 months to start on the delivery date (as defined below) and to end 45 months later, i.e. on 31.12.2021.

 

Section 7.5 – the Tenant may suggest a substitute tenant or substitute tenants to the Landlord (Hereinafter: “ The Substitute Tenant ”) to lease the premises pursuant to conditions that are not inferior to the conditions in this agreement, and subject to the fact that if the rent by the Substitute Tenant is less than the rent fixed pursuant to this agreement, the Tenant will continue to be liable to pay the difference in the rent, and this by giving written notice to the Landlord (Hereinafter: “ The Tenant’s Notice ”). It is agreed that the Landlord will not refuse to accept the Substitute Tenant other than based on business and/or reasonable grounds only. If the Landlord agreed and engaged in a lease agreement with the Substitute Tenant – the Tenant will not be obligated to pay the rent, subject to the provisionד above, commencing from the date the lease starts for the Substitute Tenant and it will be exempted of any liability toward the Landlord, to the exclusion of the undertaking to pay the difference in the rent, insofar as the Tenant must pay such a difference.

 

InMode Ltd   Sha’ar Yokneam
514073618   Limited Partnership
[Signature] 79   [Signature]

 

 

Section 8 to the lease agreement – The Rent

 

Section 8.1 – “The Rent” – subject to the provisions in the lease contract, the Tenant will pay the Landlord rent for the premises (without the parking fee) and a parking fee for the parking spaces, all as detailed below.

 

(1) Commencing from the delivery date and up to 31.12.2018, the Tenant will pay, for reach month for the premises (without the parking spaces), monthly rent of a sum of NIS 48.5 (Forty Eight New Shekels and Fifty Agorot) for each square meter of the area of the premises, whereby this amount will be linked to the Basic Index in addition to VAT stipulated by law; and
(2) Commencing from 1.1.2019 and until 31.12.2021, the Tenant will pay for each month for the premises (without the parking spaces), monthly rent of a sum of NIS 50 (Fifty New Shekels) for each square meter of the area of the premises, whereby this amount will be linked to the Basic Index in addition to VAT stipulated by law; and
(3) Commencing from the delivery date and until 31.12.2018, the Tenant will pay the Landlord a monthly parking fee of a total sum of NIS 275 (Two Hundred and Seventy Five) for each parking space, whereby this amount is linked to the Basic Index and in addition to VAT stipulated by law.
(4) Commencing from 1.1.2019 and until 31.12.2021 the Tenant will pay the Landlord monthly rent of a total sum of NIS 283 (Two Hundred and Eighty Three New Shekels) for each parking space, whereby this amount is linked to the Basic Index and in addition to VAT stipulated by law.

 

Section 8.7 – instead of “7 days” will read: “14 days”. Section 10 (and all of its sub-sections) – it is clarified that insofar as the payments and/or taxes and/or levies for the use and/or possession of the premises and/or operation of the premises as stated in Section 10 to the lease contract is concerned, these payments will apply to the Tenant during the course of the entire lease period and will be paid by it on the lawful date to pay them to the authorities, insofar as they are applicable by their very nature pursuant to the law upon tenants and/or possessors of a property (as opposed to owners).

 

InMode Ltd   Sha’ar Yokneam
514073618   Limited Partnership
[Signature] 80   [Signature]

 

 

Section 12.11 – it is agreed that insofar as the Landlord executes works as stated in this section above, the works will be executed upon coordinating them in advance with the Tenant while minimizing the interruption to the Tenant’s activity in the premises, insofar as possible under the circumstances.

 

Section 12.12 – will be deleted.

 

Section 13 to the lease agreement – delivery of possession and the delivery protocol

 

Section 13.1 – “The Delivery Date” fulfillment of the suspending condition as stated below in this appendix.

 

Section 13.4 - will be deleted.

 

Section 14 . 4 – Notwithstanding the provisions above, any malfunction or damage sustained as a result of the Landlord’s works in the premises will be repaired by the Landlord and/or the Management Company and at their expense. Additionally, the Landlord and/or the Management Company undertake to repair at their expense only damages to the shell of the premises originating from water penetration defects into the premises, subject to the fact that they were not caused due to an act and/or omission by the Tenant and/or someone on its behalf.

 

Section 14 . 6 – And all provided that reasonable use by the Tenant of the premises for the purpose of the lease is not prejudiced.

 

Section 17.4 – will be deleted.

 

Section 18.4 – after the words “the expenses”, “reasonable” will be added.

 

Section 19.4 – in the second paragraph, instead of “3 business days” will read: “10 business days”.

 

Section 20.2. – After the words: “Any expenses”, “not imposed upon it explicitly pursuant to this agreement” will be added.

 

InMode Ltd   Sha’ar Yokneam
514073618   Limited Partnership
[Signature] 81   [Signature]

 

  

Section 21.4 – Notwithstanding the provisions above, any malfunction or damage sustained as a result of the Landlord’s works will be repaired by the Landlord and/or the Management Company and at their expense. Section 21.5 – Notwithstanding the provisions above, the Landlord undertakes that performance of all such works will be done insofar as possible in a manner that minimizes the damages and inconvenience to the Tenant and that the Landlord and/or the Management Company will in any event put the premise back to its previous condition immediately after completing the work.

 

Section 22 – at the end of the Section the following will be added: “The Landlord will not refuse to carry out internal changes that are not related to construction and/or adding space unless based solely on reasonable grounds, provided that the Landlord’s approval was requested to make the changes in advance and in writing by the Tenant”.

 

Section 23 to the Lease Agreement – Conveying Rights

 

Section 23.1 – in the third line after the words: “Pursuant to its sole discretion”, the following will be added: “The Landlord will not refuse such actions unless based solely on reasonable business reasons”.

 

At the end of Section 23.1 the following will be added: “Unless it receives the Landlord’s consent in writing and in advance. The Landlord will not refuse such actions unless based solely on reasonable business reasons”.

 

Section 23.1.5 – after the words: “As determined by the Landlord” will read: “reasonable and as practiced”. Similarly, at the end of the section after the words: “Of its discretion” the following will be added “however reasonably and as practiced”.

 

InMode Ltd   Sha’ar Yokneam
514073618   Limited Partnership
[Signature] 82   [Signature]

 

 

Section 23.3 – The Tenant declares and undertakes that as on the date this agreement was signed there are no “controlling shareholders” (as defined in the agreement) in the Tenant. It is agreed that insofar as a change applies to the control over the Tenant during the course of the lease period, by such a manner that there will be controlling shareholders in the Tenant, the Tenant undertakes to notify the Landlord of this as soon as possible and remit the controlling shareholders details to it, and that from this moment and onwards the provisions in this section will apply pertaining to a prohibition against changing control in the Tenant, as detailed in the lease agreement. The Landlord will not refuse a change in the controlling shareholders in the Tenant unless based solely on reasonable business grounds.

 

Section 23.5 – the provisions in this section is subject to the fact that the Tenant’s rights in the premises pursuant to this agreement are not prejudiced.

 

Section 24.3 – it is agreed that no breach will be considered a material breach unless the breach was not remedied within 4 business days of the breaching party receiving a warning to do so. Section 24.3.2 – instead of “7 days” will read: “14 days”.

 

Section 24.5 – the early notice will be 30 days.

 

Section 24.5.3 – Instead of “45 days” will read: “60 days”.

 

Section 24.8 – Notwithstanding the above it is hereby agreed that solely in regard to the first delay in making a payment during the course of the lease period, not exceeding 7 (Seven) days following the date determined for payment thereof – will not entitle the Landlord to a right to receive interest in arrears from the Tenant.

 

Section 25.5 – Realizing the securities as stated above will only be after giving a warning of 14 days to the Tenant, at the end of which the Tenant did not settle its debts to the authorities.

 

Section 25.7.1 – provided that the Tenant was given a written warning 14 days in advance pertaining to its intention to act as stated above, and an opportunity to remedy its breach.

 

InMode Ltd   Sha’ar Yokneam
514073618   Limited Partnership
[Signature] 83   [Signature]

 

 

Section 25.8 – For the avoidance of doubt, and notwithstanding the provisions above, the Landlord will not vacate the premises before giving an advance written warning of 21 days to the Tenant, during the course of which the Tenant did not remedy the breach.

 

Section 26 to the Lease Agreement – Securities

 

Section 26.1 – personal guarantee – none.

 

Section 26.2 - Bank guarantee – the bank guarantee will be of an amount equal to rent and management fees, paid by the Tenant for 3 months’ rent, i.e. a sum of NIS 198,063 in addition to VAT thereon, whereby this amount will be linked to the Basic Index, in the format attached to the contract as Appendix G .

 

Section 26.4 - Deposit – none.

 

Section 26.5 – Promissory Note – none.

 

Section 26.6 – instead of “7 days” will read: “14 days”

 

Section 29 - will be deleted.

 

Section 31.4 – at the end the following will be added: “and that it will not prevent reasonable use by the Tenant of the premises”

 

InMode Ltd   Sha’ar Yokneam
514073618   Limited Partnership
[Signature] 84   [Signature]

 

 

Appendix D – The Management Agreement

 

The Management Fees – it is agreed that commencing from the delivery date and until 31.12.2018, the monthly management fees that the Tenant will pay to the Landlord for the premises will be a sum of NIS 9.75 (Nine New Shekels and Seventy Five Agorot) per square meter of the area of the premises, whereby this amount will be linked to the Basic Index and in addition to VAT stipulated by law. Similarly, commencing form 1.1.2019 and through until 31.12.2021, the monthly management fee to be paid by the Tenant to the Landlord for the premises will be a sum of NIS 10 (Ten New Shekels) per square meter of the area of the premises, whereby this amount will be linked to the Basic Index and in addition to VAT stipulated by law. Notwithstanding the provisions above, the Landlord will be entitled, at any time, in accordance with its sole discretion and for any reason, to collect from the Tenant monthly management fees in accordance with that detailed in the management agreement (i.e. on the basis of cost +15%, whereby this amount will be linked to the Basic Index and in addition to VAT stipulated by law), all as detailed in the management agreement and provided that the calculation based on COST will not exceed management fees of a sum of NIS 15 per square meter. The Tenant undertakes that it will not have any allegation and/or claim and/or demand against the Landlord and/or the Management Company and/or anyone on their behalf insofar as the management fees are concerned as detailed above (including but not limited to the amount being fixed or calculated pursuant to the mechanism fixed in the management agreement, provided that it does not exceed the aforementioned fixed sum of NIS 15 per square meter). For the avoidance of doubt, it is clarified that the management fees stated in this section above include the Tenant’s participation fee in the expenses and the equipment renewal fund.

 

InMode Ltd   Sha’ar Yokneam
514073618   Limited Partnership
[Signature] 85   [Signature]

 

 

Insurance Premiums – it is further agreed that notwithstanding the provisions in Section 8 to the management agreement, the Tenant’s relative share in the expenses to pay the insurance premiums for the areas, as detailed in Section 8 to the management agreement, will be collected as a separate charge and not as part of the management fees and expenses, as defined in the management agreement, and this according to a calculation of the total premiums paid to the insurance company by the Landlord, divided by the total built up area of the complex and multiplied by the area of the premises and/or pursuant to any other calculation, as detailed in Section 8 to the management agreement and/or the lease contract, and in accordance with the amounts determined from time to time by the Management Company and/or the Landlord, of their sole discretion. The Tenant undertakes that it will not have any allegation and/or claim and/or demand against the Landlord and/or the Management Company and/or anyone on their behalf insofar as the insurance premiums are concerned as detailed above (including but not limited to the amount being fixed or calculated pursuant to the mechanism fixed in this appendix and/or pursuant to another mechanism fixed in the management agreement and/or in the lease contract).

 

Special Terms:

 

1. Suspending Condition

 

1.1. The Tenant declares that it is aware that as of the date this contract is signed, the premises are not vacate and that it is occupied by the existing tenant whose lease period has not yet come to an end (Hereinafter: “ The Current Tenant ”). It is thereby hereby agreed that the Current Tenant actually vacating the premises will be by 1.5.2018 (Hereinafter: “ The Suspending Condition Fulfillment Date ”), constitutes a suspending condition to the validity of this contract.

 

1.2. If and insofar as the Current Tenant does not vacate the premises of any person and object by the suspending condition fulfillment date, the suspending condition fulfillment date will automatically be deferred to the date the premises are actually vacated by the Current Tenant and the rest of the dates fixed in this contract will also be deferred accordingly.

 

InMode Ltd   Sha’ar Yokneam
514073618   Limited Partnership
[Signature] 86   [Signature]

 

  

1.3. Notwithstanding the provisions above it is agreed that insofar as the deferment of the suspending condition fulfillment date exceeds 30 (Thirty) days, for any reason, each party to this contract may (however is not obligated) to notify the other party that this contract is null and void, as if it was never signed. In the event one of the parties decides to cancel this contract as stated above, that party who decided to rescind the contract is released of all of its undertakings pursuant to this contract and the other party will not have and hereby waives any allegation, claim and/or demand in connection with this contract and/or the premises.

 

2. Technical Specification : The premises will be delivered to the Tenant in the condition it will be in on the delivery date (“As Is”).

 

In witness whereof the parties hereto set their hands at the place and on the date stipulated in the heading to this contract above:

 

InMode Ltd   Sha’ar Yokneam
514073618   Limited Partnership
[Signature]   [Signature]
     
The Landlord  

The Tenant

 

Through Messrs. [Signature]

CEO

 

InMode Ltd   Sha’ar Yokneam
514073618   Limited Partnership
[Signature] 87   [Signature]

 

 

Tenant’s Attorney’s Confirmation

 

I the undersigned, Adv. Sagi Omer, of 16 Derech Hayam, Haifa , hereby confirm that the Tenant is an existing and operating corporation and that it reached all the resolutions required to engage in this contract pursuant to its incorporation documents, that the signatures above are the signatures of Messrs. Moshe Mizrahi I.D. 051825396 and —————— I.D. —————— who signed and is authorized to sign this contract on the Tenant’s behalf and their signatures are binding upon the Tenant for all senses and purposes, and signed this contract in front of me

 

In witness whereof I hereto set my hands

 

Sagi Omer, Adv.

License 57764

Derech Hayam 16, Haifa

Sagi Omer , Adv.

 

InMode Ltd   Sha’ar Yokneam
514073618   Limited Partnership
[Signature] 88   [Signature]

 

 

FLOOR 3

 

 

 

InMode Ltd   Sha’ar Yokneam
514073618   Limited Partnership
[Signature] 89   [Signature]

 

 

FLOOR 2

 

 

 

InMode Ltd   Sha’ar Yokneam
514073618   Limited Partnership
[Signature] 90   [Signature]

 

 

Addendum No. 1 to Unprotected Lease Contract dated February 2018

Entered into and signed in Yokneam on January 13, 2019

 

Between: Shaar Yokneam, Registered Limited Partnership
  Partnership No. 550014666
   By the authorized representatives
  Itay Kaplan, I.D. 058768615
  and Yael Gross, I.D. 55984280
  with its address for purposes of this addendum
  being “Shaar Yokneam” complex
  28 HaKidma St. Yokneam-Ilit
  and which shall be referred to in short as the “ Lessor ”
   
    of the first part ;
   
And: InMode Ltd. P.C. 51-407361-8
  By the authorized representatives
  Moshe Mizrahi, I.D. 051825396
  authorized to sign on behalf of the company and bind it
  with its address for purposes of this addendum
  being “Tavor” building, Shaar Yokneam, P.O.B. 533, Yokneam
  and which shall be referred to in short as the “ Lessee ”
   
  of the second part ;

 

Whereas a lease contract, together with its annexes and attachments was signed in February 2018 between the Lessor and Lessee (the “ Original Lease Contract ”) for the lease of areas and parking spaces on the complex known as “Shaar Yokneam” (the “ Current Leased Property ” and the “ Complex ”, respectively), as being extended and/or amended from time to time;

 

(the Original Lease Contract together with all of its addenda, including this addendum, and their annexes and attachments shall be referred to collectively as the “ Lease Contract ”); and

 

Whereas the Lessee contacted the Lessor in a request to lease also the Additional Area, as defined below, as well as the Additional Parking Spaces, as defined below, AS IS, and by doing so, to increase the area of the Current Lease Property, as defined above, the Lessor agreed to the Lessee’s request, and all under the terms and conditions specified in this addendum below;

 

THEREFORE, it is hereby represented, stipulated and agreed by the parties as follows:

 

 

 

 

1. Preamble and annexes

 

1.1 The preamble to this addendum and its annexes constitutes an integral part hereof and is binding as the remaining of its terms.

 

1.2 Section headings are for orientation and convenience purposes only and shall not be used for the interpretation of this addendum.

 

1.3 Terms and expressions appearing in this addendum shall have the meaning ascribed to them in the Lease Contract, unless expressly stated otherwise.

 

1.4 This addendum constitutes and integral part of the Lease Contract.

 

1.5 Previous drafts of this addendum shall have no weight in connection with the interpretation of the Lease Contract and/or of this addendum or any of their conditions. Such drafts shall not be admissible in any judicial or quasi-judicial proceeding.

 

2. Increasing the area of the leased property

 

2.1 Subject to the fulfillment of the terms and conditions specified herein, commencing from January 15, 2019 (the “ Effective Date ”), an additional area of approx. 416 sqm gross, shall be added to the area of the Current Leased Property, on the third floor of “Beit Tavor” which is in the Complex, as well as 3 parking spaces on the roof of Beit Tavor, and all as delineated and marked in the blueprint attached hereto as Annex A (hereinafter respectively the “ Additional Area ” and the “ Additional Parking Spaces ”).

 

The Current Leased Property together with the Additional Area shall be referred to as the “ Leased Property ”.

 

The area of the Leased Property (i.e. the area of the Current Leased Property together with the Additional Area) is approx. 1,372 sqm gross.

 

2.2 Commencing from the Effective Date, the Additional Area shall be added to the area of the Current Leased Property, and shall be deemed as part of the Leased Property and all of the terms and conditions of the Lease Contract shall apply thereto for all intents and purposes, such that any reference to the “area of the leased property” and/or the “leased property” in the Lease Contract shall mean the area of the Current Leased Property together with the Additional Area, other than with respect to issues where another arrangement is explicitly included in this addendum.

 

2.3 It is clarified, for the avoidance of doubt, that the Lessee leases the Additional Area solely for the purpose of expanding the Leased Property and for the Purpose of the Lease, as defined in the Lease Contract.

 

 

 

 

2.4 The Additional Area shall be delivered to the Lessee AS IS, and the delivery thereof shall constitute as confirmation on the part of the Lessee that the Additional Area was delivered thereto in accordance with the provisions of the Lease Contract and to its absolute satisfaction and that it neither has nor shall have any claims and/or arguments and/or demands with respect thereto vis-à-vis the Lessor and/or anyone on its behalf.

 

2.5 It is clarified that the responsibility is imposed solely on the Lessee and it undertakes to update all parties involved, including the Local Authority and/or any other authority or party, on the lease of the Additional Area commencing from the Effective Date, including (but not limited to) updating the name of the Lessee as the possession holder of the Additional Area commencing from the Effective Date, and that no reasonability is or shall be imposed on the Lessor in this matter.

 

The Lessor’s knowledge, the possession of the Additional Area and the Additional Parking Spaces on the Effective Date shall occur where the said areas are clear of any debt to any authority and/or party whatsoever, including the taxes specified in Section 10 of the Lease Contract.

 

3. The terms of the lease of the Additional Area

 

It is agreed that subject to the full and timely fulfillment of all of the terms and conditions specified herein, the Lessee shall lease the Additional Area from the Lessor, for a lease period of 36 (thirty-six) months, commencing on the Effective Date, i.e. January 15, 2019 and ending on December 31, 2021 (the “ Term of Lease of the Additional Area ”).

 

4. Rent, management fees and additional payments for the Additional Area

 

4.1 It is clarified and agreed that commencing from the Effective Date, the Lessee undertakes to pay monthly rent for the Additional Area, in the sum of ILS 21,008 (twenty-one thousand and eight ILS), plus linkage differentials to the CPI (as defined in the Lease Contract), published on December 15, 2018 or in proximity thereto, for the month of November 2018 (the “ Base Index ”) plus lawful VAT (hereinafter collectively: the “ Rent for the Term of Lease of the Additional Area ”).

 

4.2 Commencing from the Effective Date, the Lessee undertakes to pay monthly management fees for the Additional Area, in the sum of ILS 4,576 (four thousand and five hundred and seventy-six ILS), linked to the Base Index plus lawful VAT.

 

Notwithstanding the aforesaid, the Lessor shall be entitled, at any time, under its sole discretion and for whatever reason, to collect monthly management fees from the Lessee in accordance with the provisions of the management agreement (i.e., based on COST+15%, linked to the Base Index plus lawful VAT), all as specified in the management agreement and provided that calculation based on COST shall not exceed management fees of ILS 15 per sqm. The Lessee undertakes that it shall have no argument and/or claim and/or demand vis-à-vis the Lessor and/or the management company and/or anyone on their behalf with respect to the management fees as specified above (including whether the amount is fixed or calculated under the mechanism set forth in the management agreement (provided that it does not exceed the amount determined above of ILS 15 per sqm) (the “ Management Fees for the Term of Lease of the Additional Area ”). For the avoidance of doubt, it is clarified that the management fees as stated in this section above, includes the participation fees of the Lessee in the expenses and the fund for renewal of the equipment.

 

 

 

 

4.3 The Lessee shall pay the Lessor monthly parking fees for the Additional Parking Spaces, in the sum total of ILS 300 (three hundred ILS) for each parking space, linked to the Base Index plus lawful VAT (the “ Parking Fees for the Term of Lease of the Additional Area ”).

 

For convenience purposes, the rent for the Term of Lease of the Additional Area, the Management Fees for the Term of Lease of the Additional Area and the Parking Fees for the Term of Lease of the Additional Area, shall be referred to collectively as the “ Rent ”.

 

4.4 The Rent shall be paid in the method and dates set forth regarding the payments for the Leased Property, as specified in the Lease Contract.

 

4.5 For the avoidance of doubt, it is clarified that all of the other debts and payments applicable to the Lessee under the Lease Contract, including (but not limited to) payment of municipal taxes, electricity consumption, water and any payment to any third party whatsoever, shall also apply to the Additional Area, such that commencing from the Effective Date, the Lessee undertakes to pay the above payments with respect to the Leased Property (i.e. also with respect to the area of the Current Leased Property and with respect to the Additional Area). To the best of the Lessor’s knowledge, possession of the Additional Area and of the Additional Parking Spaces, on the Effective Date, shall occur when the said areas are clear of any debt to any authority and/or party whatsoever, including the taxes specified in Section 10 of the Lease Contract. For the avoidance of doubt, the Lessee shall not be liable for any debt whatsoever for the above areas with respect to a period prior to the Effective Date.

 

5. Work of the Lessee for increasing the area of the Leased Property

 

5.1 The Lessee hereby fundamentally undertakes, that commencing from the Effective Date, it shall perform, at its exclusive responsibility and expense, all of the work required for the adjustment of the Leased Property to its purposes and needs.

 

5.2 The Lessee undertakes that the Lessee’s work stated in Section 5.1 above, shall be performed and completed in accordance with the provisions of the Lease Contract and according to the instructions regarding the performance of the Lessee’s work, to be delivered to the Lessee by the Lessor and/or anyone on its behalf.

 

 

 

 

6. Insurance and collateral

 

It is agreed that additional terms and conditions for the taking effect of this addendum, are when the following fundamental obligations of the Lessee are fulfilled:

 

Insurance

 

6.1 The Lessee undertakes that the insurance it undertook to make according to the Lease Contract, shall be extended such that they apply also to the Additional Area during the entire lease period.

 

6.2 The Lessee shall present to the Lessor, the certificates of insurance as required in the Lease Contract (including in this addendum) by no later than the date of signing of this addendum. It is clarified that non-presentation of the certificates of insurance shall not exempt the Lessee from its insurance liability, as specified in the insurance provisions and annexes of the Lease Contract.

 

Collateral

 

6.3 Notwithstanding the provisions of the Lease Contract, it is clarified and agreed that to secure the fulfillment of the Lessee’s obligations and undertakings under the Lease Contract and this addendum, the Lessee shall provide the Lessor, on the date of signing of this addendum, a bank guarantee in the amount equal to the Rent and management fees, paid by the Lessee for three (3) months of Rent, i.e. ILS 89,800 (eighty nine thousand and eight hundred ILS) plus VAT for such, linked to the Base Index, in the form attached hereto as Annex G , this in addition to the collateral provided by the Lessee under the Lease Contract (the “ Additional Bank Guarantee ”).

 

6.4 The validity of the Additional Bank Guarantee shall be in accordance with the provisions of the Lease Contract for the entire duration of the Lease Period of the Additional Area, and all under the responsibility and expense of the Lessee and to secure all of the Lessee’s undertakings and obligations during the lease period of the Leased Property.

 

6.5 Without derogating from the aforesaid, all of the collateral deposited with the Lessor in accordance with the provisions of the Lease Contract, shall serve the Lessor and/or the management company and/or anyone on their behalf, also to secure the full and accurate fulfillment of the entire undertakings and obligations of the Lessee under this addendum and with respect to the Additional Area.

 

 

 

 

Direct debit authorization

 

The direct debit authorization provided by the Lessee to the Lessor under the Lease Contract, shall also apply for the collection of the payments applicable to the Lessee under this addendum.

 

7. General

 

7.1 All remaining provisions of the Lease Contract, insofar as not expressly modified in this addendum, shall remain in force and bind the parties, including but without derogating, all aspects relating to the Additional Area, as the case may be and mutatis mutandis , if any.

 

7.2 The provisions of this addendum shall not impose on any of the parties hereto, any obligation which is not imposed thereon in accordance with the Lease Contract and/or under any law and the aforesaid shall not derogate from any undertaking and/or duty of any of the parties according to the Lease Contract and/or any law.

 

7.3 For the avoidance of doubt, it is clarified that the Lessee shall not be entitled to offset any of the Lessee’s payments in accordance with the Lease Contract and/or this addendum, including, but not limited to, the Rent, any monetary obligations which the Lessor and/or the management company shall be liable to pay to the Lessee, if any, pursuant to the Lease Contract and/or this addendum.

 

7.4 It is clarified and agreed by the parties that the provisions of this addendum shall not constitute as a waiver and/or forgiveness of any argument and/or claim and/or demand of any of the parties to other party, including under the Lease Contract and/or under any law.

 

7.5 Any term in the Lease Contract that entitles any exclusivity to the Lessee, if any, is retroactively void and null, and shall no longer be in force.

 

7.6 Any breach of any of the provisions of this addendum shall be considered as a breach of the Lease Contract for all intents and purposes and shall entitle the parties with all of the remedies available thereto under the Lease Contract and/or by law, for such breach.

 

7.7 In any event of discrepancy between the provisions of the Lease Contract (without this addendum) and the provisions of this addendum, the provisions of this addendum shall prevail.

 

7.8 This addendum shall take effect only after the signing of the parties hereon and subject to the fulfillment of the above condition precedent.

 

 

 

   

In witness whereof, the parties have hereunto set their hands in the place and on the date stated in the heading of this addendum above;

 

(Signed+ stamped)   (Signed+ stamped)
 The Lessor   The Lessee

 

Certification of the Lessee’s Attorney

 

I the undersigned, Adv. Sagi Omer do hereby certify that the Lessee is an existing and operating corporation and it made all of the resolutions required for its engagement in this addendum, according to its incorporation documents; that the above signatures are the signatures of Messrs. Moshe Mizrahi (I.D. 051825396 ) who, with his signature is authorized to bind the Lessee.

 

[Signature and stamp

Sagi Omer, Adv.

License No. 57764

16 Derech Hayam, Haifa]

 

 

Certification of the Lessor’s Attorney

 

I the undersigned, Adv. ____________ do hereby certify that the Lessor is an existing and operating corporation and it made all of the resolutions required for its engagement in this addendum, according to its incorporation documents; that the above signatures are the signatures of Messrs. _____________ (I.D. ____________) and _____________ (I.D. ____________).

 

 

 

 

 

 

 

Exhibit 10.12

 

Wigmore Medical Limited (“Wigmore”) - Invasix Ltd (“Invasix”)

Founders Memorandum of Understanding

 

1. The Company  

Wigmore, on behalf of the Parties, incorporated “Invasix UK Ltd”, a limited liability company in the United Kingdom (the “ Company ”), for the purpose of marketing Invasix Products to plastic surgeons, dermatologists, general practices, spa facilities, specialized hair removal clinics and salons in the UK, including Ireland and Scotland (the “ Market ”), including providing post-sale services to customers.

 

The Products to be distributed by the Company include BodyTite Platform, Fractora TiteFX Platform, InMode Platform, upgrades and disposables of the above and additional products suitable to the Market as agreed from time to time by the Parties (the “ Products ”). The Products shall be supplied by Invasix at such prices as detailed in the Price List attached hereto as Schedule A .

       
2. Ownership   Initially, the holdings of the Parties in the Company shall be as follows: Wigmore shall hold 49% and Invasix shall hold 51% of the outstanding share capital of the Company.
       
3. Board of Directors, Shareholders Resolutions  

1.    The Board of Directors (“ Board ”) will initially include 2 members: Mr. Bedo Eghiayan on behalf of Wigmore and Mr. Moshe Mizrahy on behalf of Invasix. The Board shall be the Company’s supreme management body.

2.    The Board shall act by unanimous resolution. If the Board cannot reach such unanimous resolution on a certain matter, the matter shall be resolved by the General Meeting.

3.    Resolutions of the General Meeting of the shareholders shall require a simple majority of the voting power, except for resolutions in material issues, which shall require a majority of 75% of the voting power (in case such matters require a resolution of the General Meeting).

4.    Material issues which require a special majority of the shareholders:

(a) resolutions which are contrary to the provisions of the Founders Agreement;

(b) resolutions which entail shareholders' investments or obligations beyond those expressly mentioned in the Founders Agreement;

(c) acquisition or disposal of any interest in any legal entity;

(d) merger with any other entity;

(e) declaration or distribution of dividends or profits;

(f) sale or disposal of the whole or a substantial or material part of the undertaking or goodwill or assets of the Company;

(g) pledge, mortgage or other encumbrances of any of the Company’s assets;

(h) any transaction with a shareholder, director or with any person or entity which is related (directly or indirectly) to any of the Parties; and

 

 

 

 

      (i) appointment of all office holders in the Company, accountants and legal counsel.
       
4. Financing  

1.    Once the initial budget of the Company is agreed between the Parties, the Parties shall provide the Company with a working capital loan, according to their pro-rata share of the Company, and subject to such additional terms as determined in the loan documents to be executed by the Parties.

2.    Additional capital loans shall be provided by the Parties according to the approved budget and subject to a resolution of the Board.

3.    No dividend shall be distributed to shareholders of the Company before all capital loans are repaid in full and the Company has sufficient cash flow to carry out its work plan as determined by the Board.

4.    In case the Board resolves to raise additional funding by equity investments, each shareholder shall have a preemptive right to participate in such investments pro-rata to its share of the Company. A shareholder who chooses not to participate in any such investment shall be diluted.

       
5. Services Provided by Wigmore   Initially, Wigmore shall provide the Company with bookkeeping and accounting services, human resources and secretarial services. The Company shall also lease from Wigmore facilities for its operation, located at Wimpole House, 1 Bashley Road, London, pursuant to such terms as included in the Lease Agreement to be executed between Wigmore and the Company.
       
6. Services Provided by Invasix   Invasix shall provide the Company with exclusivity regarding marketing and distribution of the Products in the Market, and shall also provide the Company’s personnel with training regarding use of the Products.
       
7. Non-Compete   For as long as they are shareholders of the Company, the Parties will not, directly or indirectly, compete or assist others to compete with the Products in the Market.
       
8. Buy Out upon a Party’s Wish to Sell   The Company’s incorporation documents (Articles of Association) will include a no transfer period, a right of first refusal, and a right of first offer. The exiting Party agrees to continue to supply the Company with existing products and/or services for a period of up to nine months from the date of notification of intent to exit or for the period of any existing supply agreements, whichever is longer.
       
9. Buy Out upon Intended Liquidation   Any shareholder of the Company (currently only the Parties) requesting the winding up of the Company, must first offer its shares in the Company to the other shareholders, and if the other shareholders or some of them agree to purchase such shares at a price agreed between them, then the shares will be sold to such shareholders at such price, and the

 

  –  2  –  

 

 

      request for winding up will be canceled. If the Parties do not agree on the price, the Parties shall refer the valuation to a qualified person agreed between them, and if not agreed between them within 14 days, such party that was recommended by the Company’s auditors.
       
10. Equity Swap   Wigmore shall be entitled to swap its shares in the Company with Ordinary Shares of Invasix prior to any IPO or M&A transaction of Invasix and its share of Invasix shall be calculated as the product of Wigmore’s share percentage of the Company multiplied by the Company’s sales share out of the total sales of the Invasix group. For example: if Wigmore holds 49% of the Company, the Company’s sales amount to $10M and the total sales of the Invasix group amount to $100M, then Wigmore’s share of Invasix shall be 4.9% (49%* 10%).
       
11. Confidentiality   Each Party will keep confidential all non-public information of the other Party or of the Company and will use such information only for the furtherance of this MOU into a Founders Agreement, for the operation of the Company and such other purposes expressly permitted by the other Party. The Parties will publicly disclose the existence or terms of this MOU or the definitive agreements only upon mutual agreement or as required by applicable laws or any securities exchange rules applicable or that may become applicable.
       
12. Change of Control   In case that there is a Change of Control (as shall be more specifically defined in the definitive documents) in a Party, such Party is obligated to notify the other Party immediately after such Change of Control becomes public knowledge. In such an event, the No-Sale obligation of the other Party shall terminate. In addition if there has been a Change of Control in a Party then the other Party shall have the right to purchase such Party’s interest in the Company under a procedure to be set forth in the definitive agreements.
       
13. Dispute Settlement   The definitive Founders Agreement shall include a dispute resolution mechanism for resolution of conflicts between the Parties.
       
14. Binding Effect and Definitive Documents   This MOU is a non-binding document that expresses the Parties’ intentions. The Parties undertake to negotiate in good faith with a mutual desire to conclude the definitive agreements by the beginning of April 2014, containing additional terms customary for transactions of this type.

 

Agreed and accepted on 4/3, 2014

 

/s/ Moshe Mizrahy   /s/ Mr. Bedo Eghiayan
Invasix Ltd.   Wigmore Medical Limited
By: Mr. Moshe Mizrahy, CEO   By: Mr. Bedo Eghiayan, CEO

 

  –  3  –  

 

 

Exhibit 10.13

 

COMPENSATION POLICY

   

INMODE LTD.

 

Compensation Policy for Executive Officers and Directors

 

ADOPTED: ______________, 2019

 

  1  

 

 

Table of Contents

 

    Page
     
A. Overview and Objectives 3
     
B. Base Salary and Benefits 5
     
C. Cash Bonuses 7
     
D. Equity-Based Compensation 8
     
E. Retirement and Termination of Service Arrangements (Excluding Directors) 10
     
F. Exemption, Indemnification and Insurance 11
     
G. Arrangements upon Change of Control 12
     
H. Board of Directors Compensation 12
     
I. Miscellaneous 13

 

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A. Overview and Objectives

 

1. Introduction

 

This document sets forth the compensation policy for Executive Officers (as defined below) and directors (this “ Compensation Policy ” or “ Policy ”) of InMode Ltd. and its subsidiaries worldwide (respectively “ InMode ” and collectively, the “ Group ”), in accordance with the requirements of the Companies Law 5759-1999 (including the regulations promulgated thereunder, the “ Companies Law ”).

 

Compensation is a key component of InMode’s overall human capital strategy to attract, retain, reward, and motivate highly skilled individuals that will enhance the Group’s value and otherwise assist the Group to reach its business and financial short and long term goals. Accordingly, the structure of this Policy was established to tie the compensation of each Executive Officer and director to the Group's goals and performance.

 

For purposes of this Policy, “ Executive Officers ” shall mean “Office Holders” of InMode as such term is defined in Section 1 of the Companies Law, and executives of the subsidiaries of InMode worldwide who are directly subordinated to the CEO of InMode (in this Policy, the “ CEO ” ) , excluding directors of InMode.

 

With respect to a person engaged both as a director in InMode and as an Executive Officer, in the event of a contradiction between the different provisions of this Policy which apply to Executive Officers and the provisions of this Policy which apply to directors, the provisions of this Policy which apply to such person's capacity as an Executive Officer shall govern.

 

This Compensation Policy shall apply to compensation agreements and arrangements which will be approved after the date on which this Compensation Policy is approved by the general meeting of InMode’s shareholders and shall serve as InMode’s Compensation Policy for the maximum period of time permitted by applicable law.

 

The Compensation Committee (upon its appointment in accordance with applicable law) and the Board of Directors of InMode (the “ Compensation Committee ” and “ Board ”, respectively) shall review and reassess the adequacy of this Policy from time to time, as required by the Companies Law.

 

It should be clarified, that wherever reference is made to the required approvals in this Compensation Policy, such reference relates to the applicable law as of the date of approval of this Compensation Policy and in any case is subject to the provisions of sections 33 and 35 below.

 

Each of the Executive Officers may be engaged as an employee and/or as an independent service provider (including through a company controlled by him or her, against the issuance of a tax invoice to the Company or the relevant Group entity), provided that if the Executive Officer is engaged as an independent service provider the total amount paid to him or her, excluding VAT, shall not exceed the maximum Employment Cost amounts with respect to Executive Officers, as applicable, who are engaged as employees as specified in this Policy.

 

2. Objectives

 

InMode’s objectives and goals in setting this Compensation Policy are to attract, motivate and retain highly experienced personnel who will provide leadership for the Group’s success and enhance InMode’s shareholders’ value, while supporting a performance culture that is based on merit, and rewards excellent performance in the short and long term, while recognizing InMode’s core values. To that end, this Policy is designed, among others:

 

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

 

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2.2. To provide the Executive Officers and directors with a structured compensation package, while creating a balance between the fixed components, i.e. , the base salaries and benefits, and the variable compensation, such as bonuses and equity-based compensation in order to minimize potential conflicts between the interests of Executive Officers and directors and those of the Group;

 

2.3. To strengthen the retention and the motivation of Executive Officers and directors in the short and long term.

 

2.4. This Compensation Policy was prepared taking into account the Group’s nature, size and business and financial characteristics.

 

3. Compensation structure and instruments

 

Compensation instruments under this Compensation Policy may include the following:

 

w Base salary;

 

w Benefits and perquisites;

 

w Cash bonuses (short-to-medium term incentive);

 

w Equity based compensation (medium-to-long term incentive); and

 

w Retirement and termination of service arrangements payments.

 

For the purposes of this Compensation Policy:

 

“ Base Salary ” shall mean: gross salary, before contributions to social benefits;

 

“ Employment Cost ” shall mean: any payment for the employment and/or engagement under a consultancy or service agreement, including contributions to social benefits, car and expenses of the use thereof, bonuses and any other benefit or payment as defined in the first Addendum “A” to the Companies Law.

 

4. Overall Compensation - Ratio between Fixed and Variable Compensation

 

This Policy aims to balance the mix of “fixed compensation”, comprised of Base Salary and benefits (“ Fixed Compensation ”) and “variable compensation”, comprised of cash bonuses and equity based compensation 1 (excluding adjustment period/retirement bonuses, granted in accordance with section 21 below) (“ Variable Compensation ”) in order to, among other things, appropriately incentivize Executive Officers to meet InMode’s short and long term goals while taking into consideration the Group’s need to manage a variety of business risks.

 

The total Variable Compensation of each Executive Officer shall not exceed 85% of the total compensation package of such Executive Officer on an annual basis. The Board believes that such range expresses the appropriate compensation mix in the event that all performance objectives are achieved and assumes that all compensation elements are granted with respect to a given year.

 

It should be clarified, that the Fixed Compensation may constitute 100% of the total compensation package for an Executive Officer or director in any year (under circumstances in which a variable component will not be approved for that year and/or in the event of a failure to meet the set goals, if and when determined).

 

 

 

1 Based on the fair value on the date of grant, calculated annually, on a linear basis.

 

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5. Intra-Group Compensation Ratio

 

In the process of drafting this Policy, InMode’s Board has examined the ratio between Employment Cost associated with the engagement of the Executive Officers and directors during the 2018 calendar year (the “ Executive Officers Cost ”) and the average and median employer cost associated with the engagement of the other employees of the Group during the same period (the “ Other Employees Cost ” and the “ Ratio ”, respectively). The Board believes that the current Ratio does not adversely impact the work environment in InMode. The following are the ratios as of the date of the approval of this Compensation Policy 2 :

 

Position   Ratio between the
Executive Officers Cost
and the average Other
Employees Cost 		    Ratio between the
Executive Officers Cost
and the median Other
Employees Cost 		 
President North America   10.8     18  
Other Executive Officers (average)   1.6     2.7  

 

B. Base Salary and Benefits

 

6. Base Salary

 

6.1. The Base Salary varies between Executive Officers, is individually determined by InMode (subject to the approvals of the Compensation Committee and the Board, and with respect to the CEO, also InMode’s general meeting of shareholders to the extent required by the Companies Law) and other entities in the Group and may be considered and adjusted by InMode and other entities in the Group (subject to the approvals of the abovementioned organs) on a periodic basis, according to, among others, the educational background, prior vocational experience, expertise and qualifications, role, business authorities and responsibilities, past performance and previous compensation arrangements of such Executive Officer, as well as the Group’s financial state and cash position and any requirements or restrictions prescribed by any applicable legislation, from time to time. When determining the Base Salary, InMode and other entities in the Group may also decide to consider, at the sole discretion of the Compensation Committee and the Board and as required, the prevailing pay levels in the relevant market, Base Salary and the total compensation package of comparable Executive Officers in the Group, the proportion between the Executive Officer’s compensation package and the salaries of other employees in the Group and specifically the median and average salaries and the effect of such proportions on the work relations in the Group.

 

6.2. Annual Base Salary for Executive Officers shall not exceed the amount specified in the table below:

 

The Executive Officer   Maximum Annual Base Salary  
CEO; President North America   $ 500,000  
Other Executive Officers (excluding directors)   $ 300,000  

 

 

2 The above ratios are based on the Employment Cost during 2018 calendar year. In calculating the above ratios, the Employment Cost for each employee/Executive Officer was divided by the actual number of months such employee/Executive Officer was engaged by the Company during 2018 calendar year.

 

  5  

 

 

7. Benefits

 

7.1. In addition to the Base Salary, the following benefits may be granted to the Executive Officers (subject to the approvals of the Compensation Committee and the Board, and with respect to the CEO – also InMode’s general meeting of shareholders to the extent required by the Companies Law), in order, among other things, to comply with legal requirements. It shall be clarified, that the list below is not an exhaustive list and InMode and other entities in the Group (subject to the abovementioned required approvals) may grant to the Group's Executive Officers other similar, comparable or customary benefits, subject to applicable law. In addition, Executive Officers employed outside of Israel may receive other similar, comparable or customary benefits as applicable in the relevant jurisdiction in which they are employed.

 

w Vacation days in accordance with market practice and the applicable law, up to a cap of 30 days per annum;

 

w Sick days in accordance with market practice and the applicable law; However, entities in the Group may decide to cover sick days from the first day;

 

w Convalescence pay according to applicable law;

 

w Medical insurance in accordance with market practice and applicable law;

 

w With respect to Executive Officers employed in Israel: monthly remuneration for a study fund (“Keren Hishtalmut”), and with reference to InMode’s practice and common market practice;

 

w Pension and savings - according to local market practices and legislation;

 

w Disability insurance - InMode and other entities in the Group may purchase disability insurance, according to applicable legislation.

 

w Various components that the Group may provide to all or part of its employees and/or its Executive Officers, such as: parking spaces, reimbursement for meals and accommodation expenses, vacations, Group events, etc.

 

7.2. InMode and other entities in the Group may offer additional benefits to its Executive Officers and directors, including but not limited to: communication, car and travel benefits, insurances and other benefits (such as newspaper subscriptions, academic and professional studies), etc., including their gross up.

 

7.3. InMode and other entities in the Group may reimburse its Executive Officers and directors for reasonable work-related expenses incurred as part of their activities, including without limitation, meeting participation expenses, reimbursement of business travel expenses, including a daily stipend when traveling and accommodation expenses. InMode and other entities in the Group may provide advance payments to its Executive Officers and directors in connection with work-related expenses.

 

8. Signing Bonus

 

At the discretion of the Compensation Committee and the Board (and with respect to the CEO- subject to the approval of InMode’s general meeting of shareholders to the extent required by the Companies Law), InMode and other entities in the Group may grant a newly recruited Executive Officer a signing bonus. Such bonus may be granted in cash, equity or a combination of both. The signing bonus will not exceed: (1) 50% of such Executive Officer’s annual Base Salary, if the signing bonus is granted in cash; (2) 100% of such Executive Officer’s annual Base Salary, if the signing bonus is granted in equity awards, as shall be determined according to acceptable valuation practices at the time of grant; (3) In case the signing bonus is a combination of cash and equity, its ceiling shall be proportional to the cash and equity components, calculated in accordance with the ratios mentioned in sections (1) and (2) above.

 

  6  

 

 

C. Cash Bonuses

 

InMode (subject to the approvals of the Compensation Committee and the Board, and with respect to the CEO- also InMode’s general meeting of shareholders to the extent required by the Companies Law) and other entities in the Group may grant cash bonuses to its Executive Officers on a quarterly or annually basis, or on a shorter or longer period basis, in accordance with the principles detailed below.

 

9. Annual Bonuses

 

9.1. The annual bonus that may be paid to the Executive Officers for any fiscal year shall not exceed three (3) annual Base Salaries.

 

9.2. CEO

 

The annual bonus to the CEO will be based mainly on measurable criteria, and with respect to its less significant part shall be determined at the discretion of the Compensation Committee and the Board, in accordance with the following:

 

Position   Group/Individual
Performance Measures 		  InMode’s
Discretion
         
CEO   75%-100%   0%-25%

 

The measurable criteria and their relative weight shall be determined by the Compensation Committee and the Board in respect of each calendar year. These measurable criteria may include, inter alia , objectives relating to compliance with the Group’s work plans and with various budget objectives, including, inter alia , compliance with objectives relating to revenues, expenses, investments, etc., meeting various financial objectives, such as objectives relating to the annual profit (net profit, pre-tax profit, etc.) and the Group’s EBITDA, objectives relating to the recruitment and development of professional personnel, objectives relating to raising investments, debt, etc., objectives relating to the Group’s business operations, objectives relating to the realization of the Group’s assets, the acquisition of new activities and/or companies and objectives relating to an increase of the return on the Group’s assets.

 

9.3. Other Executive Officers (Excluding CEO)

 

The Group may also award (subject to the approvals of the Compensation Committee and the Board) an annual bonus to its Executive Officers, due to their unique contribution to the Group. Such grant may be based, inter alia , on measurable criteria, based on the Group’s financial results, the scope of the Group’s business activity, the CEO’s opinion on the contribution of the Executive Officer to the Group, the distribution of the annual bonus over the year, etc. It should be clarified, that the annual bonus may be based in whole or in part on discretion, provided that it does not exceed the ceiling specified in section 9.1 above. The CEO shall be entitled to determine the abovementioned targets for each such an Executive Officer. Notwithstanding the foregoing, it is hereby clarified, that the grant of annual bonus to an Executive Officer, of up to three monthly Base Salaries, may be approved by the CEO in his/her discretion.

 

10. Special Bonuses

 

In addition to the annual bonus, InMode and other entities in the Group may grant Executive Officers and directors a special bonus as an award for special achievements (outstanding personal achievement, outstanding personal effort or outstanding Group’s performance, such as in connection with mergers and acquisitions, securities offerings, achieving target budget or business plan objectives under exceptional circumstances and special recognition in case of retirement), at the discretion of the Compensation Committee and the Board (and with respect to the CEO and directors- also InMode’s general meeting of shareholders to the extent required by the Companies Law) which shall not exceed twelve (12) monthly Base Salaries or twelve (12) Base Payments (as defined below), as applicable.

 

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11. Additional Provisions Relating to Cash Bonuses

 

11.1. Pro Rata Payment

 

Should the employment or service of the Executive Officer terminate prior to the end of a fiscal year, InMode and other entities in the Group may pay the Executive Officer his/her pro-rata share of that fiscal year’s bonus, based on the period such Executive Officer was employed by the Group or has served in the Group.

 

11.2. Compensation Recovery (“ Clawback ”)

 

11.2.1. In the event of an accounting restatement, InMode and other entities in the Group shall be entitled to recover from its Executive Officers and directors the bonus compensation in the amount in which such bonus exceeded what would have been paid under the financial statements, as restated (“ Compensation Recovery ”), provided that a claim is made by InMode or the applicable Group entity prior to the third anniversary of the fiscal year end of the year in which the restated financial statements are issued.

 

11.2.2. Notwithstanding the aforesaid, the Compensation Recovery will not be triggered in the following events:

 

w The financial restatement is required due to changes in the applicable financial reporting standards or law; or

 

w The Group (subject to any required approval under applicable law) has determined that clawback proceedings in the specific case would be impossible, impractical or not commercially or legally efficient; or

 

w The amount to be paid under the clawback proceedings is less than 10% of the relevant bonus received by the Executive Officer or director.

 

11.2.3. It shall be clarified, that InMode and the other entities in the Group shall not be entitled to Compensation Recovery with respect to equity-based compensation granted to its Executive Officers and directors.

 

11.3. Reduction or Postponement

 

Without derogating from Section 36 below, in the event of the termination of office of an Executive Officer under circumstances in which he/she will not be entitled to severance pay, InMode (subject to the approvals of the Compensation Committee and the Board) and the other entities in the Group may revoke the entitlement of such an Executive Officer to an annual bonus and to all parts of the annual bonus which have not yet been paid to him.

 

D. Equity-Based Compensation

 

12. General and Objectives

 

12.1. InMode (subject to the approvals of the Compensation Committee and the Board, and with respect to InMode’s directors and CEO – also InMode’s general meeting of shareholders to the extent required by the Companies Law) may grant from time to time equity-based compensation which will be individually determined and awarded according to, inter alia , the performance, educational background, prior business experience, qualifications, role and the personal responsibilities of the Executive Officer.

 

12.2. The main objectives of the equity-based compensation is to enhance the alignment between the Executive Officers’ and directors’ interests with the long term interests of InMode and its shareholders, and to strengthen the retention and the motivation of Executive Officers and directors in the medium-to-long term. In addition, since equity-based awards are structured to vest over time, their incentive value to recipients is aligned with longer-term strategic plans.

 

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12.3. The equity based compensation offered by InMode is intended to be in a form of options exercisable into shares, restricted shares and/or other equity based awards, such as restricted share units (RSUs), in accordance with the Group’s incentive plan(s) in place as may be updated from time to time. 3

 

13. Fair Market Value

 

The fair market value of the equity-based compensation for each Executive Officer during a fiscal year, shall not exceed 200% of his/her annual Base Salary, as shall be determined according to acceptable valuation practices at the time of grant. 4

 

14. Taxation Regime

 

Subject to any applicable law, InMode may determine, at the discretion of the Compensation Committee and the Board (and with respect to InMode’s directors and CEO- also InMode’s general meeting of shareholders to the extent required by the Companies Law), the tax regime under which equity-based compensation may be granted, including a tax regime which will maximize the benefit to the Executive Officers and directors.

 

15. Exercise Price

 

The exercise price for each option shall not be less than the average closing price of InMode’s shares on NASDAQ over the 30 trading days preceding the date of the Board’s approval of the grant of the relevant option.

 

It is hereby clarified, that unless otherwise determined by InMode (subject to the approvals of the Compensation Committee and the Board, and with respect to InMode’s directors and CEO- also InMode’s general meeting of shareholders), and subject to the provisions of any applicable law, the exercise price of restricted shares and restricted share units (RSUs) is the par value of the share.

 

Options, restricted shares and restricted share units (RSUs) may also be exercised by a method of “Cashless” exercise.

 

The Board considered the possibility of determining a ceiling for the exercise value of the variable equity components and decided, taking into account the purpose of the equity-based compensation, not to set such a ceiling in this Policy.

 

16. Vesting

 

All equity-based incentives granted to Executive Officers and directors shall be subject to vesting periods in order to promote long-term retention of such recipients. Grants to Executive Officers shall vest gradually over a period of at least two years, while grants to directors shall vest over a period of at least one year. Such grants may be vested on a quarterly, semi-annual or an annual basis, or based on other time periods (which may not be necessarily equal), as determined by InMode (subject to the approvals of the Compensation Committee and the Board, and with respect to InMode’s directors and CEO- also InMode’s general meeting of shareholders to the extent required by the Companies Law). InMode (subject to the abovementioned required approvals) may condition the vesting of part or all of the equity-based incentives, for some or all of its Executive Officers and directors, upon the achievement of predetermined performance goals. InMode (subject to the abovementioned required approvals) may also set terms relating to vesting in connection with an Executive Officer or director leaving the Group (due to a dismissal, resignation, death or disability).

 

 

3 The equity based compensation is based on the fair value on the date of grant, calculated annually, on a linear basis.

4 Calculated annually, on a linear basis.

 

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17. For details regarding ceilings with respect to director’s equity-based compensation see section 29 below.

 

18. General

 

All other terms of the equity awards shall be in accordance with the Group’s incentive plans and other related practices and policies. Accordingly, InMode may (subject to the approvals of the Compensation Committee and the Board, and with respect to InMode’s directors and CEO- also InMode’s general meeting of shareholders to the extent required by the Companies Law) extend the period of time for which an award is to remain exercisable and make provisions with respect to the acceleration of the vesting period of any Executive Officer’s or director's awards, including, without limitation, in connection with a corporate transaction involving a change of control, subject to any additional approval as may be required by the Companies Law.

 

E. Retirement and Termination of Service Arrangements (Excluding Directors)

 

19. Advanced Notice Period

 

19.1. InMode (subject to the approvals of the Compensation Committee and the Board, and with respect to the CEO- also InMode’s general meeting of shareholders to the extent required by the Companies Law) and other entities in the Group may provide each Executive Officer, pursuant to an Executive Officer’s employment or consultancy/service agreement and according to the Group’s decision per each case, a prior notice of termination of up to nine (9) months (the “ Advance Notice Period ”). During the Advance Notice Period, the Executive Officer may be entitled to all of the compensation elements, and to the continuation of vesting of his/her options, restricted shares, RSUs and/or any other equity based awards.

 

19.2. During the Advance Notice Period, an Executive Officer will be required to keep performing his/her duties pursuant to his/her agreement with the Group, unless InMode (subject to the approvals of the Compensation Committee and the Board, and with respect to the CEO- also InMode’s general meeting of shareholders to the extent required by the Companies Law) or the relevant entity in the Group has waived the Executive Officer’s services to the Group during the Advance Notice Period and pay the amount payable in lieu of notice, plus the value of benefits.

 

19.3. In the event of a change of control in the Group, InMode (subject to the approvals of the Compensation Committee and the Board, and with respect to the CEO- also InMode’s general meeting of shareholders to the extent required by the Companies Law) and other entities in the Group may decide to extend the Advance Notice Period as provided in section 19.1 above (and the entitlement to compensation for such extended Advance Notice Period, accordingly) to up to two times the original Advance Notice Period of the Executive Officer.

 

20. Adjustment Period/Retirement Bonus

 

In addition to the Advance Notice Period, InMode (subject to the approvals of the Compensation Committee and the Board, and with respect to the CEO- also InMode’s general meeting of shareholders to the extent required by the Companies Law) and other entities in the Group may provide an additional adjustment period/retirement payment that will be determined, among other things, taking into consideration the Executive Officer’s seniority in the Group, performance during employment, contribution to InMode and the Group achieving its goals and the circumstances of retirement or termination. The maximum adjustment period/retirement bonus that may be paid to each Executive Officer shall be up to six (6) monthly Base Salaries and may only be granted to Executive Officers who have served in the Group for at least one year.

 

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21. Additional Retirement and Termination Benefits

 

InMode and other entities in the Group 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.

 

F. Exemption, Indemnification and Insurance

 

22. Exemption

 

InMode (subject to the approvals of the Compensation Committee and the Board, and with respect to InMode’s directors and CEO- also InMode’s general meeting of shareholders to the extent required by the Companies Law) and other entities in the Group may exempt in advance and retroactively its Executive Officers and directors, from any liability to the Group, in whole or in part, for damages in consequence of his or her duty of care vis-a-vis the Group, to the fullest extent permitted by applicable law and subject to the provisions of the relevant Group member’s Articles of Association.

 

23. Indemnification

 

InMode (subject to the approvals of the Compensation Committee and the Board, and with respect to InMode’s directors and CEO- also InMode’s general meeting of shareholders to the extent required by the Companies Law) and other entities in the Group may indemnify its Executive Officers and directors to the fullest extent permitted by applicable law and the relevant Group member’s Articles of Association, for any liability and expense that may be imposed on the Executive Officer or director, all subject to applicable law and the relevant Group member’s Articles of Association.

 

24. Insurance

 

24.1. InMode (subject to the approvals of the Compensation Committee and the Board, and with respect to InMode’s directors and CEO- also InMode’s general meeting of shareholders to the extent required by the Companies Law) will provide “Directors’ and Officers’ Liability Insurance” (the “ Insurance Policy ”), as well as a “run off” insurance policy for its Executive Officers and directors as follows:

 

w The annual premium to be paid by InMode shall not exceed $750,000 for the aggregate coverage of the Insurance Policy;

 

w The limit of liability of the insurer shall be up to $75 million per event and in the aggregate in the insurance period;

 

w The deductible amount per each claim shall not exceed $1 million;

 

w The Insurance Policy, as well as the limit of liability and the premium for each extension or renewal shall be approved by InMode, which may determine (subject to the approvals of the Compensation Committee and the Board, and with respect to InMode’s directors and CEO- also InMode’s general meeting of shareholders to the extent required by the Companies Law) that the sums are reasonable considering InMode’s and the Group's exposures, the scope of coverage and the market conditions and that the Insurance Policy reflects market terms, and does not materially affect the Group’s profitability, assets or liabilities;

 

w The policy may also cover the liability of the controlling shareholders due to their positions as Executive Officers and/or directors in the Group, from time to time, provided that the coverage terms in this respect do not exceed those of the other Executive Officers and directors in the Group.

 

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G. Arrangements upon Change of Control

 

25. The following benefits may be granted to the Executive Officers and directors in addition to the benefits applicable in the case of any retirement or termination of service upon a “Change of Control” following of which the employment of the Executive Officer is terminated or adversely adjusted in a material way:

 

25.1. Vesting acceleration of outstanding options, restricted shares, restricted share units (RSUs) and/or other equity based awards.

 

25.2. Extension of the exercise period of options, restricted shares, restricted share units (RSUs) and/or other equity based awards for Executive Officers and directors for a period of up to five (5) years, following the date of termination of employment.

 

25.3. An Advance Notice Period, in accordance with section 19.3 above.

 

25.4. An Adjustment period/retirement bonus in accordance with section 20 above, of up to twelve (12) months of Employment Cost.

  

H. Directors’ Compensation

 

26. The compensation of InMode’s directors shall be in accordance with the amounts provided in the Companies Regulations (Rules Regarding the Compensation and Expenses of an External Director) of 2000, as amended by the Companies Regulations (Relief for Public Companies Traded in Stock Exchange Outside of Israel) - 2000, as such regulations may be amended from time to time, or in accordance with section 27 below, subject to any required approvals by applicable law.

 

27. The compensation of InMode’s directors (including external directors and independent directors under the Companies Law, if any) shall not exceed the following:

 

27.1. Base payment of $45,000 per year (the “ Base Payment ”);

 

27.2. Chairman of the Board- an additional amount of $25,000 per year to the Base Payment;

 

27.3. Committee Chairman- an additional amount of $10,000 per year to the Base Payment;

 

27.4. Committee member- an additional amount of $5,000 per year to the Base Payment.

 

28. In addition, the Group may engage with its directors (excluding external and independent directors under the Companies Law) for the receipt of consulting services and/or other special services, for a consideration of up to $1,000 per day, plus reasonable expense reimbursement. Such compensation shall be paid for a maximum of 6 days per year for each director.

 

29. Directors may be granted equity-based compensation in accordance with applicable principles detailed in section D of this Policy, and subject to the provisions of the Companies Law. 5

 

Equity based-compensation granted to InMode’s directors, shall not exceed the following amounts (subject to any applicable law): 6

 

29.1. Director: $100,000 per year (the “ Equity Compensation ”);

 

29.2. Chairman of the Board- an additional amount of $55,000 per year to the Equity Compensation;

 

29.3. Committee Chairman- an additional amount of $10,000 per year per year to the Equity Compensation;

 

29.4. Committee member- an additional amount of $5,000 per year to the Equity Compensation;

 

 

5 The equity based compensation is based on the fair value on the date of grant, calculated annually, on a linear basis.

6 Based on the fair value on the date of grant, calculated annually, on a linear basis.

 

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30. InMode’s external and independent directors under the Companies Law may be entitled to reimbursement of expenses in accordance with the Companies Law.

 

31. The directors may be entitled to additional compensation or benefits as expressly set out in this Policy, and specifically in Sections 7.2, 7.3 and 10.

 

I. Miscellaneous

 

32. This Policy is designed solely for the benefit of the Group. Nothing in this Compensation Policy shall be deemed to grant any of the Group’s current or future Executive Officers, directors or employees or any third party any right or privilege in connection with their employment by or service with the Group and their compensation in respect thereof. Such rights and privileges, to which Executive Officers, directors or employees serving in the Group or that will serve in the Group in the future, are entitled for, shall be exclusively those that are determined specifically in relation to him or her and, if applicable, governed by their respective personal employment and/or service agreements.

 

33. 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, nor should it be interpreted as limiting or derogating from InMode’s or other Group member’s Articles of Association.

 

34. This Policy is not intended to affect current agreements nor affect obligating customs (if applicable) between the Group and its Executive Officers and directors as such may exist prior to the approval of this Compensation Policy, subject to any applicable law.

 

35. In the event of amendments made to the Companies Law or any regulations promulgated thereunder providing relief in connection with Group’s compensation to its Executive Officers and/or directors, InMode may elect to act pursuant to such relief without regard to any contradiction with this Policy.

 

36. The Group (subject to any required approvals by the applicable law) may determine that none or only part of the payments, benefits and perquisites shall be granted, and is authorized to cancel or suspend a compensation package or part of it.

 

37. An immaterial change in the terms of office of Executive Officers (excluding directors, a controlling shareholder or a controlling shareholder’s relative) during the term of this Compensation Policy, will be subject to the approval of InMode’s CEO only (changes in the terms of office of the CEO shall be approved in accordance with the Companies Law). An immaterial change in this matter shall be deemed to be a change that does not exceed 5% of the annual Employment Cost with respect to the employment of such an Executive Officer in the Group, subject to the conditions prescribed in this Compensation Policy.

 

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

 

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Exhibit 21.1

 

InMode Ltd.

 

List of Subsidiaries

 

Subsidiary   Jurisdiction of Incorporation
Invasix Inc.   Delaware, USA
Invasix Corp.   Canada
InMode M.D. Ltd.   Israel
Invasix UK Ltd.   United Kingdom
InMode Japan KK   Japan
Invasix Iberia S.L.   Spain
Guangzhou InMode Medical Technology Ltd.   China
InMode Asia Limited.   Hong Kong
InMode India Private Limited   India

 

 

 

 

Exhibit 23.2

 

 

CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

 

We hereby consent to the use in this Registration Statement on Form F-1 of Inmode Ltd. of our report dated March 13, 2019 relating to the financial statements of Inmode Ltd., which appears in this Registration Statement. We also consent to the reference to us under the heading “Experts" in such Registration Statement.

 

Tel-Aviv, Israel /s/ Kesselman & Kesselman
July 11, 2019 Certified Public Accountants (lsr.)
  A member firm of PricewaterhouseCoopers International Limited

 

Kesselman & Kesselman, Trade Tower, 25 Hamered Street, Tel-Aviv 6812508, Israel,

P.O Box 50005 Tel-Aviv 6150001 Telephone: +972 -3- 7954555, Fax:+972 -3- 7954556, www.pwc.com/il

 

 

 

Exhibit 23.3

 

CONSENT OF DIRECTOR NOMINEE

 

InMode Ltd. (the “Company”) is filing a Registration Statement on Form F-1 (the “Registration Statement”) with the Securities and Exchange Commission under the Securities Act of 1933, as amended (the “Securities Act”), in connection with the initial public offering (“IPO”) of its ordinary shares. In connection with the IPO, I hereby consent, pursuant to Rule 438 of the Securities Act, to being named as a nominee to the board of directors of the Company in the Registration Statement, as may be amended from time to time. I also consent to the filing of this consent as an exhibit to such Registration Statement and any amendments thereto.

 

  /s/ Hadar Ron
  Name:   Hadar Ron
  Date:   23/7/2018

 

     

 

 

 

Exhibit 23.4

 

CONSENT OF DIRECTOR NOMINEE

 

InMode Ltd. (the “Company”) is filing a Registration Statement on Form F-1 (the “Registration Statement”) with the Securities and Exchange Commission under the Securities Act of 1933, as amended (the “Securities Act”), in connection with the initial public offering (“IPO”) of its ordinary shares. In connection with the IPO, I hereby consent, pursuant to Rule 438 of the Securities Act, to being named as a nominee to the board of directors of the Company in the Registration Statement, as may be amended from time to time. I also consent to the filing of this consent as an exhibit to such Registration Statement and any amendments thereto.

 

/s/ Bruce Mann

  Name:   Bruce Mann
  Date:   July 22, 2018

 

 

 

 

Exhibit 23.5

 

CONSENT OF DIRECTOR NOMINEE

 

InMode Ltd. (the “Company”) is filing a Registration Statement on Form F-1 (the “Registration Statement”) with the Securities and Exchange Commission under the Securities Act of 1933, as amended (the “Securities Act”), in connection with the initial public offering (“IPO”) of its ordinary shares. In connection with the IPO, I hereby consent, pursuant to Rule 438 of the Securities Act, to being named as a nominee to the board of directors of the Company in the Registration Statement, as may be amended from time to time. I also consent to the filing of this consent as an exhibit to such Registration Statement and any amendments thereto.

 

  /s/ Michael Anghel
  Name:   Michael Anghel
  Date:   July 22, 2018

 

     

 

 

Exhibit 23.6

CONSENT OF DIRECTOR NOMINEE

InMode Ltd. (the “Company”) is filing a Registration Statement on Form F-1 (the “Registration Statement”) with the Securities and Exchange Commission under the Securities Act of 1933, as amended (the “Securities Act”), in connection with the initial public offering (“IPO”) of its ordinary shares. In connection with the IPO, I hereby consent, pursuant to Rule 438 of the Securities Act, to being named as a nominee to the board of directors of the Company in the Registration Statement, as may be amended from time to time. I also consent to the filing of this consent as an exhibit to such Registration Statement and any amendments thereto.

 

/s/ Michael Kreindel

Name: Michael Kreindel
Date: September 5, 2018