Israel
(State or other jurisdiction of
incorporation or organization)
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3844
(Primary Standard Industrial
Classification Code Number)
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Not Applicable
(I.R.S. Employer
Identification Number)
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Mitchell S. Nussbaum, Esq.
Angela M. Dowd, Esq.
Loeb & Loeb LLP
345 Park Avenue
New York, New York 10154
(212) 407-4000 - Telephone
(212) 407-4990 - Facsimile
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Eran Yaniv, Adv.
Sharon Rosen, Adv.
Fischer Behar Chen Well
Orion & Co.
3 Daniel Frisch Street
Tel Aviv, 6473104, Israel
+972 3 6944111 - Telephone
+972 3 6091116 - Facsimile
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Yvan-Claude Pierre, Esq.
Daniel I. Goldberg, Esq.
Reed Smith LLP
599 Lexington Avenue
New York, New York 10022
(212) 521-5400 - Telephone
(212) 521-5450 - Facsimile
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Shlomo Landress, Adv.
Amit, Pollak, Matalon & Co.
Nitsba Tower,
17 Yitzhak Sadeh St.,
Tel Aviv 67775, Israel
+972 3 568 9000
Telephone
+972 3 568 9001
Facsimile
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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
(1)
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||||||
Ordinary shares, par value NIS 0.01
(2)(3)
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$ | 15,000,000 | $ | 1,743 | ||||
Underwriter warrants
(4)(6)
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- | - | ||||||
Ordinary shares, par value NIS 0.01 underlying the underwriter warrants
(3)(5)
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$ | 750,000 | $ | 87.15 | ||||
TOTAL
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$ |
15,750,000
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$ |
1,830.15
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(1)
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Estimated solely for the purpose of calculating the amount of the registration fee pursuant to Rule 457(o) under the Securities Act.
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(2)
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Includes ordinary shares initially offered and sold outside the United States that may be resold from time to time in the United States either as part of their distribution or within 40 days after the later of the effective date of this registration statement and the date the ordinary shares are first bona fide offered to the public, and also includes ordinary shares that may be purchased by the underwriters pursuant to an option to purchase additional ordinary shares to cover over-allotments, if any. The ordinary shares are not being registered for the purpose of sales outside the United States.
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(3)
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Pursuant to Rule 416 of the Securities Act, the securities being registered hereunder include such additional securities as may be issued after the date hereof as a result of share splits, share dividends or similar transactions.
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(4)
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We have agreed to issue, upon closing of this offering, warrants exercisable for a period of four years following the effective date of this registration statement representing 5% of the aggregate number of ordinary shares issued in the offering, but not including the over-allotment option, or the “underwriter warrants,” to Chardan Capital Markets, LLC. Resales of the underwriter warrants on a delayed or continuous basis pursuant to Rule 415 under the Securities Act are registered hereby. Resales of ordinary shares issuable upon exercise of the underwriter warrants are also being similarly registered on a delayed or continuous basis hereby. See “Underwriting.”
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(5) |
No fee required pursuant to Rule 457(g) under the Securities Act.
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(6)
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Estimated solely for purposes of calculating the registration fee pursuant to Rule 457(g) under the Securities Act. We have calculated the proposed maximum aggregate offering price of the ordinary shares underlying the underwriters’ warrants by assuming that such warrants are exercisable to purchase ordinary shares at a price per ordinary share equal to 100% of the price per ordinary share sold in this offering.
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PRELIMINARY PROSPECTUS
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SUBJECT TO COMPLETION, DATED DECEMBER 23, 2014
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Per Ordinary Share
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Total
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|||||||
Public offering price
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$ | $ | ||||||
Underwriting discount and commissions (1)
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$ | $ | ||||||
Proceeds, before expenses, to us
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$ | $ |
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(1)
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We have also agreed to issue, upon closing of this offering, compensation warrants to Chardan Capital Markets, LLC as representative of the underwriters, entitling it to purchase up to ordinary shares. For a description of other terms of the compensation warrants and a description of the additional compensation to be received by the underwriters see “Underwriting.”
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Chardan Capital Markets, LLC
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Maxim Group LLC
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1
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14
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47
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48
|
|
49
|
|
50
|
|
52
|
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55
|
|
56
|
|
58
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73
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|
101
|
|
110
|
|
130
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|
132
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|
136
|
|
144
|
|
146
|
|
156
|
|
163
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|
163
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|
163
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|
164
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F-1
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PROSPECTUS
SUMMARY
The following summary does not contain all of the information you should consider before investing in our ordinary shares. You should read the following summary together with the entire prospectus carefully, including the “Risk Factors” section beginning on page 14 and the financial statements and the accompanying notes to those financial statements beginning on page F-1 before making an investment decision. Unless otherwise indicated, all information in this prospectus assumes no exercise of the underwriters’ over-allotment option and no exercise of the underwriter warrants. Unless the context otherwise requires, references to “we,” “our,” “us,” “our company,” and “Check-Cap” refer to Check-Cap Ltd., an Israeli company. The terms “dollar,” “US$” or “$” refer to U.S. dollars, the lawful currency of the United States, and the term “NIS” refers to New Israeli Shekels, the lawful currency of the State of Israel. Unless otherwise indicated, U.S. dollar translation of NIS amounts presented in this prospectus are translated using the rate of $1.00 = NIS 3.4380, the exchange rate published by the Bank of Israel on June 30, 2014, and U.S. dollar translation of Euro amounts presented in this prospectus are translated using the rate of $1.00 = Euro 1.3693, the exchange rates published by the Wall Street Journal on June 30, 2014.
Our Company
We are a clinical stage medical diagnostics company engaged in the development of an ingestible imaging capsule that utilizes low-dose X-rays for the screening for colorectal cancer, or CRC. While CRC is the second leading cause of death from cancer in the United States and is largely preventable with early detection, about one-half of Americans over the age of 50 do not undergo any form of CRC screening due in large part to the pain, discomfort and embarrassment related to current screening methods. Unlike other structural screening methods that are designed to generate structural information of the colon for the detection of pre-cancerous polyps, such as optical colonoscopy, computed tomographic colonography, or CTC, and other capsule-based technology, our imaging capsule is designed to be ingested without any cleansing of the colon and to travel through the gastrointestinal tract naturally while the patient continues his or her normal daily routine. Furthermore, unlike the procedures for CRC imaging devices currently on the market, all of which require the patient to fast for several hours prior to administration, the procedure for the Check-Cap device is designed to enable patients to continue eating normally. We believe that this solution will be attractive to both physicians and patients, thereby increasing the number of people willing to undergo screening for CRC.
Our imaging capsule is being designed to create a reconstructed three-dimensional image of the colon and to enable detection of clinically significant polyps with a high degree of sensitivity. Colon polyps are fleshy growths that occur on the lining of the colon. Polyps in the colon are extremely common, and when certain types of polyps grow large enough they can become cancerous.
Our imaging capsule will be swallowed by the patient and propelled by natural motility through the gastrointestinal tract and excreted naturally with no need for retrieval for data collection. Unlike other CRC screening methods, this process should not disrupt a patient’s normal activities or require fasting. Our imaging capsule employs X-rays which are considered low dose by the Radiation Safety Division of the Radiological Protection Branch of the Soreq Nuclear Research Center, which allows it to image the lining of the colon even when surrounded by intestinal content. As such, we believe that patients using our imaging capsule will not be required to undergo any prior bowel cleansing.
Our imaging capsule is being designed to transmit the data it collects to an external data recorder that will be worn by the patient. The external data recorder is being designed to enable the transfer of the data to physicians, who will then utilize our data viewer software application to analyze the data collected by our imaging capsule. We intend for physicians to be able to review the colon’s inner images at any location at any time, in less time than is required to perform an optical colonoscopy
In order to enable a complete view of capsule positioning and motility, we have designed a Capsule Positioning System, or CPS, which is mounted on the patient’s back throughout the entire procedure. The CPS is being designed to provide the physician with accurate localization data aligned with a reconstructed image.
In the event that polyps are identified through our imaging capsule, the patient would be required to undergo a subsequent traditional colonoscopy procedure to examine, remove and biopsy the polyps. For those patients who require a subsequent polypectomy, concerns regarding pain, discomfort and embarrassment may still remain with respect to the subsequent polypectomy. We do not, however, believe that these concerns will make the use of our imaging capsule any less attractive to doctors and patients. Although patients who are initially screened utilizing a traditional colonoscopy could avoid the need for a second procedure if polyps are discovered because they could undergo a polypectomy during the initial screening, if necessary, we believe that our imaging capsule will still be attractive to doctors and patients since a large majority of patients who are screened will not require a subsequent polypectomy. According to a review published by the Agency for Healthcare Research and Quality in October 2008, out of 100 adults aged 50-75, only 25-30 persons have one or more polyps and only 15 persons have significant (10+mm) polyps.
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A clinical proof-of-concept study, which was based on a 10-case study conducted at Tel Aviv Medical Center in Israel and used a prior version of our imaging capsule, did not identify any material safety or feasibility issues. The study demonstrated the applicability of our imaging technology to the human colon, generating images taken in the colon without any prior bowel-cleansing. All subjects ingested the capsule easily with smooth passage within the designated transit time, on average, within two to three days. There were no reported device-related adverse events. Mild effects on bowel movements were noted, which were determined to be related to the contrast agent and passed within one to two days after the capsule was excreted.
Another objective of the 10-case study was to estimate total radiation exposure for each case study. This was calculated using standard established factors for calculating effective radiation exposure, such as the duration of the capsule inside the body, and was based on the activity of the radiation source inside the imaging capsule and radiation energy, both of which were measured for each case study. The average calculated exposure for the entire procedure in the 10-case study, from ingestion of the capsule to excretion, was 0.03 mSv (STD 0.007 mSv). This level of radiation exposure is similar to a single chest X-ray (approximately 0.06mSv) and two orders of magnitude less than a CTC.
The 10-case clinical proof-of-concept study focused on assessing the safety and feasibility of the Check-Cap imaging system. The 10-case study is the first part of a multi-center, prospective clinical feasibility study to establish the safety, functionality and preliminary efficacy of the Check-Cap imaging system in patients eligible for CRC screening, by comparing results from the clinical feasibility study with those from non-invasive, low-sensitivity fecal occult blood tests, or FOBTs, and fecal immunochemical tests, or FITs, as well as from optical colonoscopies. The feasibility study is designed to include approximately 60 subjects. The study is being conducted in Israel at the Tel Aviv Medical Center and Laniado Hospital and is planned to also be conducted at the Erasmus University Medical Center in the Netherlands. The clinical feasibility study will evaluate the image resolution generated by the capsule in an unprepped human colon, will assess polyp imaging in various shapes and in different segments of the colon and will evaluate the safety of the device in terms of total and segmental transit time and analyze the effects of the presence of polyps and variable colon dimensions on these parameters. The study will seek to create a clinical atlas of images that will enable comparisons between images acquired by different CRC screening modalities. During the feasibility study we will collect data about the overall imaging of the colon’s internal surfaces during the passage of the capsule to support the development of a correlation map of polyps identified through our imaging system with polyps imaged by optical colonoscopy and CTC. Additionally, the feasibility study will measure total radiation exposure and the distribution of contrast material within the colon.
Following the successful completion of the broader multi-center, prospective clinical feasibility study, we plan to submit during 2015 a request for CE marking for the marketing and sale of our capsule in the European Union. We expect to perform post-marketing studies in Europe following CE marking for the purpose of collecting additional clinical data to support market adoption. Subject to regulatory approval and available capital, we anticipate launching our product commercially in Europe during 2016.
We plan to conduct a second pre-IDE meeting, now referred to as a pre-submission meeting, with the U.S. Food and Drug Administration, or FDA
,
in late 2015, and subsequently to submit a request for the approval of an investigational device exemption, or IDE, for a pivotal study in the United States to (i) demonstrate device safety as evidenced by a lack of device-related serious adverse events; and (ii) provide efficacy data concerning our imaging capsule’s sensitivity and specificity. We anticipate that FDA approval for the pivotal study will be subject to our providing sufficient clinical data from the multi-center, prospective clinical feasibility study. We also intend to pursue clinical trials for regulatory approvals in Japan and China in parallel to the U.S. pivotal study. Pivotal studies are expected, among other things, to compare the images of polyps identified by our imaging system with the same polyps detected by traditional optical colonoscopy and CTC in instances where patients were referred after positive exam results. These clinical findings will be analyzed in comparison with results obtained from FOBTs and FITs. Subject to the successful completion of our clinical trials and the receipt of initial FDA approval for the marketing of our imaging capsule in the United States, we anticipate launching our product commercially in the United States during 2017.
We have submitted patent applications covering our technology in the United States, member states of the European Patent Organisation, Australia, Brazil, Canada, China, Hong Kong, India, Israel, Japan and South Korea. We have been granted patents for our core patent by the U.S. Patent and Trademark Office as well as from the European Patent Office, Australia, China, Hong Kong, Israel, India and Japan. We also filed patent applications describing the use of our imaging technology in several other medical applications.
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Since our formation, we have not generated any revenue. We do not anticipate generating any revenue for the foreseeable future and we do not yet have any specific launch dates for our product. For the six months ended June 30, 2014, we had a total comprehensive loss of $2.2 million. For the year ended December 31, 2013, we had a total comprehensive loss of $4.0 million. As of June 30, 2014, we had an accumulated deficit of $24.7 million and a total shareholders’ deficit of $998,000.
Industry Background
According to the American Cancer Society, or the ACS, CRC is the third most common cancer diagnosed and the second leading cause of death from cancer in the United States. The ACS estimates that in 2014, in the United States approximately 136,830 people are expected to be diagnosed with CRC and approximately 50,310 people will die from CRC. According to the World Health Organization, or the WHO, in 2012, in Europe there were an estimated 471,000 cases of CRC and approximately 228,000 died from the disease, and in Japan there were an estimated 112,675 cases of CRC and approximately 49,345 died from the disease. According to the WHO, in 2020 the expected numbers of cases of CRC are estimated to be 159,972 in the United States, 528,481 in Europe, 128,346 in Japan and 1,678,127 worldwide.
CRC screening can reduce death rates from CRC by detecting polyps at an earlier, more treatable stage. CRC is one of the few cancers that can be prevented through screening because pre-cancerous polyps, from which colon cancers often develop, can be identified and removed. Moreover, the five-year survival rate is greater than 90% for CRC patients diagnosed at an early, localized stage. However, less than 40% of cases are currently diagnosed at that stage. According to the Centers for Disease Control and Prevention, or the CDC, at least 6 out of every 10 deaths from CRC could be prevented if every adult age 50 years or older was screened regularly and approximately 30,000 lives could be saved each year in the United States if the screening recommendations were followed. The ACS’ goal is to have 80% of those 50 years and older who are covered by the program screened by 2018.
Today, there is a range of options for CRC screening in the average risk population, with current technology falling into two general categories: (i) structural exams, such as optical colonoscopy, sigmoidoscopy, CTC and optical capsules (all of which require aggressive bowel preparation), which are invasive exams that enable physicians to visualize the colon for abnormalities; and (ii) stool tests, such as FOBTs, FITs and stool DNA tests, which test for blood and irregularities in DNA. Notwithstanding the many CRC screening alternatives, the fact that the tests are encouraged by clinicians and insurers and the clinical value of screening for CRC, a large portion of the population are still reticent to undergo CRC screening and are not satisfied with the currently available alternatives.
The ACS recommends that men and women over the age of 50 undergo an optical colonoscopy every 10 years or other structural tests, such as sigmoidoscopy or virtual colonoscopy, every five years or alternatively, a FOBT should be performed every year. According to the U.S. Census Bureau, as of mid-2014, there were projected to be approximately 91 million Americans aged 50-75 years. Assuming the longest screening interval of 10 years, the addressable annual U.S. patient population is at least 9.1 million.
Optical colonoscopy is currently considered the most reliable method for detecting disorders of the colon and is the standard screening tool for early detection of colon cancer. Optical colonoscopy demonstrates a high degree (approximately 95%) of sensitivity (
i.e.
, detection of individuals with cancer) and specificity (
i.e.
, avoiding false negative results). Optical colonoscopy involves the insertion of a flexible colonoscope, which is an approximately160 centimeters long endoscope, by a physician into a patient’s colon through the anus in order to visually inspect the interior of the colon. Air must be pumped in through the rectum in a process called “insufflation.” Sigmoidoscopy, or FSIG, is an endoscopic procedure that examines the lower part of the colon lumen. The exam may be performed with a variety of endoscopic instruments, including a standard 60 centimeter sigmoidoscope. FSIG is typically performed without sedation and with a more limited bowel preparation than a standard optical colonoscopy. An optical colonoscopy and sigmoidoscopy can perform both diagnostic and limited treatment functions, by allowing for the removal of polyps and adenomas during the course of the procedure. However, both of these procedures carry some risks of bowel perforations and bleeding and related limitations as they require prior cleansing of the bowel, insufflation and sedation, involve potential complications and may cause patient anxiety, discomfort and, in some cases, pain. In addition, a patient’s normal daily routine is disrupted for one or two days.
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CTC, or virtual colonoscopy, is an imaging procedure that results in cross-sectional, two- or three-dimensional views of the entire colon with the use of a special X-ray machine linked to a computer. Here, as well, a flexible tube is inserted into the rectum in order to allow air or carbon dioxide to open the colon. The patient then passes through the CT scanner, which creates multiple images of the colon interior. This method does not allow for treatment and the subject is exposed to a high dose of radiation. A full bowel cleansing is currently necessary for a successful examination by CTC.
FOBT is based on an analysis of stool samples and is currently the most widely used non-invasive screening test. It has a lower sensitivity in detecting polyps (measured by the percentage of polyps being found). According to the CDC, in 2012, only approximately 10.6% of men and 10.2% of women in the United States underwent the procedure due to its inconvenience and unreliable performance. FOBT is being replaced by a more sensitive blood stool technology FIT, but it is also not designed to detect the majority of non-bleeding polyps.
In 2009, optical capsule endoscopy became commercially available in Europe for CRC screening. In early 2014, the FDA granted approval for optical capsule endoscopy procedure to be used for CRC screening for use in patients who have had an incomplete optical colonoscopy. However, this technology requires bowel cleansing to a greater degree than is required for a regular optical colonoscopy, which can result in dehydration and in turn can lead to cancellation of the procedure in certain cases. Moreover, because this procedure must be completed within several hours in order to maintain a clean colon and to accommodate the capsule’s limited battery life, patients are required to drink large amounts of liquid so that the capsule can flow through the gastrointestinal tract during the time allotted. Furthermore, camera-based optical capsule endoscopy procedures generate a large number of images, often requiring more physician time to analyze the images than to conduct an optical colonoscopy.
Several companies are developing technologies based on molecular diagnostics (from blood and other bodily fluids), or MDx, tests that investigate the link between genes and the function of metabolic pathways, drug metabolism and disease development with a primary focus on the study of DNA, RNA and proteins. Genetic markers can be traced within stool samples in minute quantities. For example, a special collecting kit for stool samples and an analyzer to diagnose CRC based on these stool-based markers has been developed and recently approved by the FDA. While the method of screening for CRC using stool DNA testing has been endorsed by several societies, this test does not generate structural information on the colon and therefore, does not detect most pre-cancerous polyps.
Our Solution
We believe that our imaging capsule could represent a potential breakthrough in CRC screening by providing a structural exam without the pain, discomfort and embarrassment experienced by some patients undergoing a traditional optical colonoscopy and other currently available screening methods by offering the following benefits:
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eliminating the need for fasting and prior bowel cleansing, which would differentiate our imaging capsule from every other currently available structural screening exam;
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providing patients with a procedure that requires them to swallow our capsule and small amounts of a contrast agent, thereby minimizing any disruption to their normal activities;
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eliminating the need to sedate patients;
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obviating the requirement for the insufflation (the forcing of air into the gastrointestinal tract) of patients;
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administering our technology on an outpatient basis;
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providing digital reporting, storage and remote consulting capabilities; and
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enabling a physician to analyze the results in approximately 10 minutes, which would be less time than is required to conduct an optical colonoscopy.
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Although our imaging capsule utilizes radiation that is considered low dose, we believe that the risks associated with such radiation exposure are low compared to risks associated with other procedures such as perforation, bleeding or sedation related effects (optical colonoscopy and sigmoidoscopy) and dehydration and damage to kidneys (optical capsules). Unlike FOBTs, FITs and stool DNA tests, our capsule-based imaging modality generates structural information on the colon, which could assist in the detection of pre-cancerous polyps. We therefore do not believe that the low dose radiation in our imaging capsule will make our imaging capsule less attractive to physicians and patients than other less effective products that do not employ any radiation.
We believe that gastroenterologists will embrace our technology and encourage the use of our imaging capsule. This may increase the number of people undergoing CRC screening and may cause more people with polyps to obtain polypectomy – a therapeutic procedure during which polyps are removed and which currently receives different reimbursement coverage.
Our imaging capsule and CPS are intended to be prescribed to patients by physicians. Just prior to swallowing our capsule, a patient will begin drinking small amounts of a radio opaque contrast agent (such as barium sulfate or iodine) with his or her meals, which enhances the contrast of the colon surface. The capsule is propelled by natural motility through the gastrointestinal tract. As it makes its way through the gastrointestinal tract, information is transmitted to a receiving device worn by the patient that stores the information for offline analysis. After our imaging capsule is expelled from a patient’s body, the CPS data will be transferred to physicians, who will then utilize our data viewer software application to analyze the data collected by our imaging capsule. Our proprietary software is being designed to process the data and produce a two- and three-dimensional visualization of the colon. A physician will then analyze the visualization to determine whether any anatomical anomalies are present on the surface of the colon.
Our imaging capsule consists of an X-ray source and several X-ray detectors. The X-ray source is contained in a rotating radiation shield, enabling the generation of 360-degree angular scans. The collection of successive angular scans enables the virtual reconstruction of a portion of the colon. During movement of our imaging capsule longitudinally through the colon, successive images of portions of the colon are collected to enable the three-dimensional reconstruction of the colon. Our imaging capsule is also intended to enable identification of polyps, which protrude inward into the colon, through the detection of irregularities in the topography of the colon.
Image for illustration purpose only
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Our Strategy
Our goal is to become a leading supplier of CRC screening technology and, subject to the successful completion of the development of our technology and the receipt of the requisite regulatory approvals, to establish our technology as a leading CRC screening method. Key elements of our strategy include:
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obtaining CE marking for the marketing and sale of our imaging capsule in the European Union, followed by obtaining regulatory approvals for the use of our imaging capsule initially in the United States and Japan. In Europe and Japan, we intend to offer our imaging capsule as an imaging and screening tool for the general population. In the United States, we may first seek to obtain regulatory approvals for our imaging capsule as an adjunct tool to FOBTs and FITs, and after we have conducted more extensive clinical studies, we anticipate applying to the FDA for the use of our imaging capsule as an initial screening tool;
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obtaining third-party reimbursement for our technology;
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enhancing our existing technology portfolio and developing new technologies; and
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successfully marketing our product to establish a large customer base.
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Our Challenges
Because we are still in the clinical and development stage, we are subject to certain challenges, including, among others, that:
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our technology has been tested on a limited basis and therefore we cannot assure the product’s clinical value;
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we need to CE mark the devices in the European Union and obtain the requisite regulatory approvals in the United States, Japan and other markets where we plan to focus our commercialization efforts;
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we need to raise an amount of capital sufficient to complete the development of our technology, obtain the requisite regulatory approvals and commercialize our current and future products;
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we need to obtain reimbursement coverage from third-party payors for procedures using our imaging capsule;
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we need to increase our manufacturing capabilities; and
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we need to establish and expand our customer base while competing against other sellers of capsule endoscopes as well as other current and future CRC screening technologies and methods.
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Our ability to operate our business and achieve our goals and strategies is subject to numerous risks as described more fully in “Risk Factors.”
Implications of Being an Emerging Growth Company
As a company with less than $1.0 billion in revenue during our last fiscal year, we qualify as an “emerging growth company” pursuant to the Jumpstart Our Business Startups Act of 2012, or the JOBS Act. An emerging growth company may take advantage of certain exemptions from specified disclosure and other requirements that are otherwise generally applicable to public companies. These exemptions include:
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being permitted to provide only two years of audited financial statements, in addition to any required unaudited 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 for the assessment of our internal control over financial reporting provided by Section 404 of the Sarbanes-Oxley Act of 2002;
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not being required to comply with any requirements adopted by the Public Company Accounting Oversight Board requiring mandatory audit firm rotation or a supplement to the auditor’s report in which the auditor would be required to provide additional information about the audit and our financial statements;
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reduced disclosure obligations regarding executive compensation; and
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not being required to hold a nonbinding advisory vote on executive compensation or seek shareholder approval of any golden parachute payments not previously approved.
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In addition, the JOBS Act provides that an emerging growth company can take advantage of an extended transition period for complying with new or revised accounting standards. However, we have elected to “opt out” of this provision and, as a result, we will comply with new or revised accounting standards as required when they are adopted for public companies. This decision to opt out of the extended transition period under the JOBS Act is irrevocable.
We will remain an emerging growth company until the earliest of (i) the last day of the fiscal year in which our total annual gross revenues exceed $1.0 billion; (ii) the last day of the fiscal year in which the fifth anniversary of the date of the first sale of ordinary shares under this registration statement occurs; (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 Securities Exchange Act of 1934, as amended, or the Exchange Act. When we are no longer deemed to be an emerging growth company, we will not be entitled to rely on the exemptions provided in the JOBS Act discussed above. We may choose to take advantage of some, but not all, of the exemptions available to emerging growth companies. We have taken advantage of some of the reduced reporting exemptions in this prospectus. Accordingly, the information contained herein and in future filings with the U.S. Securities and Exchange Commission may be different from the information provided by other public companies in similar filings.
Concurrent Private Placement
Concurrently with this offering, we expect to complete a Private Placement of ordinary shares at a purchase price per ordinary share equal to the public offering price in accordance with Regulation S under the Securities Act or Regulation D under the Securities Act, to certain investors including certain of our affiliates. The sale of such ordinary shares will not be registered under the Securities Act. We expect to receive $ in aggregate net proceeds from the Private Placement. The closing of the Private Placement is conditioned upon the completion of the offering to which this prospectus relates. However, the completion of the offering to which this prospectus relates is not conditioned upon the closing of the Private Placement.
Corporate Information
We were incorporated as a limited liability private company under the laws of the State of Israel on April 5, 2009, and on May 31, 2009, we acquired all of the business operations and substantially all of the assets of Check-Cap LLC, a Delaware limited liability company formed in December 2004. Our principal executive offices are located at Check-Cap Building, Abba Hushi Avenue, P.O. Box 1271, Isfiya, 30090, Mount Carmel, Israel. Our telephone number is +972-4-8303400. Our website address is
www.check-cap.com
. Information contained on, or accessible through, our website does not constitute part of this prospectus and is not incorporated by reference herein.
Throughout this prospectus we refer to the trademark “CHECK-CAP” that we use in our business. Furthermore, we received a notice of allowance for the “CHECK-CAP” mark and design logo in the United States and hold a registered trademark for the “CHECK-CAP” design logo in Europe. Other trademarks and service marks appearing in this prospectus are the property of their respective holders.
Recent Developments
Credit Line
Agreement
;
Private Placement
On August 20, 2014, we entered into a certain credit line agreement, pursuant to which we obtained a credit line in an aggregate principal amount of $12 million from certain lenders and existing shareholders, or the Lenders. The credit line amount was deposited in an escrow account at the closing, which was consummated on October 14, 2014.
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We issued to each Lender at closing a warrant, collectively referred to as the Credit Line Warrants, to purchase a number of our ordinary shares constituting 2% of our share capital on a fully diluted basis (assuming conversion of all of our convertible securities into ordinary shares at a 1:1 conversion rate) as of the closing for each $1 million (or portion thereof) extended by such Lender. We issued Credit Line Warrants to purchase in the aggregate 53,169,092 of our ordinary shares. The Credit Line Warrants are exercisable for a period of ten years at an exercise price of NIS 0.01 per share, and may be exercised on a net issuance basis.
Under the terms of the agreement, if we intend to consummate (as defined in the credit line agreement) an initial public offering of our securities, or an IPO, and such IPO is expected to be consummated on or prior to February 18, 2015, or if we consummate (as defined in the credit line agreement) an IPO on or prior to February 18, 2015, we will be entitled to direct that all or any portion of the credit loan amount be invested in ordinary shares in a private placement transaction that is exempt from the registration requirements of the Securities Act at a price per ordinary share equal to the public offering price per share in the IPO. In the event that we direct that less than the full credit line amount be invested in the private placement, the amount to be invested by each lender in the private placement will be equal to their pro rata share of the total credit line amount. If we consummate (as defined in the credit line agreement) an IPO on or prior to February 18, 2015, any part of the credit line amount not so invested in the private placement will be released to the Lenders. The consummation of any of the transactions contemplated by the credit line agreement, including, without limitation, the Private Placement, is not a condition to our obligation or the obligation of the underwriters to consummate the transactions contemplated by the underwriting agreement.
If we do not consummate (as defined in the credit line agreement) an IPO on or prior to February 18, 2015, we may “call” the credit line amount (
i.e.,
direct that such funds be released from the escrow account to us) at any time thereafter until April 14, 2016, subject to certain conditions. Any part of the credit line amount not so called by us on or prior to such date will be released to the Lenders. If we call the credit line amount from the escrow account on or prior to April 14, 2016, the amount called will bear interest at the annual rate of 7%; provided that the aggregate interest rate will not be less than 5%. The called credit line amount (and, at our option, the interest accrued thereon) will automatically convert into shares of our company upon the earlier of a qualified financing round (which includes a public offering, including an IPO), an M&A Event (
i.e.
, as defined in the credit line agreement as an acquisition with or into another entity, the sale or license of all or substantially all of our assets or intellectual property or all or substantially all of our issued and outstanding share capital, or any other transaction having the same effect of any of the foregoing) and April 14, 2016, and the Lenders may elect to convert the entire called credit line amount (and, at our option, the interest accrued thereon) upon a non-qualified financing round, all under the terms and conditions set forth in the credit line agreement. In the event that the qualified financing round is an IPO, in lieu of automatic conversion, we are entitled, to the extent permitted by law, to deposit in trust an amount equal to 125% of the called credit line amount (and, at our option, the interest accrued thereon) and irrevocably instruct the trustee to submit an offer, on behalf of each Lender, for the purchase of the IPO shares at the IPO price determined by the lead underwriters.
Israel-United States Binational Industrial Research and Development Foundation
Grant
On July 13, 2014, we entered into a Cooperation and Project Funding Agreement with the Israel-United States Binational Industrial Research and Development Foundation, or the BIRD Foundation, and Synergy Research Inc., or Synergy, pursuant to which the BIRD Foundation has agreed to award a grant in the maximum amount of the lesser of (i) $900,000; and (ii) 50% of the actual expenditures for the funding of a project entitled “Collection & Analysis of Gastrointestinal Images for Diagnostic Adenomatic Polyps and Colorectal Cancer.” The development work is expected to be performed over a 24 month period by Synergy (or a subcontractor on its behalf) and us. Of the total grant amount, we are expected to receive an aggregate of $567,000 to fund our expenditures for the project, in five installments. We received our first advance payment from the BIRD Foundation of $68,000 in July 2014. Our research and development expenses, net is presented net of the differences between the fair value of the liability and the grant amount received from the BIRD Foundation.
We are required to repay the total sum granted to us and Synergy by the BIRD Foundation, linked to the U.S. Consumer Price Index from date of receipt of each payment, up to 100%, 113%, 125%, 138% and 150% of the linked sum granted by the BIRD Foundation if repaid within one year, two years, three years, four years and five or more years, respectively, of the original project completion date in accordance with the project proposal. Repayments are made at the rate of 5% of gross revenues derived from the product funded by the project. Under the terms of the agreement, if any portion of the product funded by the project is sold outright to a third party prior to full repayment of the grant to the BIRD Foundation, one-half of the sale proceeds will be applied to the repayment of the grant. If the funded product is licensed to a third party, 30% of all payments received under the respective license agreement must be paid to the BIRD Foundation in repayment of the grant.
|
(1) The number of ordinary shares to be outstanding after our initial public offering and the concurrent Private Placement is based on ordinary shares issued and outstanding as of , 2015, and excludes:
|
·
|
19,126,687 ordinary shares issuable upon the exercise of outstanding warrants to purchase preferred shares (comprised of (i) warrants to purchase 836,412 Series C-1 preferred shares; (ii) warrants to purchase 1,175,257 Series C-2 preferred shares; (iii) warrants to purchase 503,872 Series D-1 preferred shares; and (iv) warrants to purchase 16,611,146 Series D-2 preferred shares, following their conversion into warrants to purchase ordinary shares immediately prior to the closing of this offering) with a weighted average exercise price of $0.45 per ordinary share;
|
|
·
|
230,920 ordinary shares issuable upon the exercise of outstanding warrants, which will be automatically exercised, without consideration, if and when Guy Neev exercises any part of his options to purchase 1,995,475 ordinary shares, or the Neev Options, in proportion to (i) the portion of the Neev Options exercised by Guy Neev; and (ii) the number of warrants held by the optionee with respect to which such warrants were granted that were exercised prior to the exercise of the Neev Options;
|
|
·
|
57,599,850 ordinary shares issuable upon the exercise of outstanding warrants , of which (i) warrants to purchase 53,169,092 ordinary shares have an exercise price of NIS 0.01 per ordinary share and are fully vested; (ii) warrants to purchase 2,215,379 ordinary shares have an exercise price of NIS 0.01 per ordinary share and will become fully vested upon the closing of this offering; and (iii) warrants to purchase 2,215,379 ordinary shares with an exercise price per share equal to the price per share at which our ordinary shares are sold to the public in this offering which will become fully vested upon the closing of this offering;
|
|
·
|
12,366,188 ordinary shares issuable upon the exercise of outstanding options with a weighted average exercise price of $0.17 per ordinary share, granted under our 2006 Unit Option Plan;
|
·
|
11,630,739 ordinary shares issuable upon the exercise of outstanding options granted under our 2006 Unit Option Plan, which will become fully vested upon the closing of this offering; (i) fifty-percent of which have an exercise price of NIS 0.01 per ordinary share; and (ii) fifty-percent of which will be exercisable at the price per share at which our ordinary shares are sold to the public in this offering;
|
|
· |
769,453 ordinary shares issuable upon the exercise of options with an exercise price of $0.2478 per ordinary share, under our 2006 Unit Option Plan, which we have agreed that certain executive officers will be entitled to upon completion of an equity financing, which includes this offering;
|
|
· |
the ordinary shares issuable upon the exercise of warrants to be issued to certain finders in connection with the credit line agreement if either (i) the credit line amount extended to us is invested in ordinary shares in a private placement on or prior to February 18, 2015; or (ii) if we do not consummate an IPO on or prior to February 18, 2015 and we call the credit line amount, upon conversion of the credit line amount into ordinary shares in accordance with the terms of the credit line agreement;
|
|
·
|
150,000 ordinary shares issuable upon the exercise of warrants with an exercise price per ordinary shares equal to the initial public offering price to be issued to our U.S. legal counsel as partial compensation for services rendered in connection with the offering; and
|
|
·
|
the ordinary shares issuable upon exercise of the underwriter warrants to be issued in connection with this offering.
|
|
Except as otherwise indicated, information in this prospectus reflects or assumes:
|
||
·
|
the adoption of our amended and restated articles of association prior to the closing of this offering, which will replace our articles of association currently in effect;.
|
|
·
|
a one-for- reverse split of our ordinary shares, which will occur prior to the pricing of this offering;
|
|
·
|
the conversion of all outstanding preferred shares into an aggregate of ordinary shares immediately prior to the closing of this offering;
|
|
·
|
the issuance of 1,995,475 ordinary shares to Mr. Guy Neev upon the exercise prior to the closing of this offering of the Neev Options;
|
|
·
|
the issuance of 7,503,521 ordinary shares issuable under warrants that will be automatically exercised, without consideration, upon the exercise by Mr. Guy Neev of the Neev Options;
|
|
· |
the issuance of ordinary shares in the Private Placement at the initial public offering price per ordinary share;
|
|
·
|
an initial public offering price of $ , which is the mid-point of the range set forth of the front cover of this prospectus; and
|
|
·
|
that the underwriters do not exercise their over-allotment option.
|
Year Ended December 31,
|
Six Months Ended June 30,
|
|||||||||||||||
2013
|
2012
|
2014
|
2013
|
|||||||||||||
(US$ in thousands, except per share data)
|
||||||||||||||||
(Unaudited)
|
||||||||||||||||
Research and development expenses, net
(1)
|
2,662 | 2,692 | 1,640 | 1,364 | ||||||||||||
General and administrative expenses
|
1,090 | 1,203 | 564 | 520 | ||||||||||||
Other expenses (income)
|
(10 | ) | 13 | -- | -- | |||||||||||
Operating loss
|
3,742 | 3,908 | 2,204 | 1,884 | ||||||||||||
Finance income
|
(63 | ) | (416 | ) | (60 | ) | (45 | ) | ||||||||
Finance expenses
|
316 | 229 | 85 | 230 | ||||||||||||
Finance expenses (income), net
|
253 | (187 | ) | 25 | 185 | |||||||||||
Loss and total comprehensive loss for the period
|
3,995 | 3,721 | 2,229 | 2,069 | ||||||||||||
Loss per ordinary share of NIS 0.01 par value, basic and diluted
(2)
|
0.18 | 0.17 | 0.10 | 0.09 | ||||||||||||
Weighted average number of ordinary shares outstanding – basic and diluted (in thousands)
(2)
|
32,542 | 32,530 | 32,542 | 32,542 | ||||||||||||
Pro forma loss per ordinary share of NIS 0.01 par value
(3)
|
||||||||||||||||
Basic and diluted (unaudited)
(2)
|
||||||||||||||||
Pro forma weighted average number of ordinary shares outstanding - basic and diluted (in thousands) (unaudited)
(2)
|
||||||||||||||||
Statements of Financial Position Data |
As of December 31, 2013
|
As of June 30, 2014
|
|||||||||||
Actual
|
Pro forma
(3)
|
Pro forma as
adjusted
(4)
|
|||||||||||
(US$ in thousands)
Unaudited
|
|||||||||||||
Cash and cash equivalents
|
$ | 4,975 | $ | 2,794 | $ | ||||||||
Working capital
(5)
|
4,131 | 1,990 | |||||||||||
Total assets
|
5,375 | 3,276 | |||||||||||
Capital stock
|
23,676 | 23,716 | |||||||||||
Total shareholders’ equity (deficit)
|
$ | 1,191 | $ | (998 | ) |
|
(
1)
|
Research and development expenses, net is presented net of the differences between the amount of grants received from the OCS and the fair value of their financial liability. The effect of the participation by the OCS totaled $0.4 million and $0.2 million for the years ended December 31, 2013 and 2012, respectively. See “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Financial Operations Overview—Research and Development, Expenses, Net” for more information.
|
(2)
|
Basic and diluted loss per ordinary share is computed based on the basic and diluted weighted average number of ordinary shares outstanding during each period. For purposes of these calculations, the following ordinary shares are deemed to be outstanding: (i) the 1,995,475 ordinary shares issuable to Mr. Guy Neev upon exercise of the Neev Options; and (ii) the 7,503,521 ordinary shares issuable under warrants that will be automatically exercised without consideration upon the exercise by Mr. Guy Neev of the Neev Options. For additional information, see Note 17 to our financial statements for the year ended December 31, 2013 included elsewhere in this prospectus.
|
|
(3)
|
On a pro forma basis to give effect to the conversion immediately prior to the completion of this offering of all of our outstanding preferred shares into ordinary shares.
|
|
(4)
|
On a pro forma as adjusted basis to give further effect to (i) the issuance and sale of ordinary shares by us in this offering at an assumed initial public offering price of $ per share, the midpoint of the estimated initial public offering price range set forth on the cover of this prospectus, after deducting underwriting discounts and commissions and estimated offering expenses payable by us; and (ii) the issuance and sale of ordinary shares by us in the concurrent Private Placement at an assumed price of $ per ordinary share, the estimated public offering price, after deducting commissions and estimated expenses payable by us in connection with the concurrent Private Placement.
|
|
(5)
|
Working capital is defined as total current assets minus total current liabilities.
|
|
·
|
we may not have adequate financial or other resources to complete the development of our product;
|
|
·
|
we may not be able to manufacture our products in commercial quantities, at an adequate quality or at an acceptable cost;
|
|
·
|
we may not be able to establish adequate sales, marketing and distribution channels;
|
|
·
|
healthcare professionals and patients may not accept our imaging capsule;
|
|
·
|
we may not be aware of possible complications from the continued use of our imaging capsule since we have limited clinical experience with respect to the actual use of our imaging capsule;
|
|
·
|
technological breakthroughs in CRC screening, treatment and prevention may reduce the demand for our imaging capsule;
|
|
·
|
changes in the market for CRC screening, new alliances between existing market participants and the entrance of new market participants may interfere with our market penetration efforts;
|
|
·
|
third-party payors may not agree to reimburse patients for any or all of the purchase price of our imaging capsule, which may adversely affect patients’ willingness to purchase our imaging capsule;
|
|
·
|
uncertainty as to market demand may result in inefficient pricing of our imaging capsule;
|
|
·
|
we may face third-party claims of intellectual property infringement;
|
|
·
|
we may fail to obtain or maintain regulatory approvals for our imaging capsule in our target markets or may face adverse regulatory or legal actions relating to our imaging capsule even if regulatory approval is obtained; and
|
|
·
|
we are dependent upon the results of ongoing clinical studies relating to our imaging capsule and the products of our competitors.
|
|
·
|
market acceptance of a new product, including healthcare professionals’ and patients’ preferences;
|
|
·
|
development of similarly cost-effective products by our competitors;
|
|
·
|
development delays of our imaging capsule;
|
|
·
|
technological innovations in CRC screening, treatment and prevention;
|
|
·
|
adverse medical side effects suffered by patients using our imaging capsule, whether actually resulting from the use of our imaging capsule or not;
|
|
·
|
changes in regulatory policies toward CRC screening or imaging technologies;
|
|
·
|
changes in regulatory approval or clearance requirements for our product;
|
|
·
|
third-party claims of intellectual property infringement;
|
|
·
|
budget constraints and the availability of reimbursement or insurance coverage from third-party payors for our imaging capsule;
|
|
·
|
increases in market acceptance of other technologies; and
|
|
·
|
adverse responses from certain of our competitors to the offering of our imaging capsule.
|
|
·
|
there is sufficient long-term clinical evidence to convince them to alter their existing screening methods and device recommendations;
|
|
·
|
there are recommendations from other prominent physicians, educators and/or associations that our imaging capsule is safe and effective;
|
|
·
|
we obtain favorable data from clinical studies for our imaging capsule;
|
|
·
|
reimbursement or insurance coverage from third-party payors is available; and
|
|
·
|
they become familiar with the complexities of our imaging capsule.
|
|
·
|
the existence of clinical data sufficient to support the use of our imaging capsule for the visualization, imaging, or screening of the colon as compared to other colon visualization, imaging or screening methods (if clinical trials indicate that our imaging capsule is not as clinically effective as other current methods, or if our technology causes unexpected complications or other unforeseen negative effects, we may not obtain regulatory clearance or approval to market and sell our imaging capsule or physicians may be reluctant to use it);
|
|
·
|
the availability of sufficient clinical data for physicians to use our imaging capsule in their practice and for private third-party payors to make an adequate reimbursement decision to provide coverage for our imaging capsule; and
|
|
·
|
the availability of a reliable contrast agent for our imaging capsule that is accepted by physicians and patients.
|
|
•
|
foreign certification, registration and other regulatory requirements;
|
|
•
|
customs clearance and shipping delays;
|
|
•
|
import and export controls;
|
|
•
|
trade restrictions;
|
|
•
|
multiple and possibly overlapping tax structures;
|
|
•
|
difficulty forecasting the results of our international operations and managing our inventory due to our reliance on third-party distributors;
|
|
•
|
differing laws and regulations, business and clinical practices, third-party payor reimbursement policies and patient preferences;
|
|
•
|
differing standards of intellectual property protection among countries;
|
|
•
|
difficulties in staffing and managing our international operations;
|
|
•
|
difficulties in penetrating markets in which our competitors’ products are more established;
|
|
•
|
currency exchange rate fluctuations; and
|
|
•
|
political and economic instability, war or acts of terrorism.
|
|
•
|
we may not be able to demonstrate to FDA’s satisfaction that our products are safe and effective for their intended use;
|
|
•
|
the data from our pre-clinical studies and clinical trials may be insufficient to support clearance or approval;
|
|
•
|
in the case of a PMA submission, that the manufacturing process or facilities we use may not meet applicable requirements; and
|
|
•
|
changes in FDA’s 510(k) clearance, de novo reclassification, or PMA approval processes and policies, or the adoption of new regulations may require additional data.
|
|
•
|
patients do not enroll in the clinical trial at the rate we expect;
|
|
•
|
patients do not comply with trial protocols;
|
|
•
|
patient follow-up is not at the rate we expect;
|
|
•
|
patients experience adverse side effects;
|
|
•
|
patients die during a clinical trial, even though their death may be unrelated to our product;
|
|
•
|
FDA or other regulatory authorities do not approve a clinical trial protocol or a clinical trial, or place a clinical trial on hold;
|
|
•
|
institutional review boards, or IRBs, Ethics Committees and third-party clinical investigators may delay or reject our trial protocol and Informed Consent Form;
|
|
•
|
third-party clinical investigators decline to participate in a study or trial or do not perform a study or trial on our anticipated schedule or consistent with the investigator agreements, study or trial protocol, good clinical practices or other FDA or IRBs, Ethics Committees, or any other applicable requirements;
|
|
•
|
third-party organizations do not perform data collection, monitoring and analysis in a timely or accurate manner or consistent with the study or trial protocol or investigational or statistical plans;
|
|
•
|
regulatory inspections of our studies, trials or manufacturing facilities may require us to, among other things, undertake corrective action or suspend or terminate our studies or clinical trials;
|
|
•
|
changes in governmental regulations or administrative actions;
|
|
•
|
the interim or final results of the study or clinical trial are inconclusive or unfavorable as to safety or efficacy; and
|
|
•
|
a regulatory agency or our Notified Body concludes that our trial design is or was inadequate to demonstrate safety and efficacy.
|
|
•
|
untitled letters, warning letters, fines, injunctions, corporate integrity agreements, consent decrees and civil penalties;
|
|
•
|
unanticipated expenditures to address or defend such actions;
|
|
•
|
custom
er notifications for repair, replacement or refunds;
|
|
•
|
recall, detention or seizure of our products;
|
|
•
|
operating restrictions or partial suspension or total shutdown of production;
|
|
•
|
refusing or delaying our requests for 510(k) clearance or premarket approval of new products or modified products;
|
|
•
|
operating restrictions;
|
|
•
|
withdrawing 510(k) clearances on PMA approvals that have already been granted;
|
|
•
|
suspension or withdrawal of our CE Certificates of Conformity;
|
|
•
|
refusal to grant export approval for our products; or
|
|
•
|
criminal prosecution.
|
|
•
|
pending and future patent applications may not result in the issuance of patents or, if issued, may not be issued in a form that will be advantageous to us;
|
|
•
|
our issued patents may be challenged, invalidated or legally circumvented by third parties;
|
|
•
|
our patents may not be upheld as valid and enforceable or prevent the development of competitive products;
|
|
•
|
the eligibility of certain inventions related to diagnostic medicine, more specifically diagnostic methods and processes, for patent protection in the United States has been limited recently which may affect our ability to enforce our issued patents in the United States or may make it difficult to obtain broad patent protection going forward in the United States;
|
|
•
|
for a variety of reasons, we may decide not to file for patent protection on various improvements or additional features; and
|
|
•
|
intellectual property protection and/or enforcement may be unavailable or limited in some countries where laws or law enforcement practices may not protect our proprietary rights to the same extent as the laws of the United States, the European Union, Canada or Israel.
|
|
•
|
the agreements may be breached, may not provide the scope of protection we believe they provide or may be determined to be unenforceable;
|
|
•
|
we may have inadequate remedies for any breach;
|
|
•
|
proprietary information could be disclosed to our competitors; or
|
|
•
|
others may independently develop substantially equivalent or superior proprietary information and techniques or otherwise gain access to our trade secrets or disclose such technologies.
|
|
•
|
progress, or lack of progress, in developing and commercializing our products;
|
|
•
|
favorable or unfavorable decisions about our products or intellectual property from government regulators, insurance companies or other third-party payors;
|
|
•
|
our ability to recruit and retain qualified regulatory and research and development personnel;
|
|
•
|
changes in investors’ and securities analysts’ perception of the business risks and conditions of our business;
|
|
•
|
changes in our relationship with key collaborators;
|
|
•
|
changes in the market valuation or earnings of our competitors or companies viewed as similar to us;
|
|
•
|
changes in key personnel;
|
|
•
|
depth of the trading market in our ordinary shares;
|
|
•
|
termination of the lock-up agreement or other restrictions on the ability of us or any of our existing shareholders to sell ordinary shares after this offering and the concurrent Private Placement;
|
|
•
|
changes in our capital structure, such as future issuances of securities or the incurrence of additional debt;
|
|
•
|
the granting or exercise of employee stock options or other equity awards;
|
|
•
|
realization of any of the risks described under this section entitled “Risk Factors;” and
|
|
•
|
general market and economic conditions.
|
|
•
|
our goals and strategies;
|
|
•
|
the timing and conduct of the clinical trials for our ingestible imaging capsule, including statements regarding the timing, progress and results of current and future preclinical studies and clinical trials, and our research and development programs;
|
|
•
|
the clinical utility, potential advantages and timing or likelihood of regulatory filings and approvals of our ingestible imaging capsule;
|
|
•
|
our future business development, results of operations and financial condition;
|
|
•
|
our ability to protect our intellectual property rights;
|
|
•
|
our plans to develop, launch and commercialize our imaging capsule and any future products;
|
|
•
|
the timing, cost or other aspects of the commercial launch of our imaging capsule;
|
|
•
|
market acceptance of our product;
|
|
•
|
our estimates regarding expenses, future revenues, capital requirements and our need for additional financing;
|
|
•
|
our estimates regarding the market opportunity for our imaging capsule;
|
|
•
|
the impact of government laws and regulations;
|
|
•
|
our ability to recruit and retain qualified regulatory and research and development personnel;
|
|
•
|
unforeseen changes in healthcare reimbursement for any of our approved product;
|
|
•
|
difficulties in maintaining commercial scale manufacturing capacity and capability; our ability to generate growth;
|
|
•
|
our failure to comply with regulatory guidelines;
|
|
•
|
uncertainty in industry demand and patient wellness behavior;
|
|
•
|
general economic conditions and market conditions in the medical device industry;
|
|
•
|
future sales of large blocks or our ordinary shares, which may adversely impact our share price;
|
|
•
|
depth of the trading market in our ordinary shares; and
|
|
•
|
our intended use of proceeds of this offering and the concurrent Private Placement.
|
|
•
|
approximately $ million on research and development;
|
|
•
|
approximately $ million on regulatory submissions for approvals of our product, including approximately $ million on clinical trials in Europe and the United States;
|
|
•
|
approximately $ million to build our manufacturing capabilities for the clinical phase; and
|
|
•
|
the balance, if any, for working capital and other general corporate purposes. |
|
•
|
the timing of clinical studies and eventual FDA or other regulatory approvals of our imaging capsule;
|
|
•
|
the need or desire on our part to accelerate, increase or eliminate existing initiatives due to, among other things, changing market conditions and competitive developments; and
|
|
•
|
the availability of other sources of cash including cash flow from operations and new bank debt financing arrangements, if any.
|
|
•
|
on an actual basis;
|
|
•
|
on a pro forma basis to give effect to: (i) the conversion of all of our outstanding preferred shares into an aggregate of ordinary shares immediately prior to the completion of this offering; (ii) the issuance of 1,995,475 ordinary shares to Mr. Guy Neev upon the exercise of the Neev Options, which will occur, prior to the closing of this offering; and (iii) the issuance of 7,503,521 ordinary shares issuable under warrants that will be automatically exercised without consideration upon the exercise of the Neev Options; and
|
|
•
|
on a pro forma as adjusted basis to give further effect to (i) the issuance and sale of ordinary shares by us in this offering at an assumed initial public offering price of $ per ordinary share, the midpoint of the estimated initial public offering price range set forth on the cover of this prospectus, after deducting underwriting discounts and commissions and estimated offering expenses payable by us; and (ii) the issuance and sale of ordinary shares by us in the Private Placement at an assumed price of $ per ordinary share, the midpoint of the estimated public offering price range, after deducting commissions and estimated expenses payable by us in connection with the Private Placement.
|
As of June 30, 2014
|
||||||||||||
Actual
|
Pro forma
|
Pro forma as adjusted
|
||||||||||
(in thousands of US$)
(Unaudited)
|
||||||||||||
Liabilities:
|
||||||||||||
Other financial liabilities
|
$ | 657 | $ | $ | ||||||||
Shareholders’ equity:
|
||||||||||||
Preferred share capital, 242,845,819 shares authorized, 86,778,910 shares issued, actual, no shares issued, pro forma, no shares issued, pro forma, as adjusted
|
226 | - | - | |||||||||
Ordinary share capital, 907,154,181 shares authorized, shares issued, actual, shares issued, pro forma, shares issued, pro forma, as adjusted
|
53 | |||||||||||
Premium on preferred shares
|
21,167 | - | - | |||||||||
Share options
|
1,793 | |||||||||||
Premium on ordinary shares
|
6 | |||||||||||
Capital reserve for ordinary share-based payment
|
471 | |||||||||||
Accumulated deficit
|
(24,714 | ) | ||||||||||
Total shareholders’ deficit
|
$ | (998 | ) | $ | $ |
|
•
|
19,126,687 ordinary shares issuable upon the exercise of outstanding warrants to purchase preferred shares (comprised of (i) warrants to purchase 836,412 Series C-1 preferred shares; (ii) warrants to purchase 1,175,257 Series C-2 preferred shares; (iii) warrants to purchase 503,872 Series D-1 preferred shares; and (iv) warrants to purchase 16,611,146 Series D-2 preferred shares, following their conversion into warrants to purchase ordinary shares immediately prior to the closing of this offering) with a weighted average exercise price of $0.45 per ordinary share;
|
|
•
|
230,920 ordinary shares issuable upon the exercise of outstanding warrants, which will be automatically exercised, without consideration, if and when Mr. Guy Neev exercises any part of the Neev Options, in proportion to (i) the portion of the Neev Options exercised by Mr. Guy Neev; and (ii) the number of warrants held by the optionee with respect to which such warrants were granted that were exercised prior to the exercise of the Neev Options;
|
|
•
|
57,599,850 ordinary shares issuable upon the exercise of outstanding warrants, of which (i) warrants to purchase 53,169,092 ordinary shares have an exercise price of NIS 0.01 per ordinary share and are fully vested; (ii) warrants to purchase 2,215,379 ordinary shares have an exercise price of NIS 0.01 per ordinary share and will become fully vested upon the closing of this offering; and (iii) warrants to purchase 2,215,379 ordinary shares with an exercise price per share equal to the price per share at which our ordinary shares are sold to the public in this offering which will become fully vested upon the closing of this offering;
|
|
•
|
12,366,188 ordinary shares issuable upon the exercise of outstanding options with a weighted average exercise price of $0.17 per ordinary share, granted under our 2006 Unit Option Plan;
|
|
•
|
11,630,739 ordinary shares issuable upon the exercise of outstanding options granted under our 2006 Unit Option Plan, which will become fully vested upon the closing of this offering; (i) fifty-percent of which have an exercise price of NIS 0.01 per ordinary share; and (ii) fifty-percent of which will be exercisable at the price per share at which our ordinary shares are sold to the public in this offering;
|
|
•
|
769,453 ordinary shares issuable upon the exercise of options with an exercise price of $0.2478 per ordinary share, under our 2006 Unit Option Plan, which we have agreed that certain executive officers will be entitled to upon completion of an equity financing, which includes this offering;
|
|
•
|
the ordinary shares issuable upon the exercise of warrants to be issued to certain finders in connection with the credit line agreement if either (i) the credit line amount extended to us is invested in ordinary shares in a private placement on or prior to February 18, 2015; or (ii) if we do not consummate an IPO on or prior to February 18, 2015 and we call the credit line amount, upon conversion of the credit line amount into ordinary shares;
|
|
•
|
150,000 ordinary shares issuable upon the exercise of warrants with an exercise price per ordinary shares equal to the initial public offering price to be issued to our U.S. legal counsel as partial compensation for services rendered in connection with the offering; and
|
|
•
|
the ordinary shares issuable upon exercise of the underwriter warrants to be issued in connection with this offering.
|
Assumed initial public offering price per share
|
$
|
||||||
Pro forma net tangible book value (deficit) per share before this offering, as of June 30, 2014
|
$
|
||||||
Increase in pro forma net tangible book value per share attributable to new investors in this offering and new investors in the Private Placement
|
|||||||
Pro forma net tangible book value per share after the offering and the Private Placement
|
|||||||
Dilution in pro forma tangible book value per share to new investors in this offering
|
$
|
Average Price
Per
Ordinary
Share
|
|||||||||
Shares Purchased
|
Total Consideration
|
||||||||
Number
|
Percentage
|
Amount
|
Percentage
|
||||||
Existing shareholders
|
|||||||||
New Investors
|
|||||||||
Total
|
|
•
|
the 1,995,475 ordinary shares issuable to Mr. Guy Neev upon exercise of the Neev Options, which shares were deemed to be outstanding on June 30, 2014;
|
|
•
|
the 7,503,521 ordinary shares issuable under warrants that will be automatically exercised without consideration upon the exercise by Mr. Guy Neev of the Neev Options, which shares were deemed to be outstanding on June 30, 2014;
|
•
|
the issuance of ordinary shares in the Private Placement at the initial public offering price per ordinary share; and
|
|
•
|
the conversion of all of our outstanding preferred shares into an aggregate of ordinary shares immediately prior to the completion of this offering.
|
|
•
|
19,126,687 ordinary shares issuable upon the exercise of outstanding warrants to purchase preferred shares (comprised of (i) warrants to purchase 836,412 Series C-1 preferred shares; (ii) warrants to purchase 1,175,257 Series C-2 preferred shares; (iii) warrants to purchase 503,872 Series D-1 preferred shares; and (iv) warrants to purchase 16,611,146 Series D-2 preferred shares, following their conversion into warrants to purchase ordinary shares immediately prior to the closing of this offering) with a weighted average exercise price of $0.45 per ordinary share;
|
|
•
|
230,920 ordinary shares issuable upon the exercise of outstanding warrants, which will be automatically exercised, without consideration, if and when Mr. Guy Neev exercises any part of the Neev Options, in proportion to (i) the portion of the Neev Options exercised by Mr. Guy Neev; and (ii) the number of warrants held by the optionee with respect to which such warrants were granted that were exercised prior to the exercise of the Neev Options;
|
|
•
|
57,599,850 ordinary shares issuable upon the exercise of outstanding warrants, of which (i) warrants to purchase 53,169,092 ordinary shares have an exercise price of NIS 0.01 per ordinary share and are fully vested; (ii) warrants to purchase 2,215,379 ordinary shares have an exercise price of NIS 0.01 per ordinary share and will become fully vested upon the closing of this offering; and (iii) warrants to purchase 2,215,379 ordinary shares with an exercise price per share equal to the price per share at which our ordinary shares are sold to the public in this offering which will become fully vested upon the closing of this offering;
|
|
•
|
12,366,188 ordinary shares issuable upon the exercise of outstanding options with a weighted average exercise price of $0.17 per ordinary share, granted under our 2006 Unit Option Plan;
|
|
•
|
11,630,739 ordinary shares issuable upon the exercise of outstanding options granted under our 2006 Unit Option Plan, which will become fully vested upon the closing of this offering; (i) fifty-percent of which have an exercise price of NIS 0.01 per ordinary share; and (ii) fifty-percent of which will be exercisable at the price per share at which our ordinary shares are sold to the public in this offering;
|
|
•
|
769,453 ordinary shares issuable upon the exercise of options with an exercise price of $0.2478 per ordinary share, under our 2006 Unit Option Plan, which we have agreed that certain executive officers will be entitled to upon completion of an equity financing, which includes this offering;
|
|
•
|
the ordinary shares issuable upon the exercise of warrants to be issued to certain finders in connection with the credit line agreement if either (i) the credit line amount extended to us is invested in ordinary shares in a private placement on or prior to February 18, 2015; or (ii) if we do not consummate an IPO on or prior to February 18, 2015 and we call the credit line amount, upon conversion of the credit line amount into ordinary shares;
|
|
•
|
150,000 ordinary shares issuable upon the exercise of warrants with an exercise price per ordinary shares equal to the initial public offering price to be issued to our U.S. legal counsel as partial compensation for services rendered in connection with the offering; and
|
|
•
|
ordinary shares issuable upon exercise of the underwriter warrants to be issued in connection with this offering.
|
|
•
|
the percentage of ordinary shares held by existing shareholders will decrease to approximately % of the total number of ordinary shares outstanding after this offering; and
|
|
•
|
the number of ordinary shares held by new investors will increase to , or approximately % of the total number of ordinary shares outstanding after this offering.
|
|
•
|
the judgment was rendered by a court which was, according to the laws of the state of the court, competent to render the judgment;
|
|
•
|
the judgment may no longer be appealed;
|
|
•
|
the obligation imposed by the judgment is enforceable according to the rules relating to the enforceability of judgments in Israel and the substance of the judgment is not contrary to public policy; and
|
|
•
|
the judgment is executory in the state in which it was given.
|
|
•
|
the judgment was given in a state whose laws do not provide for the enforcement of judgments of Israeli courts (subject to exceptional cases);
|
|
•
|
the enforcement of the judgment is likely to prejudice the sovereignty or security of the State of Israel;
|
|
•
|
the judgment was obtained by fraud;
|
|
•
|
the opportunity given to the defendant to bring its arguments and evidence before the court was not reasonable in the opinion of the Israeli court;
|
|
•
|
the judgment was rendered by a court not competent to render it according to the laws of private international law as they apply in Israel;
|
|
•
|
the judgment is contradictory to another judgment that was given in the same matter between the same parties and that is still valid; or
|
|
•
|
at the time the action was brought in the foreign court, a lawsuit in the same matter and between the same parties was pending before a court or tribunal in Israel.
|
Year Ended December 31,
|
Six Months Ended June 30
,
|
|||||||||||||||
2013
|
2012
|
2014
|
2013
|
|||||||||||||
(US$ in thousands, except per share data)
|
||||||||||||||||
(Unaudited)
|
||||||||||||||||
Research and development expenses, net
(1)
|
2,662 | 2,692 | 1,640 | 1,364 | ||||||||||||
General and administrative expenses
|
1,090 | 1,203 | 564 | 520 | ||||||||||||
Other expenses (income)
|
(10 | ) | 13 | -- | -- | |||||||||||
Operating loss
|
3,742 | 3,908 | 2,204 | 1,884 | ||||||||||||
Finance income
|
(63 | ) | (416 | ) | (60 | ) | (45 | ) | ||||||||
Finance expenses
|
316 | 229 | 85 | 230 | ||||||||||||
Finance expenses (income), net
|
253 | (187 | ) | 25 | 185 | |||||||||||
Loss and total comprehensive loss for the period
|
3,995 | 3,721 | 2,229 | 2,069 | ||||||||||||
Loss per ordinary share of NIS 0.01 par value
, basic and diluted
(2)
|
0.18 | 0.17 | 0.10 | 0.09 | ||||||||||||
Weighted average number of ordinary shares outstanding – basic and diluted (in thousands)
(
2)
|
32,542 | 32,530 | 32,542 | 32,542 | ||||||||||||
Pro forma loss per ordinary share of NIS 0.01 par value
(3)
|
||||||||||||||||
Basic and diluted (unaudited)
(2)
|
||||||||||||||||
Pro forma weighted average number of ordinary shares outstanding - basic and diluted (in thousands) (unaudited)
(2)
|
As of December 31, 2013
|
As of June 30, 2014
|
||||||||||||
Actual
|
Pro forma
(3)
|
Pro forma as
adjusted
(4)
|
|||||||||||
(US$ in thousands)
Unaudited
|
|||||||||||||
Cash and cash equivalents
|
$ | 4,975 | $ | 2,794 | $ | ||||||||
Working capital
(5)
|
4,131 | 1,990 | |||||||||||
Total assets
|
5,375 | 3,276 | |||||||||||
Capital stock
|
23,676 | 23,716 | |||||||||||
Total shareholders’ equity (deficit)
|
$ | 1,191 | $ | (998 | ) | $ |
|
(1)
|
Research and development expenses, net is presented net of the differences between the amount of grants received from the OCS and the fair value of their financial liability. The effect of the participation by the OCS totaled $0.4 million, and $0.2 million for the years ended December 31, 2013, and 2012, respectively. See “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Financial Operations Overview—Research and development, net” for more information.
|
|
(2)
|
Basic and diluted loss per ordinary share is computed based on the basic and diluted weighted average number of ordinary shares outstanding during each period. For purposes of these calculations, the following ordinary shares are deemed to be outstanding: (i) the 1,995,475 ordinary shares issuable to Mr. Guy Neev upon exercise of the Neev Options; and (ii) the 7,503,521 ordinary shares issuable under warrants that will be automatically exercised without consideration upon the exercise by Mr. Guy Neev of the Neev Options. For additional information, see Note 17 to our financial statements for the year ended December 31, 2013 included elsewhere in this prospectus.
|
|
(3)
|
On a pro forma basis to give effect to the conversion immediately prior to the completion of this offering of all of our outstanding preferred shares into ordinary shares.
|
|
(4)
|
On a pro forma as adjusted basis to give further effect to (i) the issuance and sale of ordinary shares by us in this offering at an assumed initial public offering price of $ per share, the midpoint of the estimated initial public offering price range set forth on the cover of this prospectus, after deducting underwriting discounts and commissions and estimated offering expenses payable by us and (ii) the issuance and sale of ordinary shares by us in the Private Placement at an assumed price of $ per share, the estimated public offering price, after deducting commissions and estimated expenses payable by us in connection with the Private Placement.
|
|
(5)
|
Working capital is defined as total current assets minus total current liabilities.
|
|
•
|
personnel-related expenses, including salaries, benefits and related expenses;
|
|
•
|
payments made to third-party contract research organizations, contract manufacturers, investigative sites and consultants;
|
|
•
|
manufacturing development costs;
|
|
•
|
costs associated with preclinical studies and clinical trials;
|
|
•
|
facilities, depreciation and other expenses, which include direct and allocated expenses for rent and maintenance of facilities; and
|
|
•
|
costs associated with obtaining patents and maintaining.
|
Six months ended June 30,
|
||||||||
2014
|
2013
|
|||||||
(Unaudited)
(US$ in thousands
)
|
||||||||
Research and development expenses, net
|
$ | 1,640 | $ | 1,364 | ||||
General and administrative expenses
|
564 | 520 | ||||||
Operating loss
|
2,204 | 1,884 | ||||||
Finance income
|
(60 | ) | (45 | ) | ||||
Finance expenses
|
85 | 230 | ||||||
Finance expenses, net
|
25 | 185 | ||||||
Loss for the period
|
2,229 | 2,069 | ||||||
Total comprehensive loss for the period
|
$ | 2,229 | $ | 2,069 |
Six months ended June 30,
|
||||||||||||
2014
|
2013
|
Change
|
||||||||||
(Unaudited)
|
||||||||||||
(US$ in thousands)
|
||||||||||||
Salaries and related expenses
|
$ | 1,105 | $ | 1,039 | $ | 66 | ||||||
Share-based payment
|
32 | 9 | 23 | |||||||||
Materials
|
177 | 108 | 69 | |||||||||
Subcontractors
|
215 | 58 | 157 | |||||||||
Depreciation
|
36 | 35 | 1 | |||||||||
Cost for registration of patents
|
28 | 74 | (46 | ) | ||||||||
Other research and development
|
47 | 41 | 6 | |||||||||
1,640 | 1,364 | 276 | ||||||||||
Less participation of the OCS
|
- | - | - | |||||||||
Total research and development expenses, net
|
$ | 1,640 | $ | 1,364 | $ | 276 |
Six months ended June 30,
|
||||||||||||
2014
|
2013
|
Change
|
||||||||||
(Unaudited)
|
||||||||||||
(US$ in thousands)
|
||||||||||||
Salaries and related expenses
|
$ | 342 | $ | 334 | $ | 8 | ||||||
Share-based payment
|
8 | 1 | 7 | |||||||||
Professional fees
|
43 | 39 | 4 | |||||||||
Facility cost
|
45 | 56 | (11 | ) | ||||||||
Depreciation
|
3 | 3 | - | |||||||||
Other general and administrative
|
123 | 87 | 36 | |||||||||
Total general and administrative expenses, net
|
$ | 564 | $ | 520 | $ | 44 |
Year ended December 31,
|
||||||||
2013
|
2012
|
|||||||
(US$ in thousands, except per
share data)
|
||||||||
Research and development expenses, net
|
$ | 2,662 | $ | 2,692 | ||||
General and administrative expenses
|
1,090 | 1,203 | ||||||
Other expenses (income)
|
(10 | ) | 13 | |||||
Operating loss
|
3,742 | 3,908 | ||||||
Finance income
|
(63 | ) | (416 | ) | ||||
Finance expenses
|
316 | 229 | ||||||
Finance expenses (income), net
|
253 | (187 | ) | |||||
Loss for the year
|
3,995 | 3,721 | ||||||
Total comprehensive loss for the year
|
$ | 3,995 | $ | 3,721 |
2013
|
2012
|
Change
|
||||||||||
(US$ in thousands)
|
||||||||||||
Salaries and related expenses
|
$ | 2,170 | $ | 2,091 | $ | 79 | ||||||
Share-based payment
|
41 | 25 | 16 | |||||||||
Materials
|
307 | 329 | (22 | ) | ||||||||
Subcontractors
|
218 | 330 | (112 | ) | ||||||||
Depreciation
|
70 | 67 | 3 | |||||||||
Cost for registration of patents
|
118 | 52 | 66 | |||||||||
Other research and development
|
110 | 29 | 81 | |||||||||
3,034 | 2,923 | 111 | ||||||||||
Less participation of the OCS
|
(372 | ) | (231 | ) | (141 | ) | ||||||
Total research and development expenses, net
|
$ | 2,662 | $ | 2,692 | $ | (30 | ) |
2013
|
2012
|
Change
|
||||||||||
(US$ in thousands)
|
||||||||||||
Salaries and related expenses
|
$ | 683 | $ | 653 | $ | 30 | ||||||
Share-based payment
|
16 | 6 | 10 | |||||||||
Professional fees
|
95 | 70 | 25 | |||||||||
Facility cost
|
104 | 142 | (38 | ) | ||||||||
Depreciation
|
7 | 7 | - | |||||||||
Other general and administrative
|
185 | 325 | (140 | ) | ||||||||
Total general and administrative expenses
|
$ | 1,090 | $ | 1,203 | $ | (113 | ) |
Year ended December 31,
|
Six Months Ended June 30,
|
|||||||||||||||
2013
|
2012
|
2014
|
2013
|
|||||||||||||
(US$ in thousands)
|
||||||||||||||||
(Unaudited) | ||||||||||||||||
Net cash used in operating activities
|
(3,657 | ) | (4,160 | ) | (2,159 | ) | (1,843 | ) | ||||||||
Net cash generated from (used in) investing activities
|
3,402 | (3,543 | ) | (22 | ) | 3,420 | ||||||||||
Net cash generated from financing activities
|
647 | 1,573 | -- | -- |
Payments due by period
|
||||||||||||||||||||
(US$ in thousands)
|
||||||||||||||||||||
Total
|
Less than 1
year
|
1-3 years
|
4-5 years
|
More than 5
years
|
||||||||||||||||
Operating lease obligations(1):
|
653 | 193 | 168 | 119 | 173 | |||||||||||||||
Other long term liabilities reflected on the Statements of Financial Position:
|
||||||||||||||||||||
Royalties to ASIC designer(2)
|
170 | - | 74 | 96 | - | |||||||||||||||
Office of the Chief Scientist(3)
|
1,618 | - | 318 | 1,300 | - | |||||||||||||||
Reimbursement liability to
|
||||||||||||||||||||
Check-Cap LLC unitholders(4)
|
749 | - | 19 | 137 | 593 | |||||||||||||||
Total
|
2,537 | - | 411 | 1,533 | 593 |
|
(1)
|
Operating lease obligations consist of payments pursuant to a lease agreement for office facilities as well as lease agreements for vehicles, which generally run for a period of three years.
|
|
(2)
|
See “Provision for royalties to an ASIC designer.”
|
|
(4)
|
On May 31, 2009, we entered into an asset transfer agreement with Check-Cap LLC pursuant to which Check-Cap LLC transferred all of its business operations and substantially all of its assets to us, in connection with which we undertook to reimburse the unitholders of Check-Cap LLC for any tax burdens that may be imposed on them due to the reorganization. The reimbursement liability is calculated assuming deemed royalties are paid to the U.S. unitholders of Check-Cap LLC under Section 367(d) of the Code and is based in part on our forecasted sales. The liability is calculated using the provisions of IAS 39, under which expected cash outflows were discounted using a 17.6% discount factor commensurate with our company’s risk at the date of initial recognition of the liability. Any updates in the expected cash outflows and the liability will be recorded to profit and loss each period. As of June 30, 2014, it was probable that we will be required to reimburse the U.S. unitholders of Check-Cap LLC, and accordingly, a liability for this reimbursement has been accounted for in our financial statements for such period in the amount of $749,000. See “Related Party Transactions—Transactions with Check-Cap LLC and the Members and Manager of Check-Cap LLC.”
|
|
•
|
completion of the clinical development of the final product;
|
|
•
|
conducting clinical trials in Europe, the United States and other territories;
|
|
•
|
development of future generations of our imaging capsule and future products;
|
|
•
|
FDA and additional regulatory filing costs; and
|
|
•
|
patent maintenance fees.
|
|
•
|
Fair Value of our Ordinary Shares.
Because our shares were not publicly traded prior to this offering, we estimate the fair value of our ordinary shares, as discussed below in “—Valuation of our ordinary shares.”
|
|
•
|
Volatility.
The expected share price volatility is based on the historical equity volatility of the ordinary shares of comparable companies that are publicly traded.
|
|
•
|
Expected Term.
The expected term of options granted represents the estimated period of time that options granted are expected to be outstanding. Since adequate historical experience is not available to provide a reasonable estimate, the expected term is determined based on the midpoint between the available exercise dates (the end of the vesting periods) and the last available exercise date (the contracted expiration date).
|
|
•
|
Risk-Free Rate.
The risk-free interest rate is based on the yield from U.S. Treasury zero-coupon bonds with a term equivalent to the contractual life of the options.
|
|
•
|
Expected Dividend Yield.
We have never declared or paid any cash dividends and do not presently plan to pay cash dividends in the foreseeable future. Consequently, we used an expected dividend yield of zero.
|
Parameters
|
June 2013 Grant
|
April-August 2012
Grants
|
||||||
Expected volatility (in %)
|
40-60 | 64-68 | ||||||
Option term (in years)
|
5-10 | 5-10 | ||||||
Risk free interest rate (in %)
|
0.75-2.25 | 0.75-2.25 | ||||||
Anticipated rate of dividends (in %)
|
0 | 0 |
Grant date
|
Number of shares
subject to awards
granted
|
Exercise price per
share
|
Estimated fair value
per ordinary share at
grant date
|
|||||||
04/04/2012
|
1,160,000 | $ | 0.25 | $ | 0.07 | |||||
28/08/2012
|
350,000 | $ | 0.25 | $ | 0.07 | |||||
12/06/2013
|
2,355,000 | $ | 0.25 | $ | 0.152 |
|
•
|
eliminating the need for fasting and prior bowel cleansing, which would differentiate our imaging capsule from every other currently available structural screening exam;
|
|
•
|
providing patients with a procedure that requires them to swallow our capsule and small amounts of a contrast agent, thereby minimizing any disruption to their normal activities;
|
|
•
|
eliminating the need to sedate patients;
|
|
•
|
obviating the requirement for the insufflation (the forcing of air into the gastrointestinal tract) of patients;
|
|
•
|
administering our technology on an outpatient basis;
|
|
•
|
providing digital reporting, storage and remote consulting capabilities; and
|
|
•
|
enabling a physician to analyze the results in approximately 10 minutes, which would be less time than is required to conduct an optical colonoscopy.
|
|
•
|
obtaining CE marking for the marketing and sale of our imaging capsule in the European Union, followed by obtaining regulatory approvals for the sale of our imaging capsule initially in the United States and Japan.
|
|
•
|
In Europe and Japan, we intend to offer our imaging capsule as an imaging and screening tool for the general population. In the United States, we may choose to first obtain regulatory approvals for our imaging capsule as an adjunct tool to FOBTs and FITs, and after we have conducted more extensive clinical studies in the United States, we anticipate applying to the FDA for the use of our imaging capsule as an initial screening tool;
|
|
•
|
obtaining third-party reimbursement for our technology;
|
|
•
|
enhancing our existing technology portfolio and developing new technologies; and
|
|
•
|
successfully marketing our product to establish a large customer base.
|
|
•
|
X-ray Source – including radioactive material sealed in a cylindrical housing.
|
|
•
|
Collimator – Radiation shield around the source, which absorbs most of the radiation. Several radial holes enable distribution of radiation in defined directions.
|
|
•
|
X-ray Sensor – Comprised of several solid state X-ray detectors for measuring the scattered radiation intensity.
|
|
•
|
Activation Circuit – Activates and/or deactivates the capsule. The circuit shall operate either by illumination of light or magnetic induction. The activation shall be coded to avoid false activation.
|
|
•
|
Tilt Sensor – Indication of capsule motion (3D acceleration).
|
|
•
|
Rotation Motor – For rotating the collimator and X-ray Source.
|
|
•
|
Source Concealment Mechanism – Conceals the source inside the radiation shield.
|
|
•
|
R-T – Radio frequency transceiver device to communicate with the receiver.
|
|
•
|
Batteries – Electrical power supply for the capsule.
|
|
•
|
Memory – Data storage. The imaging capsule should be able to store up to an hour of measured data.
|
|
•
|
CPS coil – Transmits a continuous electromagnetic wave utilized by an external localization system to track 3D position.
|
|
•
|
Sticker Housing – Biocompatible and water-resistant sticker and housing integrating all functional components, attached to the patient’s back, enabling five days of continuous operation.
|
|
•
|
Recorder–Consists of receiver electronics embedded software and nonvolatile memory.
|
|
•
|
Antennas – radio frequency antennas are embedded into the sticker housing and used to communicate with the capsule.
|
|
•
|
Activation/Deactivation Circuit – Used to activate/deactivate the CPS through a specialized protocol.
|
|
•
|
UI Indicators - Provides user with vocal, light or vibration indication as required.
|
|
•
|
PCB – Electronics’ printed circuit board.
|
|
•
|
Microcontroller – Runs embedded software and logic that manages the CPS.
|
|
•
|
RF Transceivers – Several transceivers used to communicate with the imaging capsule.
|
|
•
|
TILT/Compass Sensors – To determinate patient’s body movements.
|
|
•
|
Batteries – Electrical power supply for the CPS.
|
|
•
|
Memory – Non-volatile data storage to store data acquired by the imaging capsule.
|
|
•
|
Communication Driver Software – to communicate with the CPS and retrieve collected data following procedure completion.
|
|
•
|
Data Processing Software – to process and reconstruct clinical data into a 3D structure.
|
|
•
|
Data Display and Management Software – includes the following functions:
|
|
○
|
3D visualization of the reconstructed colon surface.
|
|
○
|
Measurement and annotation tools.
|
|
○
|
Registration of patient and capsule data and management of the patient database.
|
|
•
|
The number of photons hitting the detector per time frame.
|
|
•
|
The angular spread of the photon beam coming out of the capsule collimator.
|
|
•
|
our technology has been tested on a limited basis and therefore we cannot assure the product’s clinical value;
|
|
•
|
we need to CE mark the devices in the European Union and obtain the requisite regulatory approvals in the United States, Japan and other markets where we plan to focus our commercialization efforts;
|
|
•
|
we need to raise an amount of capital sufficient to complete the development of our technology, obtain the requisite regulatory approvals and commercialize our current and future products;
|
|
•
|
we need to obtain reimbursement coverage from third-party payors for procedures using our imaging capsule;
|
|
•
|
we need to increase our manufacturing capabilities; and
|
|
•
|
we need to establish and expand our customer base while competing against other sellers of capsule endoscopes as well as other current and future CRC screening technologies and methods.
|
|
•
|
product design and development;
|
|
•
|
product testing;
|
|
•
|
validation and verifications;
|
|
•
|
product manufacturing;
|
|
•
|
product labeling;
|
|
•
|
product storage, shipping and handling;
|
|
•
|
premarket clearance or approval;
|
|
•
|
advertising and promotion;
|
|
•
|
product marketing, sales and distribution; and
|
|
•
|
post-market surveillance reporting death or serious injuries and medical device reporting.
|
|
•
|
Class I devices, which are subject to only general controls (
e.g.
, labeling, medical devices reporting, and prohibitions against adulteration and misbranding) and, in some cases, to the 510(k) premarket clearance requirements;
|
|
•
|
Class II devices, generally requiring 510(k) premarket clearance before they may be commercially marketed in the United States; and
|
|
•
|
Class III devices, consisting of devices deemed by FDA to pose the greatest risk, such as life-sustaining, life-supporting or implantable devices, or devices deemed not substantially equivalent to a predicate device, generally requiring submission of a PMA supported by clinical trial data.
|
|
•
|
product listing and establishment registration, which helps facilitate FDA inspections and other regulatory action;
|
|
•
|
Quality System Regulation, or QSR, which requires manufacturers, including third-party manufacturers, to follow stringent design, testing, control, documentation and other quality assurance procedures during all aspects of the manufacturing process;
|
|
•
|
labeling regulations and FDA prohibitions against the promotion of products for uncleared, unapproved or off-label use or indication;
|
|
•
|
clearance of product modifications that could significantly affect safety or efficacy or that would constitute a major change in intended use of one of our cleared devices;
|
|
•
|
approval of product modifications that affect the safety or effectiveness of one of our approved devices;
|
|
•
|
medical device reporting regulations, which require that manufacturers comply with FDA requirements to report if their device may have caused or contributed to a death or serious injury, or has malfunctioned in a way that would likely cause or contribute to a death or serious injury if the malfunction of the device or a similar device were to recur;
|
|
•
|
post-approval restrictions or conditions, including post-approval study commitments;
|
|
•
|
post-market surveillance regulations, which apply when necessary to protect the public health or to provide additional safety and effectiveness data for the device;
|
|
•
|
FDA’s recall authority, whereby it can ask, or under certain conditions order, device manufacturers to recall from the market a product that is in violation of governing laws and regulations;
|
|
•
|
regulations pertaining to voluntary recalls; and
|
|
•
|
notices of corrections or removals.
|
|
•
|
untitled letters, warning letters, fines, injunctions, consent decrees and civil penalties;
|
|
•
|
unanticipated expenditures to address or defend such actions;
|
|
•
|
customer notifications for repair, replacement, refunds;
|
|
•
|
recall, detention or seizure of our products;
|
|
•
|
operating restrictions or partial suspension or total shutdown of production;
|
|
•
|
refusing or delaying our requests for 510(k) clearance or premarket approval of new products or modified products;
|
|
•
|
operating restrictions;
|
|
•
|
withdrawing 510(k) clearances on PMA approvals that have already been granted;
|
|
•
|
refusal to grant export approval for our products; or
|
|
•
|
criminal prosecution.
|
|
•
|
The federal Anti-Kickback Statute, which prohibits, among other things, knowingly or willingly offering, paying, soliciting or receiving remuneration, directly or indirectly, in cash or in kind, to induce or reward the purchasing, leasing, ordering or arranging for or recommending the purchase, lease or order of any health care items or service for which payment may be made, in whole or in part, by federal healthcare programs such as Medicare and Medicaid. This statute has been interpreted to apply to arrangements between medical device manufacturers on one hand and prescribers, purchasers and formulary managers on the other. Further, PPACA, among other things, clarified that a person or entity needs not to have actual knowledge of the federal Anti-Kickback Statute or specific intent to violate it. Although there are a number of statutory exemptions and regulatory safe harbors to the federal Anti-Kickback Statute protecting certain common business arrangements and activities from prosecution or regulatory sanctions, the exemptions and safe harbors are drawn narrowly, and practices that do not fit squarely within an exemption or safe harbor may be subject to scrutiny;
|
|
•
|
The federal civil False Claims Act, which prohibits, among other things, individuals or entities from knowingly presenting, or causing to be presented, a false or fraudulent claim for payment of government funds or knowingly making, using or causing to be made or used, a false record or statement material to an obligation to pay money to the government or knowingly concealing or knowingly and improperly avoiding, decreasing, or concealing an obligation to pay money to the federal government. In addition, PPACA amended the Social Security Act to provide that the government may assert that a claim including items or services resulting from a violation of the federal Anti-Kickback Statute constitutes a false or fraudulent claim for purposes of the federal civil False Claims Act. Many medical device manufacturers and other healthcare companies have been investigated and have reached substantial financial settlements with the federal government under the civil False Claims Act for a variety of alleged improper marketing activities, including providing free product to customers with the expectation that the customers would bill federal programs for the product; providing consulting fees, grants, free travel, and other benefits to physicians to induce them to use the company’s products. In addition, in recent years the government has pursued civil False Claims Act cases against a number of manufacturers for causing false claims to be submitted as a result of the marketing of their products for unapproved, and thus non-reimbursable, uses. Device manufacturers also are subject to other federal false claim laws, including, among others, federal criminal healthcare fraud and false statement statutes that extend to non-government health benefit programs;
|
|
•
|
Analogous state laws and regulations, such as state anti-kickback and false claims laws, may apply to items or services reimbursed under Medicaid and other state programs or, in several states, apply regardless of the payor. Several states now require medical device manufacturers to report expenses relating to the marketing and promotion or require them to implement compliance programs or marketing codes. For example, California, Connecticut and Nevada mandate implementation of corporate compliance programs, while Massachusetts and Vermont impose more detailed restrictions on device manufacturer marketing practices and tracking and reporting of gifts, compensation and other remuneration to health care providers;
|
|
•
|
The federal Foreign Corrupt Practices Act of 1997 and other similar anti-bribery laws in other jurisdictions generally prohibit companies and their intermediaries from providing money or anything of value to officials of foreign governments, foreign political parties, or international organizations with the intent to obtain or retain business or seek a business advantage. Recently, there has been a substantial increase in anti-bribery law enforcement activity by U.S. regulators, with more frequent and aggressive investigations and enforcement proceedings by both the Department of Justice and the U.S. Securities and Exchange Commission. Violations of these laws can result in the imposition of substantial fines, interruptions of business, loss of supplier, vendor or other third-party relationships, termination of necessary licenses and permits, and other legal or equitable sanctions. Other internal or government investigations or legal or regulatory proceedings, including lawsuits brought by private litigants, may also follow as a consequence; and
|
|
•
|
The federal Physician Payment Sunshine Act, being implemented as the Open Payments Program, requires certain medical device manufacturers to engage in extensive tracking of payments or transfers of value to physicians and teaching hospitals, maintenance of a payments database, and public reporting of the payment data. Device manufacturers with products for which payment is available under Medicare, Medicaid or the State Children’s Health Insurance Program are required to track and report such payments. Applicable manufacturers should have begun tracking on August 1, 2013 and must report payment data to the Centers for Medicare & Medicaid Services, or CMS
,
by June 30, 2014.
|
|
•
|
No. 1 type license for marketing – Specially controlled medical devices (Class III, IV)
|
|
•
|
No. 2 type license for marketing – Controlled medical devices (Class II)
|
|
•
|
No. 3 type license for marketing – General medical devices (Class I)
|
|
•
|
initial treatment – during the first three months following diagnosis;
|
|
•
|
maintenance care – between initial and terminal treatment; and
|
|
•
|
terminal treatment – during the final six months prior to death.
|
Code
|
Description
|
Payment (1)
|
|||
G0105
|
Colorectal cancer screening; colonoscopy on individual at high risk
|
$
|
208.83
|
||
G0121
|
Colorectal cancer screening; colonoscopy on individual not meeting criteria for high risk
|
$
|
208.83
|
Code
|
Short Description
|
APC
|
Payment (2)
|
||||
G0105
|
Colorectal scrn; high risk ind
|
0158 (Colorectal cancer
|
$
|
646.73
|
|||
G0121
|
Colon ca scrn not high risk ind
|
screening; Colonoscopy)
|
Name
|
Age
|
Position(s)
|
||
Guy Neev
|
47
|
Chief Executive Officer and Director
|
||
Lior Torem
|
45
|
Chief Financial Officer
|
||
Yoav Kimchy
|
53
|
Chief Technology Officer and Director
|
||
Alex Ovadia
|
53
|
Vice President, Research and Development
|
||
Tomer Kariv
|
54
|
Chairman of the Board of Directors
|
||
Walter L. Robb
|
86
|
Director
|
||
Richard Stone
|
72
|
Director
|
||
Alon Dumanis
|
64
|
Director
|
|
•
|
Nomination of our directors.
Israeli law and our amended and restated articles of association do not require director nominations to be made by a nominating committee of our board of directors consisting solely of independent directors, as required under the Listing Rules of the NASDAQ Stock Market. In accordance with Israeli law and practice, directors are recommended by our board of directors for election by our shareholders (other than directors elected by our board of directors to fill a vacancy).
|
|
•
|
Compensation of officers
. Israeli law and our amended and restated articles of association do not require that the independent members of our board of directors (or a compensation committee composed solely of independent members of our board of directors) determine an executive officer’s compensation, as is generally required under the Listing Rules of the NASDAQ Stock Market with respect to the chief executive officer and all other executive officers. For details regarding the approvals required under the Israeli Companies Law for the approval of compensation of the chief executive officer, all other executive officers and directors, see below under “Approval of Related Party Transactions under Israeli Law — Disclosure of Personal Interests of an Office Holder and Approval of Certain Transactions— Compensation of Chief Executive Officer,” “Approval of Related Party Transactions under Israeli Law — Disclosure of Personal Interests of an Office Holder and Approval of Certain Transactions— Compensation of Officers Other than the Chief Executive Officer” and “Approval of Related Party Transactions under Israeli Law — Disclosure of Personal Interests of an Office Holder and Approval of Certain Transactions— Compensation of Directors,” respectively.
|
|
•
|
Shareholder approval.
We will seek shareholder approval for all corporate actions requiring such approval under the requirements of the Israeli Companies Law, rather than seeking approval for corporate actions in accordance with NASDAQ Listing Rule 5635. In particular, under the NASDAQ Listing Rule, shareholder approval is generally required for: (i) an acquisition of shares/assets of another company that involves the issuance of 20% or more of the acquirer’s shares or voting rights or if a director, officer or 5% shareholder has greater than a 5% interest (or such persons collectively have a 10% or greater interest) in the target company or the assets to be acquired or the consideration to be received and the present or potential issuance of ordinary shares, or securities convertible into or exercisable for ordinary shares, could result in an increase in outstanding common shares or voting power of 5% or more; (ii) the issuance of shares leading to a change of control; (iii) adoption/amendment of a stock option or purchase plan or other equity compensation arrangements, pursuant to which stock may be acquired by officers, directors, employees or consultants (with certain limited exception); and (iv) issuances of 20% or more of the shares or voting rights (including securities convertible into, or exercisable for, equity) of a listed company via a private placement (and/or via sales by directors/officers/5% shareholders) if such equity is issued (or sold) at below the greater of the book or market value of shares. By contrast, under the Israeli Companies Law, the adoption of, and material changes to, equity-based compensation plans generally require the approval of the board of directors (for details regarding the approvals required under the Israeli Companies Law for the approval of compensation of the chief executive officer, all other executive officers and directors, see below under “Approval of Related Party Transactions under Israeli Law — Disclosure of Personal Interests of an Office Holder and Approval of Certain Transactions— Compensation of Chief Executive Officer,” “Approval of Related Party Transactions under Israeli Law — Disclosure of Personal Interests of an Office Holder and Approval of Certain Transactions— Compensation of Officers Other than the Chief Executive Officer” and “Approval of Related Party Transactions under Israeli Law — Disclosure of Personal Interests of an Office Holder and Approval of Certain Transactions— Compensation of Directors,” respectively).
|
|
•
|
Quorum requirement.
Under our amended and restated articles of association and as permitted under the Israeli Companies Law, a quorum for any meeting of shareholders shall be the presence of at least two shareholders present in person, by proxy or by a voting instrument, who hold at least 25% of the voting power of our shares instead of 33 1/3% of the issued share capital required under the NASDAQ Listing Rules. At an adjourned meeting, any number of shareholders shall constitute a quorum, unless the meeting of shareholders was convened at the demand of shareholders, in which case, the quorum shall be the presence of one or more shareholders holding at least 5% of our issued share capital and at least one percent of the voting power of our shares, or one or more shareholders with at least 5% of the voting power of our shares.
|
|
•
|
such majority includes at least a majority of the shares held by all shareholders who are non-controlling shareholders and shareholders who do not have a personal interest in the election of the external director (other than a personal interest not deriving from a relationship with a controlling shareholder) that are voted at the meeting, excluding abstentions, which we refer to as a disinterested majority; or
|
|
•
|
the total number of shares held by shareholders who are non-controlling shareholders and shareholders who do not have a personal interest in the election of the external director (other than a personal interest not derived from a relationship with a controlling shareholder) voted against the election of the external director does not exceed 2% of the aggregate voting rights in the company.
|
|
•
|
his or her service for each such additional term is recommended by one or more shareholders holding at least 1% of the company’s voting rights and is approved at a shareholders meeting by a disinterested majority, where the total number of shares held by non-controlling, disinterested shareholders voting for such reelection exceeds 2% of the aggregate voting rights in the company, and provided further that the external director is not an affiliated or competing shareholder, as defined in the Israeli Companies Law, or a relative of such a shareholder at the time of the appointment, and is not affiliated with such a shareholder at the time of appointment or within the two years preceding the date of appointment; or
|
|
•
|
his or her service for each such additional term is recommended by the board of directors and is approved at a shareholders meeting by the same majority required for the initial election of an external director (as described above).
|
|
•
|
the audit committee has determined that he or she meets the qualifications for being appointed as an external director, except for (i) the requirement that the director be an Israeli resident (which does not apply to companies such as ours whose securities have been offered outside of Israel or are listed outside of Israel); and (ii) the requirement for accounting and financial expertise or professional qualifications; and
|
|
•
|
he or she has not served as a director of the company for a period exceeding nine consecutive years. For this purpose, a break of less than two years in the service shall not be deemed to interrupt the continuation of the service.
|
|
•
|
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 or shareholders for their approval, as applicable, in accordance with the requirements of the Israeli Companies Law;
|
|
•
|
recommending the engagement or termination of the person filling the office of our internal auditor; and
|
|
•
|
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 or shareholders for their approval, as applicable, in accordance with the requirements of the Israeli Companies Law.
|
|
•
|
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;
|
|
•
|
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 Israeli Companies Law (see “— Approval of Related Party Transactions under Israeli Law”);
|
|
•
|
determining whether a competitive process must be implemented for the approval of certain transactions with controlling shareholders or its relative or in which a controlling shareholder has a personal interest (whether or not the transaction is an extraordinary transaction), under the supervision of the audit committee or other party determined by the audit committee and in accordance with standards determined by the audit committee, or whether a different process determined by the audit committee should be implemented for the approval of such transactions;
|
|
•
|
determining the process for the approval of certain transactions with controlling shareholders or in which a controlling shareholder has a personal interest that the audit committee has determined are not extraordinary transactions but are not immaterial transactions;
|
|
•
|
where the board of directors approves the working plan of the internal auditor, to examine such working plan before its submission to the board of directors and proposing amendments thereto;
|
|
•
|
examining our internal controls and internal auditor’s performance, including whether the internal auditor has sufficient resources and tools to dispose of its responsibilities;
|
|
•
|
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 compensation of our auditor; and
|
|
•
|
establishing procedures for the handling of employees’ complaints as to the management of our business and the protection to be provided to such employees.
|
|
•
|
recommending to the board of directors for its approval (i) a compensation policy; (ii) whether a compensation policy should continue in effect, if the then-current policy has a term of greater than three years (approval of either a new compensation policy or the continuation of an existing compensation policy must in any case occur every three years); and (iii) periodic updates to the compensation policy. See “— Compensation Policy.” In addition, the compensation committee is required to periodically examine the implementation of the compensation policy;
|
|
•
|
the approval of the terms of employment and service of office holders (including determining whether the compensation terms of a candidate for chief executive officer of the company need not be brought to approval of the shareholders); and
|
|
•
|
reviewing and approving grants of options and other incentive awards to persons other than office holders to the extent such authority is delegated by our board of directors, subject to the limitations on such delegation as provided in the Israeli Companies Law.
|
|
•
|
the knowledge, skills, expertise and accomplishments of the relevant office holder;
|
|
•
|
the office holder’s roles and responsibilities and prior compensation agreements with him or her;
|
|
•
|
the relationship between the terms offered and the average compensation of the other employees of the company (including any employees employed through manpower companies);
|
|
•
|
the impact of disparities in salary upon work relationships in the company;
|
|
•
|
the possibility of reducing variable compensation at the discretion of the board of directors, and the possibility of setting a limit on the exercise value of non-cash variable equity-based compensation; and
|
|
•
|
as to severance compensation, the period of employment or service of the office holder, the terms of his or her compensation during such period, the company’s performance during such period, 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.
|
|
•
|
the link between variable compensation and long-term performance and measurable criteria;
|
|
•
|
the relationship between variable and fixed compensation, and the ceiling for the value of variable compensation;
|
|
•
|
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 required to be restated in the company’s financial statements;
|
|
•
|
the minimum holding or vesting period for variable, equity-based compensation; and
|
|
•
|
maximum limits for severance compensation.
|
|
•
|
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, within the meaning of the Israeli Companies Law (including a director and the general manager) of the company (or a relative thereof); or
|
|
•
|
a member of the company’s independent accounting firm, or anyone on his or her behalf.
|
|
•
|
information on the advisability of a given action brought for his or her approval or performed by virtue of his or her position; and
|
|
•
|
all other important information pertaining to any such action.
|
|
•
|
refrain from any conflict of interest between the performance of his or her duties to the company and his or her other duties or personal affairs;
|
|
•
|
refrain from any activity that is competitive with the company;
|
|
•
|
refrain from exploiting any business opportunity of the company to receive a personal gain for himself or herself or others; and
|
|
•
|
disclose to the company any information or documents relating to the company’s affairs which the office holder received as a result of his or her position as an office holder.
|
|
•
|
at least a majority of the shares held by all shareholders who do not have a personal interest in the transaction and who are present and voting on the matter approves the transaction, excluding abstentions; or
|
|
•
|
the shares voted against the transaction by shareholders who have no personal interest in the transaction and who are present and voting at the meeting do not exceed 2% of the voting rights in the company.
|
|
•
|
an amendment to the company’s articles of association;
|
|
•
|
an increase of the company’s authorized share capital;
|
|
•
|
a merger; and
|
|
•
|
the approval of related party transactions and acts of office holders that require shareholder approval.
|
|
•
|
a 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; and
|
|
•
|
expenses, including reasonable litigation expenses and legal fees, incurred by an office holder in relation to an administrative proceeding instituted against such office holder, or certain compensation payments made to an injured party imposed on an office holder by an administrative proceeding, pursuant to certain provisions of the Israeli Securities Law.
|
|
•
|
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 does not arise out of the negligent conduct of the office holder;
|
|
•
|
a financial liability imposed on the office holder in favor of a third party; and
|
|
•
|
expenses, including reasonable litigation expenses and legal fees, incurred by an office holder in relation to an administrative proceeding instituted against such office holder or certain compensation payments to an injured party imposed on an office holder by an administrative proceeding, pursuant to certain provisions of the Securities Law.
|
|
•
|
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 prejudice 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, monetary sanction or forfeit levied against the office holder.
|
|
•
|
each person, or group of affiliated persons, known to us to be the beneficial owner of 5% or more of our outstanding shares;
|
|
•
|
each of our directors and executive officers; and
|
|
•
|
all of our directors and executive officers as a group.
|
Ordinary Shares Beneficially Owned Prior to this Offering
|
Ordinary Shares Beneficially Owned After this Offering (Assuming No Exercise of the Over-Allotment Option)
|
Ordinary Shares Beneficially Owned After this Offering (Assuming Full Exercise of the Over-Allotment Option)
|
Ordinary Shares Beneficially Owned After this Offering and the Private Placement (Assuming No Exercise of the Over-Allotment Option)
|
Ordinary Shares Beneficially Owned After this Offering and the Private Placement (Assuming Full Exercise of the Over-Allotment Option)
|
||||||||||||||||||||||||||||||||||||
Name and Address of Beneficial Owner
|
Number
|
Percent
|
Number
|
Percent
|
Number
|
Percent
|
Number
|
Percent
|
Number
|
Percent
|
||||||||||||||||||||||||||||||
Pontifax
(1)(11)
|
28,216,569 | 25.33 | % | |||||||||||||||||||||||||||||||||||||
Shanghai Fosun Pharmaceutical Group Co. Ltd.
(2)
|
17,723,031 | 13.90 | % | |||||||||||||||||||||||||||||||||||||
Yoav and Sigalit Kimchy
(3)
|
13,105,930 | 11.93 | % | |||||||||||||||||||||||||||||||||||||
BXR Portfolio Limited
(4)
|
11,135,453 | 9.75 | % | |||||||||||||||||||||||||||||||||||||
Docor International B.V.
(5)(11)
|
9,420,292 | 8.50 | % | |||||||||||||||||||||||||||||||||||||
Spearhead Investments (Bio) Ltd.
(6)(11)
|
6,740,191 | 6.14 | % | |||||||||||||||||||||||||||||||||||||
Jacobs Investment Company LLC
(7)(11)
|
5,954,704 | 5.40 | % | |||||||||||||||||||||||||||||||||||||
Emigrant Alternative Investments LLC
(8)(11)
|
5,800,389 | 5.28 | % | |||||||||||||||||||||||||||||||||||||
Counterpoint Ventures Fund L.P.
(9)(11)
|
5,742,015 | 5.22 | % | |||||||||||||||||||||||||||||||||||||
Directors and Executive Officers:
|
||||||||||||||||||||||||||||||||||||||||
Guy Neev
(10)
|
6,781,820 | 5.86 | % | |||||||||||||||||||||||||||||||||||||
Lior Torem
|
* | * | ||||||||||||||||||||||||||||||||||||||
Yoav Kimchy
(3)
|
13,105,930 | 11.93 | % | |||||||||||||||||||||||||||||||||||||
Alex Ovadia
|
* | * | ||||||||||||||||||||||||||||||||||||||
Tomer Kariv
(1)(11)
|
28,216,569 | 25.33 | % | |||||||||||||||||||||||||||||||||||||
Walter L. Robb
(9)(11)
|
5,884,498 | 5.35 | % | |||||||||||||||||||||||||||||||||||||
Richard Stone
|
* | * | ||||||||||||||||||||||||||||||||||||||
Alon Dumanis
|
-- | -- | ||||||||||||||||||||||||||||||||||||||
Directors and executive officers as a group (8 persons)
(11)
|
55,618,074 | 49.95 | % |
___________________
|
*
|
Less than 1% of our outstanding ordinary shares.
|
(1)
|
Includes (i) 8,865,752 preferred shares directly held by Pontifax (Cayman) II L.P. that are convertible (at an assumed 1 for 1 conversion rate) into 8,865,752 ordinary shares within 60 days of December 22, 2014, warrants to purchase 1,543,311 preferred shares (which are convertible into 1,543,311 ordinary shares at an assumed 1 for 1 conversion rate) directly held by Pontifax (Cayman) II L.P. that are exercisable within 60 days of December 22, 2014, the warrants to purchase 3,248,880 ordinary shares directly held by Pontifax (Cayman) II L.P. that are exercisable within 60 days of December 22, 2014 and the Pontifax Warrants to purchase 135,370 ordinary shares directly held by Pontifax (Cayman) II L.P. that are exercisable within 60 days of December 22, 2014; (ii) 6,678,235 preferred shares directly held by Pontifax (Israel) II L.P. that are convertible (at an assumed 1 for 1 conversion rate) into 6,678,235 ordinary shares within 60 days of July 3, 2014, warrants to purchase 1,162,518 preferred shares (which are convertible into 1,162, 518 ordinary shares at an assumed 1 for 1 conversion rate) directly held by Pontifax (Israel) II L.P. that are exercisable within 60 days of December 22, 2014, warrants to purchase 2,447,258 ordinary shares directly held by Pontifax (Israel) II L.P. that are exercisable within 60 days of December 22, 2014 and the Pontifax Warrants to purchase 101,969 ordinary shares directly held by Pontifax (Israel) II L.P. that are exercisable within 60 days of December 22, 2014; and (iii) 2,592,417 preferred shares directly held by Pontifax (Israel) II – Individual Investors LLP that are convertible (at an assumed 1 for 1 conversion rate) into 2,592,417 ordinary shares within 60 days of December 22, 2014, warrants to purchase 451,277 preferred shares (which are convertible into 451,277 ordinary shares at an assumed 1 for 1 conversion rate) directly held by Pontifax (Israel) II – Individual Investors LLP that are exercisable within 60 days of December 22, 2014, warrants to purchase 949,999 ordinary shares directly held by Pontifax (Israel) II – Individual Investors LLP that are exercisable within 60 days of December 22, 2014 and the Pontifax Warrants to purchase 39,583 ordinary shares directly held by Pontifax (Israel) II – Individual Investors LLP that are exercisable within 60 days of December 22, 2014. Does not include (i) warrants held by the foregoing entities to purchase an aggregate of 2,065,289 preferred shares that are not exercisable within 60 days of December 22, 2014; and (ii) the Pontifax Warrants held by the foregoing entities to purchase an aggregate of 4,153,835 ordinary shares that are not exercisable within 60 days of December 22, 2014, which will become fully vested (to the extent not previously vested) upon completion of this offering. Pontifax Management II L.P., or Pontifax Management, is the general partner of Pontifax (Cayman) II, L.P., Pontifax (Israel) II, L.P. and Pontifax (Israel) II – Individual Investors, L.P., and Pontifax Management 2 G.P. (2007) Ltd., or Pontifax Management GP, is the general partner of Pontifax Management. Pontifax has further advised us that Mr. Tomer Kariv, the chairman of our board of directors, and Mr. Ran Nussbaum are directors of Pontifax Management GP and, as such, hold voting and dispositive power over the shares held by the Pontifax entities.
|
(2)
|
Includes warrants to purchase 17,723,031 ordinary shares held by Shanghai Fosun Pharmaceutical Group Co. Ltd. that are exercisable within 60 days of December 22, 2014.
|
(3)
|
Includes (i) 6,391,042 ordinary shares held directly by Yoav Kimchy; (ii) options to purchase 323,846 ordinary shares held by Yoav Kimchy that are exercisable within 60 days of December 22, 2014; and (iii) 6,391,042 ordinary shares held directly by Sigalit Kimchy. Does not include (i) options to purchase 266,124 ordinary shares held by Yoav Kimchy that will become exercisable upon completion of this offering; and (ii) options to purchase 1,557,688 ordinary shares held by Yoav Kimchy that are not exercisable within 60 days of December 22, 2014, which will become fully vested (to the extent not previously vested) upon completion of this offering. Yoav Kimchy, our chief technology officer and a director, and Sigalit Kimchy are husband and wife.
|
(4)
|
Includes (i) 6,759,724 preferred shares that are convertible (at an assumed 1 for 1 conversion rate) into 6,759,724 ordinary shares within 60 days of December 22, 2014; and (ii) warrants to purchase 4,375,729 preferred shares (which are convertible into 4,375,729 ordinary shares at an assumed 1 for 1 conversion rate) that are exercisable within 60 days of December 22, 2014. BXR Portfolio Limited (formerly named Eastern Petroleum Investment Company Limited) has advised us that it is a wholly-owned subsidiary of BXR Group Limited. BXR Group Limited has advised us that the board of directors of BXR Group Limited possesses the ultimate voting and investment power over the shares held by BXR Portfolio Limited.
|
(5)
|
Includes (i) 6,557,305 preferred shares that are convertible (at an assumed 1 for 1 conversion rate) into 6,557,305 ordinary shares within 60 days of December 22, 2014; (ii) warrants to purchase 647,608 preferred shares (which are convertible into 647,608 ordinary shares at an assumed 1 for 1 conversion rate) that are exercisable within 60 days of December 22, 2014; and (iii) warrants to purchase 2,215,379 ordinary shares that are exercisable within 60 days of December 22, 2014. Does not include warrants to purchase 640,081 ordinary shares that are not exercisable within 60 days of December 22, 2014. Docor International B.V. has advised us that it is a wholly-owned subsidiary of Crecor B.V., which is a wholly-owned subsidiary of the Van Leer Group Foundation. Docor International B.V. has advised us that the supervisory board and managing board of Crecor B.V. are responsible for the investments of Crecor B.V. and as such, possess the ultimate voting and investment power over the shares held by Docor International B.V.
|
(6)
|
Includes 6,740,191 preferred shares that are convertible (at an assumed 1 for 1 conversion rate) into 6,740,191 ordinary shares within 60 days of December 22, 2014. Does not include warrants to purchase 773,709 ordinary shares that are not exercisable within 60 days of December 22, 2014. Spearhead Investments (Bio) Ltd. has advised us that it is wholly-owned by Biomedix Incubator Ltd., an Israeli company whose shares are publicly traded on the Tel Aviv Stock Exchange.
|
(7)
|
Includes (i) 5,517,131 preferred shares that are convertible (at an assumed 1 for 1 conversion rate) into 5,517,131 ordinary shares within 60 days of December 22, 2014; and (ii) warrants to purchase 437,573 preferred shares (which are convertible into 437,573 ordinary shares at an assumed 1 for 1 conversion rate) that are exercisable within 60 days of December 22, 2014. Does not include warrants to purchase 557,209 ordinary shares that are not exercisable within 60 days of December 22, 2014. Mr. Gary Jacobs has advised us that he serves as the Managing Director of Jacobs Investment Company, LLC, and as such, possesses the ultimate voting and investment power over the shares held by Jacobs Investment Company LLC.
|
(8)
|
Includes 5,800,389 preferred shares that are convertible (at an assumed 1 for 1 conversion rate) into 5,800,389 ordinary shares within 60 days of December 22, 2014. Does not include warrants to purchase 665,829 ordinary shares that are not exercisable within 60 days of December 22, 2014. Emigrant Alternative Investments LLC has advised us that it is a wholly-owned subsidiary of Emigrant Bank, which is a wholly-owned subsidiary of Emigrant Bancorp, Inc., which is a wholly-owned subsidiary of New York Private Bank & Trust Corporation (“NYPBTC”), which is wholly owned by trusts benefitting the family of Paul Milstein (the “Trusts”) and by some members of that family. Each of the foregoing may be deemed to be a beneficial owner of the shares held by Emigrant Alternative Investments LLC. Emigrant Alternative Investments LLC has advised us that Howard Milstein, through control of the Trusts, which own 100% of the voting stock of NYPBTC, and in his capacity as an officer of NYPBTC, may be deemed to have sole power to vote and dispose of the shares held by Emigrant Alternative Investments LLC.
|
(9)
|
Includes: (i) 4,612,172 preferred shares that are convertible (at an assumed 1 for 1 conversion rate) into 4,612,172 ordinary shares within 60 days, held by Counterpoint Ventures Fund LP and Counterpoint Ventures Fund II LP; and (ii) warrants to purchase 1,129,843 ordinary shares that are exercisable within 60 days of December 22, 2014 held by Counterpoint Ventures Fund II LP. Mr. Robb has advised us that the general partner of each of Counterpoint Ventures Fund LP and Counterpoint Ventures Fund II LP is Lion Development LLC, which is 99% controlled by Mr. Walter Robb, and as such, Walter Robb possesses the ultimate voting and investment power over the shares held by the Counterpoint Ventures entities. Does not include warrants to purchase 529,434 ordinary shares held in the aggregate by the Counterpoint entities that are not exercisable within 60 days of December 22, 2014. In addition, Mr. Walter Robb directly holds options to purchase 142,483 ordinary shares that are exercisable within 60 days of December 22, 2014 and options to purchase 16,356 ordinary shares that are not exercisable within 60 days of December 22, 2014.
|
(10)
|
Includes options to purchase 6,781,820 ordinary shares exercisable within 60 days of December 22, 2014. Does not include (i) options to purchase 266,100 ordinary shares that will become exercisable upon completion of this offering; and (ii) options to purchase 6,230,753 ordinary shares that are not exercisable within 60 days of December 22, 2014, which will become fully vested (to the extent not previously vested) upon completion of this offering.
|
(11)
|
Does not include warrants to purchase 2,065,289 ordinary shares held by the Pontifax entities, warrants to purchase 640,081 ordinary shares held by Docor International B.V., warrants to purchase 773,709 ordinary shares held by Spearhead Investments (Bio) Ltd., warrants to purchase 557,209 ordinary shares held by Jacobs Investment Company LLC, warrants to purchase 665,829 ordinary shares held by Emigrant Alternative Investments LLC and warrants to purchase 529,434 ordinary shares held by the Counterpoint Ventures entities (collectively referred to as the “Anti-Dilution Warrants”). The Anti-Dilution Warrants were issued as anti-dilution protection in connection with the grant to Mr. Guy Neev of the Neev Options. The Anti-Dilution Warrants will be automatically exercised, without consideration, if and when Mr. Guy Neev exercises any part of the Neev Options, in proportion to the portion of the Neev Options exercised by Mr. Guy Neev (and with respect to Anti-Dilution Warrants to purchase 211,718 ordinary shares held by the Pontifax entities, in proportion to the number of warrants held by the Pontifax entities with respect to which such Anti-Dilution Warrants were granted that were exercised prior to the exercise of the Neev Options).
|
|
•
|
the Anti-Dilution Warrants to purchase 7,734,441 ordinary shares, which will be automatically exercised, without consideration, unless the holder thereof objects to such exercise, if and when Mr. Guy Neev exercises any part of the Neev Options, in proportion to the portion of the Neev Options exercised by Mr. Guy Neev (and with respect to 230,920 of such warrants, in proportion to the number of warrants with respect to which such 230,920 warrants were granted that were exercised prior to the exercise of the Neev Options);
|
|
•
|
warrants to purchase 836,412 Series C-1 preferred shares with an exercise price of $0.2495 per share. The warrants are exercisable on a cashless basis;
|
|
•
|
warrants to purchase 1,175,257 Series C-2 preferred shares with an exercise price of $0.269 per share. Of such warrants, warrants to purchase 1,007,975 Series C-2 preferred shares are exercisable on a cashless basis; 1,007,975 C-2 warrants (with cashless exercise) were issued to Pontifax and 167,282 C2 warrants (without cashless exercise) were issued to placement agents;
|
|
•
|
warrants to purchase 503,872 Series D-1 preferred shares with an exercise price of $0.37708 per share;
|
|
•
|
warrants to purchase 16,611,146 Series D-2 preferred shares with an exercise price of $0.47135 per share; and
|
|
•
|
warrants to purchase 57,599,850 ordinary shares, of which (i) warrants to purchase 53,169,092 ordinary shares have an exercise price of NIS 0.01 per ordinary share and are fully vested; (ii) the Pontifax Warrants to purchase 2,215,379 ordinary shares have an exercise price of NIS 0.01 per ordinary share and will become fully vested upon the closing of this offering; and (iii) the Pontifax Warrants to purchase 2,215,379 ordinary shares with an exercise price per share equal to the price per share at which our ordinary shares are sold to the public in this offering which will become fully vested upon the closing of this offering.
|
|
•
|
options to purchase 12,366,188 of our ordinary shares (which include options to purchase 936,936 ordinary shares issued as anti-dilution protection in connection with the grant to Mr. Guy Neev of the Neev Options), with a weighted average exercise price of $0.17 per share, were outstanding under our 2006 Unit Option Plan. Of such outstanding options, options to purchase 10,376,684 of our ordinary shares, with a weighted average exercise price of $0.17 per share, were vested as of such date;
|
|
•
|
options to purchase 11,630,739 of our ordinary shares were outstanding under our 2006 Unit Option Plan, which will become fully vested upon the closing of this offering, (i) fifty-percent of which have an exercise price of NIS 0.01 per ordinary share; and (ii) fifty-percent of which will be exercisable at the price per share at which our ordinary shares are sold to the public in this offering;
|
|
•
|
the Neev Options for 1,995,475 shares; and
|
|
•
|
769,453 ordinary shares issuable upon the exercise of options with an exercise price of $0.2478 per ordinary share, under our 2006 Unit Option Plan, which we have agreed that certain executive officers will be entitled to upon completion of an equity financing, which includes this offering.
|
|
•
|
Since January 1, 2011, we granted options to purchase an aggregate of 16,613,441 ordinary shares, in each case having an exercise price per share ranging from NIS 0.01 (approximately $0.00270) to $0.24780, to certain of our employees, officers and consultants under our 2006 Unit Option Plan. Of such options, options to purchase an aggregate of 1,675,810 ordinary shares have been forfeited and cancelled without being exercised as of the date of this prospectus.
|
|
•
|
In October 2012, we issued and sold 14,780 ordinary shares pursuant to the exercise of options held by an employee, having an exercise price per share of $0.22270.
|
|
•
|
Pursuant to a Share Purchase Agreement dated March 4, 2011 between us and the investors identified therein, we issued an aggregate 24,545,195 of our Series D-1 preferred shares and warrants for the purchase of 16,199,826 of our Series D-2 preferred shares, for aggregate consideration of $9.3 million. In addition, as partial consideration for brokerage services in connection with such financing, we issued warrants to purchase 503,872 Series D-1 preferred shares and warrants to purchase 411,320 Series D-2 preferred shares.
|
|
•
|
Pursuant to a Share Purchase Agreement dated January 10, 2012 between us and the investors identified therein, we issued a total of 2,510,783 Series D-3 preferred shares, for aggregate consideration of $1.1 million.
|
|
•
|
Pursuant to a Credit Line Agreement dated August 20, 2014 between us and the lenders identified therein, we issued warrants for the purchase of an aggregate 53,169,092 ordinary shares.
|
|
•
|
On October 14, 2014, we issued a warrant for the purchase of 4,430,758 ordinary shares to an existing shareholder as consideration for certain services it may provide at our request.
|
|
•
|
amendments to our articles of association;
|
|
•
|
appointment, terms of service and termination of service of our auditors;
|
|
•
|
appointment of external directors;
|
|
•
|
approval of certain related party transactions;
|
|
•
|
increases or reductions of our authorized share capital;
|
|
•
|
mergers; and
|
|
•
|
the exercise of our board of director’s powers by a general meeting, if our board of directors is unable to exercise its powers and the exercise of any of its powers is essential for our proper management.
|
|
•
|
Beginning on the date of this prospectus, all of the ordinary shares sold in this offering will be immediately available for sale in the public market;
|
|
•
|
Beginning 181 days after the date of this prospectus, subject to possible extension as described in “Underwriting” below, additional ordinary shares will become eligible for sale in the public market, all of which will be held by affiliates and subject to the volume and other restrictions of Rule 144, as described below; and
|
|
•
|
The remainder of the ordinary shares will be eligible for sale in the public market from time to time beginning on the date of this prospectus, as described below.
|
|
•
|
1% of the number of ordinary shares then outstanding, which will equal approximately shares immediately after this offering and the concurrent Private Placement; or
|
|
•
|
the average weekly trading volume of our ordinary shares on the NASDAQ Capital Market during the four calendar weeks preceding the filing of a notice on Form 144 with respect to that sale.
|
|
•
|
amortization over an eight-year period of the cost of purchased know-how and patents and rights to use a patent and know-how which are used for the development or advancement of the Industrial Enterprise;
|
|
•
|
under limited conditions, an election to file consolidated tax returns with related Israeli Industrial Companies; and
|
|
•
|
expenses related to a public offering are deductible in equal amounts over three years.
|
|
•
|
an individual citizen or resident of the United States;
|
|
•
|
a corporation (or other entity treated as a corporation) that is created or organized (or treated as created or organized) in or under the laws of the United States, any state thereof or the District of Columbia;
|
|
•
|
an estate whose income is includible in gross income for U.S. federal income tax purposes regardless of its source; or
|
|
•
|
a trust if (i) a U.S. court can exercise primary supervision over the trust’s administration and one or more U.S. persons are authorized to control all substantial decisions of the trust; or (ii) it has a valid election in effect under applicable U.S. Treasury regulations to be treated as a U.S. person.
|
|
•
|
financial institutions or financial services entities;
|
|
•
|
broker-dealers;
|
|
•
|
persons that are subject to the mark-to-market accounting rules under Section 475 of the Code;
|
|
•
|
tax-exempt entities;
|
|
•
|
governments or agencies or instrumentalities thereof;
|
|
•
|
insurance companies;
|
|
•
|
regulated investment companies;
|
|
•
|
real estate investment trusts;
|
|
•
|
certain expatriates or former long term residents of the United States;
|
|
•
|
persons that actually or constructively own 5% or more of our voting shares;
|
|
•
|
persons that acquired the ordinary shares pursuant to an exercise of employee options, in connection with employee incentive plans or otherwise as compensation;
|
|
•
|
persons that hold the ordinary shares as part of a straddle, constructive sale, hedging, conversion or other integrated transaction;
|
|
•
|
persons whose functional currency is not the U.S. dollar;
|
|
•
|
passive foreign investment companies; or
|
|
•
|
controlled foreign corporations.
|
|
•
|
any gain recognized by the U.S. Holder on the sale or other disposition of its ordinary shares; and
|
|
•
|
any “excess distribution” made to the U.S. Holder (generally, any distributions to such U.S. Holder during a taxable year of the U.S. Holder that are greater than 125% of the average annual distributions received by such U.S. Holder in respect of the ordinary shares during the three preceding taxable years of such U.S. Holder or, if shorter, such U.S. Holder’s holding period for the ordinary shares).
|
|
•
|
the U.S. Holder’s gain or excess distribution will be allocated ratably over the U.S. Holder’s holding period for the ordinary shares;
|
|
•
|
the amount allocated to the U.S. Holder’s taxable year in which the U.S. Holder recognized the gain or received the excess distribution or to the period in the U.S. Holder’s holding period before the first day of our first taxable year in which we qualified as a PFIC will be taxed as ordinary income;
|
|
•
|
the amount allocated to other taxable years (or portions thereof) of the U.S. Holder and included in its holding period will be taxed at the highest ordinary tax rate in effect for that year and applicable to the U.S. Holder; and
|
|
•
|
the interest charge generally applicable to underpayments of tax will be imposed in respect of the tax attributable to each such other taxable year of the U.S. Holder.
|
|
•
|
fails to provide an accurate taxpayer identification number;
|
|
•
|
is notified by the IRS that backup withholding is required; or
|
|
•
|
in certain circumstances, fails to comply with applicable certification requirements.
|
Underwriter
|
Number of Ordinary
Shares
|
|
Chardan Capital Markets, LLC
|
||
Maxim Group LLC
|
||
Total
|
Total
|
||||||
Per
Share
|
Without
Over-
Allotment
|
With
Over-
Allotment
|
||||
Public offering price
|
||||||
Underwriting discounts and commissions
|
||||||
Proceeds, before expenses, to us
|
|
•
|
to legal entities that are authorized or regulated to operate in the financial markets or, if not so authorized or regulated, whose corporate purpose is solely to invest in securities;
|
|
•
|
to any legal entity that has two or more of (i) an average of at least 250 employees during its last fiscal year; (ii) a total balance sheet of more than €43 million (as shown on its last annual unconsolidated or consolidated financial statements); and (iii) an annual net turnover of more than €50 million (as shown on its last annual unconsolidated or consolidated financial statement);
|
|
•
|
to fewer than 100 natural or legal persons (other than qualified investors within the meaning of Article 2(1)I of the Prospectus Directive) subject to obtaining the prior consent of the company or any underwriter 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 the publication by the company of a prospectus pursuant to Article 3 of the Prospectus Directive.
|
|
•
|
to Italian qualified investors, as defined in Article 100 of Decree no. 58 by reference to Article 34-ter of CONSOB Regulation no. 11971 of 14 May 1999 (“Regulation no. 1197l”) as amended (“Qualified Investors”); and
|
|
•
|
in other circumstances that are exempt from the rules on public offer pursuant to Article 100 of Decree No. 58 and Article 34-ter of Regulation No. 11971 as amended. Any offer, sale or delivery of the ordinary shares or distribution of any offer document relating to the ordinary shares in Italy (excluding placements where a Qualified Investor solicits an offer from the issuer) under the paragraphs above must be:
|
|
•
|
made by investment firms, banks or financial intermediaries permitted to conduct such activities in Italy in accordance with Legislative Decree No. 385 of 1 September 1993 (as amended), Decree No. 58, CONSOB Regulation No. 16190 of 29 October 2007 and any other applicable laws; and
|
|
•
|
in compliance with all relevant Italian securities, tax and exchange controls and any other applicable laws.
|
SEC registration fee
|
$ | 1,830.15 | ||
FINRA filing fee
|
$ | 2,862.50 | ||
NASDAQ listing fee
|
$ | 50,000 | ||
Legal fees and expenses*
|
||||
Accounting fees and expenses*
|
||||
Transfer agent and registrar’s fees and expenses*
|
||||
Printing expenses*
|
||||
Miscellaneous fees and expenses*
|
||||
Total*
|
Page
|
|
F - 2
|
|
Financial statements
:
|
|
F - 3
|
|
F - 4
|
|
F - 5
|
|
F - 6
|
|
F - 7 - F - 36
|
December 31,
|
|||||||||||
2013
|
2012
|
||||||||||
Note
|
in USD thousands
|
||||||||||
Assets
|
|||||||||||
Current assets
|
|||||||||||
Cash and cash equivalents
|
5 | 4,975 | 4,583 | ||||||||
Restricted deposit
|
46 | 43 | |||||||||
Short-term investment
|
5 | - | 3,450 | ||||||||
Other current assets
|
6 | 130 | 164 | ||||||||
Total current assets
|
5,151 | 8,240 | |||||||||
Property and equipment, net
|
7 | 224 | 256 | ||||||||
Total assets
|
5,375 | 8,496 | |||||||||
Liabilities and shareholders’ equity
|
|||||||||||
Current liabilities
|
|||||||||||
Trade accounts payable
|
221 | 140 | |||||||||
Other current liabilities
|
141 | 140 | |||||||||
Employee benefits
|
8A | 658 | 509 | ||||||||
Total current liabilities
|
1,020 | 789 | |||||||||
Non-current liabilities
|
|||||||||||
Royalties provision
|
10A | 2,577 | 2,046 | ||||||||
Other financial liabilities
|
11D1 | 587 | 532 | ||||||||
Total non-current liabilities
|
3,164 | 2,578 | |||||||||
Shareholders’ equity
|
1D | ||||||||||
Preferred share capital
|
226 | 226 | |||||||||
Ordinary share capital
|
53 | 53 | |||||||||
Premium on preferred shares
|
21,167 | 21,167 | |||||||||
Share options
|
1,793 | 1,793 | |||||||||
Premium on ordinary shares
|
6 | 6 | |||||||||
Capital reserve for ordinary share-based payment
|
431 | 374 | |||||||||
Accumulated deficit
|
(22,485 | ) | (18,490 | ) | |||||||
Total shareholders’ equity
|
1,191 | 5,129 | |||||||||
Total liabilities and shareholders’ equity
|
5,375 | 8,496 |
July 3, 2014
|
||||||
Date of approval of
financial statements
|
Tomer Kariv- Chairman of the Board of Directors
|
Guy Neev-CEO
|
Lior Torem-CFO
|
Year ended December 31,
|
|||||||||||
Note
|
2013
|
2012
|
|||||||||
in USD thousands
|
|||||||||||
Research and development expenses, net
|
13 | 2,662 | 2,692 | ||||||||
General and administrative expenses
|
14 | 1,090 | 1,203 | ||||||||
Other expenses (income)
|
(10 | ) | 13 | ||||||||
Operating loss
|
3,742 | 3,908 | |||||||||
Finance income
|
15 | (63 | ) | (416 | ) | ||||||
Finance expenses
|
16 | 316 | 229 | ||||||||
Finance expenses (income), net
|
253 | (187 | ) | ||||||||
Loss for the year
|
3,995 | 3,721 | |||||||||
Total comprehensive loss for year
|
3,995 | 3,721 | |||||||||
Loss per ordinary share (in USD) Basic and diluted
|
0.18 | 0.17 | |||||||||
Weighted average number of ordinary shares outstanding - basic and diluted
(in thousands)
|
17 | 32,542 | 32,530 | ||||||||
Pro forma loss per ordinary share (in USD) Basic and diluted (unaudited)
|
1D |
X.XX
|
X.XX
|
||||||||
Pro forma weighted average number of ordinary shares outstanding - basic and diluted (in thousands) (unaudited)
|
XXX
|
XXX
|
Preferred share capital
|
Ordinary share capital
|
Premium on preferred shares
|
Share options
|
Premium on ordinary shares
|
Capital reserve for ordinary share based payment
|
Accumulated deficit
|
Total
|
|||||||||||||||||||||||||
In USD thousands
|
||||||||||||||||||||||||||||||||
For the year ended
December 31, 2013
|
||||||||||||||||||||||||||||||||
Balance - January 1, 2013
|
226 | 53 | 21,167 | 1,793 | 6 | 374 | (18,490 | ) | 5,129 | |||||||||||||||||||||||
Ordinary share based payment
|
- | - | - | - | - | 57 | - | 57 | ||||||||||||||||||||||||
Comprehensive loss for the year
|
- | - | - | - | - | - | (3,995 | ) | (3,995 | ) | ||||||||||||||||||||||
Total shareholders’ equity as of December 31, 2013
|
226 | 53 | 21,167 | 1,793 | 6 | 431 | (22,485 | ) | 1,191 | |||||||||||||||||||||||
For the year ended
December 31, 2012
|
||||||||||||||||||||||||||||||||
Balance - January 1, 2012
|
219 | 53 | 20,145 | 1,793 | 3 | 343 | (14,769 | ) | 7,787 | |||||||||||||||||||||||
Issue of preferred D3 shares, net
|
7 | - | 1,022 | - | - | - | - | 1,029 | ||||||||||||||||||||||||
Issue of ordinary share under
employee share option plan
|
- | (* | ) | - | - | 3 | - | - | 3 | |||||||||||||||||||||||
Recognition of share based payment
|
- | - | - | - | 31 | - | 31 | |||||||||||||||||||||||||
Comprehensive loss for the year
|
- | - | - | - | - | - | (3,721 | ) | (3,721 | ) | ||||||||||||||||||||||
Total shareholders’ equity as of December 31, 2012
|
226 | 53 | 21,167 | 1,793 | 6 | 374 | (18,490 | ) | 5,129 | |||||||||||||||||||||||
(*)
|
Less than NIS 1 thousands
|
Year ended December 31,
|
||||||||
2013
|
2012
|
|||||||
in USD thousands
|
||||||||
CASH FLOWS FROM OPERATING ACTIVITIES
|
||||||||
Loss for the year
|
(3,995 | ) | (3,721 | ) | ||||
Net gain arising on financial assets and liabilities designated as at fair value
through profit or loss
|
55 | 116 | ||||||
Depreciation and amortization
|
77 | 73 | ||||||
Ordinary share-based compensation
|
57 | 31 | ||||||
Royalties provision
|
(116 | ) | (464 | ) | ||||
Changes in assets and liabilities items:
|
||||||||
Decrease in other current assets
|
34 | 25 | ||||||
Increase (decrease) in trade accounts payable and other current liabilities
|
82 | (385 | ) | |||||
Increase in employees benefits
|
149 | 165 | ||||||
Net cash used in operating activities
|
(3,657 | ) | (4,160 | ) | ||||
CASH FLOWS FROM INVESTING ACTIVITIES
|
||||||||
Purchase of property and equipment
|
(45 | ) | (105 | ) | ||||
Proceeds from disposal of property and equipment
|
- | 16 | ||||||
Increase in restricted deposit
|
(3 | ) | (4 | ) | ||||
Decrease (increase) short-term investment
|
3,450 | (3,450 | ) | |||||
Net cash generated from (used in) investing activities
|
3,402 | (3,543 | ) | |||||
CASH FLOWS FROM FINANCING ACTIVITIES
|
||||||||
Proceeds from issuance of preferred shares, net
|
- | 1,029 | ||||||
Receipt of loan from the Office of Chief Scientist
|
647 | 541 | ||||||
Proceeds from issue of ordinary shares
|
- | 3 | ||||||
Net cash generated from financing activities
|
647 | 1,573 | ||||||
Effect of exchange rate changes on cash and cash equivalents
|
- | (7 | ) | |||||
Net increase (decrease) in cash and cash equivalents
|
392 | (6,137 | ) | |||||
Cash and cash equivalents at the beginning of the year
|
4,583 | 10,720 | ||||||
Cash and cash equivalents at the end of the year
|
4,975 | 4,583 |
NOTE 1
|
-
|
GENERAL INFORMATION
|
|
A.
|
General
|
|
B.
|
Financial Position
|
|
C.
|
Agreement for transfer of assets
|
|
D.
|
Pro Forma Information (unaudited)
|
NOTE 2
|
-
|
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
|
|
A.
|
Declaration regarding the implementation of International Financial Reporting Standards as issued by the International Accounting Standard Board (IFRS)
|
|
B.
|
Presentation of statements of financial position
|
|
C.
|
Format for analysis of expenses in the statement of comprehensive Income
|
|
D.
|
Foreign currency:
|
|
1.
|
Functional currency and presentation currency
The Company has not yet generated revenues, and the majority of its expenses is in U.S. Dollar (Dollar or USD) or NIS, while none of these currencies is significantly material compared to the other. After considering the factors to determine the functional currency in IAS 21, "the Effects of Changes in Foreign Exchange Rates", management determined that the Dollar is the Company's functional currency.
Management judgment, in setting the Dollar as the Company's functional currency, is based mainly on the following criteria: The Company's budget and other Company internal reports, including reports to the Company's Board of Directors and investors, are presented in Dollars. Management is using these reports in order to make decisions for the Company. All of the Company's equity and debt financings were in Dollars; and it is expected that a significant portion of the Company's future revenue will be in Dollars. The financial statements are presented in Dollars, which is the functional currency of the Company. See Note 2Q regarding the rates of exchange and changes in them during the presented periods.
|
|
2.
|
Translation of transactions that are not in the functional currency
In preparing the financial statements of the Company, transactions in currencies other than the functional currency of the Company (hereafter – “foreign currency”) are recorded at the rates of exchange prevailing at the date of the transactions. At each statement of financial position date, monetary items denominated in foreign currencies are remeasured at the rates prevailing at the statement of financial position date. (Non-monetary items carried at fair value that are denominated in foreign currencies are remeasured at the rates prevailing at the date when the fair value was determined). Non-monetary items that are measured in terms of historical cost are translated at the historical exchange rates that were in effect on the date of the execution of the transactions related to them.
|
NOTE 2
|
- SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONT.)
|
D.
|
Foreign currency (Cont.)
|
|
3.
|
Recognition of exchange differences
Exchange differences are recognized in profit and loss in the period in which they arise.
|
|
E.
|
Cash and cash equivalents
|
|
F.
|
Property and equipment
|
|
(1)
|
General
|
|
(2)
|
Depreciation of property and equipment
|
Length of useful life
|
Depreciation rate
|
|||||
Years
|
%
|
|||||
Office furniture and equipment
|
10-14 | 7-10 | ||||
Laboratory equipment
|
3-7 | 15-33 | ||||
Computers and auxiliary equipment
|
3 | 33 |
|
G.
|
Research and development costs
|
NOTE 2
|
-
|
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONT.)
|
|
G.
|
Research and development costs (Cont.)
|
|
H.
|
Financial assets
|
|
(1)
|
General
|
|
(2)
|
Loans and receivables
|
|
§
|
Significant financial difficulties of the issuer or debtor;
|
|
§
|
Probability that the debtor will enter bankruptcy or financial reorganization.
|
NOTE 2
|
-
|
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONT.)
|
|
H.
|
Financial assets (Cont.)
|
I.
|
IFRS 13 "Fair Value Measurement"
|
J.
|
Financial liabilities and equity instruments issued by the Company
|
NOTE 2
|
-
|
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONT.)
|
|
J.
|
Financial liabilities and equity instruments issued by the Company (Cont.)
|
|
(2)
|
Warrants for the acquisition of the Company's preferred and ordinary shares
|
|
a.
|
Warrants to acquire shares of the Company which provide the holder with the right to acquire a fixed number of preferred shares in consideration of a fixed amount of cash are presented in equity as “receipts on account of issued preferred shares” section. For this purpose, an exercise amount varying according to the exercise date, where at the date of the issuance, the exercise price at any possible exercise date can already be determined, is treated as a fixed amount.
|
|
b.
|
Warrants to acquire shares of the Company shares which provide the holder with the right to acquire a fixed number of ordinary or preferred shares in consideration of a variable amount of cash or cashless right are presented in current liabilities, measured at fair value through profit and loss.
|
|
(3)
|
Derecognition of financial liabilities
|
|
K.
|
Grants from the Office of the Chief Scientist of the Ministry of Economy (formerly named the Ministry of Industry, Trade and Labor) (hereafter-"OCS")
|
|
L.
|
Provisions
|
NOTE 2
|
-
|
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONT.)
|
|
M.
|
Share-based payments
|
|
N.
|
Taxes on income
|
|
O.
|
Employee benefits
|
|
P.
|
Loss per share
|
NOTE 2
|
-
|
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONT.)
|
|
Q.
|
Exchange rates and linkage bases
|
Representative
|
Representative
|
|||||||
exchange rate of $
|
exchange rate of
€
|
|||||||
(NIS/$ 1)
|
€ $ (/ 1) | |||||||
Date of financial statements:
|
||||||||
December 31, 2013
|
3.471 | 0.7259 | ||||||
December 31, 2012
|
3.733 | 0.7586 |
%
|
%
|
|||||||
Changes in exchange rates for the period:
|
||||||||
Year ended:
|
||||||||
December 31, 2013
|
(7.02 | ) | 4.31 | |||||
December 31, 2012
|
(2.30 | ) | 1.96 |
NOTE 3
|
-
|
NEW STANDARDS AND INTERPRETATIONS NOT YET ADOPTED
|
NOTE 3
|
-
|
NEW STANDARDS AND INTERPRETATIONS NOT YET ADOPTED (CONT.)
|
NOTE 4
|
-
|
SIGNIFICANT ACCOUNTING JUDGMENT AND KEY SOURCE OF ESTIMATIONS
|
|
A.
|
Share-based compensation
|
NOTE 4
|
-
|
SIGNIFICANT ACCOUNTING JUDGMENT AND KEY SOURCE OF ESTIMATIONS (CONT.)
|
|
A.
|
Share-based compensation (Cont.)
|
|
1.
|
Option Valuations
|
|
2.
|
Valuation of the Company's ordinary shares
|
NOTE 4
|
-
|
SIGNIFICANT ACCOUNTING JUDGMENT AND KEY SOURCE OF ESTIMATIONS (CONT.)
|
|
B.
|
Royalties provision
|
|
1.
|
Government grants from the Office of the Chief Scientist
|
|
2.
|
Provision for royalties to an ASIC designer
|
NOTE 4
|
-
|
SIGNIFICANT ACCOUNTING JUDGMENT AND KEY SOURCE OF ESTIMATIONS (CONT.)
|
|
B.
|
Royalties provision (Cont.)
|
|
3.
|
Reimbursement liability to Predecessor Entity unit holders
|
C.
|
Fair value of financial instruments
|
NOTE 5
|
-
|
CASH AND CASH EQUIVALENTS AND SHORT TERM INVESTMENT
|
|
Annual interest rate as
|
December 31,
|
|||||||||
of December 31, 2013
|
2013
|
2012
|
|||||||||
%
|
in USD thousands
|
||||||||||
Cash on hand and bank balances
|
270 | 78 | |||||||||
Short-term deposits
|
0-1.64 | 4,705 | 4,505 | ||||||||
Cash and cash equivalents
|
4,975 | 4,583 | |||||||||
Cash and short-term deposits in Dollar
|
4,589 | 3,476 | |||||||||
Short-term deposits in GBP
|
4 | - | |||||||||
Cash and short-term deposits in NIS
|
382 | 1,107 | |||||||||
Short-term investments
|
- | 3,450 |
NOTE 6
|
-
|
OTHER RECEIVABLES
|
December 31,
|
||||||||
2013
|
2012
|
|||||||
in USD thousands
|
||||||||
Government institutions
|
45 | 37 | ||||||
Other
|
64 | 68 | ||||||
Prepaid expenses
|
21 | 59 | ||||||
130 | 164 |
NOTE 7
|
-
|
PROPERTY AND EQUIPMENT, NET
|
Office
|
Computers
|
|||||||||||||||
Furniture
|
and
|
|||||||||||||||
And
|
Laboratory
|
auxiliary
|
||||||||||||||
equipment
|
equipment
|
equipment
|
Total
|
|||||||||||||
in USD thousands
|
||||||||||||||||
Cost
|
||||||||||||||||
Cost as of January 1, 2012
|
75 | 244 | 106 | 425 | ||||||||||||
Additions
|
14 | 35 | 56 | 105 | ||||||||||||
Disposals
|
- | (16 | ) | - | (16 | ) | ||||||||||
Cost as of December 31, 2012
|
89 | 263 | 162 | 514 | ||||||||||||
Additions
|
1 | 8 | 36 | 45 | ||||||||||||
Cost as of December 31, 2013
|
90 | 271 | 198 | 559 | ||||||||||||
Accumulated depreciation
|
||||||||||||||||
Accumulated depreciation as of January 1, 2012
|
18 | 114 | 53 | 185 | ||||||||||||
Depreciation
|
6 | 32 | 37 | 75 | ||||||||||||
Disposals
|
- | (2 | ) | - | (2 | ) | ||||||||||
Accumulated depreciation as of December 31, 2012
|
24 | 144 | 90 | 258 | ||||||||||||
Depreciation
|
7 | 29 | 41 | 77 | ||||||||||||
Accumulated depreciation as of December 31, 2013
|
31 | 173 | 131 | 335 | ||||||||||||
Net book value:
|
||||||||||||||||
December 31, 2013
|
59 | 98 | 67 | 224 | ||||||||||||
December 31, 2012
|
65 | 119 | 72 | 256 |
NOTE 8
|
-
|
EMPLOYEE BENEFITS
|
|
A.
|
Composition
|
December 31,
|
||||||||
2013
|
2012
|
|||||||
(Audited)
|
||||||||
in USD thousands
|
||||||||
Short term employee benefits:
|
||||||||
Benefits for vacation pay
|
222 | 230 | ||||||
Liability for salary, bonuses and wages
|
436 | 279 | ||||||
658 | 509 |
|
B.
|
Post-employment Benefits
|
|
C.
|
Short-term employee benefits
|
|
(1)
|
Paid vacation days
|
|
(2)
|
Related parties
|
NOTE 9
|
-
|
TAXES ON INCOME
|
|
(1)
|
The Company received final tax assessments for the year ended December 31, 2009
|
|
(2)
|
Losses and deductions for tax purposes carried forward amount to approximately $16.7 thousand as of December 31, 2013. Due to the lack of expectation of taxable income in the foreseeable future, no deferred taxes were recorded for these carry forward losses and deductions.
|
|
(3)
|
Corporate tax rates in Israel:
|
NOTE 10
|
-
|
COMMITMENTS
AND CONTINGENT LIABILITIES
|
|
A.
|
Provisions
|
NOTE 10
|
-
|
COMMITMENTS AND CONTINGENT LIABILITIES (CONT.)
|
|
A.
|
Provisions (Cont.)
Royalties to the OCS (Cont.)
The movement in the provision is as follows:
|
December 31,
|
||||||||
2013
|
2012
|
|||||||
in USD thousands
|
||||||||
Balance at the beginning of the year:
|
1,190 | 990 | ||||||
Changes during the year:
|
||||||||
Amounts charged to the statement of profit and loss and other comprehensive loss
|
(219 | ) | (341 | ) | ||||
Amounts received during the year
|
647 | 541 | ||||||
Balance at year end
|
1,618 | 1,190 |
December 31,
|
||||||||
2013
|
2012
|
|||||||
in USD thousands
|
||||||||
Royalties to the OCS
|
1,618 | 1,190 | ||||||
Royalties to an ASIC designer
|
171 | 157 | ||||||
Reimbursement liability to Predecessor Entity’s unit holders
|
788 | 699 | ||||||
2,577 | 2,046 |
NOTE 10
|
-
|
COMMITMENTS AND CONTINGENT LIABILITIES (CONT.)
|
|
B.
|
Commitments
|
1.
|
Rental agreement
|
2.
|
Agreements for financial brokerage service
|
3.
|
Detector development agreement
|
|
C.
|
Liens
|
|
D.
|
Legal
|
NOTE 11
|
-
|
SHARE CAPITAL
|
|
A.
|
Authorized capital:
|
December 31,
|
||||||||
2013
|
2012
|
|||||||
Thousands of shares
|
||||||||
Ordinary shares with par value of NIS 0.01
|
907,154 | 907,154 | ||||||
Preferred A shares with par value of NIS 0.01
|
6,750 | 6,750 | ||||||
Preferred B shares with par value of NIS 0.01
|
6,769 | 6,769 | ||||||
Preferred C1 shares with par value of NIS 0.01
|
17,494 | 17,494 | ||||||
Preferred C2 shares with par value of NIS 0.01
|
31,833 | 31,833 | ||||||
Preferred C3 shares with par value of NIS 0.01
|
30,000 | 30,000 | ||||||
Preferred D1 shares with par value of NIS 0.01
|
80,000 | 80,000 | ||||||
Preferred D2 shares with par value of NIS 0.01
|
60,000 | 60,000 | ||||||
Preferred D3 shares with par value of NIS 0.01
|
5,000 | 5,000 | ||||||
Preferred D4 shares with par value of NIS 0.01
|
5,000 | 5,000 |
NOTE 11
|
-
|
SHARE CAPITAL (CONT.)
|
|
B.
|
Issued capital
|
Number of shares
|
Share capital
|
Premium on shares
|
||||||||||||||||||||||
December 31,
|
December 31,
|
December 31,
|
||||||||||||||||||||||
2013
|
2012
|
2013
|
2012
|
2013
|
2012
|
|||||||||||||||||||
Thousands of shares
|
in USD thousands
|
in USD thousands
|
||||||||||||||||||||||
Ordinary shares with par value of NIS 0.01 fully paid up
|
23,043 | 23,043 | 53 | 53 | 6 | 6 | ||||||||||||||||||
Preferred A shares with par value of NIS 0.01, participating and convertible, fully paid up
|
6,750 | 6,750 | 15 | 15 | 660 | 660 | ||||||||||||||||||
Preferred B shares with par value of NIS 0.01, participating and convertible, fully paid up
|
6,769 | 6,769 | 15 | 15 | 1,367 | 1,367 | ||||||||||||||||||
Preferred C1 shares with par value of NIS 0.01, participating and convertible, fully paid up
|
16,415 | 16,415 | 42 | 42 | 3,584 | 3,584 | ||||||||||||||||||
Preferred C2 shares with par value of NIS 0.01, participating and convertible, fully paid up
|
29,789 | 29,789 | 79 | 79 | 7,606 | 7,606 | ||||||||||||||||||
Preferred D1 shares with par value of NIS 0.01, participating and convertible, fully paid up
|
24,545 | 24,545 | 68 | 68 | (*)8,721 | (*)8,721 | ||||||||||||||||||
Preferred D3 shares with par value of NIS 0.01, participating and convertible, fully paid up
|
2,511 | 2,511 | 7 | 7 | 1,022 | 1,022 | ||||||||||||||||||
279 | 279 | 22,966 | 22,966 | |||||||||||||||||||||
NOTE 11
|
-
|
SHARE CAPITAL (CONT.)
|
|
C.
|
Rights attached to shares
|
|
(1)
|
Ordinary shares
|
|
(2)
|
Liquidation preferences on Preferred shares
|
|
(3)
|
Conversion
|
NOTE 11
|
-
|
SHARE CAPITAL (CONT.)
|
|
D.
|
Changes in share capital
|
Description
|
Amount raised, gross
in USD thousands
|
Shares issued
|
Price per share
|
Warrants issued
|
Series A Investment Round, February 2005
|
$675
|
6,750,000 Preferred A Shares
|
$0.10
|
None
|
Series B Investment Round, August 2005
|
$1,382
|
6,769,359 Preferred B Shares
|
$0.20
|
None
|
Conversion of April 2007 Bridge Loan, June 2009
|
$403
|
1,614,490
Preferred C1 Shares
|
$0.25
|
Expired
|
Series C Investment Round, June 2009
|
$7,384
|
14,800,416
Preferred C1 Shares
13,725,012
Preferred C2 Shares
|
$0.25
$0.27
|
The lead investor received 836,412 preferred C1 warrants and 1,007,975 preferred C2 warrants (1)
|
Joinder to Series C Investment, November 2009 to February 2010
|
$4,321
|
16,063,656
Preferred C2 Shares
|
$0.27
|
Expired
In addition, finder's received 539,021 preferred C2 warrants (2)
|
Anti-Dilution Warrants
|
-
|
-
|
-
|
7,804,912 ordinary share warrants (3)
|
Series D1 Investment Round, March 2011 (4)
|
$9,255
|
24,545,195
Preferred D1 Shares
|
$0.38
|
16,199, 826 preferred D2 warrants issued to all investors (4)
In addition, finder's received 411,320 preferred D2 warrants and 503,872 preferred D1 warrants (5)
|
Series D3 Investment Round, January 2012 (6)
|
$1,055
|
2,510,783 Preferred D3 Shares
|
$0.42
|
None
|
Subtotal
|
$24,475
|
|||
Less: Issuance expenses
|
($850)
|
|||
Less: D1 and D2 warrants classified as financial liability
|
($439)
|
|||
Ordinary shares
|
$59
|
|||
Total
|
$23,245
|
NOTE 11
|
-
|
SHARE CAPITAL (CONT.)
|
|
D.
|
Changes in share capital (Cont.)
|
|
(1)
|
Of the warrants issued to the lead investor, the 836,412 preferred C1warrants are exercisable at $0.2495 per share and the 1,007,975 preferred C2 warrants are exercisable at $0.2269 per share. These warrants expire on June 1, 2019 and are exercisable on a cashless basis. According to IAS 32, ‘Financial Instruments: Presentation’ (hereinafter—IAS 32), the preferred C1 and C2 warrants issued to the lead investor are classified as a financial liability, as their respective terms do not provide for fixed monetary payment in exchange for fixed number of shares. Accordingly, such warrants are presented in the statement of financial position as financial liabilities carried at fair value through profit and loss. As of December 31, 2013 and 2012, the fair value of such warrants was $587 thousand and $532 thousand, respectively. The increase in the fair value of such warrants for the year ended December 31, 2013 was $55 and was charged to the statement of profit or loss and other comprehensive income within “Changes in fair value of financial assets and liabilities designated at fair value through profit and loss.”
|
|
(2)
|
In consideration for brokerage services in connection with the Series C preferred share investment: (i) on December 15, 2009, the Company issued warrants to purchase 371,739 preferred C2 shares, with an exercise price of $0.2690 per share, exercisable until November 22, 2014; and (ii) on April 27, 2010, the Company issued warrants to purchase 167,282 preferred C2 shares, with an exercise price of $0.2690 per share, exercisable until January 21, 2015. These grants were accounted for as a deduction of equity.
|
|
(3)
|
On May 11, 2010, the Company issued, free of charge, to all of its shareholders (except for certain ordinary shareholders) and warrant holders, warrants to purchase an aggregate of 7,804,912 ordinary shares (hereafter- “Anti-dilution Warrants”), as anti-dilution protection due to certain options granted to the Company’s CEO (hereafter- “CEO Options”). The Anti-dilution Warrants will be automatically exercised, without consideration, upon the exercise by the Company’s CEO of the CEO Options (and with respect to Anti-dilution warrants granted to warrant holders, in proportion to the number of warrants with respect to which such Anti-dilution warrants were granted that were exercised prior to the exercise of the CEO Options). The fair value of the Anti-dilution Warrants on the grant date is immaterial. See Note 17.
|
|
(4)
|
In connection with brokerage services in connection with the Series D-1 investment, the Company issued warrants to purchase 411,320 preferred D2 shares, with an exercise price of $0.47135 per share and exercisable until March 17, 2015, and warrants to purchase 503,872 preferred D1 shares, with an exercise price of $0.37708 per share and exercisable until March 17, 2015.These grants were accounted for as a deduction of equity. In addition, the brokerage services providers received $449 thousand in cash.
|
|
(5)
|
On January 10, 2012, the Company entered into a share purchase agreement pursuant to which the Company issued 2,510,783 preferred D3 shares in consideration of an investment of $1,055 thousand, reflecting a per share price of $0.42 per preferred D3 share.
|
NOTE 12
|
-
|
SHARE BASED PAYMENT
|
1)
|
In connection with the transfer of all of the business operations and substantially all of the assets of Check-Cap LLC to the Company in 2009, the Company assumed the Check-Cap LLC 2006 Unit Option Plan (hereafter: “the Plan”). According to the Plan, the Company is authorized to grant options to purchase ordinary shares of the Company to employees, directors and consultants of the Company. The options granted according to the Plan are generally exercisable for 10 years from the grant date unless otherwise determined by the Company’s Board of Directors, vest over a period to be determined by the Company’s Board of Directors, and have an exercise price to be determined by the Company’s Board of Directors.
|
2)
|
In April 2012, the Company’s Board of Directors approved the grant of 1,160,000 options to purchase ordinary shares NIS 0.01 par value of the Company at an exercise price of $0.2478 to employees and consultants of the Company. 25,012 of these options were vested on the grant date. 551,670 of the options will vest over two years, 357,494 of the options will vest over three years and the remaining, and 188,330 options will vest over four years.
The compensation expense was based on the fair value on the grant date, and was estimated at approximately $24 thousand.
|
3)
|
In August 2012 the Company’s Board of Directors approved the grant of 350,000 options to purchase ordinary shares NIS 0.01 par value of the Company at an exercise price of $0.2478 to employees and consultants of the Company. 29,174 of these options were vested on the grant date. 233,328 of the options will vest over two years, 87,498 of the options will vest over three years.
The compensation expense was based on the fair value on the grant date, and was estimated at approximately $4 thousand. This amount is charged to profit and loss over the vesting periods.
|
4)
|
In June 2013 the Company’s Board of Directors approved the grant of 2,355,000 options to purchase ordinary shares NIS 0.01 par value of the Company at an exercise price of $0.2478 to employees and consultants of the Company. 322,928 of these options were vested on the grant date. 1,351,660 of the options will vest over two years, 513,746 of the options will vest over three years, and 166,666 options will vest over four years. The compensation expense was based on the fair value on the grant date, and was estimated at approximately $84 thousand. This amount is charged to profit and loss over the vesting periods.
|
NOTE 12
|
-
|
SHARE-BASED PAYMENT (CONT.)
|
Element
|
June 2013
|
April-August 2012
|
||||
Share price (in $)
|
0.152 | 0.07(**) | ||||
Exercise price (in $)
|
0.25 | 0.25 | ||||
Expected volatility (in %) (*)
|
40-60 | 64-67 | ||||
Option term (in years)
|
5-10 | 5-10 | ||||
Risk free interest rate (in %)
|
0.75-2.25 | 0.75-2.25 | ||||
Anticipated rate of dividends (in %)
|
0 | 0 |
|
(*)
|
Since the shares of the Company are not marketable, the expected volatility was determined on the basis of the historic volatility of the share price of peer companies whose shares are traded on the stock exchange.
|
|
(**)
|
Based on funds raising close to the date of vesting.
|
|
C.
|
Effect of share based payment transactions on the Company's profit or loss and on the financial position
|
For the year ended December 31,
|
||||||||
2013
|
2012
|
|||||||
in USD thousands
|
||||||||
The part of the expense settled by equity instruments of the Company
|
53 | 31 |
NOTE 12
|
-
|
SHARE-BASED PAYMENT (CONT.)
|
|
D.
|
Additional details of options granted to employees
|
Number of options
|
Weighted average of exercise price
|
|||||||
USD
|
||||||||
Balance as of January 1, 2012
|
13,020,977 | 0.124 | ||||||
Granted
|
1,510,000 | 0.248 | ||||||
Exercised
|
(14,780 | ) | 0.223 | |||||
Forfeited
|
(508,453 | ) | 0.166 | |||||
Balance as of December 31, 2012
|
14,007,744 | 0.136 | ||||||
Granted
|
2,355,000 | 0.248 | ||||||
Forfeited
|
(934,485 | ) | 0.171 | |||||
Balance as of December 31, 2013
|
15,428,259 | 0.151 |
Options granted to employees and are exercisable
|
'Weighted average remaining term of the options
|
|||||||
Number of options
|
Years
|
|||||||
Balance as of December 31, 2012
|
10,652,275 | 6.686 | ||||||
Balance as of December 31, 2013
|
11,897,828 | 6.010 |
NOTE 13
|
-
|
RESEARCH AND DEVELOPMENT EXPENSES, NET
|
For the year ended December 31,
|
||||||||
2013
|
2012
|
|||||||
in USD thousands
|
||||||||
Salaries and related expenses
|
2,170 | 2,091 | ||||||
Share-based payment
|
41 | 25 | ||||||
Materials
|
307 | 329 | ||||||
Subcontractors
|
218 | 330 | ||||||
Depreciation and amortization
|
70 | 67 | ||||||
Cost for registration of patents
|
118 | 52 | ||||||
Others
|
110 | 29 | ||||||
3,034 | 2,923 | |||||||
Less participation of the OCS
|
(372 | ) | (231 | ) | ||||
Total research and development, net
|
2,662 | 2,692 |
NOTE 14
|
-
|
GENERAL AND ADMINISTRATIVE EXPENSES
|
For the year ended December 31,
|
||||||||
2013
|
2012
|
|||||||
in USD thousands
|
||||||||
Expenses for employee benefits
|
683 | 653 | ||||||
Share-based payment
|
16 | 6 | ||||||
Professional services
|
95 | 70 | ||||||
Office rent and maintenance
|
104 | 142 | ||||||
Depreciation and amortization
|
7 | 7 | ||||||
Others
|
185 | 325 | ||||||
Total general and administrative
|
1,090 | 1,203 |
NOTE 15
|
-
|
FINANCING INCOME
|
For the year ended December 31,
|
||||||||
2013
|
2012
|
|||||||
in USD thousands
|
||||||||
Interest income on short term deposits
|
59 | 183 | ||||||
Changes in provision for royalties
|
- | 233 | ||||||
Exchange rate differences
|
4 | - | ||||||
Total financing income
|
63 | 416 |
NOTE 16
|
-
|
FINANCING EXPENSES
|
For the year ended December 31,
|
||||||||
2013
|
2012
|
|||||||
in USD thousands
|
||||||||
Bank fees
|
5 | 6 | ||||||
Current changes in provision for royalties
|
256 | 85 | ||||||
Changes in fair value of financial assets and liabilities designated at fair value through profit and loss
|
55 | 116 | ||||||
Exchange rate differences
|
- | 22 | ||||||
Total financing expenses
|
316 | 229 |
NOTE 17
|
-
|
LOSS PER SHARE
|
NOTE 18
|
-
|
FINANCIAL INSTRUMENTS
|
|
A.
|
Financial instruments fair value
|
|
B.
|
Financial instruments according to category
|
December 31,
|
||||||||
2013
|
2012
|
|||||||
in USD thousands
|
||||||||
Financial assets:
|
||||||||
Cash and cash equivalents
|
4,975 | 4,583 | ||||||
Restricted deposit
|
46 | 43 | ||||||
Short-term investment
|
- | 3,450 | ||||||
Other current assets
|
130 | 164 | ||||||
5,151 | 8,240 | |||||||
Financial liabilities:
|
||||||||
Current liabilities:
|
||||||||
Trade accounts payable
|
221 | 140 | ||||||
Other current liabilities
|
141 | 140 | ||||||
Employee benefits liabilities
|
658 | 509 | ||||||
Non-current liabilities:
|
||||||||
Royalties provision
|
2,577 | 2,046 | ||||||
Other financial liabilities
|
587 | 532 | ||||||
4,184 | 3,367 |
NOTE 18
|
-
|
FINANCIAL INSTRUMENTS (CONT.)
|
|
C.
|
Purposes of financial risk management
|
|
D.
|
Market risk
|
Liabilities
|
Assets
|
|||||||||||||||
December 31,
|
December 31,
|
|||||||||||||||
2013
|
2012
|
2013
|
2012
|
|||||||||||||
in USD thousands
|
in USD thousands
|
|||||||||||||||
NIS
|
940 | 605 | 490 | 1,220 | ||||||||||||
Euro
|
171 | 156 | - | - |
NOTE 18
|
-
|
FINANCIAL INSTRUMENTS (CONT.)
|
|
D.
|
Market risk (Cont.)
|
Effect of NIS currency
|
||||||||
December 31,
|
||||||||
2013
|
2012
|
|||||||
in USD thousands
|
||||||||
Pre tax effect of increase of 10% in the $ currency vis-à-vis the NIS:
|
||||||||
Effect on profit or loss and other comprehensive income for the year
|
41 | (56 | ) | |||||
Effect on equity (deficiency)
|
41 | (56 | ) | |||||
Pre tax effect of decrease of 10% in the $ currency vis-à-vis the NIS:
|
||||||||
Effect on profit or loss and other comprehensive income for the year
|
(45 | ) | 62 | |||||
Effect on equity (deficiency)
|
(45 | ) | 62 | |||||
Pre tax effect of increase of 10% in the $ currency vis-à-vis the Euro:
|
||||||||
Effect on profit or loss and other comprehensive income for the year
|
16 | 14 | ||||||
Effect on equity (deficiency)
|
16 | 14 | ||||||
Pre tax effect of decrease of 10% in the $ currency vis-à-vis the Euro:
|
||||||||
Effect on profit or loss and other comprehensive income for the year
|
(17 | ) | (16 | ) | ||||
Effect on equity (deficiency)
|
(17 | ) | (16 | ) |
|
E.
|
Management of credit risk
|
F.
|
Liquidity risk
|
NOTE 19
|
-
|
FAIR VALUE
|
For the year ended December 31, 2013
|
||||
Level 3
|
||||
in USD thousands
|
||||
Other financial liabilities
|
587 | |||
Total
|
587 |
For the year ended December 31, 2012
|
||||
Level 3
|
||||
in USD thousands
|
||||
Other financial liabilities
|
532 | |||
Total
|
532 | |||
NOTE 20
|
-
|
TRANSACTIONS WITH INTERESTED PARTIES AND RELATED PARTIES
|
|
A.
|
Compensation to key management personnel and interested parties
|
For the year ended December 31,
|
||||||||
2013
|
2012
|
|||||||
in USD thousands
|
||||||||
Salary and related expenses to interested parties employed by the Company
|
403 | 436 | ||||||
Number of personnel to which benefit applies
|
2 | 2 | ||||||
Salary and related expenses to key management personnel
|
381 | 195 | ||||||
Number of personnel to which benefit applies
|
2 | 1 | ||||||
Share based payment to interested parties and key management personnel
|
46 | 31 | ||||||
Number of personnel to which benefit applies
|
5 | 5 |
NOTE 20
|
-
|
TRANSACTIONS WITH INTERESTED PARTIES AND RELATED PARTIES (CONT.)
|
|
B.
|
Transactions with interested and related parties
|
For the year ended December 31,
|
||||||||
2013
|
2012
|
|||||||
in USD thousands
|
||||||||
Consultation (1)
|
40 | 37 | ||||||
Key man life insurance premium (2)
|
9 | 8 | ||||||
Management fees (3)
|
- | 80 | ||||||
49 | 125 |
|
(1)
|
On July 1, 2005, the Company entered into an agreement with Hadar Kimchy according to which Hadar Kimchy provides marketing communication and graphical design services to the Company in consideration for a monthly retainer of 10,260 NIS ($3 thousand). The above services are provided to the Company by Sigalit Kimchy, who is employed by Hadar Kimchy. Sigalit Kimchy is a shareholder and is the spouse of Yoav Kimchy, the Company's chief technology officer and a director.
|
|
(2)
|
In connection with the asset transfer agreement entered into with the Predecessor Entity in May 2009, the Company assumed the former obligation of the Predecessor Entity to distribute any proceeds it collects on the $1,000,000 key man life insurance policy with respect to Yoav Kimchy, the Company's chief technology officer and a director, to the former holders of the Series A preferred units in an amount equal to their respective capital contributed to the Predecessor Entity, less any amounts previously distributed to them, plus any accrued and unpaid dividends due to them as of the date of distribution.
|
|
(3)
|
Check-Cap Ltd. (Delaware), which is the manager of the Predecessor Entity and is wholly-owned by Mr. Kimchy, the Company's chief technology officer and a director, handles from time to time certain logistical, administrative and investor relations matters for us with the Company’s U.S. suppliers and investors, in consideration of a quarterly payment of $20,000, which amount essentially covers Check-Cap Ltd. (Delaware)’s costs of performing these functions. The Company last utilized such services as of December 31, 2012.
|
|
C.
|
Liabilities to interested parties and other related parties
|
December 31,
|
||||||||
2013
|
2012
|
|||||||
in USD thousands
|
||||||||
Current liabilities-
|
||||||||
Trade accounts payable
|
34 | 22 | ||||||
Employee benefits liabilities
|
108 | 98 | ||||||
Non-current liabilities
-
|
||||||||
Reimbursement liability to Predecessor Entity's unit holders
|
788 | 699 |
Page
|
|
Financial statements
:
|
|
F - 38
|
|
F - 39
|
|
F - 40
|
|
F - 41
|
|
F - 42 - F - 43
|
June 30,
|
December 31,
|
||||||||||||
2014
|
2013
|
||||||||||||
unaudited
|
audited
|
||||||||||||
Note
|
In USD thousands
|
||||||||||||
Assets
|
|||||||||||||
Current assets
|
|||||||||||||
Cash and cash equivalents
|
2,794 | 4,975 | |||||||||||
Restricted deposit
|
46 | 46 | |||||||||||
Other current assets
|
230 | 130 | |||||||||||
Total current assets
|
3,070 | 5,151 | |||||||||||
Property and equipment, net
|
206 | 224 | |||||||||||
Total assets
|
3,276 | 5,375 | |||||||||||
Liabilities and shareholders’ equity (deficit)
|
|||||||||||||
Current liabilities
|
|||||||||||||
Trade accounts payable
|
278 | 221 | |||||||||||
Other current liabilities
|
116 | 141 | |||||||||||
Employee benefits
|
686 | 658 | |||||||||||
Total current liabilities
|
1,080 | 1,020 | |||||||||||
Non-current liabilities
|
|||||||||||||
Royalties provision
|
2,537 | 2,577 | |||||||||||
Other financial liabilities
|
657 | 587 | |||||||||||
Total non-current liabilities
|
3,194 | 3,164 | |||||||||||
Shareholders’ equity
|
1D
|
Pro Forma
as of
June 30, 2014
(unaudited)
|
|||||||||||
Preferred share capital
|
- | 226 | 226 | ||||||||||
Ordinary share capital
|
XXX
|
53 | 53 | ||||||||||
Premium on preferred shares
|
- | 21,167 | 21,167 | ||||||||||
Share options
|
XXX
|
1,793 | 1,793 | ||||||||||
Premium on ordinary shares
|
XXX
|
6 | 6 | ||||||||||
Capital reserve for ordinary share-based payment
|
471 | 471 | 431 | ||||||||||
Accumulated deficit
|
(24,714 | ) | (24,714 | ) | (22,485 | ) | |||||||
Total shareholders’ equity (deficit)
|
(998 | ) | (998 | ) | 1,191 | ||||||||
Total liabilities and shareholders’ equity (deficit)
|
- | 3,276 | 5,375 |
Six months ended
June 30,
|
Three months ended June 30,
|
|||||||||||||||
2014
|
2013
|
2014
|
2013
|
|||||||||||||
unaudited
|
||||||||||||||||
In USD thousands
|
||||||||||||||||
Research and development expenses, net
|
1,640 | 1,364 | 843 | 704 | ||||||||||||
General and administrative expenses
|
564 | 520 | 269 | 249 | ||||||||||||
Operating loss
|
2,204 | 1,884 | 1,112 | 953 | ||||||||||||
Finance income
|
(60 | ) | (45 | ) | (20 | ) | (27 | ) | ||||||||
Finance expenses
|
85 | 230 | 50 | 149 | ||||||||||||
Finance expenses, net
|
25 | 185 | 30 | 122 | ||||||||||||
Loss for the period
|
2,229 | 2,069 | 1,142 | 1,075 | ||||||||||||
Total comprehensive loss for the period
|
2,229 | 2,069 | 1,142 | 1,075 | ||||||||||||
Loss per ordinary share (in USD) basic and diluted
|
0.10 | 0.09 | 0.05 | 0.05 | ||||||||||||
Weighted average number of ordinary shares outstanding - basic and diluted
(in thousands)
|
32,542 | 32,542 | 32,542 | 32,542 | ||||||||||||
Pro forma loss per ordinary share (in USD) basic and diluted
|
X.XX
|
X.XX
|
X.XX
|
X.XX
|
||||||||||||
Pro forma weighted average number of ordinary shares outstanding - basic and diluted (in thousands)
|
XXX
|
X.XX
|
X.XX
|
X.XX
|
Preferred share capital
|
Ordinary share capital
|
Premium on preferred shares
|
Share options
|
Premium on ordinary shares
|
Capital reserve for ordinary share based payment
|
Accumulated deficit
|
Total
|
|||||||||||||||||||||||||
unaudited
|
||||||||||||||||||||||||||||||||
In USD thousands
|
||||||||||||||||||||||||||||||||
For the six months ended June 30, 2014
|
||||||||||||||||||||||||||||||||
Balance - January 1, 2014
|
226 | 53 | 21,167 | 1,793 | 6 | 431 | (22,485 | ) | 1,191 | |||||||||||||||||||||||
Ordinary share-based payment
|
- | - | - | - | - | 40 | - | 40 | ||||||||||||||||||||||||
Comprehensive loss for the year
|
- | - | - | - | - | - | (2,229 | ) | (2,229 | ) | ||||||||||||||||||||||
Total shareholders’ deficit as of June 30, 2014
|
226 | 53 | 21,167 | 1,793 | 6 | 471 | (24,714 | ) | (998 | ) | ||||||||||||||||||||||
For the six months ended June 30, 2013
|
||||||||||||||||||||||||||||||||
Balance - January 1, 2013
|
226 | 53 | 21,167 | 1,793 | 6 | 374 | (18,490 | ) | 5,129 | |||||||||||||||||||||||
Ordinary share-based payment
|
- | - | - | - | - | 10 | - | 10 | ||||||||||||||||||||||||
Comprehensive loss for the year
|
- | - | - | - | - | - | (2,069 | ) | (2,069 | ) | ||||||||||||||||||||||
Total shareholders’ equity as of June 30, 2013
|
226 | 53 | 21,167 | 1,793 | 6 | 384 | (20,559 | ) | 3,070 |
Six months ended
June 30,
|
||||||||
2014
|
2013
|
|||||||
unaudited
|
||||||||
in USD thousands
|
||||||||
CASH FLOWS FROM OPERATING ACTIVITIES
|
||||||||
Loss for the period
|
(2,229 | ) | (2,069 | ) | ||||
Net gain arising on financial assets and liabilities designated as at fair value through profit or loss
|
70 | 123 | ||||||
Depreciation and amortization
|
40 | 39 | ||||||
Ordinary share-based compensation
|
40 | 10 | ||||||
Changes in assets and liabilities items:
|
||||||||
Increase in other current assets
|
(100 | ) | (4 | ) | ||||
Increase in trade accounts payable and other current liabilities
|
32 | 67 | ||||||
Increase (decrease) in employees benefits
|
28 | (108 | ) | |||||
Increase (decrease) in royalties provision
|
(40 | ) | 99 | |||||
Net cash used in operating activities
|
(2,159 | ) | (1,843 | ) | ||||
CASH FLOWS FROM INVESTING ACTIVITIES
|
||||||||
Purchase of property and equipment
|
(22 | ) | (27 | ) | ||||
Increase in restricted deposit
|
- | (3 | ) | |||||
Decrease in short-term investment
|
- | 3,450 | ||||||
Net cash generated from (used in) investing activities
|
(22 | ) | 3,420 | |||||
Net increase (decrease) in cash and cash equivalents
|
(2,181 | ) | 1,577 | |||||
Cash and cash equivalents at the beginning of the period
|
4,975 | 4,583 | ||||||
Cash and cash equivalents at the end of the period
|
2,794 | 6,160 |
NOTE 1
|
-
|
GENERAL INFORMATION
|
|
A.
|
General
|
|
B.
|
Financial Position
|
|
C.
|
Agreement for transfer of assets
|
|
D.
|
Pro Forma Information (unaudited)
|
NOTE 2
|
-
|
SIGNIFICANT ACCOUNTING POLICIES
|
NOTE 3
|
-
|
UNAUDITED INTERIM CONSOLIDATED FINANCIAL STATEMENTS
|
NOTE 4
|
-
|
SUBSEQUENT EVENTS
|
Chardan Capital Markets, LLC
|
Maxim Group LLC
|
|
·
|
a 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; and
|
|
·
|
expenses, including reasonable litigation expenses and legal fees, incurred by an office holder in relation to an administrative proceeding instituted against such office holder, or certain compensation payments made to an injured party imposed on an office holder by an administrative proceeding, pursuant to certain provisions of the Israeli Securities Law.
|
|
·
|
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; and
|
|
·
|
expenses, including reasonable litigation expenses and legal fees, incurred by an office holder in relation to an administrative proceeding instituted against such office holder or certain compensation payments to an injured party imposed on an office holder by an administrative proceeding, pursuant to certain provisions of the Securities Law.
|
|
·
|
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 prejudice 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, monetary sanction or forfeit levied against the office holder.
|
|
·
|
Since January 1, 2011, we granted options to purchase an aggregate of 4,982,702 ordinary shares to certain of our employees, officers and consultants under our 2006 Unit Option Plan, of which (i) options to purchase 1,117,702 ordinary shares having an exercise price of $0.22270 were granted in June 2011; (ii) options to purchase 1,160,000 ordinary shares having an exercise price of $0.24780 were granted in April 2012; (iii) options to purchase 350,000 ordinary shares having an exercise price of $0.24780 were granted in August 2012; (iv) options to purchase 2,355,000 ordinary shares having an exercise price of $0.24780 were granted in June 2013; and (v) options to purchase 11,630,739 ordinary shares having an exercise price of NIS 0.01 were granted on August 20, 2014. Of such options, options to purchase an aggregate of 1,606,562 ordinary shares have been forfeited and cancelled without being exercised as of the date of this prospectus. We claimed exemption from registration under the Securities Act for such transactions under Section 4(a)(2) and/or Regulation S of the Securities Act.
|
|
·
|
In October 2012, we issued and sold 14,780 ordinary shares pursuant to the exercise of options held by an employee, having an exercise price per share of $0.22270. We claimed exemption from registration under the Securities Act for this transaction under Section 4(a)(2) and/or Regulation S of the Securities Act.
|
|
·
|
Pursuant to a Share Purchase Agreement dated March 4, 2011 between us and the investors identified therein, we issued an aggregate 24,545,195 of our Series D-1 preferred shares and warrants for the purchase of 16,199,826 of our Series D-2 preferred shares, for aggregate consideration of $9.3 million. In addition, as partial consideration for brokerage services in connection with such financing, we issued warrants to purchase 503,872 Series D-1 preferred shares and warrants to purchase 411,320 Series D-2 preferred shares. We claimed exemption from registration under the Securities Act for this transaction under Section 4(a)(2) and/or Regulation S of the Securities Act.
|
|
·
|
Pursuant to a Share Purchase Agreement dated January 10, 2012 between us and the investors identified therein, we issued a total of 2,510,783 Series D-3 preferred shares, for aggregate consideration of $1.1 million. We claimed exemption from registration under the Securities Act for this transaction under Section 4(a)(2) and/or Regulation S of the Securities Act.
|
|
·
|
Pursuant to a Credit Line Agreement dated August 20, 2014 between us and the lenders identified therein, we issued warrants for the purchase of an aggregate 53,169,092 ordinary shares. We claimed exemption from registration under the Securities Act for this transaction under Section 4(a)(2) and/or Regulation S of the Securities Act.
|
|
·
|
On October 14, 2014, we issued a warrant for the purchase of 4,430,758 ordinary shares to an existing shareholder as consideration for certain services it may provide at our request.
We claimed exemption from registration under the Securities Act for this transaction under Section 4(a)(2) and/or Regulation S of the Securities Act.
|
Check-Cap Ltd.
|
|||
By:
|
/s/ Guy Neev
|
||
Name:
|
Guy Neev
|
||
Title:
|
Chief Executive Officer
|
Dated: December 23, 2014
|
By:
|
/s/ Guy Neev | |
Name:
|
Guy Neev
|
||
Title:
|
Chief Executive Officer and Director
(Principal Executive Officer)
|
||
Dated: December 23, 2014
|
By:
|
/s/ Lior Torem | |
Name:
|
Lior Torem
|
||
Title:
|
Chief Financial Officer (Principal Financial Officer
and Principal Accounting Officer)
|
||
Dated: December 23, 2014
|
By:
|
/s/ Tomer Kariv | |
Name:
|
Tomer Kariv
|
||
Title:
|
Chairman of the Board of Directors
|
||
Dated: December 23, 2014
|
By:
|
/s/ Walter L. Robb | |
Name:
|
Walter L. Robb
|
||
Title:
|
Director
|
||
Dated: December 23, 2014
|
By:
|
/s/ Yoav Kimchy | |
Title:
|
Yoav Kimchy
|
||
Title:
|
Director
|
||
Dated: December 23, 2014
|
By:
|
/s/ Alon Dumanis | |
Name:
|
Alon Dumanis
|
||
Title:
|
Director
|
||
Dated: December 23, 2014
|
By:
|
/s/ Richard Stone | |
Name:
|
Richard Stone
|
||
Title:
|
Director
|
Authorized U.S. Representative
|
||
/s/ Donald J. Puglisi
|
||
Managing Director
Puglisi & Associates
|
Exhibit
No.
|
Description
|
|
1.1**
|
Form of Underwriting Agreement
|
|
3.1*
|
Sixth Amended and Restated Articles of Association of the Registrant
|
|
3.2**
|
Form of Amended and Restated Articles of Association of the Registrant to be effective prior to completion of this offering
|
|
4.1**
|
Form of Registrant’s Ordinary Share Certificate
|
|
4.2**
|
Form of Underwriter Warrants
|
|
5.1**
|
Form of opinion of Fischer Behar Chen Well Orion & Co.
|
|
10.1*
|
2006 Unit Option Plan, and Amendments thereto
|
|
10.2*
|
Amended and Restated Shareholders Agreement dated as of October 14, 2014 by and among Check-Cap Ltd. and the shareholders parties thereto
|
|
10.3**
|
Amendment to Amended and Restated Shareholders Agreement to be dated as of , 2015 by and among Check-Cap Ltd. and the shareholders parties thereto
|
|
10.4*
|
Form of Series C-1 preferred shares purchase warrant
|
|
10.5*
|
Forms of Series C-2 preferred shares purchase warrant
|
|
10.6*
|
Form of Series D-1 preferred shares purchase warrant
|
|
10.7*
|
Form of Series D-2 preferred shares purchase warrant
|
|
10.8*
|
Share Purchase Agreement dated as of March 4, 2011 by and among Check-Cap Ltd. and the investors parties thereto
|
|
10.9*
|
Forms of Anti-Dilution Warrants
|
|
10.10*
|
Asset Transfer Agreement, dated as of May 31, 2009 by and between Check-Cap Ltd. and Check-Cap LLC.
|
|
10.11*
|
The Agreement for ASIC Design and Development dated November 26, 2009 by and between Check-Cap Ltd. and Politechnico di Milano
|
|
10.12*
|
Form of Indemnification Agreement
|
|
10.13*
|
Credit Line Agreement, dated as of August 20, 2014 by and among Check-Cap Ltd. and certain Lenders named therein
|
|
10.14*
|
Form of Ordinary Shares Warrant Certificate issued pursuant to a certain Credit Line Agreement dated as of August 20, 2014
|
|
10.15*
|
Forms of Ordinary Shares Warrant Certificate issued to the Pontifax entities
|
|
10.16*
|
Addendum to Credit Line Agreement dated as of October 14, 2014 by and among Check-Cap Ltd. and certain Lenders named therein
|
|
10.17*
|
Second Addendum to Credit Line Agreement dated as of December 22, 2014 by and among Check-Cap Ltd. and certain Lenders named therein
|
|
23.1*
|
Consent of Brightman Almagor Zohar & Co
|
|
23.2**
|
Consent of Fischer Behar Chen Well Orion & Co. (included in Exhibit 5.1)
|
|
24*
|
Power of Attorney (included on the signature page of this registration statement)
|
"
Company
"
-
|
means Check-Cap Ltd.;
|
"
Companies
Law
"
-
|
means the Israel Companies Law, 5759-1999, as the same shall be amended from time to time;
|
"
Director"
-
|
means a member of the Board of Directors of the Company;
|
"
Deemed Preferred D1 Purchase Price
" -
|
means $0.37708 per each Preferred D1 Share
;
|
"
Deemed Preferred D2 Purchase Price
" -
|
means the price per share actually paid for each Preferred D2 Share upon the exercise of those certain Warrants issued to the Investors (as such term is defined in that certain Share Purchase Agreement between the Company and the Investors dated March 4, 2011) and any other person under substantially the same terms and conditions as the aforesaid warrants;
|
"
Deemed Preferred D3 Purchase Price
" -
|
means $0.42 per each Preferred D3 Share;
|
"
Deemed Preferred D4 Purchase Price
" -
|
means the price per share actually paid for each Preferred D4 Share upon the exercise of those certain Warrants issued to GE Capital Equity Holdings Inc. (as such term is defined in that certain Development and Supply Agreement by and between the Company and GE Capital Equity Holdings Inc. dated January 10, 2012) and any other person under substantially the same terms and conditions as the aforesaid warrants;
|
"
Dispose
," "
Disposing
" or "
Disposition
" -
|
means with respect to any asset (including shares or any portion thereof or interest therein), a sale, assignment, transfer, conveyance, gift, exchange or other disposition of such asset, whether such disposition be voluntary, involuntary or by operation of applicable law, including (but not limited to) the following: (a) in the case of an asset owned by a natural person, a transfer of such asset upon the death of its owner, whether by will, intestate succession or otherwise; (b) in the case of an asset owned by an entity, (i) a merger or consolidation of such entity (other than the case in which such entity is the survivor thereof), (ii) a conversion of such entity into another type of entity, or (iii) a distribution of such asset, including in connection with the dissolution, liquidation, winding-up or termination of such entity (unless, in the case of dissolution, such entity’s business is continued without the commencement of liquidation or winding-up); and (c) a disposition in connection with, or in lieu of, a foreclosure of an encumbrance; but such terms shall not include the creation of an encumbrance;
|
"
Docor
" -
|
means Docor International B.V.;
|
"
Effective Date
"
-
|
means February 9, 2005;
|
"
Emigrant
"
-
|
means Emigrant Alternative Portfolios LLC, a Delaware limited liability company;
|
"
Entitled Holder
"
-
|
as defined in Article 11(b);
|
"
ESOP
" -
|
has the meaning given such term in Article 11(b)(i) hereof;
|
"
Fiscal Year
" -
|
means the Company's taxable year ending December 31
|
"
Founder
" -
|
means Mr. Yoav Kimchy;
|
"
GE Shareholders
" -
|
GE Medical Systems Israel Ltd., GE Capital Equity Holdings Inc., and any Affiliate to which they transfer any of their Shares;
|
"
Immediate Family Shareholder
" -
|
means with respect to any Shareholder who is a natural person, such Shareholder’s parents (including step-parents), siblings (including step-siblings), spouse and children (including step-children);
|
"
Liquidation Event
" -
|
means, the Company's merger into a public company in which the merger consideration is shares which are publicly traded on a stock exchange;
|
"
Major Decisions
" -
|
shall have the meaning ascribed to such term in Article 73 below.
|
"
Office
holder
” -
|
means every Director and every officer of the Company, including without limitation, each of the persons defined as “
Nosei Misra
” in the Companies Law;
|
" Ordinary Majority " - | More than fifty percent (50%) of the voting power represented by the shares held by all of the Shareholders present at a General Meeting, who are entitled to vote and who voted at such meeting in person or by means of a proxy (excluding abstentions); |
"
Ordinary
Shares
" -
|
means the Company’s Ordinary Shares, nominal value NIS 0.01 each;
|
"
Permitted Transferee
" -
|
with respect to a Shareholder means such Shareholder, such Shareholder's spouse or a descendant of such Shareholder, or a trust for the benefit of any of the foregoing,
(i) an Affiliate of a Shareholder, (ii) another Shareholder, (iii) the Company, (iv) the partners or Shareholders of a Shareholder that is a partnership or limited liability company, respectively, or (v) a transferee approved by the Board of Directors. Notwithstanding the foregoing, no competitor of the Company or Affiliate of a competitor can be a Permitted Transferee;
|
"
Person
" -
|
means an individual, corporation, partnership, joint venture, trust, and any other body corporate or unincorporated organization;
|
"
Preferred A Shares
" -
|
means the Company's Series A Convertible Preferred Shares, nominal value NIS 0.01 each;
|
"
Preferred B Shares
" -
|
means the Company's Series B Convertible Preferred Shares, nominal value NIS 0.01 each;
|
"
Preferred C Shares
" -
|
means the Company's Preferred C1 Shares, Preferred C2 Shares and Preferred C3 Shares together;
|
"
Preferred C1 Shares
" -
|
means the Company's Series C1 Convertible Preferred Shares, nominal value NIS 0.01 each;
|
"
Preferred C2 Shares
" -
|
means the Company's Series C2 Convertible Preferred Shares, nominal value NIS 0.01 each;
|
"
Preferred C3 Shares
" -
|
means the Company's Series C3 Convertible Preferred Shares, nominal value NIS 0.01 each;
|
"
Preferred D Shares
" -
|
means the Company's Preferred D1 Shares, the Preferred D2 Shares the Preferred D3 Shares and the Preferred D4 Shares, together;
|
"
Preferred D1 Shares
" -
|
means the Company's Preferred D1 Shares, nominal value NIS 0.01 each;
|
"
Preferred D2 Shares
" –
|
means the Company's Preferred D2 Shares, nominal value NIS 0.01 each;
|
"
Preferred D3 Shares
" –
|
means the Company's Preferred D3 Shares, nominal value NIS 0.01 each;
|
"
Preferred D4 Shares
" –
|
means the Company's Preferred D4 Shares, nominal value NIS 0.01 each;
|
"
Preferred Shares
" -
|
means the Preferred A Shares, the Preferred B Shares, the Preferred C Shares and the Preferred D Shares;
|
"
Preferred A Shares Conversion Price
" -
|
has the meaning given such term in Article 5.3 (a) hereof;
|
"
Preferred A Shares Preferred Amount
" -
|
means, at any date, an amount sufficient to give each Preferred A Shareholder an 8% annual compounded return on the amount of (a) its Deemed Preferred A Purchase Price from the date of the purchase through such date less (b) the aggregate distributions made by the Company with respect to such Preferred A Shares as of the respective dates of such distributions and less (c) any payments made to such shareholders by the Company in connection with the Reorganization. Preferred A Shares Preferred Amount will continue to accrue after any payment of all or portion of each Preferred A Shares Preferred Amount taking into account the amount of such payment until the Preferred A Shareholder has received aggregate distributions equal to the Deemed Preferred A Purchase Price;
|
"
Preferred B Shares Conversion Price
" -
|
has the meaning given such term in Article 5.4 (a) hereof;
|
"
Preferred B Shares Preferred
Amount
" -
|
means, at any date, an amount sufficient to give each Preferred B Shareholder an 8% annual compounded return on the amount of (a) its Deemed Preferred B Purchase Price from the date of the purchase through such date less (b) the aggregate distributions made by the Company with respect to such Preferred B Shares as of the respective dates of such distributions and less (c) any payments made to such shareholders by the Company in connection with the Reorganization. Preferred B Shares Preferred Amount will continue to accrue after any payment of all or portion of each Preferred B Shares Preferred Amount taking into account the amount of such payment until the Preferred B Shareholder has received aggregate distributions equal to the Deemed Preferred B Purchase Price;
|
"
Preferred C Shares Conversion Price
" -
|
has the meaning given such term in Article 5.5(a) hereof;
|
"
Preferred C Shares Preferred Amount
" -
|
means, at any date, an amount sufficient to give each Preferred C Shareholder an 8% annual compounded return on the amount of (a) its Deemed Preferred C Purchase Price from the date of the purchase through such date less (b) the aggregate distributions made by the Company with respect to such Preferred C Shares as of the respective dates of such distributions. Preferred C Shares Preferred Amount will continue to accrue after any payment of all or portion of each Preferred C Shares Preferred Amount taking into account the amount of such payment until the Preferred C Shareholder has received aggregate distributions equal to the Deemed Preferred C Purchase Price;
|
"
Preferred D Shares Conversion Price
" -
|
has the meaning given such term in Article 5.5A(a) hereof;
|
"
Preferred D Shares Preferred Amount
" -
|
means, at any date, an amount sufficient to give each Preferred D Shareholder an 8% annual compounded return on the amount of (a) its Deemed Preferred D Purchase Price from the date of the purchase through such date less (b) the aggregate distributions made by the Company with respect to such Preferred D Shares as of the respective dates of such distributions. Preferred D Shares Preferred Amount will continue to accrue after any payment of all or portion of each Preferred D Shares Preferred Amount taking into account the amount of such payment until the Preferred D Shareholder has received aggregate distributions equal to the Deemed Preferred D Purchase Price;
|
"
Pontifax
" -
|
means Pontifax (Cayman) II L.P., Pontifax (Israel) II L.P., and Pontifax (Israel) II - Individual Investors L.P.;
|
"
Pontifax Director
" -
|
means the Director appointed by Pontifax;
|
"
Price Per Share
" -
|
means, with respect to a share, the price actually paid for such share upon the issuance thereof;
|
"
Proposed Issuance
" -
|
means any proposal by the Company to issue shares other than equity or options or other rights to acquire equity pursuant to the ESOP;
|
"
Qualifying IPO
" -
|
means
an initial public offering by the Company or a corporate successor of its equity interests in which at least $50 million is raised at a pre money Company valuation of at least $200 million
;
|
"
Requisite
Majority
"
-
|
means
the
holders of
more than fifty percent (50%) of the voting power represented by the Preferred Shares held by all of the Preferred Shareholders (treated as a single class) present at a General Meeting, who are entitled to vote and who voted at such meeting in person or by means of a proxy (excluding abstentions);
|
"
Register of Shareholders
" -
|
means the register of shareholders that must be maintained pursuant to Section 127 of the Companies Law;
|
"
Reorganization
"
|
means the reorganization and the transfer of certain assets or licensing of certain Company assets from Check-Cap LLC;
|
" Securities Law " - | means the Securities Law, 5728-1968, as amended from time to time; |
"
Shareholder
" –
|
means any person or entity registered in the Register of Shareholders as the owner of shares of the Company;
|
"
Spearhead
"
|
means Spearhead Investments (Bio) Ltd.;
|
"
Year”
and
"
Month
" -
|
a Gregorian month or year;
|
|
2.2
|
The objects of the Company shall be to engage in any lawful activity.
|
|
(i)
|
If the Response Notices, in the aggregate, are in respect of all of, or more than, the Offered Shares, then the Offerees who sent such Response Notices shall acquire the Offered Shares, on the terms aforementioned, at a closing that shall take place (i) within seven (7) days following the expiration of the Response Period (or any such other date as shall be agreed upon between the parties); or (ii) upon the closing of the Third Party transaction, as applicable.
|
|
(ii)
|
in the event that the Offerees have not realized their first refusal rights hereunder in their entirety, then, subject to provisions herein, the Selling Shareholder shall be entitled to transfer such Offered Shares not purchased pursuant to this Article 20 to the Third Party, within forty-five (45) days thereafter,
except
that the Offered Shares may not be sold at a price and under conditions more favourable to the transferee than the price and conditions under which they were offered to the Offerees.
|
|
(vii)
|
Docor shall be entitled to appoint one (1) Director; and
|
|
(viii)
|
The majority of the Directors shall be entitled to appoint one (1) Director.
|
|
The Company may, from time to time and subject to any provision of law, enter into an agreement to insure an Office Holder against any liability, in whole or in part, that may be imposed upon such Office Holder as a result of an action or omission carried out in his capacity as an Office Holder in each of the following cases:
|
|
(i)
|
breach of duty of care towards the Company or towards another person;
|
|
(ii)
|
breach of fiduciary duty towards the Company, provided that the Office Holder acted in good faith and had reasonable grounds to assume that the action would not harm the interests of the Company;
|
|
(iii)
|
a monetary liability imposed on him in favor of another person.
|
|
(iv)
|
expenses, including reasonable litigation expenses and legal fees, incurred by the Office Holder as a result of an Administrative Proceeding instituted against the officer.
|
|
(v)
|
payments to an injured party imposed on the Office Holder pursuant to Section 52ND(a)(1)(a) of the Securities Law.
|
|
(a)
|
The Company may, from time to time and subject to any provision of law, indemnify an Office Holder, to the fully extent permitted by the Companies Law, in respect of a liability or expense set out below which is imposed on him or incurred by him in his capacity as an Office Holder of the Company:
|
|
|
(i)
|
monetary liability imposed on him in favor of another person, or expended by him as a result of, a court judgment, including a settlement or a decision of an arbitrator which is given the force of a judgment by court order;
|
|
(ii)
|
reasonable litigation expenses, including legal fees, incurred by the Office Holder (i) as a result of an investigation or proceeding instituted against such Office Holder by a competent authority, where such investigation or proceeding has concluded without the filing of an indictment against the Office holder and without any financial obligation imposed on the Office holder in lieu of a criminal proceeding, or that is concluded without indictment of the Office holder but with the imposition of a financial obligation on the Office holder in lieu of a criminal proceeding, with respect to a crime that does not require proof of criminal intent (without derogating from Article 1.2(a) above, the phrases "proceeding that has concluded without the filing of an indictment" and "financial obligation in lieu of a criminal proceeding" shall have the meanings ascribed to such phrases in Section 260(a)(1a) of the Companies Law); or (ii) in connection with a monetary sanction ("
Itzum Caspi
"); and
|
|
(iii)
|
reasonable litigation expenses, including legal fees, which the Office Holder has incurred or is obliged to pay by the court in proceedings commenced against him by the Company or in its name or by any other person, or pursuant to a criminal proceeding in which he is acquitted or in any criminal proceeding of a crime which does not require proof of criminal intent in which he is convicted.
|
|
(iv)
|
expenses, including reasonable litigation expenses and legal fees, incurred by an officer as a result of an Administrative Proceeding instituted against the Office Holder.
|
|
(v)
|
payments to an injured party imposed on the Office Holder pursuant to Section 52ND(a)(1)(a) of the Securities Law.
|
|
(b)
|
The Company may, from time to time and subject to any provision of law:
|
|
(a)
|
undertake in advance to indemnify an Office Holder of the Company for any of the following:
|
|
(i)
|
any liability as set out in Article 70(a)(i) above, provided that the undertaking to indemnify is limited to the events which in the opinion of the Board of Directors can be anticipated in light of the Company’s activities at the time of giving the indemnification undertaking, and for an amount and/or criteria which the Board of Directors has determined are reasonable in the circumstances and, the events and the amounts or criteria that the Board of Directors deem reasonable in the circumstances at the time of giving of the undertaking are stated in the undertaking; or
|
|
(ii)
|
any liability stated in Article 70(ii) or (iii) above;
|
|
(b)
|
indemnify an Officer Holder after the occurrence of the event which is the subject of the indemnity.
|
|
Subject to the provisions of applicable law, the Company may release an Office Holder in advance from liability, in whole or in part, for damage suffered as a result of breach of duty of care of the Office Holder towards the Company, other than for a breach of care in connection with a Distribution.
|
|
71A.
|
Articles 69-71 above are not intended and shall not in any way limit the Company’s ability to enter into any contract of insurance or to grant a release from liability or an indemnity:
|
|
(i)
|
in connection with a person who is not an Office Holder, including employees, contractors or consultants of the Company who are not Officer Holders;
|
|
(ii)
|
in connection with Officer Holders - to the extent that the insurance, release or indemnity is not prohibited by law.
|
|
71B.
|
The provisions of Article 69-71 above shall apply to a corporate representative of a Director and an Alternate Director.
|
|
(iv)
|
Creates (by reclassification or otherwise) any new class or series of shares, or issues any new class or series of shares (other than pursuant to the ESOP);
|
|
(v)
|
Results in the redemption or repurchase of any shares (other than pursuant to the ESOP);
|
|
(vii)
|
Results in a merger with or the acquisition of all or substantially all of the assets or stock of any entity not wholly owned by the Company;
|
|
(viii)
|
Establishes any mortgage, pledge, or lien against any material asset of the Company;
|
|
(xi)
|
Results in the acquisition by the Company of any other business or material asset;
|
|
(xii)
|
Results in any proprietary information being licensed from a third party and for which the total cost is in excess of US$150,000 per year;
|
|
(xiii)
|
Results in a material change in the business or strategic direction of the Company; or
|
|
(xiv)
|
Results in any amendment to the Company’s ESOP or any other similar incentive arrangement.
|
1
|
||
1
|
||
5
|
||
8
|
||
9
|
||
9
|
||
9
|
||
10
|
||
10
|
||
11
|
||
12
|
||
13
|
||
14
|
||
15
|
||
15
|
||
16
|
||
16
|
||
17
|
||
18
|
||
18
|
||
19
|
||
19
|
||
19
|
||
20
|
||
20
|
||
20
|
||
20
|
1.
|
|
(a)
|
motivating superior performance by means of performance-related incentives;
|
|
(b)
|
encouraging and providing for the acquisition of an ownership interest in the Company by Eligible Persons; and
|
|
(c)
|
enabling the Company to attract and retain the services of outstanding management team and other qualified and dedicated employees upon whose judgment, interest and special effort the successful conduct of its operations is largely dependent.
|
2.
|
|
(a)
|
"
Administrator
" -
means the Board or the Committee as shall be administering the Plan, in accordance with Section 3 hereof.
|
|
(b)
|
"Affiliate"
- means an entity, which is a Parent or Subsidiary of the Company, direct or indirect.
|
|
(c)
|
"
Applicable Laws
" -
means the requirements relating to the taxation or administration of employee option plans or grants or exercises of options under the law of the State of Israel with respect to option grants made hereunder to persons subject to taxation by the State of Israel and the laws of the United States, the State of Illinois with respect to option grants made hereunder to persons not subject to taxation by the laws of the State of Israel, any stock exchange or quotation system on which equity interests in the Company are listed or quoted.
|
|
(d)
|
"
Approved 102 Option
"
- means an Option granted pursuant to Section 102(b) of the Tax Ordinance and held in trust by the Trustee for the benefit of the Optionee.
|
|
(e)
|
"
Board
" -
means the Board of Directors of the Manager of the Company which functions as the board of the Company.
|
|
(f)
|
"Cause"
- means, (i) conviction of any felony involving moral turpitude or affecting the Company; (ii) any failure (as a result of gross negligence or willful misconduct) to carry out, as an employee of or service provider to the Company or its Affiliates, a reasonable directive of the chief executive officer, the Board or the Optionee’s direct supervisor, which involves the business of the Company or its Affiliates and which was capable of being lawfully performed by Optionee; (iii) embezzlement or theft of funds of the Company or its Affiliates; (iv) any breach of the Optionee’s fiduciary duties or duties of care of the Company; including, without limitation, self-dealing, prohibited disclosure of confidential information of, or relating to, the Company, or engagement in any business competitive to the business of the Company or of its Affiliates; and (v) any conduct (other than conduct in good faith) reasonably determined by the Administrator to be materially detrimental to the Company.
|
|
(g)
|
"
Code
" - means the United States Internal Revenue Code of 1986, as amended from time to time.
|
|
(h)
|
“Committee”
- shall mean a committee of the Board, designated by the Board to administer the Plan.
|
|
(i)
|
“Company”
– shall mean Check-Cap, LLC, a Delaware limited Liability Company, and any successor thereto.
|
|
(j)
|
“Common Units” or “Units”
– shall mean the common units of the Company, as may be adjusted pursuant to the Operating Agreement.
|
|
(k)
|
“
Consultant
” –
means any person who is engaged by the Company to render consulting or advisory services to any of the Company entities; provided, however, that a consultant must be an individual who is providing or will be providing bona fide services to the Company, with such services (1) not being in connection with the offer or sale of securities in a capital-raising transaction, and (2) not directly or indirectly promoting or maintaining a market for securities of the Company.
|
|
(l)
|
“
Date of Grant
”-
shall have the meaning set forth in Section 21 below.
|
|
(m)
|
“
Director
” –
means a member of the Board.
|
|
(n)
|
“Disability”
– means an Optionee’s inability to perform his or her duties with the Company, or any of its affiliates, for a consecutive period of at least 180 days, by reason of any medically determinable physical or mental impairment, as determined by a physician selected by the Optionee and acceptable to the Company.
|
|
(o)
|
“Effective Date”
– shall mean the date on which the Plan is approved by the Board.
|
|
(p)
|
"
Eligible Person
" –
shall mean an Employee, a Consultant or a Service Provider.
|
|
(q)
|
“Employee”
- shall mean any person, including an officer or Director of the Company or any Affiliate who is employed by the Company or its Affiliate.
|
|
(r)
|
“Employment”
– shall mean for purposes of Section 10 continuous and regular salaried employment with the Company or a Subsidiary, which shall include (unless the Administrator shall otherwise determine) any period of paid vacation, or any approved leave of absence.
|
|
(s)
|
“Exchange Act”
– shall mean the Securities Exchange Act of 1934, as now in effect or as hereafter amended, or under any similar law of any other jurisdiction.
|
|
(t)
|
“Exercise Price”
– shall mean the price for each Unit subject to an Option.
|
|
(u)
|
“Fair Market Value”
– means, as of any date, the value of a Unit determined as follows:
|
|
(v)
|
“
IPO
”
–
means the initial public offering of the Company’s Units or interests into which the Units are convertible or for which the Units are exchangeable pursuant to a registration statement filed with and declared effective under the Israeli Securities Law, 1968, or under the United States Securities Act of 1933, as amended, or under any similar law of any other jurisdiction.
|
|
(w)
|
"
Operating Agreement
"
shall mean the amended and restated Operating Agreement of the Company, dated August 17, 2005, as it may be amended from time to time in accordance with its terms.
|
|
(x)
|
“
Option
” –
shall mean the right to purchase the number of Units specified by the Administrator, at a price and for the term fixed by the Administrator in accordance with the Plan and subject to any other limitations and restrictions as this Plan and the Administrator shall impose.
|
|
(y)
|
“
Option Agreement
”
– means a written or electronic agreement between the Company and an Optionee evidencing the terms and conditions of an individual Option grant. The Option Agreement shall state, inter alia, the number of Units covered thereby, the dates when it may be exercised (subject to section 8), the Exercise Price and such other terms as the Administrator in its discretion may prescribe. The Option Agreement is subject to the terms and conditions of the Plan.
|
|
(z)
|
"
Optionee
"
means an Eligible Person who receives or holds an Option under the Plan.
|
|
(aa)
|
"3(i) Options"
-
means Options granted to Optionees resident in the State of Israel that do not contain such terms as will qualify them under Section 102 of the Tax Ordinance.
|
|
(bb)
|
"102 Option"
– means an Option that the Board intends to be a "102 Option" which shall only be granted to employees resident in the State of Israel who are not Ten Percent Members, and shall be subject to and construed consistently with the requirements of Section 102 of the Tax Ordinance. The Company shall have no liability to an Optionee, or to any other party, if an Option (or any part thereof), which is intended to be a 102 Option, is not a 102 Option. Approved 102 Options may either be classified as Capital Gain Options ("CGO") or Ordinary Income Options ("OIO").
|
|
(cc)
|
"
Parent
" -
means any entity (other than the Company) in an unbroken chain of entities ending with the Company if, at the time of granting an Option, each of the entities (other than the Company), owns equity interests representing fifty percent (50%) or more of total combined voting power of all classes of equity in one of the other entities in such chain.
|
|
(dd)
|
"
Securities Law
"
means the Israeli Securities Law of 1968 as amended, the United States Securities Act of 1933, as amended, or any similar law of any other jurisdiction that is applicable.
|
|
(ee)
|
"
Service Provider
" -
means an Employee, Director, supplier, Office Holders ([“
Nose Misra”
] - as such term is defined in the Companies Act, 1999, including,
inter alia
, any other person who is part of the upper management of the Company and who grants managerial services to the Company or an officer) of the Company.
|
|
(ff)
|
"
Subsidiary
" -
shall mean any entity of which the Company owns directly or indirectly fifty percent (50%) or more of the total combined voting power of all classes of equity of such entity.
|
|
(gg)
|
"
Successor Company
"
means any entity into or with which the Company is merged or by which the Company is acquired, pursuant to a Transaction in which the Company is not the surviving entity.
|
|
(hh)
|
"
Tax Ordinance
" -
means the Israeli Income Tax Ordinance [New Version]-1961 and the rules and regulations promulgated thereunder as now in effect or as hereafter amended.
|
|
(ii)
|
"
Ten Percent Member
" -
mean
s
a person who owns interests possessing more than ten percent (10%) of the total combined voting power of all classes of equity of the Company or of any of its Affiliates immediately before such Option is granted, and in accordance with Section 32(a) of the Tax Ordinance.
|
|
(jj)
|
"
Transaction"
-
means (i) merger, acquisition or reorganization of the Company with one or more other entities in which the Company is not the surviving entity or (ii) a sale of all or substantially all of the assets or equity interests the Company.
|
|
(kk)
|
"
Trustee
" -
means any individual appointed by the Company to serve as a trustee and approved in accordance with the laws of the State of Israel that may be replaced at the discretion of the Administrator.
|
|
(ll)
|
"
Trust Agreement
" –
means Addendum B to the Israeli Income Tax rules (Tax Relief for Allocation of Units to Employees 2003), as now in effect or as hereafter amended.
|
|
(mm)
|
"Vesting Dates"
- means, with respect to any Option, the date as of which the Optionee shall be entitled to exercise such Option, as set forth in Section 8 of the Plan.
|
|
(nn)
|
"
Unapproved 102 Option
"
- means an Option granted pursuant to Section 102(c) of the Tax Ordinance and not held in trust by a Trustee.
|
|
(a)
|
The Plan shall be administered by the Administrator. The Administrator shall have the authority in its sole discretion, subject and not inconsistent with the express provisions of the Plan, to administer the Plan and to exercise all the powers and authorities specifically granted to it under the Plan as necessary and advisable in the administration of the Plan.
|
|
(b)
|
Provided that the Board is entitled by law and pursuant to the Operating Agreement to delegate all and any of its powers and authority granted to it under the plan to a Committee, the Board may do so in a manner consistent therewith and the Committee shall be the Administrator.
|
|
(c)
|
The Administrator shall have the responsibility of construing and interpreting the Plan and of establishing and amending such rules and regulations, as it deems necessary or desirable for the proper administration of the Plan. The Administrator shall keep records of its meetings and shall make such rules and regulations for the conduct of its business, as it shall deem advisable.
|
|
(e)
|
Subject to the provisions of the Plan, the Applicable Laws and, the Operating Agreement, and subject to the approval of any relevant authorities, the Administrator shall have the authority, in its discretion:
|
|
i.
|
to construe and interpret the terms of the Plan and any Options granted pursuant to the Plan;
|
|
ii.
|
(i)
|
to designate the Eligible Persons to whom Options may from time to time be granted hereunder;
|
|
iii.
|
(ii)
|
determine, on the date of grant, the terms and provisions of the respective Option Agreements (which need not be identical), including, but not limited to, the number of Options to be granted to each Optionee, the number of Units to be covered by each Option, provisions concerning the time and extent to which the Options may be exercised (but not beyond the Option expiration date), and the nature and duration of restrictions as to the transferability, or restrictions constituting substantial risk of forfeiture upon occurrence of certain events;
|
|
iv.
|
(iii)
|
to prescribe forms of agreement for use under the Plan;
|
|
v.
|
(iv)
|
to determine the terms of any Option granted hereunder;
|
|
vi.
|
designate the type of Options;
|
|
vii.
|
(vi)
|
to determine the Exercise Price of any Option granted hereunder;
|
|
viii.
|
to determine the Fair Market Value of Units, subject to the terms hereof;
|
|
ix.
|
cancel or suspend Options, as necessary;
|
|
x.
|
(viii)
|
to prescribe, amend and rescind the Plan, provided that any such amendment that would adversely effect the Optionee’s rights under an outstanding Option shall not apply to such outstanding Option without the Optionee’s written consent.
|
|
xi.
|
(ix)
|
to take all other action and make all other determinations necessary for the administration of the Plan.
|
|
(f)
|
Any decision or action taken or to be taken by the Administrator, arising out of or in connection with the construction, administration, interpretation and effect of the Plan, shall, to the maximum extent permitted by Applicable Law, be within its absolute discretion (except as otherwise specifically provided herein) and shall be conclusive and binding upon all Optionees and any person claiming under or through any Optionee.
|
|
(g)
|
No individual constituent of the Administrator shall be liable for any action taken or determination made in good faith with respect to the Plan or any Option granted hereunder.
|
|
(h)
|
Any individual constituent of the Administrator shall be eligible to receive Options under the Plan while serving as a constituent member of the Administrator, unless otherwise specified herein. No person shall be eligible to be a member of the Administrator if that person’s membership would prevent the Plan from complying with exemptions provided within the Applicable Laws.
|
|
(a)
|
Options granted under this Plan may or may not contain such terms as will qualify the Options as, 102 Options or as 3(i) Options. Options granted under this Plan may or may not contain such terms as will qualify the Options as qualified options under Applicable Laws ("
Qualified Options
").
|
|
(b)
|
Each Option, granted pursuant to the Plan, shall be evidenced by an Option Agreement, in such form as the Administrator shall from time to time approve. Each Option Agreement shall state, among other matters, the number of Units to which the Option relates, the type of Option granted thereunder (whether an CGO, OIO, Unapproved 102 Option or a 3(i) Option), the Vesting Dates, the Exercise Price, the expiration date and such other terms and conditions as the Administrator may prescribe, provided that they are consistent with the terms of this Plan and the Administrator's discretion hereunder. The written agreement shall be delivered to the Optionee and shall incorporate the terms of the Plan by reference and specify the terms and conditions thereof and any rules applicable thereto (each, an "
Option Agreement
").
|
|
(c)
|
The persons eligible for participation in the Plan as Optionees shall include any Employees and/or Consultants and/or Service Providers; provided, however, that options qualified under Section 102 of the Tax Ordinance shall be granted only to Employees of the Company who are not Ten Percent Owners of the Company.
|
|
(d)
|
Neither this Plan nor any Agreement nor any offer of Options to an Optionee shall impose any obligation on the Company to continue to employ or to engage the services of any Optionee, and nothing in the Plan or in any Option granted pursuant hereto shall give any Optionee any right to continue his employment or service with the Company or restrict the right of the Company to terminate such employment or services at any time. Further, the Company and each Subsidiary expressly reserves the right at any time to dismiss an Optionee free from any liability, or any claim under the Plan, except as provided herein or in any Option Agreement.
|
|
(e)
|
The grant of an Option to an Optionee hereunder shall neither entitle such Optionee to participate, nor disqualify him from participating, in any other grant of Options pursuant to this Plan or any other incentive or Unit option plan of the Company or any of its Affiliates
|
|
(f)
|
Anything in the Plan to the contrary notwithstanding, all grants of Options to Directors and officers shall be authorized and implemented in accordance with the provisions of Applicable Law and the Operating Agreement.
|
|
(a)
|
Maximum Number of Units
The Company has reserved a total of 330.6417. Common Units which represented 10% of its equity prior to the issuance of its series Units and, as of the date hereof, represents 8.3006% of the Company [post Series B] Any Units which remain unissued and which are not subject to the outstanding Options at the termination of the Plan shall cease to be reserved for the purpose of the Plan, but until termination of the Plan the Company shall at all times reserve sufficient number of Units to meet the requirements of the Plan. Should any Option for any reason expire or be canceled prior to its exercise or relinquishment in full, the Units subject to such Option may again be subjected to an Option under the Plan or under the Company’s other Unit option plans subsequently adopted by the Company,
provided
, however, that Units that have actually been issued under the Plan shall not be returned to the Plan and shall not become available for future distribution under the Plan.
|
|
(b)
|
Units Available for Issuance
. Units may be made available from the authorized but unissued Units of the Company or from Units not reserved for some other purpose. In addition, if any Option in respect of Units is canceled or forfeited for any reason without delivery of Units, the Units subject to such Option shall thereafter again be available for award pursuant to the Plan.
|
|
(a)
|
The Exercise Price of each Unit subject to an Option shall be determined, by the Administrator; provided, however that in no event will such Exercise Price be less than 100% of the Fair Market Value per Unit on the date of grant.
|
|
(b)
|
Each Option Agreement will contain the Exercise Price determined for each Option covered thereby.
|
|
(c)
|
The total consideration to be paid for the Units to be issued upon exercise of an Option, including the method of payment, shall be determined by the Administrator and may consist entirely of (1) cash, (2) check, or (3) any combination of the foregoing methods of payment. In making its determination as to the type of consideration to accept, the Administrator shall consider if acceptance of such consideration may be reasonably expected to benefit the Company.
|
|
(d)
|
The Exercise Price shall be denominated in the currency of the primary economic environment of, either the Company or the Optionee (that is the functional currency of the Company or the currency in which the Optionee is paid), as determined by the Administrator.
|
|
(e)
|
The proceeds received by the Company from the issuance of Units subject to the Options will be added to the general funds of the Company and used for any lawful business purposes.
|
|
(a)
|
Subject to the provisions of the Plan, each Option shall vest and become exercisable commencing on the Vesting Date(s) thereof, as determined by the Administrator, for the number of Units as shall be provided in the Option Agreement. However, no Option shall be exercisable after its expiration date.
|
|
(b)
|
An Option may be subject to such other terms and conditions on the time or times when it may be exercised, as the Administrator may deem appropriate. The vesting provisions of individual Options may vary.
|
|
(a)
|
Options shall be exercised by the Optionee by giving written notice to the Company, in such form and method as may be determined by the Company and when applicable, by the Trustee in accordance with the requirements of Section 102 of the Tax Ordinance, which exercise shall be effective upon receipt of such notice by the Company and the payment of the Exercise Price times the number of Units being purchased at the Company’s principal office. The notice shall specify the number of Units with respect to which the Option is being exercised.
|
|
(b)
|
The Options may be exercised by the Optionee in whole at any time or in part from time to time, to the extent that the Options become vested and exercisable, prior to the Expiration Date, and provided that, subject to the provisions of Section 10 below, the Optionee is employed by or providing services to the Company or any of its Affiliates, at all times during the period beginning with the granting of the Option and ending upon the date of exercise.
|
|
(c)
|
Units issued upon exercise of an Option shall be issued in the name of the Optionee. Prior to exercise and until the issuance (as evidenced by the appropriate entry on the books of the Company) of the stock certificate evidencing such Units, an Optionee, as such, shall have no right to vote or receive distribution or any other rights of a Member.
|
|
(d)
|
An Option may not be exercised unless, at the time the Optionee gives notice of exercise to the Company, the Optionee includes with such notice payment in cash or by bank check of all withholding taxes due, if any, on account of its acquired Units under the Option or gives other assurance satisfactory to the Administrator and the Trustee, if applicable, of the payment of those withholding taxes.
|
|
(e)
|
Units shall not be issued pursuant to the exercise of an Option unless the exercise of such Option, the method of payment and the issuance and delivery of such Units shall comply with Applicable Laws.
|
|
(f)
|
Upon their issuance, the Units shall carry equal voting rights on all matters where such vote is permitted by applicable laws of the jurisdiction of organization of the Company and subject to the terms of the Operating Agreement with respect to the voting rights of other Common Units issued by the Company, provided however, that the Company, at its sole discretion, may require that, until the earlier to occur of the consummation of an IPO by the Company or a successor or
,
the Tenth (10
th
) anniversary of the Date of Grant any Units issued upon exercise of Options (and securities of the Company issued with respect thereto) shall be voted by an irrevocable proxy (the "
Proxy
") in the same manner as the votes of the majority of other Common Members of the Company present and voting at the applicable meeting or acting by written consent if permitted, such Proxy to be assigned to the person or persons designated by the Administrator and to provide for the power of such designated person(s) to act, on its behalf, with respect to any and all aspects of the Optionee’s Unit holdings in the Company. The Proxy may be contained in the Option Agreement of an Optionee or otherwise as the Administrator determines. If contained in the Option Agreement, no further document shall be required to implement such Proxy, and the signature of the Optionee on the Option Agreement shall indicate approval of the Proxy thereby granted. Such person or persons designated by the Board 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 the voting of such Proxy unless arising out of such member's own fraud or bad faith, to the extent permitted by Applicable Law. Such indemnification shall be in addition to any rights of indemnification the person(s) may have as a director or otherwise under the Company's Operating Agreement or organizational documents, any agreement, any vote of Members or disinterested directors, insurance policy or otherwise. Without derogating from the above, with respect to Units issuable upon exercise of Approved 102 Options, such Units shall be voted in accordance with the provisions of Section 102 and of any rules, regulations or orders promulgated thereunder.
|
|
(g)
|
To avoid doubt, the Optionees shall not have any of the rights or privileges of Members of the Company in respect of any Units purchasable upon the exercise of any Options, until registration of the Optionee as holder of such Units in the Company’s records upon exercise of the Options in accordance with the provisions of the Plan and the Options.
|
|
(h)
|
Subject to the provisions of Section 20(c), if any law or regulation requires the Company to take any action with respect to the Units specified in such notice of exercise before the issuance thereof, then the date of their issuance shall be extended for the period necessary to take such action.
|
|
(i)
|
Exercise of an Option in any manner shall result in a decrease in the number of Units and the Options thereafter available, both for purposes of the Plan and for exercise under the Option, by the number of Units as to which the Option is exercised.
|
|
(a)
|
Unless the Administrator shall otherwise determine at or after grant, in the event of termination of Optionee's Employment with the Company other than for Cause, Disability or death, or if applicable, the termination of services rendered by the Optionee to the Company other than for Cause, Disability or death, all Options granted to that Optionee, which are vested and exercisable at the time of such termination, may, unless earlier terminated in accordance with the provisions of the Plan or the Option Agreement, be exercised within three (3) months after the date of such termination (or within such shorter time period, not less than thirty (30) days, or within such longer time period, not exceeding five (5) years after the termination date as may be determined by the Administrator. but in any event, no later than the expiration date of the Options. If, on the date of termination, the Units subject to the Option have not vested in their entirety, any Units covered by the unvested portion of the Option shall expire and be of no further force and effect and revert to the Plan. To the extent the vested portion of the Option is not so exercised within the time specified herein, such unexercised vested portion of the Option shall expire and be of no further force and effect, and the Units covered by such unexercised vested portion of the Option shall revert to the Plan. For the purposes of this section, termination of employment or engagement shall mean the effective date of the termination.
|
|
(b)
|
If the Optionee’s Employment is terminated because of Optionee's death or Disability (or the Optionee dies within three (3) months after a Optionee's termination other than for Cause), then Optionee's Options may be exercised, only to the extent that such Options are exercisable by Optionee termination date or within twelve (12) months after the Optionee termination date or as otherwise determined by the Administrator. Such Options must be exercised by Optionee (or Optionee's legal representative or authorized assignee), if at all, as to all or some of the then vested Units calculated as of the termination date or such other date determined by the Administrator, within twelve (12) months after the termination date but in any event no later than the expiration date of the Options. If, on the date of termination, there are Options, which are not entirely vested, the Units covered by the unvested portion of the Options shall revert to the Plan. If the Option is not so exercised within the time specified herein, the Option shall terminate, and the Units covered by such Option shall revert to the Plan.
|
|
(c)
|
In the event of termination of Optionee's employment with the Company for Cause, or if applicable, the termination of services rendered by the Optionee to the Company for Cause, all outstanding Options granted to such Optionee (whether vested or not) shall, to the extent not theretofore exercised, immediately expire and shall be of no further force and effect as of the date of such termination, unless otherwise determined by the Administrator.
|
|
(d)
|
An optionee shall not be deemed to have been terminated by the Company or an Affiliate in the case of (i) any leave of absence approved by the Company or (ii) transfers between locations of the Company or between Affiliates of the Company, or any successor thereof.
|
11.
|
|
(a)
|
Changes in Capitalization
Subject to the terms of the Operating Agreement, the number of Units covered by each outstanding Option, the number of Units which have been reserved for issuance under the Plan but as to which no Options have yet been granted or which have been returned to the Plan upon cancellation or expiration of Options, as well as the Exercise Price per Unit of Units covered by each such outstanding Option, shall be proportionately adjusted for any increase or decrease in the number of issued Units resulting from a Unit split, reverse Unit split, Unit dividend, combination or reclassification of the Units, or any other increase or decrease in the number of issued Units without investment of cash. Such adjustment shall be made by the Administrator, whose determination in that respect shall be final, binding and conclusive. Except as expressly provided herein, no issuance by the Company of equity of any class, or securities convertible into equity of any class, shall affect, and no adjustment by reason thereof shall be made with respect to, the number of Units subject to an Option or the Exercise Price specified in an Option. If the Options or the Units issued upon the exercise of such Options will be deposited with a Trustee, as determined by the Administrator, all of the Units formed by these adjustments also will be deposited with the Trustee in the same terms and conditions as the original Options or Units.
|
|
(b)
|
Dissolution or Liquidation
In the event of a dissolution or liquidation of the Company (either voluntary or involuntary) (the "
Event
"), the Administrator shall notify each Optionee as soon as practicable prior to the effective date of such Event. The Administrator in its sole discretion may allow the exercise of any or all outstanding Options, whether or not vested, within a reasonable period of time prior to and in connection with the Event and subject to the provisions of the Applicable Laws. To the extent it has not been previously exercised, an Option will terminate immediately prior to the Event.
|
|
(c)
|
Merger, Acquisition, Units’ sale, Assets’ Sale
|
|
i.
|
In the event of a merger or consolidation of the Company with or into another entity resulting in such other entity being the surviving entity, an acquisition of all or substantially all of the outstanding capital of the Company, or the sale of substantially all of the assets of the Company (each such event, a "
Transaction
"),
the
Company shall send each Optionee notice of such Transaction not less than thirty (30) days prior to the closing of such Transaction. The Optionee shall at that time be given the opportunity to exercise the Optionee's Option in connection with the Transaction and to receive in the Transaction such consideration as the holders of Common Units receive in the Transaction and may have the opportunity to retain his Option from the Company or may receive a substitute option from the surviving company, if any.
|
|
ii.
|
Anything herein to the contrary notwithstanding, if a Transaction shall occur prior to the consummation of an IPO, then each Optionee shall be obliged to sell or exchange, as the case may be, any Units such Optionee purchased under the Plan, in accordance with the instructions of the Board, at its sole and absolute discretion, in connection with the Transaction, and in the same terms as shall be applicable to all the Common Members of the Company.
|
|
(a)
|
The Administrator may designate Options pursuant to Section 102 as Unapproved 102 Options or as Approved 102 Options.
|
|
(b)
|
The grant of an Approved 102 Option under the Plan shall be conditioned upon the approval of the Plan by the Israeli Tax Authorities.
|
|
(c)
|
Approved 102 Options may be classified as either Capital Gain Options or Ordinary Income Options.
|
|
(d)
|
Each Option Agreement shall state, inter alia, the type of Option granted thereunder (whether a CGO, OIO, Unapproved 102 Option or a 3(i) Option), the vesting provisions and the Exercise Price.
|
|
(e)
|
No Approved 102 Options may be granted under this Plan to any Employee, unless and until, the Company’s election of the type of Approved 102 Options as CGO or OIO granted to Employees (the "
Election
"), shall be appropriately filed with the Israeli Tax Authorities at least thirty (30) days before the first Date of Grant of an Approved 102 Option under this Plan. Such Election shall become effective beginning the first Date of Grant of an Approved 102 Option under the Plan and shall remain in effect until at least the end of the year following the year during which the Company first granted Approved 102 Options. The Election shall obligate the Company to grant
only
the type of Approved 102 Option it has elected, and shall apply to all Approved 102 Options granted during the period indicated herein, all in accordance with the provisions of Section 102(g) of the Tax Ordinance, as now in effect or as hereafter amended. For the avoidance of doubt, such Election shall not prevent, subject to the Board’s sole discretion, the Company from simultaneously (i) granting Unapproved 102 Options; or (ii) 3(i) Options.
|
|
(f)
|
All Approved 102 Options must be held in trust by a Trustee, as described in Section 13 below.
|
|
(g)
|
For the avoidance of doubt, the designation of Unapproved 102 Options and Approved 102 Options shall be subject to the terms and conditions set forth in Section 102 of the Tax Ordinance and regulations, rules, orders or procedures promulgated thereunder as now in effect or as hereafter amended.
|
|
(h)
|
With regard to Approved 102 Options, the provisions of the Plan and the Option Agreement shall be subject to the provisions of Section 102 and the Tax Assessing Officer’s permit, and the said provisions and permit shall be deemed an integral part of the Plan and of the Option Agreement. Any provision of Section 102 and/or the said permit which is necessary in order to receive and/or to keep any tax benefit pursuant to Section 102, which is not expressly specified in the Plan or the Option Agreement, shall be considered binding upon the Company and the Optionees.
|
13.
|
|
(a)
|
The Administrator may choose to deposit any or all Options granted pursuant to the Plan with a trustee (the
"
Trustee
"). In such event, the Trustee shall hold such Options, and any Units issued upon the exercise of any of such Options, in trust pursuant to the Company's instructions from time to time. The Trustee shall be entitled to make such provisions and take such steps as it may deem necessary or appropriate for the withholding of all taxes required by law to be withheld with respect to the exercise of the Options or their sale to a third party. The Company shall deliver the Trustee all the necessary information required by him. The Trustee shall be exempt from any liability with respect to any action or decision duly taken in its/his capacity as Trustee.
|
|
(b)
|
Anything herein to the contrary notwithstanding, Approved 102 Options granted under the Plan and/or all Units allocated or issued upon exercise of such Approved 102 Options and/or all other interests in the Company received subsequently following any realization of rights in connection with such Approved 102 Options or Units and all rights attached to Units described above or Approved 102 Options, shall be allocated or issued to the Trustee and held for the benefit of the Optionee for such period of time as required by Section 102 or any regulations, rules, orders or procedures promulgated there under as now in effect or as hereafter amended (the "
Restricted Period Per Section 102
"). All of the rights attached to Units issued upon exercise of Approved 102 Options, including without limitation distributions in respect of the Units, shall be subject to the same tax treatment as the treatment to which such Options are subject. In case the requirements pursuant to Section 102 for an Approved 102 Options are not met, then the Approved 102 Options may be regarded as Unapproved 102 Options, all in accordance with the provisions of Section 102 and regulations, rules, orders or procedures promulgated there under as now in effect or as hereafter amended.
|
|
(c)
|
Notwithstanding anything to the contrary, the Trustee shall not enter into any transaction or take any action with respect to Approved 102 Options or Units issued upon exercise thereof, will not transfer, assign, release, pledge, mortgage voluntarily, or grant in connection therewith any proxy (except as provided for in Section 9(f) hereof) or assignment deed, whether immediately effective or effective at a future date, other than by will or by operation of law, until after the full payment of the Optionee’s tax liabilities arising from the grant of such Options or their exercise or release or transfer by the Trustee or after guarantying the payment of said taxes. If such Options or Units have been transferred by will or by operation of law, the provisions of Section 102 will apply with respect to the heirs or the transferees of the Optionee or Member, as the case may be.
|
|
(d)
|
Upon receipt of an Approved 102 Option, the Optionee will sign an undertaking to release the Trustee from any liability in respect of any action or decision duly taken and bona fide executed in relation with the Plan, or any Approved 102 Option or Unit held, released or transferred by the Trustee, in accordance with the terms of Section 102.
|
|
(f)
|
Subject to the provisions of Section 102 of the Tax Ordinance and any Rules promulgated there under as now in effect or as hereafter amended, during
the Restricted Period Per Section 102 an Optionee may not release the Approved 102 Options or Shares issued upon exercise thereof from trust or sell such Options or Shares while they are held by the Trustee. A
t any time there
after each Optionee may require (but shall
not
be obligated to require) the Trustee to sell upon Optionee's direction, or transfer to the Optionee, any Approved 102 Options or
Shares issued pursuant to the exercise of such Approved 102 Options
, provided that (1) such transfer is in compliance with all applicable securities laws, and (2)
all applicable tax due pursuant to such a sale or transfer has been paid in accordance with Section 102 of the Tax Ordinance and the Trustee has received an acknowledgment from the Israeli Tax Authorities that the Optionee has paid any applicable tax due pursuant to the Tax Ordinance. Notwithstanding the above, if any such sale or release occurs during the
Restricted Period Per Section 102
, the sanctions under Section 102 of the Tax Ordinance and under any Rules promulgated there under as now in effect or as hereafter amended, shall apply to and shall be borne by such Optionee.
|
|
(a)
|
The Company’s obligation to issue or allocate Units upon exercise of an Option granted under the Plan is expressly conditioned upon: (a) the Company’s completion of any registration or other qualifications of such Units under all applicable laws, rules and regulations or (b) representations and undertakings by the Optionee (or his legal representative, heir or legatee, in the event of the Optionee’s death) to assure that the sale of the Units complies with any registration exemption requirements which the Company in its sole discretion shall deem necessary or advisable. Such required representations and undertakings may include representations and agreements that such Optionee (or his legal representative, heir, or legatee) is purchasing such Units for investment and not with any present intention of selling or otherwise disposing thereof.
|
|
(b)
|
The Optionee acknowledges that in the event that the Company’s Units or interests into which the Units are exchanged shall be registered for trading in any public market, Optionee’s rights to sell the Units may be subject to certain limitations (including a lock-up period), as will be requested by the Company or its underwriters, and the Optionee and his heirs or legal representatives unconditionally agree and accept any such limitations upon accepting any Options granted under this Plan.
|
|
(c)
|
If any Units shall be registered under the United States Securities Act of 1933, no public offering otherwise than on a national securities exchange (as defined in the United States Securities Exchange Act of 1934, as amended) or other securities market of any Units shall be made by the Optionee (or any other person) under such circumstances that he or she (or such other person) may be deemed an underwriter, as defined in the United States Securities Act of 1933.
|
|
(d)
|
Upon the grant of Options to an Optionee or the issuance of Units upon the exercise thereof, the Company shall obtain from such person the representations and undertakings as follows:
|
|
(i)
|
That the Optionee is familiar with the Company, its activity and its financial and commercial forecast, and that the Optionee knows that there is no certainty that the exercise of the Options will be financially worthwhile. The Optionee hereby undertakes not to make any claim against the Company or any of its Directors, Officers, Employees, Members, agents or advisors if it emerges, at the time of exercising the Options, that the Optionee’s investment in the Company‘s Units was not worthwhile, for any reason whatsoever.
|
|
(ii)
|
That the Optionee knows that his rights regarding the Options and the Units are subject, for all intents and purposes, to the terms of the Company’s Operating Agreement.
|
|
(iii)
|
That the Optionee knows that in addition to the allocations set forth above, the Company has allocated and/or is entitled to allocate Options and Units to other persons, and the Optionee shall have no claim regarding such allocations, their quantity, the relationship among them and between them and the Members of the Company, exercising of the option or any matter related to or stemming from them.
|
|
(iv)
|
That the Optionee knows that neither the Plan nor the grant of an Option or Units thereunder shall impose any obligation on the Company to continue the engagement of the Optionee, and nothing in the Plan or in any Option or Units granted pursuant thereto shall confer upon any Optionee any right to continue being engaged or employed by the Company, or restrict the right of the Company to terminate such engagement or employment at any time.
|
|
(v)
|
As a condition to the exercise of an Option, the Administrator may require the person exercising such Option to represent and warrant at the time of such exercise that the Units are being purchased only for investment and without any present intention to sell or distribute such Units if, in the opinion of counsel for the Company, such a representation is required.
|
16.
|
|
|
(a)
|
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 and the Operating Agreement. During the lifetime of the Optionee each and all of such Optionee's rights to purchase Units hereunder shall be exercisable only by the Optionee.
|
|
(b)
|
As long as Options and/or Units are held by the Trustee on behalf of the Optionee, all rights of the Optionee over the Units are personal, can not be transferred, assigned, pledged or mortgaged, other than by will or pursuant to the laws of descent and distribution.
|
|
(c)
|
Unless otherwise determined by the Administrator, following an IPO, an Optionee shall not have the right to effect a sale of Units issued upon the exercise of an Option during the period of any post-IPO lock-up period that the Administrator agrees will be applicable to Optionees or persons holding equity instruments as a result of exercising Options.
|
|
(a)
|
The Plan was adopted by the Board of Directors of the Company on
______________
2006. The number of Units for which Options are issuable pursuant to the Plan may only be changed in accordance with the Operating Agreement.
|
|
(b)
|
The Board may, at any time and from time to time, terminate, alter, adjust, suspend or amend the Plan in any respect, except that if at any time the
approval of the Members of the Company is required pursuant to the
Israeli Companies Law
,
1999, under Section 57 or the regulations promulgated thereunder
, the Board may not effect such modification or amendment without such approval. In no event may any action of the Company adversely alter or impair the rights of an Optionee, without such Optionee’s consent, under any Option previously granted to such Optionee.
|
|
(c)
|
Notwithstanding Subsection 18(b) above, no amendment, alteration, suspension or termination of the Plan shall impair the rights of any Optionee, unless mutually agreed otherwise between the Optionee and the Company, which agreement must be in writing and signed by the Optionee and the Company. Termination of the Plan shall not affect the Administrator's ability to exercise the powers granted to it hereunder with respect to Options granted under the Plan prior to the date of such termination.
|
|
(d)
|
The Plan shall become effective upon its adoption by the Board. It shall continue in effect for a term of ten (10) years after the earlier of its adoption by the Board, unless sooner terminated by the Board.
|
|
(a)
|
With regard to Approved 102 Options, the provisions of the Plan and/or any Option Agreement for Approved 102 Options shall be subject to the provisions of Section 102 and the Income Tax Commissioner’s permit, and the said provisions and permit shall be deemed an integral part of the Plan and of the Option Agreement.
|
|
(b)
|
Any provision of Section 102 and/or the said permit which is necessary in order to receive and/or to keep any tax benefit pursuant to Section 102, which is not expressly specified in the Plan or the Option Agreement, shall be considered binding upon the Company and the Optionees holding such Options.
|
|
(a)
|
Withholding
. The Company shall have the right to deduct from all amounts paid to an Optionee in cash (whether under this Plan or otherwise) any taxes required by law to be withheld in respect of Options under this Plan. In the case of any Option satisfied in the form of Units, no Units shall be issued unless and until arrangements satisfactory to the Administrator shall have been made to satisfy any withholding tax obligations applicable with respect to such Option. Without limiting the generality of the foregoing and subject to such terms and conditions as the Administrator may impose, the Company shall have the right to retain, or the Administrator may, subject to such terms and conditions as it may establish from time to time, permit Optionees to elect to tender, Units (including Units issuable in respect of an Option) to satisfy, in whole or in part, the amount required to be withheld.
|
|
(b)
|
The Company may place a legend on each Unit certificate to the effect that such Units were acquired pursuant to an investment representation and are subject to limitations on offers, transfers and sales as the case may be and such other legends as may be specified in the Operating Agreement.
|
|
(c)
|
Compliance with Legal and Exchange Requirements
. The Plan, the granting and exercising of Options thereunder, and the other obligations of the Company under the Plan, shall be subject to all Applicable Laws, rules, and regulations, and to such approvals by any regulatory or governmental agency as may be required. The Company shall not be obligated by virtue of any provision of the Plan to recognize the exercise of any Option or to otherwise sell or issue Units in violation of any such laws, rules, or regulations; and any postponement of the exercise or settlement of any Option under this provision shall not extend the term of such Options, and neither the Company nor its directors or officers shall have any obligation or liability to the Optionee with respect to any Option (or Units issuable thereunder) that shall lapse because of such postponement.
|
|
(d)
|
Gender and Number
. Except when otherwise indicated by the context, words in the masculine gender used in the Plan shall include the feminine gender, the singular shall include the plural, and the plural shall include the singular.
|
|
(e)
|
Governing Law.
The validity, construction, interpretation, administration and effect of the Plan and any rules, regulations and actions relating to the Plan will be governed by and construed exclusively in accordance with the laws of the State of Illinois, notwithstanding the conflicts of laws principles of any jurisdictions. The Plan and all instruments issued thereunder or in connection therewith any Affiliates and/or Subsidiaries, shall be governed by, and interpreted in accordance with, the applicable laws with in the country of organization of the Affiliate and/or Subsidiary or the laws of any jurisdiction to which persons receiving Options employees under the Plan are subject.
|
21.
|
22.
|
|
Any tax consequences arising from the grant or exercise of any Option or from the disposition of Units or from any other event or act (whether of the Optionee or of the Company or of its Trustee) hereunder, shall be borne solely by the Optionee. The Company and/or the Trustee shall withhold taxes according to the requirements under the Applicable Laws, rules, and regulations, including withholding taxes at source. Furthermore, such Optionee shall agree to indemnify the Company that employs the Optionee and/or the Trustee, and/or the Company’s Members and/or directors and/or officers if applicable, and hold them harmless against and from any and all liability for any such tax or interest or penalty thereon, including without limitation, liabilities relating to the necessity to withhold, or to have withheld, any such tax from any payment made to the Optionee, provided that they acted in due care. Except as otherwise required by law, the Company shall not be obligated to honor the exercise of any Option by or on behalf of an Optionee until all tax consequences (if any) arising from the exercise of such Options are resolved in a manner reasonably acceptable to the Company.
|
27.
|
Adopted by the Board on ____________, 2006.
|
|||
Signed
|
|||
Title
|
|||
|
1.
|
Anywhere in the Plan, the term "Operation Agreement" shall be replaced with the term "Company's Articles of Association".
|
|
2.
|
In section 7(a) of the Plan, the words "provided, however that in no event will such Exercise Price shall be less than 100% of the Fair Market Value per Unit on the date of grant" shall be deleted.
|
|
3.
|
In section 11(a) of the Plan, the following sentence will be inserted before the words "Except as expressly provided herein":
|
1.
|
Registration Rights
|
2.
|
Issues Relating to the Board of Directors
.
|
3
|
Information Rights
.
|
4
|
Distributions, Reorganization
.
|
5
|
Miscellaneous
.
|
GE Ventures Limited
By: __________________________________
Title: __________________________________
|
BioSec Ltd.
By: __________________________________
Title: __________________________________
|
Pontifax (Israel) II – Individual Investor, L.P.
By: __________________________________
Title: __________________________________
|
Pontifax (Israel) II Ltd.
By: __________________________________
Title: __________________________________
|
Pontifax (Cayman) II L.P.
By: __________________________________
Title: __________________________________
|
Spearhead Investments (Bio) Ltd.
By: __________________________________
Title: __________________________________
|
Docor International B.V.
By: __________________________________
Title: __________________________________
|
Jacobs Investments Company LLC
By: __________________________________
Title: __________________________________
|
Counterpoint Ventures Fund LP
By: __________________________________
Title: __________________________________
|
Counterpoint Ventures Fund II LP
By: __________________________________
Title: __________________________________
|
BXR Portfolio Limited
By: __________________________________
Title: __________________________________
|
Remer Holdings Inc.
By: __________________________________
Title: __________________________________
|
Paddy McGwire
By: __________________________________
|
OGI Infrastructure Telecom (pte) Ltd.
By: __________________________________
Title: __________________________________
|
Bamna Holdings Ltd.
By: __________________________________
Title: __________________________________
|
Asher Haddad
By: __________________________________
|
Michael and Dorit Cohen
By: __________________________________
|
Nachum Friedman
By: __________________________________
|
J. Rieger Ltd.
By: __________________________________
Title: __________________________________
|
Mishor Dahan technologies Ltd.
By: __________________________________
Title: __________________________________
|
Tricko Fuchs Ltd.
By: __________________________________
Title: __________________________________
|
E.E.T. Holdings Ltd.
By: __________________________________
Title: __________________________________
|
87215 Canada Ltd.
By: __________________________________
Title: __________________________________
|
Anfield Ltd.
By: __________________________________
Title: __________________________________
|
Danny Silbiger
By: __________________________________
|
Reuven Adler
By: __________________________________
|
Ray Graf
By: __________________________________
|
Michael Warren
By: __________________________________
|
Jake Foley III
By: __________________________________
|
ARZ Chemicals Ltd.
By: __________________________________
Title: __________________________________
|
Collace Services Ltd.
By: __________________________________
Title: __________________________________
|
Alon Barda
By: __________________________________
|
Edward L. McCallum Jr.
By: __________________________________
|
Gabriella Ravid
By: __________________________________
|
Arik Lukatch
By: __________________________________
|
Meir Heth
By: __________________________________
|
Tal & Michal Rivkind
By: __________________________________
|
Shevlin Ciral
By: __________________________________
|
Moshit & Ron Yaffe
By: __________________________________
|
Derek Locke
By: __________________________________
|
Perry Goldberg
By: __________________________________
|
Gary Kneisel
By: __________________________________
|
LeRoy C. Prichard
By: __________________________________
|
Cary Kalant and Maria Kalant JTWROS
By: __________________________________
|
D. Gideon Searle
By: __________________________________
|
MPI 2008
By: __________________________________
Title: __________________________________
|
Red Car Group
By: __________________________________
Title: __________________________________
|
Ari Kalman
By: __________________________________
|
Lawrence & Terence Byrne JTWROS
By: __________________________________
|
Eunice Diane Goldberg
By: __________________________________
|
Larry Byrne
By: __________________________________
|
Sheila Saporito
By: __________________________________
|
Emigrant Alternative Investments LLC
By: __________________________________
Title: __________________________________
|
Shimon Yakobov
By: __________________________________
|
Thomas C. Reynolds
By: __________________________________
|
Stephen A. Frost
By: __________________________________
|
E. Scott Jackson Irrevocable Family Trust
By: __________________________________
Title: __________________________________
|
Fred B Walters Irrevocable Family Trust (together
with Roger Walters Irrevocable Family Trust)
By: __________________________________
Title: __________________________________
|
Marianne B. Kipper Separate Property Trust Est. 1-14-88,
Marianne B. Kipper, Trustee
By: __________________________________
Title: __________________________________
|
Amir Avni
By: __________________________________
|
Norman Jackson
By: __________________________________
|
Samuel and Renee Sax Trust u/a/d 3/3/2004
By: __________________________________
Title: __________________________________
|
Lawrence Oberman
By: __________________________________
|
Jody Williams
By: __________________________________
|
David Gelfand
By: __________________________________
|
Moked Ituran Ltd.
By: __________________________________
Title: __________________________________
|
Hertzel Bybabyov
By: __________________________________
|
Sid Black
By: __________________________________
|
Mark Sweeny
By: __________________________________
|
Thomas F. Sax
By: __________________________________
|
Eddo Dinstein
By: __________________________________
|
Tamar Ozeri
By: __________________________________
|
Sigalit Kimchy
By: __________________________________
|
Yoav Kimchy
By: __________________________________
|
Andy Logan
By: __________________________________
|
John Hayes
By: __________________________________
|
Stuart Schwartz
By: __________________________________
|
William (Irwin) and Linda Horwitch
By: __________________________________
|
Sebastian Sax Supplemental Needs Trust u/a/d 3/3/2004
By: __________________________________
Title: __________________________________
|
Grant McCullagh
By: __________________________________
|
Peter Ricker
By: __________________________________
|
Richard E. Kipper Separate Property Trust Est. 1-14-88,
Richard
E. Kipper, Trustee
By: __________________________________
Title: __________________________________
|
Stanley Green and Adrienne Green, as joint
tenants
By: __________________________________
|
Boaz Benzur
By: __________________________________
|
Yitzchak Ostashinsky
By: __________________________________
|
Yitzchak Abudy
By: __________________________________
|
Dan Eilat
By: __________________________________
|
Yoram Shafek
By: __________________________________
|
Eldad Halevi
By: __________________________________
|
Bruch Nachmias
By: __________________________________
|
Zvika Kelich
By: __________________________________
|
Ilan Eilat
By: __________________________________
|
Helios Investments Pte Limited
By: __________________________________
Title: __________________________________
|
Rami Shlinger
By: __________________________________
|
Shanghai Fosun Pharmaceutical Group Co. Ltd.
By: ________________________________
Name: ________________________________
Title: ________________________________
|
Joshua Ehrlich
By: ________________________________
Name: ________________________________
Title: ________________________________
|
Bart Superannuation Pty Ltd.
By: ________________________________
Name: ________________________________
Title: ________________________________
|
Nir Grinberg
By: ________________________________
Name: ________________________________
Title: ________________________________
|
Avraham Kuzitsky
By: ________________________________
Name: ________________________________
Title: ________________________________
|
DPC Big Bay Properties Trust
By: ________________________________
Name: ________________________________
Title: ________________________________
|
Pinchas Dekel
By: ________________________________
Name: ________________________________
Title: ________________________________
|
Sharon Zaworbach
By: ________________________________
Name: ________________________________
Title: ________________________________
|
Minrav Holdings Ltd.
By: ________________________________
Name: ________________________________
Title: ________________________________
|
Moshe Haviv
By: ________________________________
Name: ________________________________
Title: ________________________________
|
Red Car Group
By: ________________________________
Name: ________________________________
Title: ________________________________
|
Yossi Avraham
By: ________________________________
Name: ________________________________
Title: ________________________________
|
Thomas F. Sax
|
Eddo Dinstein
|
Samuel and Renee Sax Trust u/a/d 3/3/2004
|
Tamar Ozeri
|
Sebastian Sax Supplemental Needs Trust u/a/d 3/3/2004
|
Sigalit Kimchy
|
Andy Logan
|
Yoav Kimchy
|
D. Gideon Searle
|
MPI 2008
|
Pontifax (Cayman) II L.P.
|
Counterpoint Ventures Fund II LP
|
Ari Kalman
|
Pontifax (Israel) II L.P.
|
Docor International BV
|
Cary Kalant and Maria Kalant JTWROS
|
Pontifax (Israel) II Individual Investors L.P.
|
Larry Byrne
|
Jacobs Investment Company LLC
|
Eunice Diane Goldberg
|
Emigrant Alternative Investments LLC
|
E.Scott Jackson Irrevocable Family Trust
|
Fred B Walters Irrevocable Family Trust (together with Roger Walters Irrevocable Family Trust)
|
Mark Sweeny
|
Amir Avni
|
Norman Jackson
|
Samuel and Renee Sax Trust u/a/d 3/3/2004
|
Lawrence Oberman
|
Jody Williams
|
Edward L. McCallum
|
David Gelfand
|
Moked Ituran Ltd.
|
Hertzel Bybabyov
|
Sheila Saporito
|
Shimon Yakobov
|
Thomas C. Reynolds
|
Moshit and Ron Yaffe
|
Spearhead Investments (Bio) Ltd.
|
Boaz Benzur
|
Yitzchak Ostashinsky
|
Yitzchak Abudy
|
Dan Eilat
|
Yoram Shafek
|
Helios Investments Pte Limited
|
Eldad Halevi
|
Bruch Nachmias
|
Ilan Eilat
|
Zvika Kelich
|
Rami Shlinger
|
BXR Portfolio Limited
|
Pontifax (Israel) II - Individual Investors, L.P.
|
Pontifax (Cayman) II L.P.
|
Pontifax (Israel) II L.P.
|
Bamna Holdings Ltd.
|
Remer Holdings Inc.
|
OGI Infrastructure & Telecom (pte) Ltd.
|
Docor International BV
|
Red Car Group
|
Asher Haddad
|
BioSec Ltd.
|
Jacobs Investment Company LLC
|
Michael and Dorit Cohen
|
Nachum Friedman
|
J. Rieger Ltd.
|
Mishor Dahan Technologies Ltd.
|
Tricko Fuchs Ltd.
|
E.E.T. Holdings Ltd.
|
87215 Canada Ltd.
|
Anfield Ltd.
|
Danny Silbiger
|
Reuven Adler
|
Ray Graf
|
Michael Warren
|
Jake Foley III
|
ARZ Chemicals Ltd.
|
Collace Services Limited
|
Alon Barda
|
Edward L. McCallum Jr.
|
Gabriella Ravid
|
Arik Lukatch
|
Meir Heth
|
Tal & Michal Rivkind
|
Shevlin Ciral
|
Moshit & Ron Yaffe
|
Derek Locke
|
Perry Goldberg
|
Gary Kneisel
|
LeRoy C. Prichard
|
Cary Kalant and Maria Kalant JTWROS
|
GE Ventures Limited
|
No.
|
Lender's Name
|
Credit Line Amount
|
Address
|
1.
|
Shanghai Fosun Pharmaceutical Group Co. Ltd. and/or its subsidiary
|
US$ 4,000,000
|
__________________________
__________________________
__________________________
Tel: ______________________
Fax: ______________________
Attention: _________________
with a copy to: (which shall not
constitute service on Fosun Pharma)
Herzog Fox & Neeman Law Offices
Asia House
4 Weizmann Street
Tel Aviv 6423904, Israel
Tel: +972-3-6922894
Fax: +972-3-6966464
Attention: Yair Geva, Adv.
|
2.
|
Counterpoint Ventures Fund II LP
|
US$ 255,000
|
__________________________
__________________________
__________________________
Tel: ______________________
Fax: ______________________
Attention: _________________
|
3.
|
Pontifax (Cayman) II LP
|
US$ 733,256
|
__________________________
__________________________
__________________________
Tel: ______________________
Fax: ______________________
Attention: _________________
|
4.
|
Pontifax (Israel) II Individual Investors LP
|
US$ 214,410
|
|
5.
|
Pontifax (Israel) II LP
|
US$ 552,334
|
|
6.
|
Docor International BV
|
US$ 500,000
|
__________________________
__________________________
__________________________
Tel: ______________________
Fax: ______________________
Attention: _________________
|
7.
|
Bart Superannuation Pty Ltd.
|
US$ 500,000
|
__________________________
__________________________
Tel: +61-292335015
Fax: +61-29233411
Attention: Fred Bart
|
No.
|
Lender's Name
|
Credit Line Amount
|
Address
|
8.
|
Joshua Ehrlich
|
US$ 250,000
|
__________________________
__________________________
Tel: + 61-417040226
Fax: (02) 93277075
Attention: Joshua Ehrlich
|
9.
|
Scott Jackson
|
US$ 50,000
|
__________________________
__________________________
__________________________
Tel: ______________________
Fax: ______________________
Attention: _________________
|
10.
|
Minrav Holdings Ltd
|
US$ 500,000
|
__________________________
__________________________
__________________________
Tel: ______________________
Fax: ______________________
Attention: _________________
|
11.
|
Avraham Kuznitsky
|
US$ 250,000
|
__________________________
__________________________
__________________________
Tel: ______________________
Fax: ______________________
Attention: _________________
|
12.
|
Pinchas Dekel
|
US$ 100,000
|
__________________________
__________________________
__________________________
Tel: ______________________
Fax: ______________________
Attention: _________________
|
13.
|
Emil Mor- Business & Financial Consulting Ltd.
|
US$ 100,000
|
__________________________
__________________________
__________________________
Tel: ______________________
Fax: ______________________
Attention: _________________
|
14.
|
Harmony (Ben Dov) Ltd
|
US$ 750,000
|
__________________________
__________________________
__________________________
Tel: ______________________
Fax: ______________________
Attention: _________________
|
No.
|
Lender's Name
|
Credit Line Amount
|
Address
|
15.
|
GE Ventures Limited
|
US$ 350,000
|
__________________________
__________________________
__________________________
Tel: ______________________
Fax: ______________________
Attention: _________________
|
16.
|
Yossi Smira
|
US$ 150,000
|
__________________________
__________________________
__________________________
Tel: ______________________
Fax: ______________________
Attention: _________________
|
17.
|
H.M.L.K. Financial Consulting Ltd.
|
US$ 360,000
|
__________________________
__________________________
__________________________
Tel: ______________________
Fax: ______________________
Attention: _________________
|
18.
|
Sharon Zaworbach
|
US$ 100,000
|
__________________________
__________________________
__________________________
Tel: ______________________
Fax: ______________________
Attention: _________________
|
19.
|
Moshe Haviv
|
US$ 100,000
|
__________________________
__________________________
__________________________
Tel: ______________________
Fax: ______________________
Attention: _________________
|
20.
|
Nir Greenberg
|
US$ 100,000
|
__________________________
__________________________
__________________________
Tel: ______________________
Fax: ______________________
Attention: _________________
|
21.
|
Dor Benvenisty
|
US$ 50,000
|
__________________________
__________________________
__________________________
Tel: ______________________
Fax: ______________________
Attention: _________________
|
No.
|
Lender's Name
|
Credit Line Amount
|
Address
|
22.
|
Norm Jackson
|
US$ 50,000
|
__________________________
__________________________
__________________________
Tel: ______________________
Fax: ______________________
Attention: _________________
|
23.
|
Shevlin Ciral
|
US$ 50,000
|
__________________________
__________________________
__________________________
Tel: ______________________
Fax: ______________________
Attention: _________________
|
24.
|
Everest Fund L.P.
|
US$ 120,000
|
__________________________
__________________________
__________________________
Tel: ______________________
Fax: ______________________
Attention: _________________
|
25.
|
Uri Perekman
|
US$ 70,000
|
__________________________
__________________________
__________________________
Tel: ______________________
Fax: ______________________
Attention: _________________
|
26.
|
DPC Big Bay Properties Trust
|
US$ 100,000
|
__________________________
__________________________
__________________________
Tel: ______________________
Fax: ______________________
Attention: _________________
|
27.
|
Capital Point Ltd.
|
US$ 500,000
|
__________________________
__________________________
__________________________
Tel: ______________________
Fax: ______________________
Attention: _________________
|
28.
|
Yossi Avraham
|
US$ 250,000
|
__________________________
__________________________
__________________________
Tel: ______________________
Fax: ______________________
Attention: _________________
|
No.
|
Lender's Name
|
Credit Line Amount
|
Address
|
29.
|
Red Car Group
|
US$ 200,000
|
__________________________
__________________________
__________________________
Tel: ______________________
Fax: ______________________
Attention: _________________
|
30.
|
Beeston Nominees (Panama) Inc.
|
US$ 695,000
|
__________________________
__________________________
__________________________
Tel: ______________________
Fax: ______________________
Attention: _________________
|
1.
|
EXERCISE OF WARRANT
|
1.1.
|
Warrant Period
. This Warrant may be exercised, subject to the terms and conditions hereof, in whole or in part, at one time or from time to time during the period commencing on June 1
st
, 2009, and for ten (10) years thereafter. The above period shall be referred to hereinafter as the "Warrant Period".
|
1.2.
|
Exercise for Cash
. This Warrant may be exercised by presentation and surrender thereof to the Company at its principal office or at such other office or agency as it may designate from time to time, accompanied by:
|
|
1.2.1.
|
A duly executed notice of exercise, in the form attached hereto as
Schedule 1.2.1
(the "
Exercise Notice
"); and
|
|
1.2.2.
|
Payment to the Company, for the account of the Company, of the aggregate Exercise Price, payable in immediately available funds by wire transfer to the Company's bank account. The Exercise Price will be paid in United States Dollars or the equivalent sum in NIS according to the Bank of Israel exchange rate as published upon Exercise.
|
1.3.
|
Exercise on Net Issuance Basis
. In lieu of payment to the Company as set forth in Section 1.2 above, the Holder may elect to convert this Warrant into the number of Warrant Shares calculated pursuant to the formula below, by presentation and surrender thereof to the Company at its principal office or at such other office or agency it may designate from time to time, accompanied by a duly executed notice of exercise, in the form attached hereto as
Schedule 1.3
(the "
Net Issuance Notice
"):
|
|
X =
|
the number of Warrant Shares to be issued to the Holder;
|
|
Y =
|
the number of Warrant Shares otherwise purchasable upon exercise of this Warrant;
|
|
A =
|
the fair market value of one Warrant Share; and
|
|
|
B =
|
the Exercise Price per one Warrant Share.
|
1.4.
|
Issuance of Warrant Shares
. Upon presentation and surrender of this Warrant, accompanied by (a) the duly executed Exercise Notice and the payment of the applicable aggregate Exercise Price pursuant to Section 1.2 above; or (b) the duly executed Net Issuance Notice pursuant to Section 1.3 above, as the case may be, the Company shall promptly (i) issue to the Holder the Warrant Shares to which the Holder is entitled; and (ii) deliver to the Holder the share certificate evidencing such Warrant Shares.
|
1.5.
|
Fractional Shares
. No fractions of Shares shall be issued in connection with the exercise of this Warrant, and the number of shares issued shall be rounded up to the nearest whole number.
|
1.6.
|
Additional Documents
. The Holder will sign and deliver any and all documents or approvals required by law, to facilitate the issuance of shares upon exercise of this Warrant.
|
1.7.
|
Loss or Destruction of Warrant
. Upon receipt by the Company of evidence reasonably satisfactory to it of the loss, theft, destruction or mutilation of this Warrant, and (in the case of loss, theft or destruction) of reasonably expenses reimbursement and satisfactory indemnification, and upon surrender and cancellation of this Warrant, if mutilated, the Company will execute and deliver a new Warrant of like tenor and date.
|
1.8.
|
Vesting
. Warrant Shares constituting 75% of the entire amount of Warrant Shares shall vest quarterly over a period of three (3) years, commencing on March 8
th
, 2008.
|
1.9.
|
Acceleration
. Immediately prior to the consummation of a Notice Event (as defined in Section 5.2 below) then, notwithstanding the vesting periods set forth above, all of the Warrant Shares which have not yet vested shall be accelerated and become immediately vested and exercisable.
|
2.
|
TAXES
|
2.1.
|
The Holder acknowledges that the grant of the Warrant, the issue of the Warrant Shares and the execution and/or performance of this Warrant may have tax consequences to the Holder and that the Company is not able to ensure or represent to the Holder the nature and extent of such tax consequences.
|
2.2.
|
The Company shall pay all of the applicable taxes and other charges payable by the Company in connection with the issuance of the Warrant Shares and the preparation and delivery of share certificates pursuant to Section 1 in the name of the Holder (such as transfer taxes in respect of the issue or delivery of Warrant Shares on exercise of this Warrant), if any, but shall not pay any taxes payable by the Holder by virtue of the holding, issuance, exercise or sale of this Warrant or the Warrant Shares by the Holder.
|
3.
|
RESERVATION OF SHARES
; PRESERVATION OF RIGHTS OF HOLDER
|
3.1.
|
Reservation of Shares
. The Company hereby agrees that, at all times prior to the expiration or exercise of this Warrant, it will maintain and reserve, free from pre-emptive or similar rights, such number of authorized but unissued shares so that this Warrant may be exercised without additional authorization of shares.
|
3.2.
|
Preservation of Rights
. The Company will not, by amendment of its organizational documents or through reorganization, recapitalization, consolidation, merger, dissolution, transfer of assets, issue or sale of securities or any other voluntary act, avoid or seek to avoid the observance or performance of any of the covenants, stipulations, conditions or terms to be observed or performed hereunder, but will at all times in good faith assist in the carrying out of all the provisions hereof and in taking of all such actions and making all such adjustments as may be necessary or appropriate in order to fulfill the provisions hereof.
|
4.
|
ADJUSTMENT
|
4.1.
|
The number of Warrant Shares purchasable upon the exercise of this Warrant and the Exercise Price shall be subject to adjustment from time to time or upon exercise, as follows:
|
|
4.1.1.
|
Bonus Shares
. In the event that during the Warrant Period the Company shall distribute a non-cash dividend or shares pursuant to a reclassification of its share capital, to all of the holders of shares of the Company (i.e., bonus shares), then this Warrant shall represent the right to acquire, in addition to the number of Warrant Shares indicated in the caption of this Warrant, the amount of such bonus shares that are distributed to persons holding the class of share capital for which the Warrant is exerciseable and/or to receive the stock dividends which are distributed to persons holding the class of share capital for which the Warrant is exerciseable, without payment of any additional consideration therefor, to which the Holder would have been entitled had this Warrant been exercised prior to the distribution of the stock dividends or the bonus shares.
|
|
4.1.2.
|
Consolidation and Division
. In the event that during the Warrant Period the Company consolidates its share capital into shares of greater par value, or subdivides them into shares of lesser par value, then the number of Warrant Shares to be allotted on exercise of this Warrant after such consolidation or subdivision shall be reduced or increased accordingly, as the case may be, and in each case the Exercise Price shall be adjusted appropriately such that the aggregate consideration hereunder to the Company shall not change.
|
|
4.1.3.
|
Capital Reorganization
. In the event that during the Warrant Period a reorganization of the share capital of the Company is effected (other than subdivision, combination or reclassification provided for elsewhere in this Section 4) and the Preferred C1 Shares are exchanged for other securities of the Company, then, as part of such reorganization, provision shall be made so that the Holder shall be entitled to purchase upon exercise of this Warrant such kind and number of shares or other securities of the Company to which the Holder would have been entitled had this Warrant been exercised without taking into effect such reorganization.
|
4.2.
|
Whenever an adjustment is effected hereunder, the Company shall promptly compute such adjustment and deliver to the Holder a certificate setting forth the number of Warrant Shares (or any other securities) for which this Warrant is exercisable and the Exercise Price as a result of such adjustment, a brief statement of the facts requiring such adjustment and the computation thereof and when such adjustment has or will become effective.
|
5.
|
NOTICE OF CERTAIN EVENTS
|
5.1.
|
If at any time during the Warrant Period, any of the Notice Events set forth in Section 5.2 below shall occur, then, in any one or more of such events, the Company shall deliver to the Holder written notice thereof, including the date on which (a) a record shall be taken in connection with such event (if applicable); and (b) the consummation date of such event. Such written notice shall be delivered to the Holder at least (if possible under the circumstances) thirty (30) days prior to the consummation of the applicable event and not less than thirty (30) days prior to the record date in respect thereto.
|
5.2.
|
For the purposes hereof, a "
Notice Event
" shall mean (i) an initial public offering by the Company or a corporate successor of its equity interests; (ii) the merger or sale of all or substantially all of the assets or shares of the Company (or other similar corporate transaction); and/or (iii) a voluntary or involuntary dissolution, liquidation or winding up of the Company.
|
6.
|
RIGHTS OF THE HOLDER
|
6.1.
|
This Warrant shall not entitle the Holder, by virtue hereof, to any voting rights or other rights as a shareholder of the Company, except for the rights expressly set forth herein.
|
6.2.
|
The Holder acknowledges that the Warrant Shares shall be subject to such certain rights, privileges, restrictions and limitations as set forth in this Warrant, and the organizational documents of the Company (or any other agreement with respect thereto), as may be amended from time to time, and that, as a result,
inter alia
, of such limitations, it may be difficult or impossible for the Holder to realize his investment and/or to sell or otherwise transfer the Warrant Shares. The Holder further acknowledges that the Company's shares are not publicly traded.
|
7.
|
REPRESENTATIONS OF THE COMPANY
|
8.
|
TERMINATION
|
9.
|
MISCELLANEOUS
|
9.1.
|
Entire Agreement; Amendment
. This Warrant sets forth the entire understanding of the parties with respect to the subject matter hereof and supersedes all existing agreements among them concerning such subject matter. All article and section headings herein are inserted for convenience only and shall not modify or affect the construction or interpretation of any provision of this Warrant. No modification or amendment of this Warrant will be valid unless executed in writing by the Company and the Holder.
|
9.2.
|
Waiver
. No failure or delay on the part of any of the parties in exercising any right, power or privilege hereunder and/or under any applicable laws or the exercise of such right or power in a manner inconsistent with the provisions of this Warrant or applicable law shall operate as a waiver thereof. Any waiver must be evidenced in writing signed by the party against whom the waiver is sought to be enforced.
|
9.3.
|
Successors and Assigns; Assignment
. Except as otherwise expressly limited herein, this Warrant shall inure to the benefit of, be binding upon, and be enforceable by the Holder and its respective successors, and administrators and is otherwise non-transferable without the prior consent of the Company. The Holder represents and warrants to the Company that this Warrant and the Warrant Shares, if and when purchased by the Holder, are for the Holder's own account and for investment purposes only and not with a view for resale or transfer and that all the rights pertaining to the Warrant or the Warrant Shares, by law or equity, shall be purchased and possessed by the Holder for the Holder exclusively.
|
9.4.
|
Governing Law
. This Warrant shall be exclusively governed and construed in accordance with the laws of the State of Israel, without regard to conflicts of laws provisions thereof.
|
9.5.
|
Arbitration
. Any dispute, controversy or claim arising in relation to this Warrant, including with regard to its validity, invalidity, breach, enforcement or termination, will be referred to a single arbitrator, who shall be appointed by the Head of the Israeli Bar Association. Arbitration proceedings shall take place in Tel Aviv, Israel, and shall be conducted in English and according to the rules of substantive law (per Section 9.4 above). The arbitrator will not be bound by rules of evidence or procedure and will give the reasons for his judgment. The arbitrator's decision shall be final and enforceable in any court. This paragraph shall constitute an arbitration agreement between the parties.
|
9.6.
|
Notices
. Any notice required or permitted to be given to a party pursuant to the provisions of this Warrant will be in writing and will be effective and deemed delivered to such party on the earliest of the following: (a) all notices and other communications delivered in person or by courier service shall be deemed to have been delivered as of actual delivery thereof; (b) those given by facsimile transmission shall be deemed delivered on the following business day after transmission, with confirmed transmission thereof; and/or (c) all notices and other communications sent by registered mail (or air mail if the posting is international) shall be deemed given three (3) days after posting.
|
9.7.
|
Severability
. If any provision of this Warrant is held to be unenforceable, this Warrant shall be considered divisible and such provision shall be deemed inoperative to the extent it is deemed unenforceable, and in all other respects this Warrant shall remain in full force and effect;
provided
,
however
, that if any such provision may be made enforceable by limitation thereof, then such provision shall be deemed to be so limited and shall be enforceable to the maximum extent permitted by applicable law.
|
9.8.
|
Counterparts
. This Warrant may be executed in any number of counterparts, each of which shall be an original, but all of which together shall constitute one instrument. Facsimile signatures of a party shall be binding as evidence of such party's agreement hereto and acceptance hereof.
|
9.9.
|
Amendments
. To the extent that any amendments to that certain Series C Preferred Share Purchase Agreement
dated June 1
st
, 2009 (
the "
Share Purchase Agreement
")
or the transactions contemplated thereby results in a required amendment to the terms of this Warrant, this Warrant shall be deemed amended to the extent that the amendments to the Share Purchase Agreement are completed in accordance with the provisions of that agreement.
|
Dated: June 1
st
, 2009
|
|
Check-Cap Ltd.
By:
______________________________
Name:
Title:
|
Check-Cap Ltd.
By:
______________________________
Name:
Title:
|
Signature: | |
Address: | |
|
Signature: | |
Address: | |
|
1.
|
EXERCISE OF WARRANT
|
1.1.
|
Warrant Period
. This Warrant may be exercised, subject to the terms and conditions hereof, in whole or in part, at one time or from time to time during the period commencing on June 1
st
, 2009, and for ten (10) years thereafter. The above period shall be referred to hereinafter as the "Warrant Period".
|
1.2.
|
Exercise for Cash
. This Warrant may be exercised by presentation and surrender thereof to the Company at its principal office or at such other office or agency as it may designate from time to time, accompanied by:
|
|
1.2.1.
|
A duly executed notice of exercise, in the form attached hereto as
Schedule 1.2.1
(the "
Exercise Notice
"); and
|
|
1.2.2.
|
Payment to the Company, for the account of the Company, of the aggregate Exercise Price, payable in immediately available funds by wire transfer to the Company's bank account. The Exercise Price will be paid in United States Dollars or the equivalent sum in NIS according to the Bank of Israel exchange rate as published upon Exercise.
|
1.3.
|
Exercise on Net Issuance Basis
. In lieu of payment to the Company as set forth in Section 1.2 above, the Holder may elect to convert this Warrant into the number of Warrant Shares calculated pursuant to the formula below, by presentation and surrender thereof to the Company at its principal office or at such other office or agency it may designate from time to time, accompanied by a duly executed notice of exercise, in the form attached hereto as
Schedule 1.3
(the "
Net Issuance Notice
"):
|
|
X =
|
the number of Warrant Shares to be issued to the Holder;
|
|
Y =
|
the number of Warrant Shares otherwise purchasable upon exercise of this Warrant;
|
|
A =
|
the fair market value of one Warrant Share; and
|
|
|
B =
|
the Exercise Price per one Warrant Share.
|
1.4.
|
Issuance of Warrant Shares
. Upon presentation and surrender of this Warrant, accompanied by (a) the duly executed Exercise Notice and the payment of the applicable aggregate Exercise Price pursuant to Section 1.2 above; or (b) the duly executed Net Issuance Notice pursuant to Section 1.3 above, as the case may be, the Company shall promptly (i) issue to the Holder the Warrant Shares to which the Holder is entitled; and (ii) deliver to the Holder the share certificate evidencing such Warrant Shares.
|
1.5.
|
Fractional Shares
. No fractions of Shares shall be issued in connection with the exercise of this Warrant, and the number of shares issued shall be rounded up to the nearest whole number.
|
1.6.
|
Additional Documents
. The Holder will sign and deliver any and all documents or approvals required by law, to facilitate the issuance of shares upon exercise of this Warrant.
|
1.7.
|
Loss or Destruction of Warrant
. Upon receipt by the Company of evidence reasonably satisfactory to it of the loss, theft, destruction or mutilation of this Warrant, and (in the case of loss, theft or destruction) of reasonably expenses reimbursement and satisfactory indemnification, and upon surrender and cancellation of this Warrant, if mutilated, the Company will execute and deliver a new Warrant of like tenor and date.
|
1.8.
|
Vesting
. Warrant Shares constituting 75% of the entire amount of Warrant Shares shall vest quarterly over a period of three (3) years, commencing on March 8
th
, 2008.
|
1.9.
|
Acceleration
. Immediately prior to the consummation of a Notice Event (as defined in Section 5.2 below) then, notwithstanding the vesting periods set forth above, all of the Warrant Shares which have not yet vested shall be accelerated and become immediately vested and exercisable.
|
2.
|
TAXES
|
2.1.
|
The Holder acknowledges that the grant of the Warrant, the issue of the Warrant Shares and the execution and/or performance of this Warrant may have tax consequences to the Holder and that the Company is not able to ensure or represent to the Holder the nature and extent of such tax consequences.
|
2.2.
|
The Company shall pay all of the applicable taxes and other charges payable by the Company in connection with the issuance of the Warrant Shares and the preparation and delivery of share certificates pursuant to Section 1 in the name of the Holder (such as transfer taxes in respect of the issue or delivery of Warrant Shares on exercise of this Warrant), if any, but shall not pay any taxes payable by the Holder by virtue of the holding, issuance, exercise or sale of this Warrant or the Warrant Shares by the Holder.
|
3.
|
RESERVATION OF SHARES
; PRESERVATION OF RIGHTS OF HOLDER
|
3.1.
|
Reservation of Shares
. The Company hereby agrees that, at all times prior to the expiration or exercise of this Warrant, it will maintain and reserve, free from pre-emptive or similar rights, such number of authorized but unissued shares so that this Warrant may be exercised without additional authorization of shares.
|
3.2.
|
Preservation of Rights
. The Company will not, by amendment of its organizational documents or through reorganization, recapitalization, consolidation, merger, dissolution, transfer of assets, issue or sale of securities or any other voluntary act, avoid or seek to avoid the observance or performance of any of the covenants, stipulations, conditions or terms to be observed or performed hereunder, but will at all times in good faith assist in the carrying out of all the provisions hereof and in taking of all such actions and making all such adjustments as may be necessary or appropriate in order to fulfill the provisions hereof.
|
4.
|
ADJUSTMENT
|
4.1.
|
The number of Warrant Shares purchasable upon the exercise of this Warrant and the Exercise Price shall be subject to adjustment from time to time or upon exercise, as follows:
|
|
4.1.1.
|
Bonus Shares
. In the event that during the Warrant Period the Company shall distribute a non-cash dividend or shares pursuant to a reclassification of its share capital, to all of the holders of shares of the Company (i.e., bonus shares), then this Warrant shall represent the right to acquire, in addition to the number of Warrant Shares indicated in the caption of this Warrant, the amount of such bonus shares that are distributed to persons holding the class of share capital for which the Warrant is exerciseable and/or to receive the stock dividends which are distributed to persons holding the class of share capital for which the Warrant is exerciseable, without payment of any additional consideration therefor, to which the Holder would have been entitled had this Warrant been exercised prior to the distribution of the stock dividends or the bonus shares.
|
|
4.1.2.
|
Consolidation and Division
. In the event that during the Warrant Period the Company consolidates its share capital into shares of greater par value, or subdivides them into shares of lesser par value, then the number of Warrant Shares to be allotted on exercise of this Warrant after such consolidation or subdivision shall be reduced or increased accordingly, as the case may be, and in each case the Exercise Price shall be adjusted appropriately such that the aggregate consideration hereunder to the Company shall not change.
|
|
4.1.3.
|
Capital Reorganization
. In the event that during the Warrant Period a reorganization of the share capital of the Company is effected (other than subdivision, combination or reclassification provided for elsewhere in this Section 4) and the Preferred C1 Shares are exchanged for other securities of the Company, then, as part of such reorganization, provision shall be made so that the Holder shall be entitled to purchase upon exercise of this Warrant such kind and number of shares or other securities of the Company to which the Holder would have been entitled had this Warrant been exercised without taking into effect such reorganization.
|
4.2.
|
Whenever an adjustment is effected hereunder, the Company shall promptly compute such adjustment and deliver to the Holder a certificate setting forth the number of Warrant Shares (or any other securities) for which this Warrant is exercisable and the Exercise Price as a result of such adjustment, a brief statement of the facts requiring such adjustment and the computation thereof and when such adjustment has or will become effective.
|
5.
|
NOTICE OF CERTAIN EVENTS
|
5.1.
|
If at any time during the Warrant Period, any of the Notice Events set forth in Section 5.2 below shall occur, then, in any one or more of such events, the Company shall deliver to the Holder written notice thereof, including the date on which (a) a record shall be taken in connection with such event (if applicable); and (b) the consummation date of such event. Such written notice shall be delivered to the Holder at least (if possible under the circumstances) thirty (30) days prior to the consummation of the applicable event and not less than thirty (30) days prior to the record date in respect thereto.
|
5.2.
|
For the purposes hereof, a "
Notice Event
" shall mean (i) an initial public offering by the Company or a corporate successor of its equity interests; (ii) the merger or sale of all or substantially all of the assets or shares of the Company (or other similar corporate transaction); and/or (iii) a voluntary or involuntary dissolution, liquidation or winding up of the Company.
|
6.
|
RIGHTS OF THE HOLDER
|
6.1.
|
This Warrant shall not entitle the Holder, by virtue hereof, to any voting rights or other rights as a shareholder of the Company, except for the rights expressly set forth herein.
|
6.2.
|
The Holder acknowledges that the Warrant Shares shall be subject to such certain rights, privileges, restrictions and limitations as set forth in this Warrant, and the organizational documents of the Company (or any other agreement with respect thereto), as may be amended from time to time, and that, as a result,
inter alia
, of such limitations, it may be difficult or impossible for the Holder to realize his investment and/or to sell or otherwise transfer the Warrant Shares. The Holder further acknowledges that the Company's shares are not publicly traded.
|
7.
|
REPRESENTATIONS OF THE COMPANY
|
8.
|
TERMINATION
|
9.
|
MISCELLANEOUS
|
9.1.
|
Entire Agreement; Amendment
. This Warrant sets forth the entire understanding of the parties with respect to the subject matter hereof and supersedes all existing agreements among them concerning such subject matter. All article and section headings herein are inserted for convenience only and shall not modify or affect the construction or interpretation of any provision of this Warrant. No modification or amendment of this Warrant will be valid unless executed in writing by the Company and the Holder.
|
9.2.
|
Waiver
. No failure or delay on the part of any of the parties in exercising any right, power or privilege hereunder and/or under any applicable laws or the exercise of such right or power in a manner inconsistent with the provisions of this Warrant or applicable law shall operate as a waiver thereof. Any waiver must be evidenced in writing signed by the party against whom the waiver is sought to be enforced.
|
9.3.
|
Successors and Assigns; Assignment
. Except as otherwise expressly limited herein, this Warrant shall inure to the benefit of, be binding upon, and be enforceable by the Holder and its respective successors, and administrators and is otherwise non-transferable without the prior consent of the Company. The Holder represents and warrants to the Company that this Warrant and the Warrant Shares, if and when purchased by the Holder, are for the Holder's own account and for investment purposes only and not with a view for resale or transfer and that all the rights pertaining to the Warrant or the Warrant Shares, by law or equity, shall be purchased and possessed by the Holder for the Holder exclusively.
|
9.4.
|
Governing Law
. This Warrant shall be exclusively governed and construed in accordance with the laws of the State of Israel, without regard to conflicts of laws provisions thereof.
|
9.5.
|
Arbitration
. Any dispute, controversy or claim arising in relation to this Warrant, including with regard to its validity, invalidity, breach, enforcement or termination, will be referred to a single arbitrator, who shall be appointed by the Head of the Israeli Bar Association. Arbitration proceedings shall take place in Tel Aviv, Israel, and shall be conducted in English and according to the rules of substantive law (per Section 9.4 above). The arbitrator will not be bound by rules of evidence or procedure and will give the reasons for his judgment. The arbitrator's decision shall be final and enforceable in any court. This paragraph shall constitute an arbitration agreement between the parties.
|
9.6.
|
Notices
. Any notice required or permitted to be given to a party pursuant to the provisions of this Warrant will be in writing and will be effective and deemed delivered to such party on the earliest of the following: (a) all notices and other communications delivered in person or by courier service shall be deemed to have been delivered as of actual delivery thereof; (b) those given by facsimile transmission shall be deemed delivered on the following business day after transmission, with confirmed transmission thereof; and/or (c) all notices and other communications sent by registered mail (or air mail if the posting is international) shall be deemed given three (3) days after posting.
|
9.7.
|
Severability
. If any provision of this Warrant is held to be unenforceable, this Warrant shall be considered divisible and such provision shall be deemed inoperative to the extent it is deemed unenforceable, and in all other respects this Warrant shall remain in full force and effect;
provided
,
however
, that if any such provision may be made enforceable by limitation thereof, then such provision shall be deemed to be so limited and shall be enforceable to the maximum extent permitted by applicable law.
|
9.8.
|
Counterparts
. This Warrant may be executed in any number of counterparts, each of which shall be an original, but all of which together shall constitute one instrument. Facsimile signatures of a party shall be binding as evidence of such party's agreement hereto and acceptance hereof.
|
9.9.
|
Amendments
. To the extent that any amendments to that certain Series C Preferred Share Purchase Agreement
dated June 1
st
, 2009 (
the "
Share Purchase Agreement
")
or the transactions contemplated thereby results in a required amendment to the terms of this Warrant, this Warrant shall be deemed amended to the extent that the amendments are to the Share Purchase Agreement are completed in accordance with the provisions of that agreement.
|
Dated: June 1
st
, 2009
|
|
Check-Cap Ltd.
By:
______________________________
Name:
Title:
|
Check-Cap Ltd.
By:
______________________________
Name:
Title:
|
Signature: | |
Address: | |
|
Signature: | |
Address: | |
|
1.
|
EXERCISE OF WARRANT
|
1.1.
|
Warrant Period
. This Warrant may be exercised, subject to the terms and conditions hereof, during the period commencing on April 27, 2010 and terminated upon the earlier of (i) January 21, 2015, or (ii) the closing of the next investment transaction in the Company following the date hereof, provided that the Company provides the Holder a written notice at least fourteen (14) days prior to such closing. The above period shall be referred to hereinafter as the "Warrant Period".
|
1.2.
|
Exercise for Cash
. This Warrant may be exercised by presentation and surrender thereof to the Company at its principal office or at such other office or agency as it may designate from time to time, accompanied by:
|
|
1.2.1.
|
A duly executed notice of exercise, in the form attached hereto as
Schedule 1.2.1
(the "
Exercise Notice
"); and
|
|
1.2.2.
|
Payment to the Company, for the account of the Company, of the aggregate Exercise Price, payable in immediately available funds by wire transfer to the Company's bank account. The Exercise Price will be paid in United States Dollars or the equivalent sum in NIS according to the Bank of Israel exchange rate as published upon Exercise.
|
1.3.
|
Issuance of Warrant Shares
. Upon presentation and surrender of this Warrant, accompanied by the duly executed Exercise Notice and the payment of the applicable aggregate Exercise Price pursuant to Section 1.2 above, the Company shall promptly (i) issue to the Holder the Warrant Shares to which the Holder is entitled; and (ii) deliver to the Holder the share certificate evidencing such Warrant Shares.
|
1.4.
|
Fractional Shares
. No fractions of Shares shall be issued in connection with the exercise of this Warrant, and the number of shares issued shall be rounded up to the nearest whole number.
|
1.5.
|
Additional Documents
. The Holder will sign and deliver any and all documents or approvals required by law, to facilitate the issuance of shares upon exercise of this Warrant.
|
1.6.
|
Loss or Destruction of Warrant
. Upon receipt by the Company of evidence reasonably satisfactory to it of the loss, theft, destruction or mutilation of this Warrant, and (in the case of loss, theft or destruction) of reasonably expenses reimbursement and satisfactory indemnification, and upon surrender and cancellation of this Warrant, if mutilated, the Company will execute and deliver a new Warrant of like tenor and date.
|
1.7.
|
Issuance of C3 Warrants
. Upon the exercise of this Warrant in accordance with the terms and conditions set forth herein, the Company shall issue to the Holder a
warrant
(the "
Ethos C3 Warrant
") to purchase such number of Preferred C3 Shares par value NIS 0.01 each of the Company (the "
Preferred C3 Shares
"), equal to the quotient obtained by dividing (A) the aggregate Exercise Price actually paid by Holder to the Company by (B) the C3 Exercise Price (as defined below). The Ethos C3 Warrant shall be substantially in the form of the C3 Warrants issued to other holders of the Company's Preferred C2 Shares, subject to appropriate adjustments.
|
2.
|
TAXES
|
2.1.
|
The Holder acknowledges that the grant of the Warrant, the issue of the Warrant Shares and the execution and/or performance of this Warrant may have tax consequences to the Holder and that the Company is not able to ensure or represent to the Holder the nature and extent of such tax consequences.
|
2.2.
|
The Holder shall be responsible and shall pay any and all taxes due in connection with the holding, issuance, exercise or sale of this Warrant, the Ethos C3 Warrants (as defined below) or the Warrant Shares by the Holder.
|
3.
|
ADJUSTMENT
|
3.1.
|
The number of Warrant Shares purchasable upon the exercise of this Warrant and the Exercise Price shall be subject to adjustment from time to time or upon exercise, as follows:
|
|
3.1.1.
|
Consolidation and Division
. In the event that during the Warrant Period the Company consolidates its share capital into shares of greater par value, or subdivides them into shares of lesser par value, then the number of Warrant Shares to be allotted on exercise of this Warrant after such consolidation or subdivision shall be reduced or increased accordingly, as the case may be, and in each case the Exercise Price shall be adjusted appropriately such that the aggregate consideration hereunder to the Company shall not change.
|
|
3.1.2.
|
Capital Reorganization
. In the event that during the Warrant Period a reorganization of the share capital of the Company is effected (other than subdivision, combination or reclassification provided for elsewhere in this Section 4) and the Preferred C2 Shares are exchanged for other securities of the Company, then, as part of such reorganization, provision shall be made so that the Holder shall be entitled to purchase upon exercise of this Warrant such kind and number of shares or other securities of the Company to which the Holder would have been entitled had this Warrant been exercised without taking into effect such reorganization.
|
3.2.
|
Whenever an adjustment is effected hereunder, the Company shall promptly compute such adjustment and deliver to the Holder a certificate setting forth the number of Warrant Shares (or any other securities) for which this Warrant is exercisable and the Exercise Price as a result of such adjustment, a brief statement of the facts requiring such adjustment and the computation thereof and when such adjustment has or will become effective.
|
4.
|
RIGHTS OF THE HOLDER
|
4.1.
|
This Warrant shall not entitle the Holder, by virtue hereof, to any voting rights or other rights as a shareholder of the Company, except for the rights expressly set forth herein.
|
4.2.
|
The Holder acknowledges that the Warrant Shares shall be subject to such certain rights, privileges, restrictions and limitations as set forth in this Warrant, and the organizational documents of the Company (or any other agreement with respect thereto), as may be amended from time to time, and that, as a result,
inter alia
, of such limitations, it may be difficult or impossible for the Holder to realize his investment and/or to sell or otherwise transfer the Warrant Shares. The Holder further acknowledges that the Company's shares are not publicly traded.
|
5.
|
TERMINATION
|
6.
|
MISCELLANEOUS
|
6.1.
|
Entire Agreement; Amendment
. This Warrant sets forth the entire understanding of the parties with respect to the subject matter hereof and supersedes all existing agreements among them concerning such subject matter. All article and section headings herein are inserted for convenience only and shall not modify or affect the construction or interpretation of any provision of this Warrant. No modification or amendment of this Warrant will be valid unless executed in writing by the Company and the Holder.
|
6.2.
|
Waiver
. No failure or delay on the part of any of the parties in exercising any right, power or privilege hereunder and/or under any applicable laws or the exercise of such right or power in a manner inconsistent with the provisions of this Warrant or applicable law shall operate as a waiver thereof. Any waiver must be evidenced in writing signed by the party against whom the waiver is sought to be enforced.
|
6.3.
|
Successors and Assigns; Assignment
. Except as otherwise expressly limited herein, this Warrant shall inure to the benefit of, be binding upon, and be enforceable by the Holder and its respective successors, and administrators and is otherwise non-transferable without the prior consent of the Company. The Holder represents and warrants to the Company that this Warrant and the Warrant Shares, if and when purchased by the Holder, are for the Holder's own account and for investment purposes only and not with a view for resale or transfer and that all the rights pertaining to the Warrant or the Warrant Shares, by law or equity, shall be purchased and possessed by the Holder for the Holder exclusively.
|
6.4.
|
Governing Law
. This Warrant shall be exclusively governed and construed in accordance with the laws of the State of Israel, without regard to conflicts of laws provisions thereof.
|
6.5.
|
Arbitration
. Any dispute, controversy or claim arising in relation to this Warrant, including with regard to its validity, invalidity, breach, enforcement or termination, will be referred to a single arbitrator, who shall be appointed by the Head of the Israeli Bar Association. Arbitration proceedings shall take place in Tel Aviv, Israel, and shall be conducted in English and according to the rules of substantive law (per Section 9.4 above). The arbitrator will not be bound by rules of evidence or procedure and will give the reasons for his judgment. The arbitrator's decision shall be final and enforceable in any court. This paragraph shall constitute an arbitration agreement between the parties.
|
6.6.
|
Notices
. Any notice required or permitted to be given to a party pursuant to the provisions of this Warrant will be in writing and will be effective and deemed delivered to such party on the earliest of the following: (a) all notices and other communications delivered in person or by courier service shall be deemed to have been delivered as of actual delivery thereof; (b) those given by facsimile transmission shall be deemed delivered on the following business day after transmission, with confirmed transmission thereof; and/or (c) all notices and other communications sent by registered mail (or air mail if the posting is international) shall be deemed given three (3) days after posting.
|
6.7.
|
Severability
. If any provision of this Warrant is held to be unenforceable, this Warrant shall be considered divisible and such provision shall be deemed inoperative to the extent it is deemed unenforceable, and in all other respects this Warrant shall remain in full force and effect;
provided
,
however
, that if any such provision may be made enforceable by limitation thereof, then such provision shall be deemed to be so limited and shall be enforceable to the maximum extent permitted by applicable law.
|
6.8.
|
Counterparts
. This Warrant may be executed in any number of counterparts, each of which shall be an original, but all of which together shall constitute one instrument. Facsimile signatures of a party shall be binding as evidence of such party's agreement hereto and acceptance hereof.
|
Dated: ________________
|
Check-Cap Ltd.
By: ______________________________
Name:
Title:
|
Signature: | |
Address: | |
|
1.
|
EXERCISE OF WARRANT
|
1.1.
|
Warrant Period
. This Warrant may be exercised, subject to the terms and conditions hereof, in whole or in part, at one time or from time to time during the period commencing on March 17, 2011 (the "
Initial Date
"), and for four (4) years thereafter. The above period shall be referred to hereinafter as the "
Warrant Period
".
|
1.2.
|
Exercise for Cash
. This Warrant may be exercised by presentation and surrender thereof to the Company at its principal office or at such other office or agency as it may designate from time to time, accompanied by:
|
|
(a)
|
A duly executed notice of exercise, in the form attached hereto as
Schedule 1.2.1
(the "
Exercise Notice
"); and
|
|
(b)
|
Payment to the Company, for the account of the Company, of the Exercise Price for the number of Warrant Shares purchased, payable in immediately available funds by wire transfer to the Company's bank account. The Exercise Price will be paid in United States Dollars or the equivalent sum in NIS according to the Bank of Israel exchange rate as published upon Exercise.
|
1.3.
|
Issuance of Warrant Shares
. Upon presentation and surrender of this Warrant, accompanied by (a) the duly executed Exercise Notice and the payment of the applicable Exercise Price for the Warrant Shares being purchased pursuant to Section 1.2 above, the Company shall promptly (i) issue to the Holder the Warrant Shares to which the Holder is entitled; and (ii) deliver to the Holder the share certificate evidencing such Warrant Shares.
|
1.4.
|
Fractional Shares
. No fractions of shares shall be issued in connection with the exercise of this Warrant, and the number of shares issued shall be rounded up to the nearest whole number.
|
1.5.
|
Additional Documents
. The Holder will sign and deliver any and all documents or approvals required by law, to facilitate the issuance of shares upon exercise of this Warrant.
|
1.6.
|
Loss or Destruction of Warrant
. Upon receipt by the Company of evidence reasonably satisfactory to it of the loss, theft, destruction or mutilation of this Warrant, and (in the case of loss, theft or destruction) of reasonable reimbursement of expenses and satisfactory indemnification, and upon surrender and cancellation of this Warrant, if mutilated, the Company will execute and deliver a new Warrant of like tenor and date.
|
1.7.
|
Vesting
. All of the Warrant Shares shall be vested as of the Initial Date.
|
2.
|
TAXES
|
2.1.
|
The Holder acknowledges that the grant of the Warrant, the issue of the Warrant Shares and the execution and/or performance of this Warrant may have tax consequences to the Holder and that the Company is not able to ensure or represent to the Holder the nature and extent of such tax consequences.
|
2.2.
|
The Company shall pay all of the applicable taxes and other charges payable by the Company in connection with the issuance of the Warrant Shares and the preparation and delivery of share certificates pursuant to Section 1 in the name of the Holder (such as transfer taxes in respect of the issue or delivery of Warrant Shares on exercise of this Warrant), if any, but shall not pay any taxes payable by the Holder by virtue of the holding, issuance, exercise or sale of this Warrant or the Warrant Shares by the Holder.
|
3.
|
RESERVATION OF SHARES;
PRESERVATION OF RIGHTS OF HOLDER
|
3.1.
|
Reservation of Shares
. The Company hereby agrees that, at all times prior to the expiration or exercise of this Warrant, it will maintain and reserve, free from pre-emptive or similar rights, such number of authorized but unissued shares so that this Warrant may be exercised without additional authorization of shares.
|
3.2.
|
Preservation of Rights
. The Company will not, by amendment of its organizational documents or through reorganization, recapitalization, consolidation, merger, dissolution, transfer of assets, issue or sale of securities or any other voluntary act, avoid or seek to avoid the observance or performance of any of the covenants, stipulations, conditions or terms to be observed or performed hereunder, but will at all times in good faith assist in the carrying out of all the provisions hereof and in taking of all such actions and making all such adjustments as may be necessary or appropriate in order to fulfill the provisions hereof.
|
4.
|
ADJUSTMENT
|
4.1.
|
The number of Warrant Shares purchasable upon the exercise of this Warrant and the Exercise Price shall be subject to adjustment from time to time or upon exercise, as follows:
|
|
(a)
|
Bonus Shares
. In the event that during the Warrant Period the Company shall distribute a non-cash dividend or shares pursuant to a reclassification of its share capital, to all of the holders of shares of the Company (i.e., bonus shares), then this Warrant shall represent the right to acquire, in addition to the number of Warrant Shares indicated in the caption of this Warrant, the amount of such bonus shares that are distributed to persons holding the class of share capital for which the Warrant is exerciseable and/or to receive the stock dividends which are distributed to persons holding the class of share capital for which the Warrant is exerciseable, without payment of any additional consideration therefor, to which the Holder would have been entitled had this Warrant been exercised prior to the distribution of the stock dividends or the bonus shares.
|
|
(b)
|
Consolidation and Division
. In the event that during the Warrant Period the Company consolidates its share capital into shares of greater par value, or subdivides them into shares of lesser par value, then the number of Warrant Shares to be allotted on exercise of this Warrant after such consolidation or subdivision shall be reduced or increased accordingly, as the case may be, and in each case the Exercise Price shall be adjusted appropriately such that the aggregate consideration hereunder to the Company shall not change.
|
|
(c)
|
Capital Reorganization
. In the event that during the Warrant Period a reorganization of the share capital of the Company is effected (other than subdivision, combination or reclassification provided for elsewhere in this Section 4) and the Preferred D1 Shares are exchanged for other securities of the Company, then, as part of such reorganization, provision shall be made so that the Holder shall be entitled to purchase upon exercise of this Warrant such kind and number of shares or other securities of the Company to which the Holder would have been entitled had this Warrant been exercised without taking into effect such reorganization.
|
4.2.
|
Whenever an adjustment is effected hereunder, the Company shall promptly compute such adjustment and deliver to the Holder a certificate setting forth the number of Warrant Shares (or any other securities) for which this Warrant is exercisable and the Exercise Price as a result of such adjustment, a brief statement of the facts requiring such adjustment and the computation thereof and when such adjustment has or will become effective.
|
5.
|
NOTICE OF CERTAIN EVENTS
|
5.1.
|
If at any time during the Warrant Period, any of the Notice Events set forth in Section 5.2 below shall occur, then, in any one or more of such events, the Company shall deliver to the Holder written notice thereof, including the date on which (a) a record shall be taken in connection with such event (if applicable); and (b) the consummation date of such event. Such written notice shall be delivered to the Holder at least (if possible under the circumstances) thirty (30) days prior to the consummation of the applicable event and not less than thirty (30) days prior to the record date in respect thereto.
|
5.2.
|
For the purposes hereof, a "
Notice Event
" shall mean (i) an initial public offering by the Company or a corporate successor of its equity interests; (ii) the merger or sale of all or substantially all of the assets or shares of the Company (or other similar corporate transaction); and/or (iii) a voluntary or involuntary dissolution, liquidation or winding up of the Company.
|
6.
|
RIGHTS OF THE HOLDER
|
6.1.
|
This Warrant shall not entitle the Holder, by virtue hereof, to any voting rights or other rights as a shareholder of the Company, except for the rights expressly set forth herein.
|
6.2.
|
The Holder acknowledges that the Warrant Shares shall be subject to such certain rights, privileges, restrictions and limitations as set forth in this Warrant, and the organizational documents of the Company (or any other agreement with respect thereto), as may be amended from time to time, and that, as a result,
inter alia
, of such limitations, it may be difficult or impossible for the Holder to realize his investment and/or to sell or otherwise transfer the Warrant Shares. The Holder further acknowledges that the Company's shares are not publicly traded.
|
7.
|
REPRESENTATIONS OF THE COMPANY
|
8.
|
TERMINATION
|
9.
|
MISCELLANEOUS
|
9.1.
|
Entire Agreement; Amendment
. This Warrant sets forth the entire understanding of the parties with respect to the subject matter hereof and supersedes all existing agreements among them concerning such subject matter. All article and section headings herein are inserted for convenience only and shall not modify or affect the construction or interpretation of any provision of this Warrant. No modification or amendment of this Warrant will be valid unless executed in writing by the Company and the Holder.
|
9.2.
|
Waiver
. No failure or delay on the part of any of the parties in exercising any right, power or privilege hereunder and/or under any applicable laws or the exercise of such right or power in a manner inconsistent with the provisions of this Warrant or applicable law shall operate as a waiver thereof. Any waiver must be evidenced in writing signed by the party against whom the waiver is sought to be enforced.
|
9.3.
|
Successors and Assigns; Assignment
. Except as otherwise expressly limited herein, this Warrant shall inure to the benefit of, be binding upon, and be enforceable by the Holder and its respective successors, and administrators and is otherwise non-transferable without the prior consent of the Company. The Holder represents and warrants to the Company that this Warrant and the Warrant Shares, if and when purchased by the Holder, are for the Holder's own account and for investment purposes only and not with a view for resale or transfer and that all the rights pertaining to the Warrant or the Warrant Shares, by law or equity, shall be purchased and possessed by the Holder for the Holder exclusively.
|
9.4.
|
Governing Law
. This Warrant shall be exclusively governed and construed in accordance with the laws of the State of Israel, without regard to conflicts of laws provisions thereof.
|
9.5.
|
Arbitration
. Any dispute, controversy or claim arising in relation to this Warrant, including with regard to its validity, invalidity, breach, enforcement or termination, will be referred to a single arbitrator, who shall be appointed by the Head of the Israeli Bar Association. Arbitration proceedings shall take place in Tel Aviv, Israel, and shall be conducted in English and according to the rules of substantive law (per Section 9.4 above). The arbitrator will not be bound by rules of evidence or procedure and will give the reasons for his judgment. The arbitrator's decision shall be final and enforceable in any court. This paragraph shall constitute an arbitration agreement between the parties.
|
9.6.
|
Notices
. Any notice required or permitted to be given to a party pursuant to the provisions of this Warrant will be in writing and will be effective and deemed delivered to such party on the earliest of the following: (a) all notices and other communications delivered in person or by courier service shall be deemed to have been delivered as of actual delivery thereof; (b) those given by facsimile transmission shall be deemed delivered on the following business day after transmission, with confirmed transmission thereof; and/or (c) all notices and other communications sent by registered mail (or air mail if the posting is international) shall be deemed given three (3) days after posting.
|
9.7.
|
Severability
. If any provision of this Warrant is held to be unenforceable, this Warrant shall be considered divisible and such provision shall be deemed inoperative to the extent it is deemed unenforceable, and in all other respects this Warrant shall remain in full force and effect;
provided
,
however
, that if any such provision may be made enforceable by limitation thereof, then such provision shall be deemed to be so limited and shall be enforceable to the maximum extent permitted by applicable law.
|
9.8.
|
Counterparts
. This Warrant may be executed in any number of counterparts, each of which shall be an original, but all of which together shall constitute one instrument. Facsimile signatures of a party shall be binding as evidence of such party's agreement hereto and acceptance hereof.
|
Dated: March 17, 2011
|
Check-Cap Ltd.
By: ______________________________
Name: Guy Neev
Title: CEO
|
To:
|
Check-Cap Ltd.
|
Signature:
Address:
|
1.
|
EXERCISE OF WARRANT
|
1.1.
|
Warrant Period
. This Warrant may be exercised, subject to the terms and conditions hereof, in whole or in part, at one time or from time to time during the period commencing on ______________ (the "
Initial Date
"), and for four (4) years thereafter. The above period shall be referred to hereinafter as the "
Warrant Period
".
|
1.2.
|
Exercise for Cash
. This Warrant may be exercised by presentation and surrender thereof to the Company at its principal office or at such other office or agency as it may designate from time to time, accompanied by:
|
|
(a)
|
A duly executed notice of exercise, in the form attached hereto as
Schedule 1.2.1
(the "
Exercise Notice
"); and
|
|
(b)
|
Payment to the Company, for the account of the Company, of the Exercise Price for the number of Warrant Shares purchased, payable in immediately available funds by wire transfer to the Company's bank account. The Exercise Price will be paid in United States Dollars or the equivalent sum in NIS according to the Bank of Israel exchange rate as published upon Exercise.
|
1.3.
|
Issuance of Warrant Shares
. Upon presentation and surrender of this Warrant, accompanied by (a) the duly executed Exercise Notice and the payment of the applicable Exercise Price for the Warrant Shares being purchased pursuant to Section 1.2 above, the Company shall promptly (i) issue to the Holder the Warrant Shares to which the Holder is entitled; and (ii) deliver to the Holder the share certificate evidencing such Warrant Shares.
|
1.4.
|
Fractional Shares
. No fractions of shares shall be issued in connection with the exercise of this Warrant, and the number of shares issued shall be rounded up to the nearest whole number.
|
1.5.
|
Additional Documents
. The Holder will sign and deliver any and all documents or approvals required by law, to facilitate the issuance of shares upon exercise of this Warrant.
|
1.6.
|
Loss or Destruction of Warrant
. Upon receipt by the Company of evidence reasonably satisfactory to it of the loss, theft, destruction or mutilation of this Warrant, and (in the case of loss, theft or destruction) of reasonable reimbursement of expenses and satisfactory indemnification, and upon surrender and cancellation of this Warrant, if mutilated, the Company will execute and deliver a new Warrant of like tenor and date.
|
1.7.
|
Vesting
. All of the Warrant Shares shall be vested as of the Initial Date.
|
2.
|
TAXES
|
2.1.
|
The Holder acknowledges that the grant of the Warrant, the issue of the Warrant Shares and the execution and/or performance of this Warrant may have tax consequences to the Holder and that the Company is not able to ensure or represent to the Holder the nature and extent of such tax consequences.
|
2.2.
|
The Company shall pay all of the applicable taxes and other charges payable by the Company in connection with the issuance of the Warrant Shares and the preparation and delivery of share certificates pursuant to Section 1 in the name of the Holder (such as transfer taxes in respect of the issue or delivery of Warrant Shares on exercise of this Warrant), if any, but shall not pay any taxes payable by the Holder by virtue of the holding, issuance, exercise or sale of this Warrant or the Warrant Shares by the Holder.
|
3.
|
RESERVATION OF SHARES;
PRESERVATION OF RIGHTS OF HOLDER
|
3.1.
|
Reservation of Shares
. The Company hereby agrees that, at all times prior to the expiration or exercise of this Warrant, it will maintain and reserve, free from pre-emptive or similar rights, such number of authorized but unissued shares so that this Warrant may be exercised without additional authorization of shares.
|
3.2.
|
Preservation of Rights
. The Company will not, by amendment of its organizational documents or through reorganization, recapitalization, consolidation, merger, dissolution, transfer of assets, issue or sale of securities or any other voluntary act, avoid or seek to avoid the observance or performance of any of the covenants, stipulations, conditions or terms to be observed or performed hereunder, but will at all times in good faith assist in the carrying out of all the provisions hereof and in taking of all such actions and making all such adjustments as may be necessary or appropriate in order to fulfill the provisions hereof.
|
4.
|
ADJUSTMENT
|
4.1.
|
The number of Warrant Shares purchasable upon the exercise of this Warrant and the Exercise Price shall be subject to adjustment from time to time or upon exercise, as follows:
|
|
(a)
|
Bonus Shares
. In the event that during the Warrant Period the Company shall distribute a non-cash dividend or shares pursuant to a reclassification of its share capital, to all of the holders of shares of the Company (i.e., bonus shares), then this Warrant shall represent the right to acquire, in addition to the number of Warrant Shares indicated in the caption of this Warrant, the amount of such bonus shares that are distributed to persons holding the class of share capital for which the Warrant is exerciseable and/or to receive the stock dividends which are distributed to persons holding the class of share capital for which the Warrant is exerciseable, without payment of any additional consideration therefor, to which the Holder would have been entitled had this Warrant been exercised prior to the distribution of the stock dividends or the bonus shares.
|
|
(b)
|
Consolidation and Division
. In the event that during the Warrant Period the Company consolidates its share capital into shares of greater par value, or subdivides them into shares of lesser par value, then the number of Warrant Shares to be allotted on exercise of this Warrant after such consolidation or subdivision shall be reduced or increased accordingly, as the case may be, and in each case the Exercise Price shall be adjusted appropriately such that the aggregate consideration hereunder to the Company shall not change.
|
|
(c)
|
Capital Reorganization
. In the event that during the Warrant Period a reorganization of the share capital of the Company is effected (other than subdivision, combination or reclassification provided for elsewhere in this Section 4) and the Preferred D2 Shares are exchanged for other securities of the Company, then, as part of such reorganization, provision shall be made so that the Holder shall be entitled to purchase upon exercise of this Warrant such kind and number of shares or other securities of the Company to which the Holder would have been entitled had this Warrant been exercised without taking into effect such reorganization.
|
4.2.
|
Whenever an adjustment is effected hereunder, the Company shall promptly compute such adjustment and deliver to the Holder a certificate setting forth the number of Warrant Shares (or any other securities) for which this Warrant is exercisable and the Exercise Price as a result of such adjustment, a brief statement of the facts requiring such adjustment and the computation thereof and when such adjustment has or will become effective.
|
5.
|
NOTICE OF CERTAIN EVENTS
|
5.1.
|
If at any time during the Warrant Period, any of the Notice Events set forth in Section 5.2 below shall occur, then, in any one or more of such events, the Company shall deliver to the Holder written notice thereof, including the date on which (a) a record shall be taken in connection with such event (if applicable); and (b) the consummation date of such event. Such written notice shall be delivered to the Holder at least (if possible under the circumstances) thirty (30) days prior to the consummation of the applicable event and not less than thirty (30) days prior to the record date in respect thereto.
|
5.2.
|
For the purposes hereof, a "
Notice Event
" shall mean (i) an initial public offering by the Company or a corporate successor of its equity interests; (ii) the merger or sale of all or substantially all of the assets or shares of the Company (or other similar corporate transaction); and/or (iii) a voluntary or involuntary dissolution, liquidation or winding up of the Company.
|
6.
|
RIGHTS OF THE HOLDER
|
6.1.
|
This Warrant shall not entitle the Holder, by virtue hereof, to any voting rights or other rights as a shareholder of the Company, except for the rights expressly set forth herein.
|
6.2.
|
The Holder acknowledges that the Warrant Shares shall be subject to such certain rights, privileges, restrictions and limitations as set forth in this Warrant, and the organizational documents of the Company (or any other agreement with respect thereto), as may be amended from time to time, and that, as a result,
inter alia
, of such limitations, it may be difficult or impossible for the Holder to realize his investment and/or to sell or otherwise transfer the Warrant Shares. The Holder further acknowledges that the Company's shares are not publicly traded.
|
7.
|
REPRESENTATIONS OF THE COMPANY
|
8.
|
TERMINATION
|
9.
|
MISCELLANEOUS
|
9.1.
|
Entire Agreement; Amendment
. This Warrant sets forth the entire understanding of the parties with respect to the subject matter hereof and supersedes all existing agreements among them concerning such subject matter. All article and section headings herein are inserted for convenience only and shall not modify or affect the construction or interpretation of any provision of this Warrant. No modification or amendment of this Warrant will be valid unless executed in writing by the Company and the Holder.
|
9.2.
|
Waiver
. No failure or delay on the part of any of the parties in exercising any right, power or privilege hereunder and/or under any applicable laws or the exercise of such right or power in a manner inconsistent with the provisions of this Warrant or applicable law shall operate as a waiver thereof. Any waiver must be evidenced in writing signed by the party against whom the waiver is sought to be enforced.
|
9.3.
|
Successors and Assigns; Assignment
. Except as otherwise expressly limited herein, this Warrant shall inure to the benefit of, be binding upon, and be enforceable by the Holder and its respective successors, and administrators and is otherwise non-transferable without the prior consent of the Company. The Holder represents and warrants to the Company that this Warrant and the Warrant Shares, if and when purchased by the Holder, are for the Holder's own account and for investment purposes only and not with a view for resale or transfer and that all the rights pertaining to the Warrant or the Warrant Shares, by law or equity, shall be purchased and possessed by the Holder for the Holder exclusively.
|
9.4.
|
Governing Law
. This Warrant shall be exclusively governed and construed in accordance with the laws of the State of Israel, without regard to conflicts of laws provisions thereof.
|
9.5.
|
Arbitration
. Any dispute, controversy or claim arising in relation to this Warrant, including with regard to its validity, invalidity, breach, enforcement or termination, will be referred to a single arbitrator, who shall be appointed by the Head of the Israeli Bar Association. Arbitration proceedings shall take place in Tel Aviv, Israel, and shall be conducted in English and according to the rules of substantive law (per Section 9.4 above). The arbitrator will not be bound by rules of evidence or procedure and will give the reasons for his judgment. The arbitrator's decision shall be final and enforceable in any court. This paragraph shall constitute an arbitration agreement between the parties.
|
9.6.
|
Notices
. Any notice required or permitted to be given to a party pursuant to the provisions of this Warrant will be in writing and will be effective and deemed delivered to such party on the earliest of the following: (a) all notices and other communications delivered in person or by courier service shall be deemed to have been delivered as of actual delivery thereof; (b) those given by facsimile transmission shall be deemed delivered on the following business day after transmission, with confirmed transmission thereof; and/or (c) all notices and other communications sent by registered mail (or air mail if the posting is international) shall be deemed given three (3) days after posting.
|
9.7.
|
Severability
. If any provision of this Warrant is held to be unenforceable, this Warrant shall be considered divisible and such provision shall be deemed inoperative to the extent it is deemed unenforceable, and in all other respects this Warrant shall remain in full force and effect;
provided
,
however
, that if any such provision may be made enforceable by limitation thereof, then such provision shall be deemed to be so limited and shall be enforceable to the maximum extent permitted by applicable law.
|
9.8.
|
Counterparts
. This Warrant may be executed in any number of counterparts, each of which shall be an original, but all of which together shall constitute one instrument. Facsimile signatures of a party shall be binding as evidence of such party's agreement hereto and acceptance hereof.
|
Dated: ___________, 2011
|
Check-Cap Ltd.
By: ______________________________
Name:
Title:
|
To:
|
Check-Cap Ltd.
|
Signature:
Address:
|
1.
|
Issue and Purchase of
Initial Closing Shares.
|
1.1.
|
Initial Closing
. At the Initial Closing (as defined below), the Company shall issue and allot to the Investors, and the Investors shall purchase from the Company, severally and not jointly, an aggregate of up to 26,519,571 of the Company's Preferred D-1 Shares (the “
Issued Shares
”), at a price per each Issued Share of
US$0.37708
(the "
Price Per Share
"). The Price Per Share reflects a Company pre-money valuation of US$40,000,000 on a Fully Diluted Basis. The amount of Issued Shares to be purchased by each Investor, and the amount to be invested by each Investor, at the Initial Closing, is set forth in each
Investor's Schedule
attached hereto in
Schedule 1
, in respect of each Investor.
|
1.2.
|
Each Investor shall receive, for no additional consideration:
|
(a)
|
A Warrant (the "
Warrant
"), for the purchase of such number of Preferred D-2 Shares as set out in each
Investor's Schedule
attached hereto, for each Investor, representing warrant coverage of 66% of the Issued Shares purchased by such Investor hereby (the "
Warrant Coverage
" and the "
Warrant Shares
", respectively) at a price per each Warrant Share of US$0.47135 (the "
Warrant Price Per Share
"), all as pursuant to the terms and conditions of the warrant in the form attached hereto as
Schedule
1.2(a)
|
2.
|
Deferred Closing
|
2.1.
|
Subject to the terms and conditions hereof, the Company may consummate an additional closing or series of closings (each a “
Deferred Closing
”) with an additional investor or investors (each an "
Additional Investor
" and together the "
Additional Investors
") on the same commercial terms as set out herein and provided that any such Deferred Closings shall occur no later than 90 days from the Effective Date. Such Additional Investors, together, shall be entitled to invest at the Deferred Closing(s) an aggregate amount that, together with the amounts invested at the Initial Closing, shall not exceed ten million U.S. dollars ($10,000,000). Each Additional Investor shall be entitled to receive:
|
|
(a)
|
Such number of Preferred D-1 Shares equal to the amount invested by such Additional Investor (the "
Additional Investor Purchase Price
") divided by the Price Per Share (the "
Additional Investor Shares
"). At each Deferred Closing an additional Investor's Schedule shall be joined to this Agreement for each Additional Investor, to reflect the Additional Investor Purchase Price invested by each Additional Investor and the Additional Investor Shares issued to such Additional Investor; and such shares shall be deemed “Issued Shares” hereunder, and such Additional Investor shall be deemed an Investor hereunder.
|
|
(b)
|
For no additional consideration, a Warrant, for the purchase of such number of Warrant Shares representing the number of Additional Investor Shares multiplied by 66% (the "
Additional Investor Warrant
") at the Warrant Price Per Share, all as pursuant to the terms and conditions of the warrant in the form attached hereto as
Schedule
1.2(a)
.
|
2.2.
|
INTENTIONALLY LEFT BLANK
|
2.3.
|
It is hereby clarified that in the event that that Company shall not have been able to raise at least US$4 million (including the amounts invested by the Investors and including no less than US$1.5 million from existing shareholders of the Company (the "
Minimum Amount
"), at the Initial Closing, then, at its sole option, the Company may terminate this Agreement upon written notice to the Investors, with no liability therefor.
|
2.4.
|
In addition, and notwithstanding any of the aforesaid, in the event that the Company determines, in its sole discretion, that the publication of a prospectus is required under the Israeli Securities Law, 1968 and all regulations promulgated thereunder (the "
ISL
") due to the number of Investors and/or Additional Investors who wish to participate in this Series D financing round, including the number of offerees or the number of persons acquiring securities pursuant to this Agreement or any other agreement on or prior to the date hereof, or in any other way, including through pre-emptive or similar rights, then the Company, in its sole discretion, may terminate this Agreement with respect to any or all such Investors and/or Additional Investor as determined by the Company in its sole discretion, upon written notice to such Investors and Additional Investors and with no liability therefor.
|
2.5.
|
The Company agrees that it shall not, without the agreement of the Investors and the Additional Investors which at such time hold a majority of the Issued Shares, enter into substantially similar share purchase agreements with Additional Investors such that the Company raises more than US$10 million in this Series D financing round (including such amounts as raised hereunder but without taking into account any shares issued by the Company pursuant to any existing co-investment or preemptive rights (or similar rights) held by shareholders of the Company).
|
3.
|
Closing
|
3.1.
|
Initial Closing
. Subject to the fulfillment (or waiver) of the conditions specified in Sections
6 and
7 below, the initial closing of the purchase of the Issued Shares, the issue and allotment of the Issued Shares and the Warrants by the Company to, and the registration of the Issued Shares in the name of the Investor in the register of shareholders of the Company (collectively, the "
Initial Closing
") shall take place at the offices of Fischer Behar Chen Well Orion & Co. on March 7, 2011, or such other later date, time and place as notified by the Company to the Investors with reasonable notice, provided that if the Initial Closing shall not take place within 30 days of such date, and without derogating from the provisions of Sections 2.3, 2.4 or 3.4 hereof, then (a) the Company may terminate this Agreement
vis a vis
any of the Investors who fail to close provided that the failure to close was not due to any action or failure to take action of the Company and (b) any Investor may terminate this Agreement
vis a vis
the other parties hereto, provided that the failure to close was not due to any action or failure to act of such Investor.
|
3.2.
|
Transactions at Initial Closing:
|
|
(a)
|
The Company shall deliver to the Investors the following documents:
|
|
(i)
|
An executed resolution of the Company's shareholders that,
inter alia,
replaces the Second Amended and Restated Articles of Association of the Company (the “
Articles
”) with the Third Amended and Restated Articles of Association of the Company, in the form attached hereto as
Schedule
3.2(a)(i)
B
(the "
New Articles
") and creates new classes of Preferred D1 Shares and Preferred D2 Shares (hereinafter, together the "
Preferred D Shares
").
|
|
(ii)
|
True and correct copies of resolutions of the Board authorizing,
inter alia,
the (i) issuance and allotment of the Issued Shares to each of the Investors against payment of the purchase price attributed to the Issued Shares allotted to such Investor at the Initial Closing, (ii) the issuance to each Investor, at the Initial Closing, of the Warrant for such number of Warrant Shares as allocated to it hereby; (iii) the issuance and allotment of Warrant Shares to the Investor against payment of the Warrant Price Per Share for that number of Warrant Shares purchased pursuant to an exercise of the Warrant; (iv) reserving a sufficient number of shares of ordinary shares of the Company to be issued upon conversion of the Preferred D-1 Shares and the Warrant Shares and (v) reserving a sufficient number of Warrant Shares to be issued upon exercise of the Warrants, and (vii) entry into this Agreement and the performance of the transactions contemplated hereby.
|
|
(iii)
|
To each Investor, a validly executed share certificate covering such Issued Shares, issued in the name of that Investor pursuant to the terms hereof.
|
|
(iv)
|
A copy of the Company's shareholders' register updated as of immediately following the Initial Closing.
|
|
(v)
|
To each Investor, the Warrant for such number of Warrant Shares as specified herein to be issued in the name of the Investor.
|
|
(vi)
|
A legal opinion from the legal counsel to the Company, dated as of the date of the Initial Closing in substantially the form attached hereto as
Schedule
3.2(a)(vi)
.
|
|
(b)
|
Each Investor shall transfer the Price Per Share for each of the Issued Shares to be purchased by it to the Company by wire transfer (in immediately payable funds), banker's check, or such other form of payment as is mutually agreed by the Company and the Investor.
|
|
(c)
|
If so required by the Company, any Investor so requested by the Company shall deliver to the Company an executed OCS Undertaking (as defined in Section
8.2 below).
|
|
(d)
|
The Company shall deliver to the Investors a compliance certificate executed by an officer of the Company dated as of the Initial Closing Date, to the effect that the conditions specified in Sections 6.1 and 6.2 of this Agreement have been satisfied.
|
3.3.
|
Transactions at Deferred Closing
. At each Deferred Closing, (i) each Additional Investor shall provide the Company with: (A) a duly executed joinder agreement and (B) payment of the Additional Investor Purchase Price; (ii) the Company shall deliver to each Additional Investor (A) a consent of the Board of Directors approving (a) the issuance of the Additional Investor Shares to the Additional Investor; (b) the issuance of the Additional Investor Warrant to the Additional Investor; (c) the issuance and allotment of Warrant Shares to the Additional Investor against payment of the Warrant Price Per Share for that number of Warrant Shares available upon exercise of the Additional Investor Warrant; (d) reserving a sufficient number of shares of ordinary shares of the Company to be issued upon conversion of the Additional Investor Shares and the Warrant Shares to be issued upon exercise of the Additional Investor Warrant and (e) reserving a sufficient number of Warrant Shares to be issued upon exercise of the Additional Investor Warrant and (B) a validly executed Share Certificate covering the applicable amount of Additional Investor Shares.
|
3.4.
|
Without derogating from the provisions of Section
2.3 or 2.4 hereof, failure of any of the Investors to consummate the transactions herein (a "
Non-Closing Investor
"), shall not affect the obligation of the Company or the other Investors hereunder to consummate this Agreement, provided that the post-Closing capitalization table of the Company set forth in Schedule
4.2 shall be replaced with a capitalization table not taking into account such Investor and not taking into account any shares no longer issuable to "finders" on account of introducing such Non-Closing Investor to the Company.
|
4.
|
Representations and Warranties of the Company
|
4.1.
|
Organization
. The Company is a company duly incorporated and validly existing under the laws of the State of Israel. The Company has the power to own and lease its properties and to carry on its business as now being conducted and as proposed to be conducted.
|
4.2.
|
Share Capital
. The authorized share capital of the Company immediately prior to the Initial Closing shall consist of eleven million four hundred thousand New Israeli Shekels (NIS 11,400,000) divided into (i) 907,154,180 Ordinary Shares, of nominal value NIS 0.01 each, of which 23,027,854 Ordinary Shares are issued and outstanding, (ii) 6,750,000 Preferred A Shares, of nominal value NIS 0.01 each, all of which are issued and outstanding, (iii) 6,769,359 Preferred B Shares, of nominal value NIS 0.01 each, all of which are issued and outstanding, (iv) 17,493,491 Preferred C1 Shares, of nominal value NIS 0.01 each, of which 16
,
414,906 are issued and outstanding, (v) 31,832,969 Preferred C2 Shares, of nominal value NIS 0.01 each, of which 29,788,667 are issued and outstanding, (vi) 30,000,000 Preferred C3 Shares, of nominal value NIS 0.01 each, none of which are issued and outstanding, (vii)
80
,000,000 Preferred D1 Shares, of nominal value NIS 0.01 each, none of which are issued and outstanding and (viii) 60,000,000 Preferred D2 Shares, of nominal value NIS 0.01 each, none of which are issued and outstanding
.
|
4.3.
|
Financial Statements
. The Company has furnished the Investor with its (i) audited and consolidated financial statements as of and for the year ended December 31, 2009; and (ii) its unaudited financial statements for the quarter ending on September 30, 2010 (together, the “
Financial Statements
”) in translated form. Subject to that set out in the Disclosure Schedule, the Financial Statements are true and correct in all material respects, are in accordance with the books and records of the Company and have been prepared in accordance with International Financial Reporting Standards consistently applied, and fairly and accurately present in all material respects the financial position of the Company as of such dates and the results of its operations for the periods then ended, subject in the case of the unaudited financial statements to year end and other audit adjustments.
|
4.4.
|
Authorization; Approvals
. All corporate action on the part of the Company, its shareholders and directors necessary for the authorization, execution, delivery, and performance of all of the Company's obligations to the Investor under this Agreement, and the other agreements contemplated hereby or which are ancillary hereto including the authorization, issuance, and allotment of the Issued Shares being sold to the Investor under this Agreement, and the issuance of the Warrant hereunder to the Investor has been (or will be) taken prior to the Closing. This Agreement, when executed and delivered by or on behalf of the Company, shall be duly and validly authorized, executed and delivered by the Company and shall constitute the valid and legally binding obligations of the Company, legally enforceable against the Company in accordance with their respective terms. Except as set forth in the Disclosure Schedule, no consent, approval, order, license, permit, action by, or authorization of or designation, declaration, or filing with any governmental authority on the part of the Company is required that has not been, or will not have been, obtained by the Company on or prior to the Closing in connection with the valid execution, delivery and performance of this Agreement and any other agreements contemplated hereby or ancillary hereto or the offer, sale, or issuance of the Issued Shares.
|
4.5.
|
Compliance with Other Instruments
. The Company is not in material default (a) under the Articles or other organizational documents, or under any note, indenture, mortgage, lease, agreement, contract, purchase order or other instrument, document or agreement to which the Company is a party, or (b) with respect to any law, statute, ordinance, regulation, order, writ, injunction, decree, or judgment of any court or any governmental department, commission, board, bureau, agency or instrumentality, domestic or foreign, which default, in any such case, would materially adversely affect or in the future is reasonably likely to materially adversely affect the Company's business, prospects, condition (financial or otherwise), affairs, operations or assets. To the Company's knowledge, no third party is in material default under any agreement, contract or other instrument, document or agreement to which the Company is a party. The Company is not a party to or bound by any order, judgment, decree or award of any governmental authority, agency, court, tribunal or arbitrator.
|
4.6.
|
No Breach
. Neither the execution and delivery of this Agreement and any other agreements contemplated hereby or ancillary hereto nor compliance by the Company with the terms and provisions hereof or thereof will conflict with, or result in a breach or violation of, any of the terms, conditions and provisions of: (i) the Articles (assuming the receipt of any and all consents required by the Articles), (ii) any judgment, order, injunction, decree, or ruling of any court or governmental authority, domestic or foreign, (iii) any agreement, contract, lease, license or commitment to which the Company is a party or to which it is subject, or (iv) applicable law. Such execution, delivery and compliance will not (a) give to others any rights, including rights of termination, cancellation or acceleration, in or with respect to any agreement, contract or commitment referred to in this paragraph, or to any of the properties of the Company, or (b) except as specified in the Articles, otherwise require the consent or approval of any person, which consent or approval has not heretofore been obtained.
|
4.7.
|
Taxes
. The Company has accurately prepared and filed all tax returns and reports required by it under applicable law. All tax returns and reports of the Company are true and correct in all material respects and the Company has paid on time all taxes and other assessments due. No deficiency assessment or proposed adjustment of income or payroll taxes of the Company is pending and the Company has no knowledge of any proposed liability for any tax to be imposed. The Company has not made any elections under applicable laws or regulations (other than elections that related solely to methods of accounting, depreciation or amortization) that would have a material adverse effect on the Company, its financial condition, its business as presently conducted or proposed to be conducted or any of its properties or assets.
|
4.8.
|
Litigation
. No action, proceeding or governmental inquiry or investigation is pending or, to the Company's knowledge, threatened against the Company or against any of the Company's properties, or with regard to the Company’s business, before any court, arbitration board or tribunal or administrative or other governmental agency.
|
5.
|
Representations and Warranties of the Investor
|
5.1.
|
Enforceability
. The Investor has full legal capacity, power and authority to execute, deliver, and perform its obligations under this Agreement, and all schedules thereof. This Agreement and the agreements to be executed by the Investor under this Agreement (if any), when executed and delivered by the Investor, will constitute the valid, binding and enforceable obligations of the Investor in accordance with their terms.
|
5.2.
|
No Breach
. The execution and delivery of this Agreement and the consummation of the transactions contemplated hereby will not result in the breach of any term of, or constitute a default under, any contract, agreement, commitment, indenture, mortgage, note or other instrument or obligation to which the Investor may be bound. No approval or consent from any person, entity or authority, is required by the Investor for the execution, delivery and performance by it of this Agreement and any other agreement hereunder.
|
5.3.
|
Securities Law
. In the event that the Investor is a not a resident of Israel, at the time such Investor was offered to purchase securities of the Company, it was, and as of the date hereof it is, and at the Closing and on each date on which it exercises any Warrant, it will be either: (i) an “accredited investor” as defined in Rule 501(a) under the U.S. Securities Act of 1933, as amended, and the rules and regulations promulgated thereunder (the "
Securities Act
") or (ii) a “qualified institutional buyer” as defined in Rule 144A(a) under the Securities Act.
|
5.4.
|
Investment
. The Investor is an investor in securities of companies in the development stage, including medical device companies and is able to bear the economic risk of its investment and has such knowledge and experience in financial or business matters, that it is capable of evaluating the merits and risks of an investment in companies in the development stage. The Investor also represents that it has (i) performed its own independent review of the data and documents it requested and received from the Company in connection with the Company and this Agreement and is aware,
inter alia
, that the Company is in the process of developing its product and does not yet have any operating history; (ii) been given the opportunity to ask questions of and receive answers from the Company regarding the Company, the terms and conditions of the Issued Shares and Warrants, and the Company’s current and proposed business, operations, properties, prospects, legal and financial condition; and (iii) reached the decision to purchase shares in the Company as a result of careful consideration, and with full knowledge of the risks inherent in such decision, including but not limited to the risks concerning (a) the business of the Company, (b) the research, development and engineering undertaken or planned to be undertaken by the Company, (c) the clinical program of the Company, (d) the regulations and laws applying to the Company and its business, (e) the intellectual property of the Company, (f) the shares of the Company and the share price thereof, and (g) taxation (the "
Enumerated Risks
"). The Investor acknowledges and agrees that the Company makes no representation or warranty that the Enumerated Risks are either the only risks or the most important risks for the Investor to take into consideration hereunder. The Investor represents and agrees that the Issued Shares allotted to such Investor hereunder and the Warrant are purchased only for investment purposes, for its own account, and not as a nominee or agent, and not with the view to, or for resale in connection with, any distribution thereof.
|
5.5.
|
Restricted Securities
. The Investor understands that the Issued Shares allotted to such Investor hereunder and the Warrant are and, when issued, the Warrant Shares allotted to the Investor hereunder will be “restricted securities” (as defined in Rule 144 under the Securities Act) and have not been registered under the Securities Act or any applicable state securities law.
|
5.6.
|
General Solicitation
. The Investor is not purchasing the Issued Shares allotted to such Investor or the Warrant as a result of any advertisement, article, notice or other communication regarding the Issued Shares or the Warrants published in any newspaper, magazine or similar media or broadcast over television or radio or presented at any seminar or any other general solicitation or general advertisement (within the meaning of Regulation D under the Securities Act).
|
5.7.
|
No Public Market
. The Investor understands and acknowledges that no public market now exists for any of the securities issued by the Company and that the Company has made no assurances that a public market will ever exist for the Company’s securities.
|
6.
|
Conditions to Closing of the Investor
|
6.1.
|
Representations and Warranties
. The representations and warranties made by the Company in this Agreement shall have been true and correct when made, and shall be true and correct as if made on the date of the Initial Closing.
|
6.2.
|
Covenants
. All covenants, agreements, and conditions contained in this Agreement to be performed or complied with by the Company prior to or at the Initial Closing shall have been performed or complied with by the Company prior to or at the Initial Closing.
|
6.3.
|
Delivery of Deliverables
. All of the deliverables to be delivered or performed by the Company pursuant to Section
3.2 shall have been delivered to the Investor.
|
6.4.
|
New Articles
. The New Articles shall have been adopted by the Company as required by the Articles and by law, and shall be in full force and effect.
|
7.
|
Conditions to Closing of the Company
|
7.1.
|
Representations and Warranties
. The representations and warranties made by the Investor in this Agreement shall have been true and correct when made, and shall be true and correct as of the date of the Initial Closing.
|
7.2.
|
Covenants
. All covenants, agreements and conditions contained in this Agreement to be performed, or complied with, by the Investor prior to or at the Initial Closing shall have been performed or complied with by the Investor prior to or at the Initial Closing.
|
7.3.
|
Minimum Amount
. The Company shall have raised and shall have closed, or shall close concurrently with the Initial Closing hereof, no less than the Minimum Amount for this round of Series D financing.
|
7.4.
|
Compliance with ISL
. The Company shall not be required to publish a prospectus pursuant to the provisions of the ISL due to the number of Investors or Additional Investors who wish to participate in this Series D financing round, including the number of offerees or the number of persons acquiring securities pursuant to this Agreement or any other agreement on or prior to the date hereof.
|
7.5.
|
Approvals
. The Company shall have obtained all board and shareholder, governmental, regulatory and other third party consents and approvals, if any, necessary for the sale of the Issued Shares and Warrant and the performance of the transactions contemplated hereby.
|
8.
|
Affirmative Covenants.
|
8.1.
|
Expenses
. Each of the Company and each Investor shall bear its own costs and expenses in connection with the transaction contemplated hereunder.
|
8.2.
|
OCS Undertaking
. To the extent that at any time hereinafter an Investor shall hold such number of securities of the Company such that it shall be legally required, in the view of the Company, to sign an undertaking to the OCS, then the Investor shall sign such undertaking as may be required by the OCS at such time (the "
OCS Undertaking
").
|
9.
|
Confidentiality
|
10.
|
Additional Agreements
|
10.1.
|
Transfer Restrictions
. The Issued Shares and the Warrant and, when issued, the Warrant Shares may only be disposed of in compliance with state and federal securities laws and with the laws of the State of Israel, as applicable. In connection with any transfer of Issued Shares, Warrants, or Warrant Shares, other than pursuant to an effective registration statement under the Securities Act or an exemption from the registration requirements of the Securities Act, to the Company, the Company may require the transferor thereof to provide to the Company an opinion of counsel selected by the transferor and reasonably acceptable to the Company, the form and substance of which opinion shall be reasonably satisfactory to the Company, to the effect that such transfer does not require registration of such transferred securities under the Securities Act. As a condition of transfer, any such transferee shall agree in writing to be bound by the terms of this Agreement and shall have the rights and obligations of the Investor under this Agreement.
|
10.2.
|
Legends
. Each Investor agrees to the imprinting, so long as is required by this Section
10, of a legend on any of the Issued Shares or the Warrant Shares in the following form:
|
11.
|
Miscellaneous
|
11.1.
|
Further Assurances
. Each of the parties 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 parties as reflected thereby.
|
11.2.
|
Governing Law; Jurisdiction
. This Agreement shall be deemed to be a contract made under the laws of the State of Israel, and for all purposes shall be construed in accordance with the laws of said state, without regard to principles of conflict of laws. Any dispute arising under or in relation to this Agreement shall be resolved exclusively in the competent court for Tel Aviv-Jaffa district, and each of the parties hereby irrevocably submits to the exclusive jurisdiction of such court.
|
11.3.
|
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 parties hereto. None of the rights, privileges, or obligations set forth in, arising under, or created by this Agreement may be assigned or transferred without the prior consent in writing of each party to this Agreement.
|
11.4.
|
Entire Agreement; Amendment and Waiver
. This Agreement and the Schedules hereto and the other agreements hereunder constitute the full and entire understanding and agreement between the parties with regard to the subject matters hereof and thereof. 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 each party to this Agreement.
|
11.5.
|
Notices, etc.
. All notices and other communications required or permitted hereunder to be given to a party to this Agreement shall be in writing and shall be telecopied or mailed by registered or certified mail, postage prepaid, or prepaid air courier, or otherwise delivered by hand or by messenger, addressed to such party's address as set forth above or at such other address as the party shall have furnished to each other party in writing in accordance with this provision.
|
11.6.
|
Delays or Omissions
. No delay or omission to exercise any right, power, or remedy accruing to any party 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 party of any breach or default under this Agreement, or any waiver on the part of any party 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 parties, shall be cumulative and not alternative.
|
11.7.
|
Severability
. If any provision of this Agreement is held by a court of competent jurisdiction 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.
|
11.8.
|
Counterparts
. This Agreement may be executed in any number of counterparts, each of which shall be deemed an original and enforceable against the parties actually executing such counterpart, and all of which together shall constitute one and the same instrument.
|
______________________________
Check Cap Ltd.
By: ______________________
Title: ______________________
|
______________________
By: ______________________
Title: ______________________
|
1.
|
EXERCISE OF WARRANT
|
1.1.
|
Warrant Period
. This Warrant may be exercised, subject to the terms and conditions hereof, during the period commencing on the Neev Exercise Date (as defined below) and terminated upon the later of (i) the lapse of 10 years from the date hereof (i.e. May 11, 2020), or (ii) the lapse of 3 months following the expiry of the Neev Options without being exercised, provided that the Company provides the Holder a written notice at least fourteen (14) days prior to such date. The above period shall be referred to hereinafter as the "
Warrant Period
".
|
1.2.
|
Company Notice
. Upon the receipt by the Company of an exercise notice by Mr. Guy Neev, according to which Mr. Guy Neev wishes to exercise the Neev Options, in whole or in part, the Company shall provide the Holder with a written notice, with the following details (the "
Company Notice
"):
|
|
1.2.1.
|
The anticipated date of exercise of the Neev Options ("
Neev Exercise Date
"), provided that the Neev Exercise Date shall occur not earlier than fourteen (14) days following the date of the Company Notice;
|
|
1.2.2.
|
The number of Neev Options exercised by Mr. Guy Neev;
|
|
1.2.3.
|
The number of Warrant Shares exercisable by the Holder, according to section
1.3 below.
|
1.3.
|
Partial Exercise.
The number of Warrant Shares exercisable under this Warrant shall correspond to the portion of Neev Options actually exercised by Mr. Guy Neev, and shall be calculated as follows:
|
|
Y= (X / 1,995,475)*Z
Where:
Y- number of Warrant Shares exercisable by the Holder;
X- number of Neev Options exercised by Mr. Guy Neev;
Z- total number of Warrant Shares underlying this Warrant.
|
1.4.
|
Automatic Exercise.
Provided that the Company provided the Company Notice, as detailed in Section
1.2, this Warrant will be deemed to have been automatically exercised by the Holder on the Neev Exercise Date, into such number of Warrant Shares as detailed in the Company Notice, unless the Holder has ordered the Company otherwise in writing, at least seven (7) days prior to the Neev Exercise Date.
|
1.5.
|
Non- Automatic Exercise
. To the extent not automatically exercised on the Neev Exercise Date in accordance with Section
1.4 above, this Warrant may be exercised into such number of Warrant Shares as detailed in the Company Notice, by presentation and surrender thereof to the Company, on or prior to the last date of the Warrant Period, at its principal office or at such other office or agency as it may designate from time to time, accompanied by a duly executed notice of exercise, in the form attached hereto as
Schedule 1.2.1
(the "
Exercise Notice
").
|
1.6.
|
Issuance of Warrant Shares
. Upon the earlier of (i) automatic exercise, as detailed in Section
1.4, or (ii) presentation and surrender of this Warrant, accompanied by the duly executed Exercise Notice, the Company shall promptly (a) issue to the Holder the Warrant Shares to which the Holder is entitled; and (b) deliver to the Holder the share certificate evidencing such Warrant Shares.
Upon automatic exercise, as detailed in Section
1.4, or, in case the Warrant was not automatically exercised, upon receipt by the Company of this Warrant and the applicable duly executed notice of exercise, together with any other documents and/or approvals that may be required by law, the Holder shall be deemed to be the holder of record of the Warrant Shares issuable upon such exercise, notwithstanding that the share transfer books of the Company shall then be closed or that certificates representing such shares shall not then be actually delivered to the Holder.
In the event that all Warrant Shares are automatically exercised, this Warrant shall become null and void upon the exercise thereof.
In the event that a portion of the Warrant Shares remains unexercised, the Company shall execute and deliver to the Holder a new Warrant, in lieu of this Warrant, representing the remaining unexercised Warrant Shares, and upon the delivery of such new Warrant to the Holder, this Warrant shall become null and void.
|
1.7.
|
Fractional Shares
. No fractions of Shares shall be issued in connection with the exercise of this Warrant, and the number of shares issued shall be rounded up to the nearest whole number.
|
1.8.
|
Additional Documents
. The Holder will sign and deliver any and all documents or approvals required by law, to facilitate the issuance of shares upon exercise of this Warrant.
|
1.9.
|
Loss or Destruction of Warrant
. Upon receipt by the Company of evidence reasonably satisfactory to it of the loss, theft, destruction or mutilation of this Warrant, and (in the case of loss, theft or destruction) of reasonably expenses reimbursement and satisfactory indemnification, and upon surrender and cancellation of this Warrant, if mutilated, the Company will execute and deliver a new Warrant of like tenor and date.
|
2.
|
TAXES
|
2.1.
|
The Holder acknowledges that the grant of the Warrant, the issue of the Warrant Shares and the execution and/or performance of this Warrant may have tax consequences to the Holder and that the Company is not able to ensure or represent to the Holder the nature and extent of such tax consequences.
|
2.2.
|
The Holder shall be responsible and shall pay any and all taxes due in connection with the holding, issuance, exercise or sale of this Warrant or the Warrant Shares by the Holder.
|
3.
|
ADJUSTMENT
|
3.1.
|
The number of Warrant Shares purchasable upon the exercise of this Warrant shall be subject to adjustment from time to time or upon exercise, as follows:
|
|
3.1.1.
|
Consolidation and Division
. In the event that during the Warrant Period the Company consolidates its share capital into shares of greater par value, or subdivides them into shares of lesser par value, then the number of Warrant Shares to be allotted on exercise of this Warrant after such consolidation or subdivision shall be reduced or increased accordingly, as the case may be.
|
|
3.1.2.
|
Capital Reorganization
. In the event that during the Warrant Period a reorganization of the share capital of the Company is effected (other than subdivision, combination or reclassification provided for elsewhere in this Section
3) and the Ordinary Shares of the Company are exchanged for other securities of the Company, then, as part of such reorganization, provision shall be made so that the Holder shall be entitled to purchase upon exercise of this Warrant such kind and number of shares or other securities of the Company to which the Holder would have been entitled had this Warrant been exercised without taking into effect such reorganization.
|
3.2.
|
Whenever an adjustment is effected hereunder, the Company shall promptly compute such adjustment and deliver to the Holder a certificate setting forth the number of Warrant Shares (or any other securities) for which this Warrant is exercisable, a brief statement of the facts requiring such adjustment and the computation thereof and when such adjustment has or will become effective.
|
4.
|
RIGHTS OF THE HOLDER
|
4.1.
|
This Warrant shall not entitle the Holder, by virtue hereof, to any voting rights or other rights as a shareholder of the Company, except for the rights expressly set forth herein.
|
4.2.
|
The Holder acknowledges that the Warrant Shares shall be subject to such certain rights, privileges, restrictions and limitations as set forth in this Warrant, and the organizational documents of the Company (or any other agreement with respect thereto), as may be amended from time to time, and that, as a result,
inter alia
, of such limitations, it may be difficult or impossible for the Holder to realize his investment and/or to sell or otherwise transfer the Warrant Shares. The Holder further acknowledges that the Company's shares are not publicly traded.
|
5.
|
TERMINATION
|
Notwithstanding anything to the contrary, this Warrant and all the rights conferred hereby shall terminate and expire at the aforementioned time on the last day of the Warrant Period, unless the Warrant was previously exercised.
|
6.
|
MISCELLANEOUS
|
6.1.
|
Entire Agreement; Amendment
. This Warrant sets forth the entire understanding of the parties with respect to the subject matter hereof and supersedes all existing agreements among them concerning such subject matter. All article and section headings herein are inserted for convenience only and shall not modify or affect the construction or interpretation of any provision of this Warrant. No modification or amendment of this Warrant will be valid unless executed in writing by the Company and the Holder.
|
6.2.
|
Waiver
. No failure or delay on the part of any of the parties in exercising any right, power or privilege hereunder and/or under any applicable laws or the exercise of such right or power in a manner inconsistent with the provisions of this Warrant or applicable law shall operate as a waiver thereof. Any waiver must be evidenced in writing signed by the party against whom the waiver is sought to be enforced.
|
6.3.
|
Successors and Assigns; Assignment
. Except as otherwise expressly limited herein, this Warrant shall inure to the benefit of, be binding upon, and be enforceable by the Holder and its respective successors and administrators and is otherwise non-transferable without the prior consent of the Company. The Holder represents and warrants to the Company that this Warrant and the Warrant Shares, if and when purchased by the Holder, are for the Holder's own account and for investment purposes only and not with a view for resale or transfer and that all the rights pertaining to the Warrant or the Warrant Shares, by law or equity, shall be purchased and possessed by the Holder for the Holder exclusively.
|
6.4.
|
Governing Law
. This Warrant shall be exclusively governed and construed in accordance with the laws of the State of Israel, without regard to conflicts of laws provisions thereof.
|
6.5.
|
Arbitration
. Any dispute, controversy or claim arising in relation to this Warrant, including with regard to its validity, invalidity, breach, enforcement or termination, will be referred to a single arbitrator, who shall be appointed by the Head of the Israeli Bar Association. Arbitration proceedings shall take place in Tel Aviv, Israel, and shall be conducted in English and according to the rules of substantive law. The arbitrator will not be bound by rules of evidence or procedure and will give the reasons for his judgment. The arbitrator's decision shall be final and enforceable in any court. This paragraph shall constitute an arbitration agreement between the parties.
|
6.6.
|
Notices
. Any notice required or permitted to be given to a party pursuant to the provisions of this Warrant will be in writing and will be effective and deemed delivered to such party on the earliest of the following: (a) all notices and other communications delivered in person or by courier service shall be deemed to have been delivered as of actual delivery thereof; (b) those given by facsimile transmission shall be deemed delivered on the following business day after transmission, with confirmed transmission thereof; and/or (c) all notices and other communications sent by registered mail (or air mail if the posting is international) shall be deemed given three (3) days after posting.
|
6.7.
|
Severability
. If any provision of this Warrant is held to be unenforceable, this Warrant shall be considered divisible and such provision shall be deemed inoperative to the extent it is deemed unenforceable, and in all other respects this Warrant shall remain in full force and effect;
provided
,
however
, that if any such provision may be made enforceable by limitation thereof, then such provision shall be deemed to be so limited and shall be enforceable to the maximum extent permitted by applicable law.
|
6.8.
|
Counterparts
. This Warrant may be executed in any number of counterparts, each of which shall be an original, but all of which together shall constitute one instrument. Facsimile signatures of a party shall be binding as evidence of such party's agreement hereto and acceptance hereof.
|
Dated: _________________
|
Check-Cap Ltd.
By: ______________________________
Name:
Title:
|
Signature:
Address: ________________
________________
|
1.
|
EXERCISE OF WARRANT
|
1.1.
|
Warrant Period
. This Warrant may be exercised, subject to the terms and conditions hereof, during the period commencing on the Neev Exercise Date (as defined below) and terminated upon the later of (i) the lapse of 10 years from the date hereof (i.e. May 11, 2020), or (ii) the lapse of 3 months following the expiry of the Neev Options without being exercised, provided that the Company provides the Holder a written notice at least fourteen (14) days prior to such date. The above period shall be referred to hereinafter as the "
Warrant Period
".
|
1.2.
|
Company Notice
. Upon the receipt by the Company of an exercise notice by Mr. Guy Neev, according to which Mr. Guy Neev wishes to exercise the Neev Options, in whole or in part, the Company shall provide the Holder with a written notice, with the following details (the "
Company Notice
"):
|
|
1.2.1.
|
The anticipated date of exercise of the Neev Options ("
Neev Exercise Date
"), provided that the Neev Exercise Date shall occur not earlier than fourteen (14) days following the date of the Company Notice;
|
|
1.2.2.
|
The percentage of Neev Options exercised by Mr. Guy Neev;
|
|
1.2.3.
|
The number of Warrant Shares exercisable by the Holder, according to section
1.3 below.
|
1.3.
|
Partial Exercise.
The number of Warrant Shares exercisable under this Warrant shall correspond to (a) the portion of Neev Options actually exercised by Mr. Guy Neev and (b) the number of warrants exercised by the Holder prior to the exercise of this Warrant, and shall be calculated as follows:
|
Y= [X *Z*(A/B)]-P
Where:
Y- number of Warrant Shares exercisable by the Holder under this Warrant;
X- the aggregate percentage of Neev Options actually exercised by Mr. Guy Neev as of the specific date of exercise of this Warrant;
Z- total maximum number of Warrant Shares underlying this Warrant.
|
|
B-
Warrants to purchase up to
__________
C-1 Preferred Shares of the Company
and
__________
C-2 Preferred Shares of the Company, which constitute the aggregate number
|
|
A- The number of warrant shares that were issued upon exercise (or any partial exercise) by the Holder of the Exisiting Warrants (as defined above) on or prior to the date of
|
|
P – The aggregate number of Warrant Shares, out of this Warrant, that have been previously issued to the Holder prior to any specific exercise of this Warrant.
|
1.4.
|
Automatic Exercise.
Provided that the Company provided the Company Notice, as detailed in Section
1.2, this Warrant will be deemed to have been automatically exercised by the Holder on the Neev Exercise Date, into such number of Warrant Shares as detailed in the Company Notice, unless the Holder has ordered the Company otherwise in writing, at least seven (7) days prior to the Neev Exercise Date.
|
1.5.
|
Non- Automatic Exercise
. To the extent not automatically exercised on the Neev Exercise Date in accordance with Section
1.4 above, this Warrant may be exercised into such number of Warrant Shares as detailed in the Company Notice, by presentation and surrender thereof to the Company, on or prior to the last date of the Warrant Period, at its principal office or at such other office or agency as it may designate from time to time, accompanied by a duly executed notice of exercise, in the form attached hereto as
Schedule 1.2.1
(the "
Exercise Notice
").
|
1.6.
|
Issuance of Warrant Shares
. Upon the earlier of (i) automatic exercise, as detailed in Section
1.4, or (ii) presentation and surrender of this Warrant, accompanied by the duly executed Exercise Notice, the Company shall promptly (a) issue to the Holder the Warrant Shares to which the Holder is entitled; and (b) deliver to the Holder the share certificate evidencing such Warrant Shares.
Upon automatic exercise, as detailed in Section
1.4, or, in case the Warrant was not automatically exercised, upon receipt by the Company of this Warrant and the applicable duly executed notice of exercise, together with any other documents and/or approvals that may be required by law, the Holder shall be deemed to be the holder of record of the Warrant Shares issuable upon such exercise, notwithstanding that the share transfer books of the Company shall then be closed or that certificates representing such shares shall not then be actually delivered to the Holder.
In the event that all Warrant Shares are automatically exercised, this Warrant shall become null and void upon the exercise thereof.
In the event that a portion of the Warrant Shares remains unexercised, the Company shall execute and deliver to the Holder a new Warrant, in lieu of this Warrant, representing the remaining unexercised Warrant Shares, and upon the delivery of such new Warrant to the Holder, this Warrant shall become null and void.
|
1.7.
|
Fractional Shares
. No fractions of Shares shall be issued in connection with the exercise of this Warrant, and the number of shares issued shall be rounded up to the nearest whole number.
|
1.8.
|
Additional Documents
. The Holder will sign and deliver any and all documents or approvals required by law, to facilitate the issuance of shares upon exercise of this Warrant.
|
1.9.
|
Loss or Destruction of Warrant
. Upon receipt by the Company of evidence reasonably satisfactory to it of the loss, theft, destruction or mutilation of this Warrant, and (in the case of loss, theft or destruction) of reasonably expenses reimbursement and satisfactory indemnification, and upon surrender and cancellation of this Warrant, if mutilated, the Company will execute and deliver a new Warrant of like tenor and date.
|
2.
|
TAXES
|
2.1.
|
The Holder acknowledges that the grant of the Warrant, the issue of the Warrant Shares and the execution and/or performance of this Warrant may have tax consequences to the Holder and that the Company is not able to ensure or represent to the Holder the nature and extent of such tax consequences.
|
2.2.
|
The Holder shall be responsible and shall pay any and all taxes due in connection with the holding, issuance, exercise or sale of this Warrant or the Warrant Shares by the Holder.
|
3.
|
ADJUSTMENT
|
3.1.
|
The number of Warrant Shares purchasable upon the exercise of this Warrant shall be subject to adjustment from time to time or upon exercise, as follows:
|
|
3.1.1.
|
Consolidation and Division
. In the event that during the Warrant Period the Company consolidates its share capital into shares of greater par value, or subdivides them into shares of lesser par value, then the number of Warrant Shares to be allotted on exercise of this Warrant after such consolidation or subdivision shall be reduced or increased accordingly, as the case may be.
|
|
3.1.2.
|
Capital Reorganization
. In the event that during the Warrant Period a reorganization of the share capital of the Company is effected (other than subdivision, combination or reclassification provided for elsewhere in this Section
3) and the Ordinary Shares of the Company are exchanged for other securities of the Company, then, as part of such reorganization, provision shall be made so that the Holder shall be entitled to purchase upon exercise of this Warrant such kind and number of shares or other securities of the Company to which the Holder would have been entitled had this Warrant been exercised without taking into effect such reorganization.
|
3.2.
|
Whenever an adjustment is effected hereunder, the Company shall promptly compute such adjustment and deliver to the Holder a certificate setting forth the number of Warrant Shares (or any other securities) for which this Warrant is exercisable, a brief statement of the facts requiring such adjustment and the computation thereof and when such adjustment has or will become effective.
|
4.
|
RIGHTS OF THE HOLDER
|
4.1.
|
This Warrant shall not entitle the Holder, by virtue hereof, to any voting rights or other rights as a shareholder of the Company, except for the rights expressly set forth herein.
|
4.2.
|
The Holder acknowledges that the Warrant Shares shall be subject to such certain rights, privileges, restrictions and limitations as set forth in this Warrant, and the organizational documents of the Company (or any other agreement with respect thereto), as may be amended from time to time, and that, as a result,
inter alia
, of such limitations, it may be difficult or impossible for the Holder to realize his investment and/or to sell or otherwise transfer the Warrant Shares. The Holder further acknowledges that the Company's shares are not publicly traded.
|
5.
|
TERMINATION
|
Notwithstanding anything to the contrary, this Warrant and all the rights conferred hereby shall terminate and expire at the aforementioned time on the last day of the Warrant Period, unless the Warrant was previously exercised.
|
6.
|
MISCELLANEOUS
|
6.1.
|
Entire Agreement; Amendment
. This Warrant sets forth the entire understanding of the parties with respect to the subject matter hereof and supersedes all existing agreements among them concerning such subject matter. All article and section headings herein are inserted for convenience only and shall not modify or affect the construction or interpretation of any provision of this Warrant. No modification or amendment of this Warrant will be valid unless executed in writing by the Company and the Holder.
|
6.2.
|
Waiver
. No failure or delay on the part of any of the parties in exercising any right, power or privilege hereunder and/or under any applicable laws or the exercise of such right or power in a manner inconsistent with the provisions of this Warrant or applicable law shall operate as a waiver thereof. Any waiver must be evidenced in writing signed by the party against whom the waiver is sought to be enforced.
|
6.3.
|
Successors and Assigns; Assignment
. Except as otherwise expressly limited herein, this Warrant shall inure to the benefit of, be binding upon, and be enforceable by the Holder and its respective successors and administrators and is otherwise non-transferable without the prior consent of the Company. The Holder represents and warrants to the Company that this Warrant and the Warrant Shares, if and when purchased by the Holder, are for the Holder's own account and for investment purposes only and not with a view for resale or transfer and that all the rights pertaining to the Warrant or the Warrant Shares, by law or equity, shall be purchased and possessed by the Holder for the Holder exclusively.
|
6.4.
|
Governing Law
. This Warrant shall be exclusively governed and construed in accordance with the laws of the State of Israel, without regard to conflicts of laws provisions thereof.
|
6.5.
|
Arbitration
. Any dispute, controversy or claim arising in relation to this Warrant, including with regard to its validity, invalidity, breach, enforcement or termination, will be referred to a single arbitrator, who shall be appointed by the Head of the Israeli Bar Association. Arbitration proceedings shall take place in Tel Aviv, Israel, and shall be conducted in English and according to the rules of substantive law. The arbitrator will not be bound by rules of evidence or procedure and will give the reasons for his judgment. The arbitrator's decision shall be final and enforceable in any court. This paragraph shall constitute an arbitration agreement between the parties.
|
6.6.
|
Notices
. Any notice required or permitted to be given to a party pursuant to the provisions of this Warrant will be in writing and will be effective and deemed delivered to such party on the earliest of the following: (a) all notices and other communications delivered in person or by courier service shall be deemed to have been delivered as of actual delivery thereof; (b) those given by facsimile transmission shall be deemed delivered on the following business day after transmission, with confirmed transmission thereof; and/or (c) all notices and other communications sent by registered mail (or air mail if the posting is international) shall be deemed given three (3) days after posting.
|
6.7.
|
Severability
. If any provision of this Warrant is held to be unenforceable, this Warrant shall be considered divisible and such provision shall be deemed inoperative to the extent it is deemed unenforceable, and in all other respects this Warrant shall remain in full force and effect;
provided
,
however
, that if any such provision may be made enforceable by limitation thereof, then such provision shall be deemed to be so limited and shall be enforceable to the maximum extent permitted by applicable law.
|
6.8.
|
Counterparts
. This Warrant may be executed in any number of counterparts, each of which shall be an original, but all of which together shall constitute one instrument. Facsimile signatures of a party shall be binding as evidence of such party's agreement hereto and acceptance hereof.
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Dated: _________________
|
Check-Cap Ltd.
By: ______________________________
Name:
Title:
|
Signature:
Address: _____________
_____________
|
1. | DEFINITION |
The term
“
Intellectual Property
”
means (i) inventions (whether or not patentable), trade secrets, technical data, databases, customer lists, designs, tools, methods, processes, technology, ideas, know how and other confidential or proprietary information and materials; (ii) trade marks and service marks (whether or not registered), applications for trade marks and service marks, trade names, logos, trade dress and other proprietary indicia and all goodwill associated therewith; (iii) documentation, advertising copy,
marketing materials, specifications, mask works, drawings, graphics, databases, recordings and other works of authorship, whether or not protected by copyright; (iv) source code, object code, data and operating files, user manuals, documentation, flow charts, algorithms, compilers, development tools, maintenance records and other materials related to computer programs; (v) internet web-sites and domain names; and (vi) all forms of legal rights and protections that may be obtained for, or may pertain to, the Intellectual Property set forth in clauses (i) through (v) in any country of the world, including, without limitation, all letters patent, patent applications, provisional patents, design patents, PCT filings and other rights to inventions or designs, all registered and unregistered copyrights in both published and unpublished works, trade secret rights, mask works, moral rights or other literary property or authors rights, rights regarding trademarks and other proprietary indicia, and all applications, registrations, issuances, divisions, continuations, renewals, reissuances and extensions of the foregoing.
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2. | TRANSFER AND DELIVERY OF ASSETS | |
2.1 The Company hereby assigns, transfers and delivers to New Check-Cap, free and clear of any and all liabilities, judgments, pledges, liens, tax liens, obligations, asserted or unasserted claims (including, without limitation, employee claims), charges, security interests, exceptions or encumbrances whatsoever, except as set forth in Section 2.1 (each, an “ Encumbrance ” and together the “ Encumbrances ” ), all of the Company’s right, title and interest in and to all of its assets (the “ Transferred Assets ” ), which include, without limitation, the following assets: | ||
2.1.1
all tangible personal property used or held for use primarily in connection with the business of the Company, including, without limitation, all machinery, equipment, parts, vehicles, furniture, office equipment, hardware, supplies and other items of tangible personal property owned by the Company;
2.1.2
all of the Company’s interest and right to any Intellectual Property, together with related registrations, applications, assignments and amendments;
2.1.3
all of the interest of the Company in the contracts listed in
Schedule 2.1.
3
(“
Assumed Contracts
”)
;
2.1.4
all leasehold interests of the Company;
2.1.5
all licenses, authorizations, permits and other approvals issued by any governmental entity, and all applications therefore pending, used or held for use in connection with the Company’s business;
2.1.6
all other records of the Company relating to its business;
2.1.7
all cash and other cash equivalent assets, except for US $
100,000
, which shall be used to finance the ongoing operations of the Company, including, without limitation, payment of governmental fees, legal expenses, audit expenses and insurance expenses
;
2.1.8
all pending or threatened contest, claim, demand, assessment, action, or cause of action, that the Company may have against any person relating to or arising out of any Transferred Asset.
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2.2 Notwithstanding anything in Section 2.1 to the contrary, the following assets of the Company (collectively, the “ Excluded Assets ” ) shall be excluded from this Agreement, and shall not be assigned or transferred to New Check-Cap and shall be retained by the Company: | ||
2.2.1
the assets of the Company that are listed on
Schedule 2.2.1
attached hereto;
2.2.2
any and all losses which are not assignable pursuant to the requirements of any applicable law, including such loss that has been attributable to, or allocated to, or is required to be attributable to the members of the Company.
|
2.2.3
all books, records, files and correspondence (whether in original or
photostatic form) to the extent used or held for use in connection with, or relating to the business, tax records and corporate records.
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2.3 | Assumed Liabilities and Obligations . | ||
2.3.1
Except for those obligations specifically identified in
Schedule 2.3
attached hereto (collectively, the
“Assumed Liabilities”
), New Check-Cap will not and hereby does not assume or undertake to pay, perform, satisfy or discharge any liability or undertaking of the Company with respect to the Transferred Assets, whether existing on, before or after the Effective Date or arising out of any transaction entered into or any state of facts existing on, prior to or after the Effective Date.
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2.3.2
New Check-Cap shall assume all performance obligations for contracts assigned to New Check-Cap from the Company pursuant to this Agreement.
|
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2.4 Except as explicitly detailed herein, New Check-Cap shall not assume any liability or obligation of the Company whatsoever.
2.5 The Company undertakes to cause the key employees listed in
Schedule 2.5
(“
Key Employees
”)
to enter into employment agreements with New Check-Cap, at terms substantially similar to their terms of employment by the Company.
2.6 No consideration shall be paid by New Check-Cap to the Company.
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3 |
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
|
||
Each of the Company and its Manager, Check-Cap Ltd., hereby jointly and severally represents and warrants to New Check-Cap that, except as otherwise set forth in the schedules referred to in this Agreement, the following representations and warranties are, as of the Effective Date, true and correct.
|
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3.1 | Organization and Existence . | ||
The Company is a company duly organized, validly existing and in good standing under the laws of its state of incorporation. The Company has full corporate power and authority to own its properties and, specifically, to own the Transferred Assets.
|
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3.2 | Execution and Effect of Agreement . | ||
The Company has the power and authority to execute and deliver this Agreement and to perform its obligations hereunder. This Agreement has been duly executed and delivered and the transactions contemplated hereby have been duly authorized by its corporate bodies. | |||
3.3 | Title and Liens . | ||
Except as set froth in Schedule 3.3 , the Company owns all the Transferred Assets free and clear of any Encumbrances, and New Check-Cap shall receive good and marketable title to the Transferred Assets owned by the Company. Except as set froth in Schedule 3.3 , the Company has the full and unrestricted power to sell, assign, transfer and deliver the Transferred Assets to New Check-Cap upon the terms and subject to the conditions of this Agreement. The Transferred Assets, when taken together with the Excluded Assets, constitute all properties, assets and leasehold estates, real, personal and mixed, tangible and intangible, comprising, used or useful in the operation of the Company ’ s business on the date hereof. |
3.4 The execution, delivery and performance of this Agreement by the Company will not violate any statute, regulation, rule, injunction, judgment, order, decree, ruling, charge or restriction of any governmental authority or court to which the Company is a
party or to which it is bound or subject, or the provisions of its Limited Liability Company Agreement, bylaws and/or certificate of incorporation, nor will it constitute a breach of any agreement, understanding, arrangement or any other settlement of any type with any third party, including, without limitation, employees, consultants, licensees, etc.
3.5 There is no pending action, arbitration, audit, hearing, investigation, litigation or suit (whether civil, criminal, administrative, investigative or informal) commenced, brought, conducted, or otherwise involving, any court, governmental authority, arbitrator
or other third party, whether at law or in equity (a
“
Proceeding
”
) that (a) has been commenced by or against the Company or that otherwise relates to or may affect the Transferred Assets or (b) challenges or may prevent, make illegal, or otherwise interfere with the transactions contemplated hereby.
3.6 The Company is not subject to or limited by any order of any governmental authority. Except as set forth in
Schedule 3.6
,
no consent, waiver, approval, permit, authorization of, declaration to or filing with any third party or governmental authority
on the part of the Company is required in connection with the execution and delivery of this Agreement.
3.7 Except as listed in Schedule 3.7, each of the Assumed Contracts constitutes the valid and legally binding obligation of the Company and of the other parties thereto, and is enforceable in accordance with its terms. Each of the Assumed Contracts constitutes
the entire agreement of the respective parties thereto relating to the subject matter thereof. All obligations required to be performed under the terms of the Assumed Contracts by the date hereof have been performed. All obligations required to be performed under the terms of the Assumed Contracts have been performed. No act or omission has occurred or failed to occur which, with the giving of notice, the lapse of time or both would constitute a default under any of the Assumed Contracts or permit termination, modification or acceleration thereunder, and each of the Assumed Contracts is in full force and effect without default on the part of the Company and, to the Company’s knowledge, of the other parties thereto.
3.8 Except as listed in Schedule 3.8, the representations and warranties made by the Company in section 3.12 of the Convertible Loan Agreement between the Company and the parties thereto, dated February 12, 2008, are true and correct on the date hereof.
|
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4 | REPRESENTATIONS AND WARRANTIES OF NEW CHECK-CAP | ||
New Check-Cap hereby represents and warrants to the Company that the following representations and warranties are, as of the Effective Date, true and correct. |
4.1 Organization and Existence . | |||
New Check-Cap is a corporation duly organized and validly existing under the laws of the State of Israel. New Check-Cap has full corporate power and authority to own the Transferred Assets. | |||
4.2 Execution and Effect of Agreement . | |||
New Check-Cap has the power and authority to execute and deliver this Agreement and to perform its obligations hereunder. This Agreement has been duly executed and delivered and the transactions contemplated hereby have been duly authorized by New Check-Cap’s board of directors. No other proceeding on the part of New Check-Cap is necessary to authorize the execution, delivery and performance of this Agreement and the transactions contemplated hereby. | |||
4.3 No Violation . | |||
The execution of this Agreement by New Check-Cap will not violate any statute, regulation, rule, injunction, judgment, order, decree, ruling, charge or restriction of any governmental authority or court to which New Check-Cap is a party or to which it is bound or subject, or the provisions of New Check-Cap’s Articles of Association, nor will it constitute a breach of any agreement, understanding, arrangement or any other settlement of any type with any third party. | |||
4.4 Consents . | |||
Except for the Tax Ruling provided by the Israeli Tax Authority to the Company and New Check-Cap on May 21, 2009, no consent, waiver, approval, permit, authorization of, declaration to or filing with any third party or governmental authority on the part of New Check-Cap is required in connection with the execution and delivery of this Agreement. | |||
5. | INDEMNIFICATION | ||
5.1 The Company hereby agrees to hold harmless and indemnify New Check-Cap, and its respective partners, executive officers, directors, employees, stockholders, agents and representatives (collectively, referred to as the “ Company Indemnitees ”) against any and all damages, liabilities, losses, costs and expenses (including attorneys’ fees and expenses), whether or not arising out of third-party claims, based upon, or arising out of, or relating to, (i) any breach by the Company of, any representation or warranty or other statement contained in this Agreement or any other agreement, certificate, document or instrument furnished pursuant hereto, or (ii) any breach of any covenant or agreement contained in this Agreement or any other agreement, certificate, document or instrument furnished pursuant hereto (collectively, the “ Company Indemnifiable Claims ”). | |||
5.2 The Company shall reimburse, promptly following request therefor, all necessary expenses actually incurred by an Company Indemnitee in connection with any Company Indemnifiable Claim, as the case may be, including, without limitation, any threatened, pending or completed action, suit, arbitration, investigation or other proceeding arising out of, or relating to, any Indemnifiable Claim. |
5.3 The rights to indemnification set forth in this Section 5.3 are in addition to, and not in limitation of, all rights and remedies to which New Check-Cap may be entitled under law. All remedies, either under this Agreement or otherwise afforded to any party, shall be cumulative and not alternative. |
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1.
|
The Company has obligated to deposit a bank check in an amount of NIS 40,000 with S. Halbi Ltd., the owner of the premises rented by the Company pursuant to that certain lease agreement dated April 2, 2009.
|
|
2.
|
See schedule 3.3(2) below, pertaining to the pledge over the intellectual property of the Company.
|
|
1.
|
Employment Agreement dated February 1, 2005 by and between Check-Cap, LLC and Yoav Kimchy, and any and all amendments thereto.
|
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2.
|
Employment Agreement dated September 11, 2005 by and between Check-Cap, LLC and Rebecca Zeitler, and any and all amendments thereto.
|
|
3.
|
Employment Agreement dated February 12, 2006 by and between Check-Cap, LLC and Rafi Sommer, and any and all amendments thereto.
|
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4.
|
Employment Agreement dated January 1, 2007 by and between Check-Cap, LLC and Gideon Baum, and any and all amendments thereto.
|
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5.
|
Employment Agreement dated May 1, 2007 by and between Check-Cap, LLC and Guy Neev, and any and all amendments thereto.
|
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6.
|
Employment Agreement dated July 28, 2008 by and between Check-Cap, LLC and Oleg Obodovsky, and any and all amendments thereto.
|
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7.
|
Employment Agreement dated June 10, 2008 by and between Check-Cap, LLC and Gitit Keidar, and any and all amendments thereto.
|
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8.
|
Agreement dated September 5th 2004 by and between Check-Cap, LLC and Pedersen & Houpt.
|
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9.
|
Sub-Contractor Agreement dated March 27, 2005 by and between Check-Cap, LLC and Itzhak Klein, and any and all amendments thereto.
|
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10.
|
Sub-Contractor Agreement dated March 27, 2005 by and between Check-Cap, LLC and Gal Ben-David, and any and all amendments thereto.
|
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11.
|
Sub-Contractor Agreement dated March 27, 2005 by and between Check-Cap, LLC and Shlomo Lewkovwicz, and any and all amendments thereto.
|
|
12.
|
Agreement dated March 28
th
2005 by and between Check-Cap, LLC and Sorek Nuclear Research Center.
|
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13.
|
Services Agreement dated June 21
st
2005 by and between Check-Cap, LLC and Moshe Oren.
|
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14.
|
Independent Contractor Agreement dated July 1, 2005 by and between Check-Cap, LLC and Hadar Kimchy, and any and all amendments thereto.
|
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15.
|
Accounting Services Agreement (letter dated January 15
th
2006) between Check Cap, LLC and Dan Bennet, CPA, and the letter dated February 15, 2009 regarding the consideration paid for such services.
|
|
16.
|
Independent Contractor Agreement dated February 12, 2006 by and between Check-Cap, LLC and Singer Instruments & Control Ltd.
|
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17.
|
ASIC Design and Development Agreement dated January 4, 2008 by and between Check-Cap, LLC and Politecnico Di Milano.
|
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18.
|
Terms of Consulting Services – letter dated July 10, 2008 from Mayo Foundation for Medical Education and Research to Check-Cap, LLC, regarding services provided by Mayo's employee - Michael Camilleri, M.D.
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19.
|
Business Development and Strategic Consulting Agreement dated June 27, 2007 by and between Check-Cap, LLC and AxcessNet LLC.
|
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20.
|
Consulting Agreement dated April 23, 2008 by and between Check-Cap, LLC and Prof. Zvi Fireman.
|
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21.
|
Consulting Agreement dated July 1, 2008 by and between Check-Cap, LLC and HADASIT MEDICAL RESEARCH SERVICES AND DEVELOPMENT LIMITED and Prof. Jacob Susna.
|
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22.
|
Services Agreement dated August 15, 2008 by and between Check-Cap, LLC and Mr. Zvika Blutstein (Time & Knowledge), and any and all amendments thereto.
|
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23.
|
Services Agreement dated September 22, 2008 by and between Check-Cap, LLC and Mr. Yosef Pahima (PAI Antennas).
|
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24.
|
Services Agreement dated September 24, 2008 by and between Check-Cap, LLC and Push-Med LLC, and any and all amendments thereto.
|
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25.
|
Services Agreement dated November 19, 2008 by and between Check-Cap, LLC and FreeMind Ltd.
|
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26.
|
Services Agreement by and between Check Cap LLC and the University of Missouri, Columbia, which closing is currently pending
.
|
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27.
|
Service Agreement dated September 17
th
2008 by and between Check Cap LLC and the Mr Eli Baruch.
|
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28.
|
Trust Agreement dated January 1, 2009 by and between Check-Cap, LLC and SGS Trustees Ltd.
|
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29.
|
Operative Leasing Agreement dated November 17, 2005 by and between Check-Cap, LLC and Sa Gal Transportation Ltd, and any and all schedules thereto.
|
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30.
|
Lease Agreement dated August 5, 2007 by and between Check-Cap, LLC and G.R.A.S Designs and Combination Ltd, and the extension thereof, effective as of March 1, 2009.
|
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31.
|
Lease Agreement dated April 2, 2009 by and between Check-Cap, LLC and S.Halbi Ltd.
|
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32.
|
Insurance policy by Harel Insurance Company, #2621122, for the period March 1, 2009 – February 28, 2010.
|
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33.
|
Management Liability Insurance (including D&O insurance), # 835634, for the period July 5, 2008 – July 5, 2009.
|
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34.
|
Key man insurance policy by Harel Insurance Company, # 91219765-8, for the period May 1, 2008 – May 1, 2010.
|
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35.
|
Management Liability (D&O) Insurance, Policy No. 6835634, by Carolina Cas. Ins. Co., term: 07/05/08-01/05/2010.
|
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36.
|
Commercial Package Insurance, Policy No. SBARX6290, by Hartford Casualty Ins. Co., term: 03/15/2009-03/15/2010.
|
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37.
|
Foreign Package Insurance, Policy No. PHFD3682413A by Ace American Ins. Co., term: 03/25/09-03/25/2010.
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38.
|
Authorization to use radioactive material or a product containing radioactive material, #(3100)631403/9406806, issued by the Israeli Ministry of Environment Protection, effective until April 3
rd
, 2010.
|
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39.
|
Agreement dated January 9
th
2006 by and between Check-Cap, LLC and Delek and any and all addendums thereof.
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1.
|
Subscription agreements with Series A Unit Holders and Series B Unit Holders.
|
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2.
|
An amount of US $100,000 in cash.
|
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1.
|
Any liabilities arising from (a) the operations of the Company or the Manager, prior to the Effective Date or (b) arising from any agreement entered by the Company or the Manager prior to the Effective Date, or (c) any liabilities of Company or the Manager arising following the Effective Date, which are related or attributable to the business of New Check-Cap, including, without limitations:
|
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a.
|
Any liabilities of the Manager towards Mr. Tom Sax, pursuant to that certain Employment Agreement dated January 1
st
2008 between the Manager and Mr. Tom Sax.
|
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b.
|
Any liabilities arising from the continuous operation, dissolution, liquidation or winding up of the Company.
|
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c.
|
Any liabilities related to the normal business, including without limitations debt of approximately $15,000 to Singer Instruments, royalties of approximately $20,000 to Freemind (related to the receipt of OCS grant).
|
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d.
|
Grant of options to the following employees and consultants – as approved in the board meeting of the Company, held in June 2008:
|
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i.
|
Israel Ohana
|
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ii.
|
David Ben Ami
|
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iii.
|
Douglas Rex
|
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iv.
|
Peter Fitzgerald
|
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v.
|
Yuval Singer
|
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vi.
|
Oleg Obodovsky
|
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vii.
|
Gitit Keidar
|
|
1.
|
Yoav Kimchy.
|
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2.
|
Guy Neev.
|
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1.
|
See schedule 2.1 above.
|
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2.
|
The Company's Intellectual Property is pledged, by way of first ranking floating charge, in favor of the Lead Lender, for itself and as agent for the other lenders who extended convertible loan to the Company under the Convertible Loan Agreement. According to the terms of the Convertible Loan Agreement, the pledge will automatically terminate upon the conversion of the loan amounts into shares of New Check Cap, in accordance with the terms of the Convertible Loan Agreement.
|
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1.
|
The Company has received a tax ruling from the Israeli tax Authorities, which set forth the terms and conditions prevailing the transfer of the Transferred Assets from the Company to New Check-Cap.
|
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2.
|
The Company has applied, on behalf of New Check-Cap, to the Office of the Chief Scientist of the Israeli Ministry of Industry and Trade, for governmental support (the "Grant") under the Encouragement of Industrial Research and Development Law, 5744-1984 (the "R&D Law"). Upon the approval of such application and the receipt of the Grant by New Check-Cap, New Check-Cap shall become subject to the provisions of the R&D Law, including, inter alia, payment of royalties and certain restrictions on the transfer of manufacturing and IP rights.
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1.
|
Yoav Kimchy and Gideon Baum have applied for a provisional patent application over the "Apparatus Method For Imaging Tissue", application no. PCT/IL2008/000765, and assigned to New Check-Cap on May 21
st
, 2009.
|
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2.
|
Yoav Kimchy, Gideon Baum, Rafi Sommer and Yitzak Klein have applied for a provisional patent over the "Intra-Lumen Polyp Detection", application no. PCT/IL2008/000163, and assigned it to New Check-Cap on May 21
st
, 2009.
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(a)
|
Politecnico di Milano
—
Department of Electronics Engineering and Information Science, and Check Cap LLC, an affiliate of Check Cap Ltd, have previously entered into a certain Agreement for Asic Design and Development, dated December 21, 2007 (the “
Previous Agreement
”) which has terminated in accordance with the Termination Letter attached hereto as
Exhibit
A
;
and
|
(b)
|
Check Cap intends to entrust Polo di Como with a research in the field of design and development of a CCA-2 Application Specific Integrated Circuit (the “
CCA-2 ASIC
”) as more fully specified herein, in continuation of the research and development process that has been made under the Previous Agreement.
|
|
(c)
|
As far as Polo di Como is concerned, the decree of the Republic’s President No. 382 dated 11/7/80 allows, according to art. 66, the performance of research and consultancy activities established through private law agreements or conventions;
|
|
(d)
|
This set of rules is completed by the current Regulation concerning Performances on commission of Politecnico di Milano issued with Rectorial Decree No. 7/AG dated 28/01/2005.
|
1.1.
|
This programme consists of (i) a design of the CCA-2 ASIC, based on improvements to the latest version of the ASIC designed under the Previous Agreement, which are detailed in
Exhibit B
attached hereto, and in accordance with the specifications provided to Polo di Como by Check Cap from time to time, and (ii) the delivery of 30 samples of the CCA-2 ASIC as bare chips (the “
Samples
”). The final CCA-2 ASIC and the Samples, collectively, the “
Deliverables
”.
|
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1.2.
|
Polo di Como shall deliver to Check Cap specifications, performance data, and any other documentation or information that would reasonably accompany or is reasonably necessary for Check-Cap to manufacture the CCA-2 ASIC independently of any assistance by Polo di Como after the end of this Agreement. Check Cap declares to have verified the possibility to manufacture the CCA-2 ASIC chip Samples at the foundry austriamicrosystems AG. Tobelbaderstrasse 30, 8141 Unterpremstaetten, Austria. Nothing herein shall limit Check Cap, following the end of this Agreement, from manufacturing the final CCA-2 ASIC at any foundry, as shall be determined at Check Cap’s sole discretion.
|
1.3.
|
Progress Reports. Polo di Como will provide Check-Cap with written progress reports every two months, as requested by Check-Cap, starting two months after the date hereof and ending on the date of Check-Cap’s final acceptance of the CCA-2 ASIC and receipt of all Deliverbles. Each report shall indicate progress as follows:
|
||
(a) Status of progress toward the next scheduled task, according to the tasks set forth in
Exhibit C
attached hereto:
|
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(b) Short description of problems in meeting such task, if any;
|
|||
(c) Proposed recovery method to meet the next task, if necessary;
|
|||
(d) Probability of meeting the next task;
|
|||
(e) Any changes in Polo di Como’s estimate of time required for meeting the next task with respect to the schedule attached hereto as
Exhibit C
, and
|
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(f) Any changes in Polo di Como’s estimate of recurring manufacturing costs for the CCA-2 ASIC.
|
|||
In addition, the parties shall have a regularly scheduled conference call, organized and paid by Check Cap, that will take place following receipt of each progress report, or more often if necessary if, for example, a task has been compromised. | |||
1 .4.
|
The responsibility for the performance of the programme will be given to Prof. Giuseppe Bertuccio, who, in case of necessity, will be able to use external professional services, according to the provisions of the Regulation concerning Performances on commission of Politecnico di Milano. |
3.1.
|
For the performance of the research programme, according to Section 1, Check-Cap undertakes to pay to Polo di Como an amount of
€
44,182 plus
€
8,836 for VAT with tax rate at 20% (the “
Consideration
”).
|
||
3.2.
|
The Consideration will be paid in three (3) installments as follows:
|
||
3.2.1.
|
€
10,000 +
€
2,000 for VAT with tax rate at 20%, upon signing the contract
|
||
3.2.2.
|
€
20,000 +
€
4,000 for VAT with tax rate at 20%, on December 10th, 2009, subject to the successful completion of WP 100, 200, 210, 220 and 300 as detailed in
Exhibit C
;
|
||
3.2.3.
|
€
14,182 +
€
2,836 for VAT with tax rate at 20%, upon the delivery of the CCA-2 ASIC chip Samples to Check Cap’s (i.e. completion of WP 400, 500, 600, 610, 620 and 630 as detailed in
Exhibit C
)
.
|
3.3.
|
In addition to the Consideration due under paragraph 3.1, provided that the project was successfully completed, and INSTEAD OF ANY ROYALTIES DUE UNDER THE PREVIOUS AGREEMENT. Polo di Como shall be entitled to royalty payments totaling
€
200,000 (Two Hundreds Thousands Euros) payable at the rate of
€
0.5 for each CCA-2 ASIC incorporated into a Check Cap product which is sold by Check-Cap. Royalty payments under this Section 3.3 shall be payable quarterly. After payment of
€
200,000 no further royalties shall be due or payable.
|
|
3.4.
|
Any payment shall be made against the submission of an appropriate pro-forma invoice by Polo di Como to Check Cap.
|
|
3.5.
|
The amounts due under this Section 3 will be paid by Check-Cap to Polo di Como, bank account No. 1600X69 at Banca Popolare di Sondrio
–
Agenzia n.21 Via Bonardi 4 20133 Milano (ABI : 05696, CAB : 01620, CIN: T, IBAN : IT34T0569601620000001600X69)
|
|
3.6.
|
Polo di Como will open a research grant of
€
21,000.00 for this research programme.
|
|
3.7.
|
Polo di Como will make use of Europractice Consortium, of which Politecnico di Milano is member, in order to complete the project. Polo di Como predicts to assign
€
7200 +
€
1440 for VAT with a tax rate of 20%, out of the Consideration paid to Polo di Como by Check Cap according to Section 3.1 above, to the Europractice finalized to the project’s activities. To avoid any doubt, any work made or services provided by the Europractice Consortium shall be considered as work or services performed by Polo di Como, and the terms of this Agreement shall apply to any such work or services provided by the Europractice Consortium, including, without limitation, the terms of Sections 4 and 8 below.
|
4.1
|
Politecnico shall have no rights to any Check-Cap technology, trade secrets, related intellectual property rights, patents (including continuations, continuations in part, and reissues) or know-how in existence prior to the date of this Agreement whether or not used in the design and manufacture of the CCA-2 ASIC.
|
4.2.
|
Check-Cap shall have no rights, other than as licensed under this Agreement or under the Previous Agreement, to any Politecnico’s technology, trade secrets, related intellectual property rights, patents (including continuations, continuations in part, and reissues) or know-how in existence prior to the date of this Agreement, whether or not used in the design and manufacture of the CCA-2 ASIC.
|
||
4.3.
|
In case the results of the research which is the subject of this Agreement are protectable with industrial property rights, whether such inventions were developed by Politecnico’s staff alone or together with Check Cap’s staff, Check-Cap shall be immediately informed by Politecnico di Milano. Check Cap shall express, through written communication, its interest in each of such inventions. In case Check-Cap is interested in filing a patent with respect to any such invention, the following terms shall apply to such invention:
|
||
4.3.1.
|
Politecnico and Check Cap shall be the joint owners of such invention, each having 50% of the ownership interest in the invention.
|
||
4.3.2.
|
To the extent that the invention is patentable, Check-Cap is entitled to the right to write and file the patent as the joint owner thereof, together with Politecnico; It is hereby clarified that Check-Cap may decide, in its sole discretion, whether or not to file the patent, and in which jurisdictions.
|
||
4.3.3.
|
Politecnico and Check-Cap shall be indicated as assignees, and shall indicate the names of their respective inventors;
|
||
4.3.4.
|
Politecnico shall grant Check-Cap an exclusive perpetual, world-wide, transferable and sub-licensable, royalty free license (except for the payments made pursuant to Section 4.3.6 below) for Politecnico’s share of ownership in the invention, for all usage and purpose;
|
4.3.5.
|
Check-Cap shall bear any costs of filing and any subsequent costs for extension procedures and maintenance; It is hereby clarified that Check-Cap may decide, in its sole discretion, whether or not to extend and maintain the patent in any jurisdiction in which it has been filed.
|
||
4.3.6.
|
Upon the first filing of the patent application, Check-Cap shall award Politecnico a sum of
€
7.000,00; upon the filing of the first national phase application, Check-Cap shall award the Politecnico a further sum of
€
7.000,00. In no event should the payment to Politecnico exceed
€
14.000,00, in regard to the same invention. No other sum shall be payable by Check-Cap to Politecnico or to the inventors indicated by Politecnico as far as the filed application is concerned;
|
||
4.3.7.
|
Politecnico shall be entitled to the free and perpetual right to use the patent solely for scientific, didactical and non-commercial purposes;
|
||
4.3.8.
|
Should Check-Cap decides not to file a patent in any jurisdiction, or to cease the international extension or not to maintain the patent, in any and all jurisdictions in which it has been filed, it shall promptly inform Politecnico, which will then have the option without consideration of receiving full ownership of the patent not of interest to Check-Cap.
|
||
4.4.
|
Politecnico hereby grants Check-Cap a world-wide, exclusive, perpetual, royalty-free, transferable and sub-licensable (subject to the terms set forth below) license and, as necessary, to any and all technology, trade secrets, related intellectual property rights or know-how of the research group responsible of, or involved in, the research under this Agreement, that does or may belong to Politecnico, that is included or incorporated into the CCA-2 ASIC with limitation that Check-Cap may not sell or sub-license the CCA-2 ASIC
’
s as a stand-alone product for sale or use by others. The license under this Section 5.4 shall, among other things, enable Check-Cap to directly manufacture or sub-license to others the right to manufacture the CCA-2 ASIC for use, sale and/or distribution in Check-Cap’s existing or future products as well as existing or future products licensed by Check-Cap for distribution, manufacture and sale by others.
|
7.1.
|
Each Party shall provide the by law foreseen insurances relevant to its personnel, working in the framework of this Agreement, at the different seats where the activities are executed.
|
7.2.
|
The personnel of each Party has to comply with the security and disciplinary rules adopted at the seats where the activities relevant to this Agreement are developed, in mutual accordance to the rules of the country where the activities are executed.
|
|
7.3.
|
The personnel of the Parties, included the external collaborators, shall have
–
before entering the seats where the activities are executed
–
to get the information relevant to security, prevention, protection and health, and to comply with any rules and procedures there foreseen.
|
|
7.4.
|
The head subject of the host Party is in charge of any obligations relevant to information, training and arrangement of the needed measures for prevention and protection.
|
|
7.5.
|
Check-Cap exonerates Polo di Como From every responsibility deriving from damages caused by its own staff to people and/or objects as a result of the activities provided for by this Agreement. Polo di Como exonerates Check-Cap from any damages caused to Polo di Como’s staff in providing the services to Check Cap under this Agreement.
|
|
8.
|
CONFIDENTIALITY AND PROPRIETARY NOTICE
|
|
8.1.
|
For purposes hereof, “
Confidential Information
” shall mean and include all information of the disclosing party, whether written, oral or recorded on any other media, including but not limited to trade secrets, patents, and processes, formulas, designs, source codes, data, writings, know-how, improvements, hardware, software, technologies, product specifications, schematics, net lists, firmware, interfaces, pinouts, designs, test vectors, tooling, customer and supplier information, drawings, financial information, pricing and marketing plans, which has been heretofore or may hereafter be transmitted or otherwise disclosed to the receiving party by the disclosing party, and which relates to the business, technology, products, marketing or activities of the disclosing party.
|
8.2.
|
Each Party acknowledges that by reason of its relationship to the other hereunder, it will access to other Party’s Confidential Information. Each Party agrees that it shall not use in any way for its account or the account of any third party, nor disclose to any third party any Confidential Information revealed to it by the other Party. Neither Party shall use the Confidential Information of the other Party for purposes other than those necessary to directly further the purposes of this Agreement. Each Party shall take every necessary precaution to protect the confidentiality of all Confidential Information.
|
|
8.3.
|
Any breach of the restrictions contained in this Section 8 is a breach of this Agreement which will cause irreparable harm to the other Party, entitling the other Party to injunctive relief in addition to all legal remedies.
|
|
8.4.
|
Check-Cap is bound to keep secret to every person not authorized by Polo di Como, facts, information, notions, documents or objects he/she has learnt about or has been acquainted with by Polo di Como under this Agreement. Polo di Como, similarly, will keep secret to every person not authorized by Check-Cap, facts, information, notions, documents or objects he/she has learnt about or has been acquainted with by Check-Cap under this Agreement.
|
|
8.5.
|
The confidentiality obligations under this Section 8 will survive the termination or expiration of this Agreement, until such facts, information, documents or objects will be disclosed to the public or, by no action or inaction of the Party receiving such facts, information, documents or objects.
|
|
8.6.
|
The Parties would not be responsible for possible damages deriving from the violation of the regulations of this Section 8 if they can prove that such violation has taken place despite the use of the normal diligence in relation with those circumstances.
|
|
8.7.
|
The Parties agree, from now on, that possible actions for the compensation of damages deriving from the violation of this Section 8’s regulations could not deal with a compensation for an amount higher than that provided for by the Agreement and the Previous Agreement.
|
8.8.
|
Every document, specification, drawing or sample and every other information which Check-Cap could have provided to Polo di Como with reference to the object of this Agreement is and will remain property of Check-Cap. Polo di Como undertakes to give Check-Cap back those documents, specifications, drawings and samples for which a request of return has been made by Check-Cap, even before the expiry of the Agreement, unless the use of such material is deemed as necessary from the person responsible for the Agreement to continue the research; in this case, by fulfilling the return’s request, the Agreement is terminated by law and every disbursement met by Polo di Como will be reimbursed up to the moment of the actual collection of the above mentioned material, and a further sum amounting to 10% of the disbursement will be paid as total compensation for every further sum due.
|
11.
|
This Agreement has to be registered only in case of use according to Art. 1, letter b), of the Tariff
–
Second Part, attached to the Decree of the Italian Republic’s President dated 26/4/1986 No. 131.
|
12.
|
The Parties declare to agree that the personal data communicated, even verbally, during the pre-contractual activities, and/or during the negotiation of the Agreement, and/or its execution, may be used exclusively within the framework of this Agreement and that they can be used only anonymously for statistical aims.
|
13.
|
Polo di Como can make free use of the research’s title of this Agreement, in a general form, with the aim of updating the database of the researches carried out by the University, which cannot be published without reference to the Company, in the website of Politecnico. Polo di Como or Politecnico can also insert the name of Check-Cap without reference to the performed research, in a list of customers of the University, which can be published on its website.
|
Como,
|
|||
POLITECNICO DI MILANO
|
CHECK-CA
P LTD
|
||
Polo Regionale di Como
|
By: Guy Neev, CEO | ||
The Pro-rector
|
|||
(Prof. Roberto Negrini) | |||
The Person Responsible for the Research | |||
(Prof. Giuseppe Bertuccio) | |||
To: |
Date: October 20th, 2009
|
Sincerely,
|
||||
Check Cap Ltd.
|
||||
By:
|
||||
Title: | CTO | |||
Agreed and Acknowledged:
|
||||
Politecnico di Milano
|
||||
Department of Electronics Engineering and Information Science
|
||||
|
|
|||
Prof. Gian Antonio Magnani |
Prof. Giuseppe Bertuccio
|
|||
Title: The Director |
Title: the person responsible for the research.
|
1) | ASIC operating from 3.1V down to 2.5V | |||
a) | verify the sensitivity of the gain w.r.t. Vdda | |||
2) |
AC coupling (Priority A)
|
|||
a) | reduce the time constant of Discriminator AC Coupler down to 10-50 ms | |||
b) | no change required for theo AC coupling in the analog chain (shaper). | |||
3) | ASIC Enable (Priority A) | |||
a) | It is necessary to switch on/off the ASIC with a digital signal at a pin | |||
b) | Only the Analog part. Digital is always connected to Vddd | |||
c) | study how to save the preamplifier input (switch toward ground). | |||
d) | the detector bias voltage is lowered from 100V down to few volts in 100-200ms (8nA current from the detector) | |||
4) |
Ipre (Priority B)
|
|||
a) |
integrate the Ipre generator?
|
|||
b) |
eventually it is not a problem to put 50Mohm/6ch (all ASICs) into the capsule
|
|||
c) |
pad for testing purpose (to eventually correct Ipre)
|
|||
d) | see I leak from detector statistic to eventually set Ipre=100pA | |||
e) | Yoav will send us the Ileak statistic | |||
5) | Discriminators | |||
a) |
7 bits threshold control for LLD and MLD in the whole range (10keV to 86keV)
|
|||
b) | 3 bits for HLD, NLD | |||
c) | same energy threshold NLD, HLD | |||
d) | Monte Carlo simulation to see the dispersion of the effective threshold levels. |
6) | Threshold Course Control | |||
a) | to be removed, not needed | |||
7) |
Vrefsh
|
|||
a) | 0.85V internally generated | |||
b) | MC for dispersion | |||
c) | ASIC test version with pad for eventually modify its value from external | |||
d) | +37 ° C, temperature sensitivity? | |||
e) | check stability from 3.1V down to 2.5V |
CCA-2
ASIC
for Check Cap Capsule - Time schedule
|
|||||||||||||||||||||
WP
|
Activity
|
Time
|
M0
|
M1
|
M2
|
M3
|
M4
|
M5
|
M6
|
M7
|
M8
|
||||||||||
no. weeks
|
July 2009
|
Aug
|
Sept
|
Oct
|
Nov
|
Dec
|
Jan 2010
|
Feb
|
March
|
||||||||||||
100
|
CCA-2 Design Specification Definition & Study
|
1
|
|||||||||||||||||||
200
|
Circuit Design & Simulation
|
7
|
|||||||||||||||||||
210
|
ASIC MC & Comer simulations - design refinement
|
4
|
|||||||||||||||||||
220
|
Layout of CCA-2 and of Test Circuits
|
5
|
|||||||||||||||||||
300
|
CCA-2 chip assembly & final check
|
▼ | |||||||||||||||||||
310
|
CCA-2 chip submission to Foundry
|
▼ | |||||||||||||||||||
320
|
CCA-2 chip fabrication (Run1)
|
8
|
|||||||||||||||||||
330
|
CCA-2 chip delivery from Foundry
|
–
|
▲ | ||||||||||||||||||
400
|
Hybrid board design, fabrication and test
|
2
|
|||||||||||||||||||
500
|
Interface software design & test (PAIC 2)
|
3
|
|||||||||||||||||||
600
|
CCA-2 ASIC bonding on hybrid board
|
– | ▼▲ | ||||||||||||||||||
610
|
Test circuits characterization
|
4
|
|||||||||||||||||||
620
|
CCA-2 functionality test & charactensation
|
8
|
|||||||||||||||||||
630
|
CCA-2 ASIC chips delivery to Check Cap
|
–
|
▼ |
CCA-2 ASIC for Check Cap Capsule
|
|||
ITEM DESCRIPTION
|
Cost (Euro)
|
||
1
|
CCA-2 ASIC from design to sample test & characterization
|
28,720
|
|
2
|
CCA-2 ASIC MPW Run
|
7,200
|
|
3
|
sub total
|
35,920
|
|
4
|
overhead
|
8,262
|
|
5
|
TOTAL
|
44,182
|
|
1.
|
Contractual Indemnity
. The Company hereby agrees, subject to the limitations set forth in this Agreement, to indemnify Indemnitee to the greatest extent possible under any applicable law against any liability or expense that may be imposed or incurred by the Indemnitee due to any act or omission of the Indemnitee in his capacity as a director or officer of the Company, either prior to or after the date hereof, in respect of the following (each of the following shall be hereinafter referred to as a "
Claim
"):
|
|
1.1.
|
a financial obligation imposed on Indemnitee in favor of another person by a court judgment, including a compromise judgment or an arbitrator's award approved by court;
|
|
1.2.
|
reasonable litigation expenses, including attorneys' fees, expended by Indemnitee (i) as a result of an investigation or proceeding instituted against him by a competent authority
that is authorized to conduct such investigation or proceeding, which investigation or proceeding has not ended in a criminal charge or in a financial liability in lieu of a criminal proceeding, or has ended in a financial obligation in lieu of a criminal proceeding for an offence that does not require proof of criminal intent (the phrases "proceeding that has not ended in a criminal charge" and "financial obligation in lieu of a criminal proceeding" shall have the meaning as defined in Section 260(al) of the Companies Law, 1999 (the "
Companies Law
")); or (ii) in connection with a monetary sanction ("
Itzum Caspi
")
|
|
1.3.
|
reasonable litigation expenses, including attorneys' fees, expended by Indemnitee or charged to him by a court, in a proceeding instituted against him by the Company or on its behalf or by another person, or in a criminal charge from which he was acquitted or in any criminal proceeding of a crime which does not require proof of criminal intent in which the Indemnitee is convicted;
|
|
1.4.
|
expenses, including reasonable litigation expenses and legal fees, incurred by the Indemnitee as a result of an Administrative Proceeding instituted against the Indemnitee. "Administrative Proceeding" shall mean a proceeding instituted pursuant to (a) Chapter H3 of the Israeli Securities Law 5728-1968 (the " Securities Law "), "Imposition of Monetary Sanctions by the Securities Authority"; (b) Chapter H4 of the Securities Law, "Imposition of Administrative Enforcement Sanctions by the Enforcement Committee"; (c) Chapter I1 of the Securities Law, "Arrangement for the Avoidance of Proceedings or Termination of Proceedings, which is Subject to Conditions" or (d) pursuant to Chapter I4(d) of the Companies Law; and |
|
1.5.
|
payments to an injured party imposed on the Indemnitee pursuant to Section 52ND(a)(1)(a) of the Securities Law. |
The above indemnification will also apply to any action taken by the Indemnitee in his capacity as a director or officer of any other company controlled, directly or indirectly, by the Company (a "
Subsidiary
")
or in his capacity as a director or officer of a company not controlled by the Company but where his appointment as a director or officer results from the Company's holdings in such company ("
Affiliate
").
|
2.
|
Limitations on Contractual Indemnity
.
|
|
2.1.
|
The total indemnification obligation that the Company undertakes towards all directors and officers of the Company (in all cases, whether serving as of the date hereof or who shall serve as directors and officers of the Company following the date hereof) shall in no event exceed
an aggregate amount equal to
the greater of: (i) US$5,000,000, or (ii) an amount equal to 25% of the Company's shareholders equity (on a consolidated basis), based on the Company's most recent consolidated financial statements available before the date on which the indemnity payment is made (the "
Maximum Cumulative Indemnification
"). Such amount has been determined by the Board of Directors of the Company to be reasonable under the circumstances. The indemnification provided under this Agreement shall not be subject to the limitations imposed by this Section
2.1 if and to the extent such limits are no longer required by the Companies Law.
|
|
|
In the event that the sum of all indemnification payments to directors and officers required to be made by the Company at any time, together with all indemnification payments to directors and officers previously paid by the Company, exceeds the Maximum Cumulative Indemnification, then the Maximum Cumulative Indemnification, or the remaining portion thereof, as applicable, shall be allocated among the directors and officers that are entitled to such indemnification and to whom the Company has not paid theretofore, in a manner that the indemnification amount that will be actually paid to each of them will be calculated according to the ratio between (a) the indemnification amount to which each of them would have been entitled absent of the Maximum Cumulative Indemnification; and (b) the aggregate amount of the then outstanding indemnification to the directors and officers who would have been entitled, absent of the Maximum Cumulative Indemnification, to indemnification pursuant to their indemnification request.
Upon payment by the Company of the Maximum Cumulative Indemnification, the Company shall not bear any additional indemnifications, except to the extent that an increase of the Maximum Cumulative Indemnification has been approved by the authorized organs of the Company.
|
|
2.2.
|
Indemnitee shall not be entitled to indemnification under Section
1, for any amount imposed on him consequent to any of the following: (i) a breach of the duty of loyalty to the Company, a Subsidiary and/or an Affiliate thereof (as applicable) by Indemnitee, except, to the extent permitted by law, for a breach of a duty of fidelity to the Company, the Subsidiary and/or the Affiliate (as applicable) while acting in good faith and having reasonable cause to assume that such act would not prejudice the interests of the Company the Subsidiary and/or the Affiliate (as applicable); (ii) a violation of the Indemnitee's duty of care towards the Company, a Subsidiary and/or an Affiliate thereof (as applicable), which was committed intentionally or recklessly, but not if only committed negligently; (iii) an act committed with the intention to realize a personal unlawful profit; (iv) a fine, monetary sanction or forfeit levied imposed on Indemnitee; (v) a counterclaim made by the Company, a Subsidiary and/or an Affiliate thereof (as applicable) or in their names in connection with a claim against the Company, the Subsidiary and/or the Affiliate (as applicable) filed by Indemnitee, other than by way of defense or by way of third party notice in connection with claim brought against the Indemnitee, or in specific cases in which the Company's Board of Directors has approved the initiation or bringing of such suit by Indemnitee, which approval shall not be unreasonably withheld; or (vi) any other act, event or circumstance with respect to which it is prohibited to do so under applicable law.
|
3.
|
Limitation of Categories of Claims
. The indemnification pursuant to Section
1.1 above, shall only apply to liabilities or expenses arising in connection with acts or omissions of Indemnitee in his capacity as a director or an officer of the Company, in respect of the events and circumstances set forth in
Exhibit A
to this Agreement, which are deemed by the Company's Board of Directors to be foreseeable at the date hereof in view of the Company's current activities. The indemnification provided under this Agreement shall not be subject to the limitations imposed by this Section
3 and Exhibit A if and to the extent such limits are no longer required by the Companies Law.
|
4.
|
Expenses; Indemnification Procedure
. The Company shall advance Indemnitee all
expenses incurred by Indemnitee in connection with a Claim on the date on which such
amounts are first payable (
"Time of Indebtness"
), and with respect to items
mentioned in Section
1.1
,
1.3
or
1.4
above, even prior to a court decision, but has no
duty to advance payments in less than seven (7) days following delivery of a written request therefor by Indemnitee to the Company, subject to Indemnitee undertaking to repay such advances if it is determined, in accordance with the terms of this Agreement
or the provisions of any applicable law, that the Indemnitee is not entitled to such
indemnification. Advances given to cover litigation expenses in accordance with
Section
1.2
above will be repaid by Indemnitee to the Company if such investigation
or proceeding has ended in a criminal charge or in a financial liability was imposed in
lieu of a criminal proceeding for a crime which requires a finding of criminal intent,
within thirty (30) days as of the court's decision. Advances given to cover litigation expenses in accordance with Section
1.3
above will be repaid in full by Indemnitee to the Company, if Indemnitee is found guilty of a crime that requires proof of criminal intent, within thirty (30) days as of the court's decision. Other advances will be repaid
by Indemnitee to the Company if it is determined by a competent court, the applicable governmental authority or the Company, at the advise of its legal counsel, that Indemnitee is not entitled to such
indemnification,
within thirty (30) days as of such decision
. As part of the aforementioned undertaking, the Company will make
available to Indemnitee any security or guarantee that Indemnitee 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 Indemnitee's assets. Such security or guarantee amount to be deemed included within the Maximum Cumulative Indemnification, for as long as it is outstanding.
|
5.
|
Notification and Defense of Claim
. If any Claim is brought against Indemnitee in respect of which indemnity is sought under this Agreement:
|
|
5.1.
|
Indemnitee will notify the Company in writing of the commencement thereof as soon as possible following Indemnitee first becoming aware thereof provided, however, that Indemnitee's failure to notify the Company as aforesaid shall not derogate from Indemnitee's right to be indemnified as provided herein except and to the extent that such failure to provide notice adversely prejudices the Company's ability to defend against such action or to conduct any directly related legal proceeding (similarly, Indemnitee must notify the Company in writing on an ongoing and current basis concerning all events that Indemnitee suspects may possibly give rise to the initiation of legal proceedings against Indemnitee). Notice to the Company shall be directed to the Chief Executive Officer of the Company (or in the case of a notice from the Chief Executive Officer, to the Chairman of the Company) at the address of the Company's principal office (or at such other address as the Company shall advise the Indemnitee). In addition, the Indemnitee will deliver to the Company, or to such person as it shall advise Indemnitee, without delay all documents Indemnitee receives or possesses in connection with the Claim, and the Company will be entitled to participate therein at its own expense or to assume the defense thereof and to employ counsel reasonably satisfactory to Indemnitee. Indemnitee shall have the right to employ its own counsel in connection with any such Claim and to participate in the defense thereof, but the fees and expenses of such counsel shall be at the expense of Indemnitee unless: (i) the Company shall have authorized the employment of counsel by Indemnitee; (ii) the Company shall have not assumed the defense of the Claim within a reasonable time; or (iii) the named parties to any such action (including any impleaded parties) include both Indemnitee and the Company, and joint representation is inappropriate under applicable standards of professional conduct due to a conflict of interest between Indemnitee and the Company, in either of which events reasonable fees and expenses of such counsel to Indemnitee shall be borne by the Company. The Company and/or its attorney shall be entitled to conclude such proceedings, all as it see fit, including by way of settlement. At the request of the Company, Indemnitee shall execute all documents required to enable the Company and/or its attorney as aforesaid to conduct Indemnitee's defense and to represent him in all matters connected therewith. For the avoidance of doubt, in the case of criminal proceedings the Company and/or the attorneys as aforesaid will not have the right to plead guilty in Indemnitee's name or to agree to a plea-bargain in his name without his prior written consent. Furthermore, in a civil proceeding (whether before a court or as a part of a compromise arrangement), the Company and/or its attorneys will not have the right to admit to any occurrences that are not indemnifiable pursuant to this Agreement and/or pursuant to law, without Indemnitee's prior written consent. However, the aforesaid will not prevent the Company and/or its attorneys as aforesaid, with the approval of the Company, to come to a financial arrangement with a plaintiff in a civil proceeding without Indemnitee's consent so long as such arrangement will not be an admittance of an occurrence not fully indemnifiable pursuant to this Agreement and/or pursuant to law.
|
|
5.2.
|
The Company shall not be liable to indemnify Indemnitee for any amounts paid in settlement of any Claim affected without the Company's written consent.
|
|
5.3.
|
Indemnitee shall give the Company such information and cooperation as may be reasonably required.
|
6.
|
Partial Indemnification
. If Indemnitee is entitled under any provision of this Agreement to indemnification by the Company for some or a portion of the expenses actually or reasonably incurred by Indemnitee in connection with a Claim or Claims, but not, however, for the total amount thereof, the Company shall nevertheless indemnify Indemnitee for the portion of such expenses to which Indemnitee is entitled.
|
7.
|
Other Indemnification
. The Company will not indemnify Indemnitee for any liability or expenses with respect to which Indemnitee has received payment by virtue of an insurance policy or other indemnification agreement, other than for amounts, which are in excess of the amount paid to Indemnitee pursuant to such policy or agreement and other than a deductible payable by the Indemnitee under an insurance policy or indemnification agreement.
|
8.
|
Collection from a Third Party
. The Company will be entitled to any amount collected from a third party in connection with a Claim or Claims actually indemnified hereunder by the Company, to be paid by the Indemnitee to the Company within fifteen (15) days as of the receipt of the said amount.
|
9.
|
Exemption
. The Company hereby irrevocably exempts Indemnitee, to the fullest extent permitted by law, from any liability for damages caused as a result of a breach of his duty of care to the Company, provided that in no event shall he be exempt with respect to (i) any actions listed in Section
2.2 above; or (ii) a violation of the Indemnitee's duty of care towards the Company in connection with any Distribution (as such term is defined in the Companies Law).
|
10.
|
Post Factum Indemnification
. It is hereby clarified that nothing in here shall limit the Company's right to indemnify the Indemnitee, post factum, for any and all amounts which Indemnitee may be obligated to pay as set forth in Section
1 without the limitations set forth in Sections 2.1, 3, 5, 7 and 8. Indemnitee's rights of indemnification hereunder shall not be deemed exclusive of any other rights Indemnitee may have under the Company’s Articles of Association, applicable law or otherwise.
|
11.
|
Severability
. Each of the provisions of this Agreement is a separate and distinct agreement and independent of the others, so that if any provision hereof shall be held to be invalid or unenforceable for any reason, such invalidity or unenforceability shall not affect the validity or enforceability of the other provisions hereof. Further, if, and solely to the extent that, any provision of this Agreement shall for any reason be held to be excessively broad, the provision shall be construed in such manner as to enable it to be enforced to the extent compatible with applicable law.
|
12.
|
Termination of services
. For the avoidance of doubt, the Company will indemnify Indemnitee even if at the relevant Time of Indebtness Indemnitee is no longer a director or an officer of the Company or of a Subsidiary or an Affiliate, as applicable, provided, that the obligations are in respect of actions taken by the Indemnitee while serving as a director or an officer, as aforesaid, and in such capacity.
|
13.
|
Further Assurances
. The parties will do, execute and deliver, or will cause to be done, executed and delivered, all such further acts, documents and things as may be reasonably required for the purpose of giving effect to this Agreement and the transactions contemplated hereby. Notwithstanding anything to the contrary, 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.
|
14.
|
Entire Agreement; Amendments
. This Agreement constitutes the entire agreement between the parties with respect to its subject matter, and supersedes and cancels all prior agreements, proposals, representations and communications between the parties regarding the subject matter hereof. No amendment, modification, termination or cancellation of this Agreement shall be effective unless it is in writing and signed by the parties hereto. In the event that according to changes in the governing law, the governing law enables any further indemnification rights to be granted by the Company to the Indemnitee, then the Company shall use its best efforts to take such corporate actions as required by law, in order to apply such indemnification rights to the Indemnitee and to amend this Agreement accordingly.
|
15.
|
Binding Effect; No Assignment
. This Agreement shall be binding upon Indemnitee and the Company, their successors and assigns, and shall inure to the benefit of Indemnitee, his heirs, personal representatives and assigns and to the benefit of the Company, its successors and assigns. Indemnitee shall not assign or otherwise transfer his rights or obligations under this Agreement and any attempt to assign or transfer such rights or obligations shall be deemed null and void.
|
16.
|
Notice
. All notices and other communications pursuant to this Agreement shall be in writing and shall be deemed provided if delivered personally, telecopied, sent by electronic facsimile, email, reputable overnight courier or mailed by registered or certified mail (return receipt requested), postage prepaid, to the parties at the addresses shown in the preamble to this Agreement, or to such other address as the party to whom notice is to be given may have furnished to the other party hereto in writing in accordance herewith. Any such notice or communication shall be deemed to have been delivered and received (i) in the case of personal delivery, on the date of such delivery, (ii) in the case of telecopier or an electronic facsimile or email, upon transmission and electronic confirmation of receipt or, if transmitted and received on a non-business day, on the first business day following transmission and electronic confirmation of receipt, (iii) if by courier two (2) business days after delivery to the courier service, and (iv) in the case of mailing, three (3) business days after mailing, or five (5) business days if sent internationally (provided, however, that any notice of change of address shall only be valid upon receipt).
|
17.
|
Governing Law; Jurisdiction
. This Agreement shall be interpreted and enforced in accordance with the laws of the State of Israel, without regard to their rules of conflict of laws, and any dispute arising from
or in connection with this Agreement is hereby submitted to the sole and exclusive jurisdiction of the competent courts in Tel Aviv, Israel.
|
18.
|
Neither party 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 Agreement against the other party that would in any manner cast any negative light, inference or aspersion against any of the parties.
|
Check-Cap Ltd.
|
||
By:
|
||
Name and title:
|
[_____________]
|
||
Name:
|
||
Signature:
|
1.
|
Negotiations, execution, delivery and performance of agreements on behalf of the Company, whether written or oral, including, inter alia, any claim or demand made by a customer, supplier, contractor or other third party transacting any form of business with the Company, relating to the negotiations or performance of such transactions, and/or to representations or inducements provided in connection thereto or otherwise;
|
2.
|
Anticompetitive acts and acts of commercial wrongdoing;
|
3.
|
Acts in regard of invasion of privacy including with respect to databases and acts in regard of slander;
|
4.
|
Any proceedings relating to intellectual property rights and/or any claim or demand made for actual or alleged infringement, misappropriation or misuse of any third party's intellectual property rights including, but not limited to confidential information, patents, copyrights, design rights, service marks, trade secrets, copyrights, misappropriation of ideas by the Company;
|
5.
|
Any claim and/or demand and/or any proceeding 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;
|
6.
|
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, agreements, notices, reports, tenders and/or other proceedings;
|
7.
|
Occurrences resulting from the Company's status as a public company, and/or from the fact that the Company's securities were offered to the public and/or are traded on a stock exchange, whether in the United States or in any other jurisdiction;
|
8.
|
Occurrences in connection with investments the Company make in other corporations whether before and/or after the investment is made, entering into the transaction, the execution, development and monitoring thereof, including actions taken by you in the name of the Company as a director or officer of the Company;
|
9.
|
The sale, purchase and holding of negotiable securities or other investments for or in the name of the Company;
|
10.
|
Actions in connection with the merger of the Company with or into another entity;
|
11.
|
Actions in connection with the sale of outstanding share capital, operations and/or business, or part thereof, of the Company;
|
12.
|
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;
|
13.
|
Actions taken in connection with labor relations and/or employment matters in the Company and trade relations of the Company , including with employees, independent contractors, customers, suppliers and various service providers;
|
14.
|
Actions concerning the approval of transactions of the Company with officers and/or directors and/or holders of controlling interests in the Company or any other transaction with a related party;
|
15.
|
Actions in connection with the testing of products developed by the Company or in connection with the distribution, sale, license or use of such products;
|
16.
|
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 relating thereof;
|
17.
|
Participation and/or non-participation at the Company's board meetings, bona fide expression of opinion and/or voting and/or abstention from voting at the Company's board meetings;
|
18.
|
Approval of corporate actions including the approval of the acts of the Company's management, their guidance and their supervision;
|
19.
|
Claims of failure to exercise business judgment and a reasonable level of proficiency, expertise and care in regard of the Company's business;
|
20.
|
Actions taken pursuant to or in accordance with the policies and procedures of the Company, whether such policies and procedures are published or not;
|
21.
|
Violations of securities laws of any jurisdiction, including without limitation, fraudulent disclosure claims, failure to comply with SEC and/or the Israeli Securities Authority and/or another applicable state securities authority and/or any stock exchange disclosure or other rules and any other claims relating to relationships with investors, shareholders and the investment community and any claims related to the Sarbanes-Oxley Act of 2002 or a similar law of another jurisdiction, all as amended from time to time;
|
22.
|
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
to the failure to disclose any information in the manner or time such information is
required to be disclosed pursuant to such laws, rules or regulations, or related to inadequate or improper
disclosure of information to shareholders, or prospective shareholders, or related to the
purchasing, offering, 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 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;
|
23.
|
Violations of laws requiring the Company to obtain regulatory and governmental licenses, permits and authorizations or laws related to any governmental grants in any jurisdiction;
|
24.
|
Actions taken in connection with the Company’s financial reports and tax returns, including the preparation thereof;
|
25.
|
Claims in connection with publishing or providing any information, including any filings with any governmental authorities, on behalf of the Company in the circumstances required under any applicable laws;
|
26.
|
Any claim or demand made by employees, consultants, agents or other individuals or entities employed by or providing services to the Company relating to compensation owed to them or damages or liabilities suffered by them in connection with such employment or service;
|
27.
|
Resolutions and/or actions relating to employment matters of the Company;
|
28.
|
Events, pertaining to the employment conditions of employees and to the employer - employee relations, including the promotion of workers, handling pension arrangements, insurance and saving finds, options and other benefits;
|
29.
|
Any claim or demand made by any lenders or other creditors or for moneys borrowed by, or other indebtedness of, the Company;
|
30.
|
Any claim or demand made by any third party suffering any personal injury and/or bodily injury and/or intellectual property damage to business or personal property through any act or omission attributed to the Company, or its respective employees, agents or other persons acting or allegedly acting on its behalf;
|
31.
|
Any claim or demand made directly or indirectly in connection with complete or partial failure, by the Company or its respective directors, officers and employees, to pay, report, keep applicable records or otherwise, of any foreign, federal, state, country, 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;
|
32.
|
Any claim or demand made by purchasers, holders, lessors or other users of products or assets of the Company, or individuals treated with such products, for damages or losses related to such trading, use or treatment;
|
33.
|
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 (including potential responsibility or liability for costs of enforcement, investigation, cleanup, governmental response, removal or remediation, for natural resources damages, property damage, personal injuries, or penalties or contribution, indemnification, cost recovery, compensation, or injunctive relief) arising out of, based on or related to (i) the presence of, release spill, emission, leaking, 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 substance, wastes or 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 (ii) circumstances forming the basis of any violation of any environmental law, environmental permit, license, registration or other authorization required under applicable environmental and/or public health law;
|
34.
|
Actions in connection with the Company's development, use, sale, licensing, distribution, marketing or offer of products and/or services;
|
35.
|
Resolutions and/or actions relating to a merger of the Company, 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 the Company;
|
36.
|
Resolutions and/or actions relating to investments in the Company and/or the purchase or sale of assets, including the purchase or sale of companies and/or businesses, and/or investments in corporate or other entities and/or investments in traded securities and/or any other form of investment;
|
37.
|
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 of the Company to comply with any statute, law, ordinance, rule, regulation, order or decree of a competent authority regarding the Company or any of its respective business operations;
|
38.
|
Any form of business with the Company 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;
|
39.
|
Any claim or demand, not covered by any of the categories of events described above, which, pursuant to any applicable law, a director or officer of the Company may be held liable to any government or agency thereof, or any person or entity, in connection with actions taken by such director or officer in such capacity;
|
40.
|
Claims related to occurrences in connection with the Company's registration in any stock exchange outside Israel and/or from the fact that the Company is public in any stock exchange;
|
41.
|
Any claim or demand filed in relation to an act that pertains to a report or notice filed pursuant to any applicable law, including regulations promulgated thereunder, or according to laws and regulations dealing with similar matters outside of Israel, or according to rules or procedures that apply at a stock exchange in Israel or abroad and/or the failure to file a report of notice as aforesaid.
|
1.
|
Credit Line Amount
; Escrow Account
|
|
1.1
|
At the Closing (as defined below) and subject thereto, each of the Lenders, severally but not jointly, shall deposit its portion of the Credit Line Amount, as set forth opposite such Lender's name on
Exhibit A
attached hereto, in an escrow account (the "
Escrow Account
"), to be held in the name of Meitav Dash Trusts Ltd. (the "
Escrow Agent
"), in accordance with the terms of the escrow agreement in the form attached hereto as
Exhibit B
(the "
Escrow Agreement
"), to be entered into by and among the Company, each Lender, Shanghai Fosun Pharmaceutical Group Co. Ltd. or, to the extent that its portion of the Credit Line Amount will be extended by its subsidiary, the subsidiary extending its portion of the Credit Line Amount ("
Fosun Pharma
"), as the Lenders' representative (the "
Lenders' Representative
") and the Escrow Agent at the Closing.
|
|
1.2
|
The Credit Line Amount shall be transferred to the Escrow Account in U.S. dollars or in New Israeli Shekels ("
NIS
"), calculated at the last representative exchange rate published by the Bank of Israel on the date immediately prior to the Closing Date (as defined below) (net of any transfer fees).
|
|
1.3
|
Any interest that may accrue on the deposited Credit Line Amount shall, other than Interest (as such terms are defined in
Exhibit 4.2
attached hereto) that may accrue on the Loan Amount (as defined below) in accordance with
Exhibit 4.2
attached hereto, accrue to the account of the Company, including in the event of the release of the Credit Line Amount to the Lenders in accordance with Sections
4.3 and
5.2 below.
|
2.
|
Credit Line Warrants
|
|
2.1
|
At the Closing and subject thereto, the Company shall issue to each Lender a warrant to purchase such number of ordinary shares, par value NIS 0.01, of the Company ("
Ordinary Shares
") that is equal to the number arrived at by multiplying (i) such number of Ordinary Shares constituting 2% of the Company's share capital on a Fully Diluted Basis (as defined below) as of the Closing by (ii) a fraction, the numerator of which is such Lender's portion of the Credit Line Amount (in U.S. Dollars) and the denominator of which is US$1,000,000 (one Million US Dollars) (the "
Fraction
"), all subject to the terms and the conditions of the warrant certificate attached hereto as
Exhibit
2
(collectively, the "
Credit Line Warrants
").
|
|
2.2
|
In this Agreement, the term "
Fully Diluted Basis
" means the issued and outstanding share capital of the Company, assuming all existing outstanding options, warrants, convertible securities, or any other right to acquire shares (excluding any securities issued in connection with the transactions contemplated under this Agreement) were exercised or converted (assuming conversion of all the convertible securities of the Company into Ordinary Shares on a 1:1 basis).
|
3.
|
Deferred Closing
|
|
3.1
|
Subject to the terms and conditions hereof, the Company may consummate an additional closing or series of closings (each, a "
Deferred Closing
") with an additional lender or lenders (each, an "
Additional Lender
" and collectively, the "
Additional Lenders
") on the same terms and conditions set forth in this Agreement; provided that any such Deferred Closings shall occur no later than forty five (45) days from the Closing. The aggregate amount to be extended by the Additional Lenders (the "
Additional Credit Line Amount
") shall, together with the Credit Line Amount that was deposited in the Escrow Account at the Closing, not exceed the maximum Credit Line Amount. Simultaneously with the consummation of a Deferred Closing, the Additional Lenders shall execute and deliver to the Company a joinder agreement in the form to be mutually agreed upon by the Company and the Majority Lenders until the Closing and to be attached as attached as
Exhibit
3
hereto, pursuant to which each such Additional Lender shall become a party to this Agreement and for all purposes under this Agreement, the Additional Lender shall be deemed to be a "Lender" and the Additional Credit Line Amount shall be deemed to be part of the "Credit Line Amount."
|
|
3.2
|
Following each Deferred Closing (if any), the number of Ordinary Shares underlying the Credit Line Warrants shall be increased, such that following such increase, the number of Ordinary Shares underlying each Lender's Credit Line Warrants shall be equal to the number obtained by multiplying (i) such number of Ordinary Shares constituting 2% of the Company's share capital on a Fully Diluted Basis as of such Deferred Closing by (ii)
the Fraction.
|
4.
|
Call of Credit Line Amount
|
|
4.1
|
If the Company does not consummate an initial public offering of its shares (an "
IPO
") on or prior to February 18, 2015 (the "
Last IPO Date
") (and for the purpose of this Agreement, an IPO shall be deemed consummated on or prior to the Last IPO Date if the registration statement for the registration of the Company' shares, was declared effective on or prior to the Last IPO Date and provided that the Company has ultimately issued shares pursuant to such registration statement no later than twenty one (21) days following the date on which such registration statement was declared effective), the Company may call the Credit Line Amount at any time until eighteen (18) months from the Closing Date (the "
Last Date
"), by sending a written notification to the Escrow Agent (with a copy to the Lenders)in accordance with the Escrow Agreement; provided that either (i) the Credit Line Amount actually called by the Company (the "
Loan Amount
") is at least US$8,000,000; or (ii) the Loan Amount, together with any additional amounts raised by the Company from the Closing Date until such date of call, shall equal at least US$8,000,000. Any amounts so called will be called pro rata among the Lenders based on their actual contribution to the Credit Line Amount as a proportion of the Credit Line Amount.
|
|
4.2
|
If the Loan Amount is called by the Company on or prior to the Last Date pursuant to Section 4.1 hereof, the provisions set forth on
Exhibit 4.2
attached hereto shall govern the Loan Amount.
|
|
4.3
|
If the Company does not consummate an IPO on or prior to the Last IPO Date and the Credit Line Amount is not called by the Company on or prior to the Last Date, the Credit Line Amount shall be released from the Escrow Account to the Lenders in accordance with the Escrow Agreement.
|
5.
|
Placement of the Credit Line Amount in an IPO
|
|
5.1
|
In the event that the Company intends to consummate an IPO and such IPO is expected to be consummated on or prior to Last IPO Date, then the Company shall be entitled, at its sole and absolute discretion, to request that each Lender place an irrevocable order with the Company or its underwriters to invest its portion of the Credit Line Amount in the IPO at the IPO price, as shall be determined by the Company and its underwriters, at their sole discretion; provided that such irrevocable order shall become effective only if the Company consummated an IPO on or prior to the Last IPO Date. At the Closing, the Lenders will execute an irrevocable instruction letter to that effect. It is clarified that the Company and the underwriters shall be entitled to place such amount of the Credit Line Amount in the IPO as they shall determine, at their sole discretion
,
and shall have no obligation to place any or all of the Credit Line Amount in the IPO. Any amounts so placed will be placed pro rata among the Lenders based on their actual contribution to the Credit Line Amount as a proportion of the Credit Line Amount.
|
|
5.2
|
If the Company consummated an IPO on or prior to the Last IPO Date, the right of the Company to call the Credit Line Amount in accordance with Section
4.1 above will automatically terminate and to the extent not placed in the IPO pursuant to Section
5.1 above, the Credit Line Amount shall be released from the Escrow Account to the Lenders in accordance with the Escrow Agreement.
|
6.
|
Replacement of Company's Articles of Association and Amendment of Shareholders Agreement
|
7.
|
C
losing
|
|
7.1
|
Time and Place of the Closing
. The closing of the transactions contemplated hereby (the "
Closing
") shall take place at the offices of Fischer Behar Chen & Co., within three Business Days (as defined in Section
16.5 hereof) of satisfaction and fulfillment, or waiver, of the conditions to Closing set forth in Sections
8 and
8.7, or at such other time and place as the Company and the Lenders that committed to extend to the Company an aggregate amount of at least fifty percent (50%) of the Credit Line Amount, which group must include Fosun Pharma (the "
Majority Lenders
"), shall mutually agree in writing (the "
Closing Date
").
|
|
7.2
|
Deliveries and Transactions at the Closing
.
At the Closing, the following transactions shall occur simultaneously (no transaction shall be deemed to have been completed or any document delivered until all such transactions have been completed and all required documents delivered):
|
|
7.2.1
|
Board Resolutions
. Copies of duly executed resolutions of the Board of Directors of the Company, in the form attached hereto as
Exhibit
7.2.1
shall be delivered to the Lenders (the "
Board Resolutions
"), approving, inter alia, the execution, delivery and performance by the Company of this Agreement, the Escrow Agreement, the Amended Shareholders' Agreement and all other documents and agreements ancillary to such agreements (collectively, the "
Transaction Documents
"), to which the Company is a party, and the transactions contemplated hereby and thereby, including the issuance of the Issued Securities (as defined below).
|
|
7.2.2
|
Shareholders Resolutions
. Copies of duly executed resolutions of the Company's shareholders, in the forms attached hereto as
Exhibit
7.2.2(a)
, shall be delivered to the Lenders (the "
Shareholder Resolutions
"), approving, inter alia: (i) the execution, delivery and performance by the Company of this Agreement and the transactions contemplated hereby, including the issuance of the Issued Securities; (ii) the execution, delivery and performance by the Company of the Amended Shareholders' Agreement; (iii) the replacement of the Company's current Articles of Association with the Amended Articles, subject to and upon the Closing; and (iv) the execution, delivery and performance by the Company of an employment agreement with Yoav Kimchy, the Company's Chief Technology Officer, substantially in the form attached hereto as
Exhibit
7.2.2(b)
, which shall replace Mr. Kimchy's current employment agreement in its entirety (the "
CTO Employment Agreement
").
|
|
7.2.3
|
The Company and the parties to the Amended and Restated Shareholders’ Agreement dated March 17, 2011 (either as an original signatory or by virtue of a joinder thereto) shall execute and deliver the Amended Shareholders' Agreement.
|
|
7.2.4
|
The Company shall deliver to the Lenders satisfactory evidence that all pre-emptive rights relating to this Agreement have been waived or expired.
|
|
7.2.5
|
The Company shall deliver to each Lender a validly executed Credit Line Warrant
in the name of such Lender.
|
|
7.2.6
|
The Company shall deliver to the Lenders a legal opinion of counsel to the Company in the form to be mutually agreed upon by the Company and the Majority Lenders until the Closing and to be attached as
Exhibit
7.2.6
hereto.
|
|
7.2.7
|
The Company shall deliver a certificate duly executed by the Chief Executive Officer of the Company, certifying and having attached, as applicable, thereto: (i) the Amended Articles; (ii) the Board Resolutions; (iii) the Shareholders Resolutions; (iv) that, the representations and warranties made by the Company in this Agreement shall have been true and correct when made, and are true and correct in all material respects as of the Closing Date; and (v) that all covenants, agreements, and conditions contained in this Agreement to be performed or complied with by the Company as of the Closing Date, to the extent not waived by the Majority Lenders, have been performed or complied with by the Company, prior to or at the Closing Date.
|
|
7.2.8
|
Each Lender shall deposit in the Escrow Account its respective portion of the Credit Line Amount, as set forth opposite such Lender's name on
Exhibit A
attached hereto, in accordance with Section
1 above.
|
|
7.2.9
|
The Company, the Lenders, the Lenders' Representative and the Escrow Agent shall execute and deliver the Escrow Agreement.
|
|
7.2.10
|
Each Lender shall execute and deliver an irrevocable letter of instructions for the investment of its portion of the Credit Line Amount in an IPO, in accordance with the provisions of Section
5.1 above, in the form to be mutually agreed upon by the Company and the Majority Lenders until the Closing and to be attached as
Exhibit
7.2.10
hereto.
|
|
7.2.11
|
Each Lender shall execute and deliver an irrevocable letter of instructions for the investment of such Lender's Escrow Amount in a PO, as such term is defined in, and in accordance with the provisions of, Section 2 of
Exhibit 4.2
, in the form to be mutually agreed upon by the Company and the Majority Lenders until the Closing and to be attached as
Exhibit
7.2.11
hereto.
|
|
7.2.12
|
The Company and Yoav Kimchy shall execute and deliver the CTO Employment Agreement.
|
|
7.2.13
|
The Company shall provide Fosun Pharma confirmation of the participation in the Credit Line Amount, of an amount not to be less than US$2,000,000, from existing shareholders.
|
|
7.3
|
If the Closing does not occur within forty five (45) days from the Effective Date, each of the Company and the Majority Lenders on behalf of the Lenders may terminate this Agreement and the transactions contemplated hereby may be abandoned by written notice to the other party, without further action of any of the parties hereto, without giving rise to any right or claim by the other party, excluding claims for breaches of obligations by any party prior to such termination
.
Any such termination by the Majority Lenders shall apply with respect to all Lenders.
|
8.
|
Conditions to Closing
by the Lenders
|
|
8.1
|
Accurate Representations and Warranties
. The representations and warranties of the Company in this Agreement shall be true and correct when made and shall be true and correct in all material respects as of the Closing Date.
|
|
8.2
|
Compliance with Covenants
. The Company shall have performed and complied with all of its covenants, agreements and undertakings set forth herein.
|
|
8.3
|
Actions Taken; Delivery of Documents
.
All the actions to be taken by the Company’s shareholders or by the Company as set forth in Section
7.2 above shall have been completed to the satisfaction of the Majority Lenders.
|
|
8.4
|
Proceedings and Documents
. All corporate and other proceedings in connection with the transactions contemplated by this Agreement shall be satisfactory in substance and form to the Lenders, and the Lenders shall have received all such counterpart copies of such documents as the Lenders may reasonably request.
|
|
8.5
|
Consents
. The Company shall have secured all permits, consents and authorizations that shall be necessary or required lawfully to consummate this Agreement.
|
|
8.6
|
Minimum Credit Line Amount
. The aggregate Credit Line Amount the Lenders committed to extend shall be at least the Minimum CLA.
|
8.7
|
CTO Employment Agreement
.
The Company and Yoav Kimchy shall have entered into the CTO Employment Agreement.
|
9.
|
Conditions to Closing by the Company
|
|
9.1
|
Accurate Representations and Warranties
. The representations and warranties of the Lenders in this Agreement shall be true and correct when made and shall be true and correct in all material respects as of the Closing Date.
|
|
9.2
|
Compliance with Covenants
. The Lenders shall have performed and complied with all of their covenants, agreements, and undertakings as set forth in this Agreement.
|
|
9.3
|
Waiver of Anti-dilution Rights
. The requisite majority of shareholders have waived their anti-dilution rights in connection with the transactions contemplated under this Agreement, including, without limitation, in connection with the issuance of the Credit Line Warrants and their underlying shares, the securities issued upon conversion of the Conversion Amount as such term is defined in Section
1.2 of
Exhibit 4.2
) and any other Issued Securities.
|
|
9.4
|
Minimum Credit Line Amount
. The aggregate Credit Line Amount the Lenders committed to extend shall be at least the Minimum CLA.
|
10.
|
Representations and Warranties of the Company
|
|
10.1
|
Definitions
. Capitalized terms used in this Section
10 and not otherwise defined in this Agreement shall have the meanings ascribed to them below:
|
|
10.2
|
Representations and Warranties of the Company
|
|
10.2.1
|
Organization
. The Company is a company duly organized and validly existing under the laws of the State of Israel. The Company has the power to own and lease its properties and to carry on its business as now being conducted and as proposed to be conducted.
|
|
10.2.2
|
Share Capital
. The authorized share capital of the Company immediately prior to the Closing shall consist of eleven million five hundred thousand New Israeli Shekels (NIS 11,500,000) divided into (i) 907,154,180 Ordinary Shares, of nominal value NIS 0.01 each, of which 23,042,634 are issued and outstanding and of which 16,265,732 are reserved for issuance to employees, consultants, officers, or directors of the Company pursuant to the company's share incentive plans or agreements to be approved by the board of directors, of which 14,475,641 are underlying issued, committed and allocated options (ii) 6,750,000 Preferred A Shares, of nominal value NIS 0.01 each, all of which are issued and outstanding, (iii) 6,769,359 Preferred B Shares, of nominal value NIS 0.01 each, all of which are issued and outstanding, (iv) 17,493,491 Preferred C1 Shares, of nominal value NIS 0.01 each, of which 16,414,906 are issued and outstanding (v) 31,832,970 Preferred C2 Shares, of nominal value NIS 0.01 each, of which 29,788,667 are issued and outstanding (vi) 30,000,000 Preferred C3 Shares, of nominal value NIS 0.01 each, none of which are issued and outstanding (vii) 80,000,000 Preferred D1 Shares, of nominal value NIS 0.01 each, of which 24,545,195 are issued and outstanding (viii) 60,000,000 Preferred D2 Shares, of nominal value NIS 0.01 each, none of which are issued and outstanding (ix) 5,000,000 Preferred D3 Shares, of nominal Value NIS 0.01 each, of which 2,510,783 are issued and outstanding and (x) 5,000,000 Preferred D4 Shares, of nominal Value NIS 0.01 each, none of which are issued and outstanding.
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10.2.3
|
Financial Statements
. The Company has furnished the Lenders with its (i) audited financial statements as of and for the year ended December 31, 2013, attached hereto as
Schedule
10.2.3(i)
to the Disclosure Schedule; (ii) its unaudited and unreviewed financial statements for the six months ended June 30, 2014, attached hereto as
Schedule
10.2.3(ii)
to the Disclosure Schedule (together, the "
Financial Statements
"). The Financial Statements are true and correct in all material respects, are in accordance with the books and records of the Company and have been prepared in accordance with International Financial Reporting Standards consistently applied, and fairly and accurately present in all material respects the financial position of the Company as of such dates and the results of its operations for the periods then ended, subject in the case of the unaudited and unreviewed financial statements to period-end adjustments.
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10.2.4
|
Authorization; Approvals
. All corporate action on the part of the Company, its Shareholders and directors necessary for the authorization, execution, delivery, and performance of all of the Company's obligations to the Lenders under the Transaction Documents, including the authorization, issuance, and delivery of the Issued Securities to the Lenders under this Agreement has been (or will be) taken prior to Closing. The Transaction Documents, when executed and delivered by or on behalf of the Company, shall be duly and validly authorized, executed and delivered by the Company and shall constitute the valid and legally binding obligations of the Company, legally enforceable against the Company in accordance with their respective terms. Except as set forth in
Schedule
10.2.4
to the Disclosure Schedule, no consent, approval, order, license, permit, action by, or authorization of or designation, declaration, or filing with any governmental authority on the part of the Company is required that has not been, or will not have been, obtained by the Company on or prior to the Closing in connection with the valid execution, delivery and performance of Transaction Documents, including the issuance of the Issued Securities (other than filing with the Israeli Registrar of Companies which shall be made promptly following each issuance of Issued Securities that are shares pursuant to this Agreement).
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10.2.5
|
Compliance with Other Instruments
. The Company is not in material default (a) under the Articles or other organizational documents, or under any note, indenture, mortgage, lease, agreement, contract, purchase order or other instrument, document or agreement to which the Company is a party, or (b) with respect to any law, statute, ordinance, regulation, order, writ, injunction, decree, or judgment of any court or any governmental department, commission, board, bureau, agency or instrumentality, domestic or foreign, which default, in any such case, would materially adversely affect or in the future is reasonably likely to materially adversely affect the Company's business, prospects, condition (financial or otherwise), affairs, operations or assets. To the Company's knowledge, no third party is in material default under any agreement, contract or other instrument, document or agreement to which the Company is a party. The Company is not a party to or bound by any order, judgment, decree or award of any governmental authority, agency, court, tribunal or arbitrator.
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10.2.6
|
No Breach
. Neither the execution and delivery of the Transaction Documents nor compliance by the Company with the terms and provisions thereof will conflict with, or result in a breach or violation of, any of the terms, conditions and provisions of: (i) the Articles (assuming the receipt of any and all consents required pursuant to the Articles), (ii) any judgment, order, injunction, decree, or ruling of any court or governmental authority, domestic or foreign, (iii) any agreement, contract, lease, license or commitment to which the Company is a party or to which it is subject, or (iv) applicable law. Such execution, delivery and compliance will not (a) give to others any rights, including rights of termination, cancellation or acceleration, in or with respect to any agreement, contract or commitment referred to in this paragraph, or to any of the properties of the Company, except as set forth on
Schedule 2.6
to the Disclosure Schedule, or (b) except as specified in the Articles and
Schedule
10.2.4
to the Disclosure Schedule, otherwise require the consent or approval of any person, which consent or approval has not heretofore been obtained.
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|
10.2.7
|
Taxes
. The Company has accurately prepared and timely
filed all tax returns and reports required by it under applicable law. All tax returns and reports of the Company are true and correct in all material respects and the Company has paid on time all taxes and other assessments due. No deficiency assessment or proposed adjustment of income or payroll taxes of the Company is pending and the Company has no knowledge of any proposed liability for any tax to be imposed. Except as set forth in
Schedule
10.2.7
to the Disclosure Schedule, the Company has not made any elections under applicable laws or regulations (other than elections that related solely to methods of accounting, depreciation or amortization) that would have a material adverse effect on the Company, its financial condition, its business as presently conducted or proposed to be conducted or any of its properties or assets. The Company is not currently liable for any income tax, capital gains tax, value added tax, or other tax other than current monthly payments in the ordinary course of business.
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|
10.2.8
|
Litigation
. No action, proceeding or governmental inquiry or investigation is pending or, to the Company's knowledge, threatened against the Company or any of its officers, directors, or employees (in their capacity as such) or against any of the Company's properties, or with regard to the Company’s business, before any court, arbitration board or tribunal or administrative or other governmental agency, nor is the Company aware of any basis for the foregoing. There is no action, suit, proceeding or investigation by the Company currently pending or that the Company intends to initiate.
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10.2.9
|
Brokers
. Except as set forth in
Schedule
10.2.9
to the Disclosure Schedule, no agent, broker, investment banker, person or firm acting in a similar capacity on behalf of or under the authority of the Company is or will be entitled to any broker’s or finder’s fee or any other commission or similar fee, directly or indirectly, on account of any action taken by the Company in connection with any of the transactions contemplated under this Agreement.
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10.2.10
|
Government Funding
.
Schedule 2.10
identifies each governmental funding that the Company has received, approvals for funding to be received in the future and pending applications for governmental funding (collectively, the "
Governmental Funding
"). Except as set forth on
Schedule 2.10
, the Company has not received any governmental funding and there are no pending applications therefor. The Company has delivered to Lenders accurate and complete copies of: (i) all applications and undertakings submitted by the Company to any governmental entity in relation to Governmental Funding (including, funding from the Office of the Chief Scientist of the Ministry of Economy ("
OCS
")); and (ii) all certificates of approval and letters of approval (and supplements thereto) granted to the Company by the OCS or any other governmental entity or other material documentation in relation to Governmental Funding. The Company is in compliance with the material terms, conditions and requirements of all Governmental Funding and has duly fulfilled all material conditions, undertakings and other obligations relating thereto. To the knowledge of the Company, no event has occurred and no circumstance or condition exists, that would reasonably be expected to give rise to or serve as the basis for (i) the annulment, revocation, withdrawal, suspension, cancellation, recapture or modification of the Governmental Funding, (ii) the imposition of any material limitation on the Governmental Funding or any benefit available in connection with the Governmental Funding, or (iii) a requirement that the Company return or refund any benefits provided under the Governmental Funding. The Company has not deposited in escrow any know-how (as such term is defined in the R&D Law) funded by the Governmental Funding nor has it pledged any such know-how.
|
10.2.11
|
Interested Party Transactions
. Except as set forth in
Schedule
10.2.11
to
the Disclosure Schedule, no officer, director or Shareholder, or, to the knowledge of the Company, any affiliate of any such person or entity, either directly or indirectly, (i) is involved in or proposes any business arrangement or relationship with the Company which is material to the Company or its business, (ii) has a beneficial interest in any contract or agreement to which the Company is a party or currently proposes to be a party, (iii) has any interest in or owns any property or right, including Intellectual Property (as defined below), material to the Company in the conduct of its business as presently conducted and, to the knowledge of the Company, as currently proposed by the Company to be conducted, or (iv) has lent or advanced any money to, or borrowed any money from, or guaranteed or otherwise become liable for any indebtedness or other obligations of the Company.
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10.2.12
|
Employees.
Schedule
10.2.12(i)
to the Disclosure Schedule lists (a) all the employees of the Company, and (b) all employment, non-competition and confidentiality agreements between the Company and any employee or consultant of the Company. Except as set forth in
Schedule
10.2.12(ii)
to
the Disclosure Schedule, the Company has no employment contract with any officer or employee or any other consultant which is not terminable by it without liability, upon thirty (30) days prior notice. Except as set forth in
Schedule
10.2.12(iii)
to the Disclosure Schedule, as of the date hereof, the Company has no deferred compensation or stock option plan covering any of its officers or employees. The Company has complied in all respects with all applicable employment laws, policies, procedures and agreements relating to employment, terms and conditions of employment and to the proper withholding and remission to the proper tax and other authorities of all sums required to be withheld from employees under applicable laws respecting such withholding. The Company has paid in full to all of its respective employees, wages, salaries, commissions, bonuses, benefits and other compensation due and payable to such employees on or prior to the date hereof, other than payments in the ordinary course of business. The Company is not bound by or subject to (and none of its assets or properties is bound by or subject to) any written or oral, express or implied, contract, commitment or arrangement with any labor union except for those provisions of general agreements between the Histadrut and any Employers’ Union or Organization that are applicable to all the employees in Israel (or to all employees in certain industries) by Extension Order(s). To the Company’s knowledge, no labor union has requested or has sought to represent any of the employees, representatives or agents of the Company. To the Company’s knowledge, neither the employment by the Company of any of its employees nor the engagement by it with any of its respective consultants, constitutes or is likely to constitute a breach of any such person’s obligations to third parties, including non-competition or confidentiality obligations. To the Company’s knowledge, no employee has violated any material term of his or her employment agreement or expressed his or her intention to terminate employment. To the Company's knowledge, none of the employees or consultants is obligated under any contract (including licenses, covenants or commitments of any nature) or other agreement, or subject to any judgment, decree or order of any court or administrative agency, that would interfere with such employee's or consultant's duties under his respective employment or consulting agreement. To the Company’s knowledge, no Key Employee intends to terminate employment with the Company, or is otherwise likely to become unavailable to continue as a Key Employee, nor does the Company have a present intention to terminate the employment of any of the foregoing. Except as set forth in
Schedule
10.2.12(iv)
to the Disclosure Schedule and in their respective employment agreements listed in
Schedule 2.12(i)
to the Disclosure Schedule or as required by applicable law, upon termination of the employment of any such employees, no severance or other payments will become due. Except as set forth in
Schedule
10.2.12(v)
to the Disclosure Schedule, the Company has no policy, practice, plan or program of paying severance pay or any form of severance compensation in connection with the termination of employment services. All employees and consultants of the Company have signed and executed an employment or consulting agreement substantially in one of the forms provided to the Lenders. Such agreements include, with respect to an employee or a consultant that were involved in the creation or development of any Company Intellectual Property, the assignment of all Intellectual Property created by such employee or consultant to the Company.
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10.2.13
|
Insurance
.
Schedule
10.2.13
to the Disclosure Schedule contains a list of each current insurance and indemnity policy in respect of which the Company has an interest (collectively, the "
Policies
"). There is no claim by the Company pending under any of the Policies. All premiums due under the Policies have been paid and the Company is otherwise in full compliance with the terms and conditions of all the Policies. Each of the Policies is valid, in full force and effect. The Company has not undertaken any action, or omitted to take any action, which would render any such Policy void or voidable or which could result in a material increase in the premium for any such Policy.
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10.2.14
|
Subsidiaries
. The Company has no subsidiaries and does not own or control, directly or indirectly, any shares of any corporation or any interest in any partnership, joint venture or other non-corporate business enterprise.
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10.2.15
|
Ownership of Assets
. Except as set forth in
Schedule
10.2.15(i)
to
the Disclosure Schedule, the Company does not currently lease or license any property. Except as set forth in
Schedule
10.2.15(ii)
to
the Disclosure Schedule, the Company has good and marketable title to all of its assets, free and clear of any mortgage, pledge, lien, security interest, conditional sale agreement, encumbrance or charge, and such assets are sufficient for the conduct of the Company’s business as currently conducted. The Company is not in default or in breach of any material provision of its leases, and the Company holds a valid leasehold interest in the property it leases.
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10.2.16
|
Contracts
.
Schedule
10.2.16
to the Disclosure Schedule contains a true and complete list of all material contracts, agreements, instruments and undertakings (oral or written) to which the Company is a party or by which, to the Company's knowledge, its property is bound, including, without limitation: (i) any contract for the lease of (a) personal property from or to third parties, or (b) real property, by the Company; (ii) any contract concerning a partnership or joint venture with the Company; (iii) any contract concerning non-competition, other than standard forms of agreements between the Company and its employees and consultants; (iv) any contract or commitment with respect to any loan, guarantee or the investment of funds to or in other persons, by the Company; (v) any contract under which the Company undertook to indemnify a third party; (vi) any license of any patent, copyright, trade secret or other proprietary right to or from the Company; (vii) any contract restricting, affecting or otherwise with respect to the development, manufacture or distribution of the Company's products or services; and (viii) any other contract to which the Company is a party, the total value of which is in excess of US$ 65,000.
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10.2.17
|
Intellectual Property Rights
|
|
(a)
|
Schedule
10.2.17(a)(i)
to the Disclosure Schedule contains a true and complete list of all Company Registered Intellectual Property as of the date hereof, including the following: (i) for each patent and patent application, the patent number or application serial number for each jurisdiction in which the patent or application has been filed or from which the registration issued, such jurisdiction, and the date of filing or issuance, and the present status thereof; (ii) for each registered trademark, trade name or service mark, the application serial number or registration number, for each country, province or state in which the mark or application has been filed or from which the registration issued, such country, province or state, the date of filing or issuance, and the class of goods covered, and the present status thereof. In addition,
Schedule
10.2.17(a)(ii)
to the Disclosure Schedule contains a true and complete list of all trademarks, trade names, or service marks that the Company has used with the intent of creating or benefiting from any common law rights relating to such marks.
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(b)
|
Each item of Company Registered Intellectual Property is valid, subsisting and enforceable (except that the foregoing does not pertain, with respect to enforceability, to any patent application) and all necessary registration, maintenance, renewal fees, annuity fees and taxes in connection with the Company Registered Intellectual Property have been paid and all necessary documents and certificates in connection with the Company Registered Intellectual Property have been filed with the relevant patent, trademark or other authorities in the United States or foreign jurisdictions in accordance with applicable law for the purposes of obtaining and maintaining the registration for such Company Registered Intellectual Property, and all assignments (and licenses where required by applicable law) of the Company Registered Intellectual Property have been duly recorded with the appropriate governmental or regulatory authority in which such Company Registered Intellectual Property was registered. The Company has complied in all material respects with all applicable notice and marking requirements for the Company Registered Intellectual Property. In each case in which the Company has acquired ownership of any Intellectual Property from any person, the Company has obtained a valid and enforceable assignment sufficient to irrevocably transfer all rights in such Intellectual Property (including the right to seek past and future damages with respect to such Intellectual Property) to the Company.
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(c)
|
The Company is not aware of any information material to a determination of patentability regarding its patent applications not called to the attention of the USPTO or any relevant foreign patent office, including any information that would preclude the grant of a patent for such patent applications. The Company has no knowledge of any information that would preclude the Company from having clear title to such patent applications and to the patents which have issued or which may issue therefrom. To the knowledge of the Company, all printed publications and patent references material to the patentability of the inventions claimed in such patent applications have been disclosed to those patent offices so requiring.
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(d)
|
Schedule
10.2.17(d)(i)
to the Disclosure Schedule sets forth a true and complete list of all material Licenses pursuant to which the Company has licensed or otherwise received rights under any Technology or Intellectual Property owned by a third party (each, an "
Inbound License
"), including all material Licenses pursuant to which the Company is granted rights in any such Technology or Intellectual Property used or held for use by the Company in the operation of the business (except for Non-Critical Software), as well as a summary of the Company’s remaining royalty payment obligations, if any, with respect to each of the Inbound Licenses.
Schedule
10.2.17(d)(ii)
to the Disclosure Schedule sets forth all material Licenses pursuant to which the Company has licensed or otherwise granted any rights under any Company Intellectual Property (each, an "
Outbound License
").
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(e)
|
The Company has not (A)(i) transferred ownership of or (ii) except pursuant to Outbound Licenses listed on
Schedule
10.2.17(d)(ii)
to the Disclosure Schedule, granted (and is not obligated to grant) to any other person any License of, any Intellectual Property that is Company Intellectual Property, or (B) authorized any other person to retain any right to use any Intellectual Property that is or was Company Intellectual Property, except pursuant to Outbound Licenses set forth in
Schedule
10.2.17(d)(ii)
to the Disclosure Schedule.
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(f)
|
The Company Intellectual Property, together with the Intellectual Property licensed to Company under the Inbound Licenses, includes all the Intellectual Property used in, or held for use in, or reasonably deemed necessary for the conduct of the Company's business as presently conducted (and for greater certainty, without limiting the Company from licensing additional Intellectual Property under Inbound Licenses in the future for the conduct of its business).
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(g)
|
Except as provided in
Schedule
10.2.17(g)
to the Disclosure Schedule
, the Company owns full title and ownership or has obtained the good and valid right or license to use, free and clear of all liens, claims and restrictions, all of the Company Intellectual Property, except as provided under any applicable law (including any conventions and treaties).
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(h)
|
Except as provided in
Schedule
10.2.17(h)
to the Disclosure Schedule the Company is not obligated to provide any consideration (whether financial or otherwise) or account to any third party with respect to any exercise of rights by the Company, or any successor to the Company, in any Company Intellectual Property, Company Technology or Company Product.
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(i)
|
No Open Source Software is incorporated directly by the Company into any of the Company Products. The Company has not used and does not use any Open Source Software in a manner that requires the Company to grant to any third party any rights in or immunities under any Company Intellectual Property, including by using any Open Source Software in a manner that requires, as a condition of use, modification or distribution of such Open Source Software, that any Company Intellectual Property or Company Technology incorporated into, derived from or distributed with such Open Source Software be (x) disclosed or distributed in source code form, (y) licensed for the purpose of making derivative works, or (z) be redistributable at no charge or for a nominal charge.
|
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(j)
|
To the knowledge of the Company, no person has interfered with, violated, infringed upon, or misappropriated, or otherwise misused any Company Intellectual Property, or is currently doing so. The Company has not brought any action or proceeding for infringement or violation of Intellectual Property or breach of any License or other contract involving Intellectual Property against any person. There is no action or proceeding pending or, to the knowledge of the Company, threatened (i) alleging infringement, misappropriation or any other violation of any Intellectual Property of any person by the Company or any Company Product, or (ii) challenging the scope, ownership, validity, or enforceability of any Company Intellectual Property. To the knowledge of the Company, neither the Company Intellectual Property nor the Company Technology is subject to any outstanding judgment, decree, order, writ, award, injunction or determination of an arbitrator or court or other government or regulatory authority (other than office actions and correspondence regarding pending patent applications and trademark applications) restricting or otherwise affecting the rights of the Company with respect thereto.
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(k)
|
To the Company's knowledge, the operation of the business of the Company does not (and did not at any time): (i) infringe or misappropriate the Intellectual Property rights of any person in any jurisdiction in which the Company currently operates or, without the Company having conducted an independent search, infringe or misappropriate the Intellectual Property rights of any person in any jurisdiction in which the Company is reasonably anticipating to operate in accordance with the Company’s current plan; (ii) violate any term or provision of any License concerning the Intellectual Property rights of the licensor under such License or; (iii) violate any right of any person to privacy or publicity; or (iv) constitute unfair competition or an unfair trade practice under any applicable law in any jurisdiction in which the Company operates. The Company has not received from any person any notice claiming that such operation or any Company Product infringes or misappropriates the Intellectual Property of any person or constitutes unfair competition or trade practices under any applicable law.
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(l)
|
The Company has taken reasonable steps consistent with industry standard practices to safeguard and maintain the secrecy and confidentiality of trade secrets and other confidential information in the possession of the Company. Without limiting the generality of the foregoing: (i) to the knowledge of the Company there has been no misappropriation or disclosure of any trade secrets or other confidential Company Intellectual Property or Company Technology, other than pursuant to an appropriate confidentiality agreement or as required under any applicable law (ii) to the knowledge of the Company, no employee, independent contractor or agent of the Company has misappropriated any trade secrets or other confidential Company Intellectual Property or Company Technology of any other person in the course of performance as an employee, independent contractor or agent of the Company; and (iii) to the knowledge of the Company, no employee, independent contractor or agent of the Company is in default or breach of any term of any nondisclosure undertaking or obligation, assignment of invention undertaking or obligation or similar undertaking, obligation or contract relating in any way to the protection, ownership, development, use or transfer of any Company Intellectual Property or Company Technology. The Company has not disclosed any confidential information of the Company that is not pursuant to an appropriate confidentiality agreement. The Company has not disclosed any third party confidential information that is protected by a confidentiality agreement in breach of that confidentiality agreement.
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(m)
|
All rights in, to and under all Intellectual Property and Technology created by Yoav Kimchy, the Company’s founder (the "
Founder
") (i) for or on behalf or in contemplation of the Company (A) prior to the inception of the Company; or (B) prior to his commencement of employment with the Company; or (ii) presently embodied in, proposed to be embodied in, or distributed with the Company Products or utilized in the development, manufacture, use or support of the Company Products, has in each case been duly and validly assigned to the Company, and the Company has no reason to believe that the Founder is unwilling to provide the Company with such cooperation as may reasonably be required to complete and prosecute all U.S. and foreign patent and copyright filings related thereto.
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(n)
|
The Company has taken reasonable steps consistent with industry standard practices to protect and preserve the ownership of all Company Intellectual Property.
|
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(o)
|
Except as set forth in
Schedule 2.10
of the Disclosure Schedule, no funding from any government authority was used in the development of the Company Intellectual Property.
|
10.2.18
|
Environmental
and Safety Laws
. (a) The Company is and has been at all times in compliance with all Environmental Laws (as hereinafter defined); (b) there has been no release of any pollutant, contaminant or toxic or hazardous material, substance or waste, or petroleum or any fraction thereof (each a "
Hazardous Substance
") on, upon, into or from any site currently or heretofore owned, leased or otherwise used by the Company; (c) there have been no Hazardous Substances generated by the Company that have been disposed of or come to rest at any site that has been included in any list of hazardous or toxic waste sites published by any governmental authority; and (d) there are no underground storage tanks located on, no polychlorinated biphenyls ("
PCBs
") or PCB-containing equipment used or stored on, and no hazardous waste stored on, any site owned or operated by the Company.
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10.2.19
|
No Adverse Change
. Other than as set forth in
Schedule
10.2.19
to the Disclosure Schedule, since June 30, 2014, there has not been:
|
|
(a)
|
any change in the assets, liabilities, financial condition or operating results of the Company from that reflected in the Financial Statements, except changes in the ordinary course of business that have not caused, in the aggregate, a material adverse effect on the assets, financial condition or business of the Company as currently conducted (a "
Material Adverse Effect
");
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(b)
|
any damage, destruction or loss, whether or not covered by insurance, that would have a Material Adverse Effect;
|
|
(c)
|
any waiver or compromise by the Company of a valuable right or of a material debt owed to it;
|
|
(d)
|
any satisfaction or discharge of any material lien, material claim, or material encumbrance or payment of any material obligation by the Company, except in the ordinary course of business and the satisfaction or discharge of which would not have a Material Adverse Effect;
|
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(e)
|
any material change to a material contract or material agreement by which the Company or any of its assets is bound or subject;
|
|
(f)
|
any material change in any compensation arrangement or agreement with any officer, director or shareholder of the Company;
|
|
(g)
|
any resignation or termination of employment of any officer of the Company;
|
|
(h)
|
any mortgage, pledge, transfer of a security interest in, or lien, created by the Company, with respect to any of its properties or assets, except liens for taxes not yet due or payable and liens that arise in the ordinary course of business and do not materially impair the Company’s ownership or use of such property or assets;
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(i)
|
any loans or guarantees made by the Company to or for the benefit of its employees, officers or directors, or any members of their immediate families, other than travel advances and other advances made in the ordinary course of its business;
|
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(j)
|
any declaration, setting aside or payment or other distribution in respect of any of the Company’s capital, or any direct or indirect redemption, purchase, or other acquisition of any of such capital by the Company;
|
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(k)
|
any sale, assignment or transfer of any of the Company's Intellectual Property not in the ordinary course of business of the Company;
|
|
(l)
|
any other event or condition of any character, other than events affecting the economy or the Company’s industry generally, that could reasonably be expected to result, individually or cumulatively, in a Material Adverse Effect and which would have been reflected in the Financial Statements had the Financial Statements been dated as of the date hereof; or
|
|
(m)
|
any arrangement or commitment by the Company to do any of the things described in this Section
10.2.19.
|
10.2.20
|
Fu
ll Disclosure
. Neither this Agreement including the Schedules attached hereto nor any certificate made or delivered in connection herewith or therewith contains any untrue statement of a material fact or omits to state a material fact necessary to make the statements herein or therein not misleading, in view of the circumstances in which they were made.
|
|
10.3
|
The Lenders hereby acknowledge and agree that the Company is not providing the Lenders with any representations and warranties other than those representations and warranties set forth in Section
10.2.
|
11.
|
Representation and Warranties of the Lenders
|
|
11.1
|
The Lender is duly organized, validly existing and in good standing under the laws of jurisdiction of its incorporation or organization. All corporate action on the part of the Lender necessary for the authorization, execution, delivery, and performance of all of the Lender's obligations under the Transaction Documents has been taken. The Transaction Documents, when executed and delivered by or on behalf of the Lender, shall constitute the valid and legally binding obligations of the Lender, legally enforceable against the Lender in accordance with their terms
.
|
|
11.2
|
The execution and delivery of the Transaction Documents and the consummation of the transactions contemplated thereby will not result in the breach of any term of, or constitute a default under, any contract or agreement to which the Lender may be bound. No approval or consent from any person, entity or authority, is required by the Lender for the execution, delivery and performance by it of the Transaction Documents that has not been, or will not have been, obtained by the Lender on or prior to the Closing.
|
|
11.3
|
The Lender is an "accredited investor" as defined in Rule 501(a) under the U.S. Securities Act of 1933, as amended, and the rules and regulations promulgated thereunder.
|
|
11.4
|
The Lender has knowledge and experience in financial and business matters, is capable of evaluating the merits and risks of the transactions evidenced by this Agreement, and can bear the economic consequences of its investment for an indefinite period of time. Without derogating from the Lender's right to rely on the representations and warranties of the Company set forth in Section
10 above and the indemnification provisions in Section
14 hereof, the Lender acknowledges that it and its advisers and representatives have had an opportunity to ask questions of, and receive answers from the Company and any other person acting on behalf of the Company concerning such investment.
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11.5
|
The Lender understands that the Issued Securities, have not been, and may not be, registered under the Israeli securities law or any other securities regulations by reason of a specific exemption from the registration provisions of such securities regulations.
|
|
11.6
|
The Lender represents and agrees that the Issued Securities, when issued to such Lender hereunder, are or will be purchased only for investment purposes, for its own account, and not as a nominee or agent, and not with the view to, or for resale in connection with, any distribution thereof.
|
|
11.7
|
The Lender acknowledges and agrees that in the event that the Company consummates a PO (including an IPO), the following securities (as applicable) will be subject to lock-up restrictions to the extent and in the form and substance determined by the Company and its underwriters, provided that such lock-up shall not exceed 180 days (unless a longer period is required under any applicable law or otherwise agreed by the Lender), without derogating from any re-sell restrictions that may apply under any applicable law: (i) the securities issued in consideration of such Lender's Credit Line Amount placed in the IPO in accordance with Section
5.1 above; (ii) the securities issued upon conversion of such Lender's Conversion Amount or according to the Lender's irrevocable letter of instructions in accordance with
Exhibit
4.2
, as applicable; (iii) the Credit Line Warrants and their underlying shares; and (iv) any other Company securities held by the Lender on or prior to the Closing, as shall be determined by the Company and its underwriters.
|
12.
|
Covenants
|
|
12.1
|
Use of Proceeds
. To the extent called by the Company, the Company will use the Loan Amount to finance its activities in accordance with a budget approved and amended from time to time by its Board of Directors.
|
|
12.2
|
OCS Undertaking
. To the extent that at any time hereinafter a Lender shall hold such number of securities of the Company such that it shall be legally required to sign an undertaking to the OCS, then such Lender shall sign such undertaking as may be required by the OCS at such time.
|
13.
|
Event of Default
|
|
13.1
|
If not repaid, placed in an IPO, converted earlier according to the provisions of this Agreement, or otherwise directed by the Majority Lenders in writing, the Credit Line Amount shall be immediately released from the Escrow Account to the Lenders, or if already called by the Company and not converted earlier or placed in a PO in accordance with
Exhibit
4.2
, the Credit Line Amount shall immediately become due and payable, without demand, in cash, upon the occurrence of the earlier of the following events: (i) the execution by the Company of a general assignment for the benefit of creditors; (ii) the filing by or against the Company of any petition in bankruptcy or liquidation proceedings of the Company
or any petition for relief under the provisions of any law for the relief of debtors, and the continuation of such petition without dismissal for a period of thirty (30) days or more; (iii) the appointment of a receiver, a trustee or a special manager to take possession of a portion of the property or assets of the Company and the continuation of such appointment without dismissal for a period of thirty (30) days or more; (iv) the commencement by the Company of any liquidation proceedings, or the adoption of a winding up resolution by the Company, or the calling by the Company of a meeting of creditors for the purpose of entering into a scheme or arrangement with them or any resolution in favor of any of the foregoing by the board of directors of the Company or shareholders of the Company; (v) the cessation of conduct of substantially all of the Company's business affairs as now being conducted for a consecutive period of more than forty (45) days; or (vi) a material breach of the representations, warranties or other statements which were made by or on behalf of the Company under this Agreement, which is not cured, if curable, within thirty (30) days following receipt by the Company of a written notice of such breach (each, an "
Event of Default
"). The Company undertakes to notify the Majority Lenders immediately following occurrence of any of the events detailed in clauses (i) to (vi) above.
|
|
13.2
|
If an M&A Event (as defined below) shall occur on or prior to either: (i) the consummation of an IPO on or prior to the Last IPO Date; or (2) the Last Date, if the Company did not consummate an IPO on or prior to the Last IPO Date and the Credit Line Amount was not called by the Company on or prior to the Last Date, then the Credit Line Amount shall be immediately released from the Escrow Account to the Lenders, unless otherwise directed by the Majority Lenders in writing. The Company undertakes to notify the Majority Lenders at least fourteen (14) days prior to the occurrence of an M&A Event.
|
14.
|
Effectiveness; Survival; Indemnification and Limits on Indemnification
|
|
14.1
|
Each representation and warranty made by the Company in Section
10 hereof shall survive and remain in full force and effect following the Closing: (i) for a period of twenty four (24) months from the Closing Date; or (ii) with respect to Sections
10.2.2 (Share Capital),
10.2.4 (Authorization; Approvals),
10.2.17 (Intellectual Property Rights) and
10.2.7 (Taxes) for a period of four (4) years from the Closing Date (respectively, the "
Expiration Date
"). The Company shall not have any liability with respect to any such representation and warranty unless a claim is made in writing and received by the Company prior to the Expiration Date and provided that prior to the submission of the written notice to the Company either the Credit Line Amount has been placed in an IPO or the Loan Amount has converted or been placed in a PO in accordance with the terms of this Agreement. Notwithstanding the aforesaid, any breach by the Company of any of its representations, covenants or warranties contained in this Agreement involving fraud or willful misrepresentation, shall survive indefinitely. The representations, warranties, covenants and obligations of the Company and the rights and remedies that may be exercised by the Lenders, shall not be limited or otherwise affected by or as a result of any information furnished to, or any investigation made by, the Lenders or any of its representatives, unless such information is included in the Transaction Documents.
|
|
14.2
|
Subject to the further provisions of this Section
14, the Company shall indemnify each of the Lenders and hold it harmless from any and all direct loss, damage (including, without limitation, any decrease in the value of the securities issued upon conversion of the Loan Amount), liability and expense (including reasonable legal fees and costs) sustained or incurred by any of the Lenders as a result of (i) the breach or misrepresentation of any warranty or representation made by the Company in Section 10 hereof; and (ii) the breach of any covenant of the Company contained in the Transaction Documents.
|
|
14.3
|
Notwithstanding anything to the contrary in this Agreement, including, without limitation, in Section
14.1 above, in the event that the representations and warranties contained in Section
10.2.2 (Share Capital) (for greater certainty, when read together with the exceptions included in the Disclosure Schedule), shall not have been true and correct as of the date of Closing except for non-material changes or changes specifically approved by Majority Lenders (any such breach, a "
Capitalization Breach
"), which results in the percentage shareholdings of the Lenders, upon conversion of the Credit Line Amount, being reduced (a "
Dilutive Issuance
"), at the election of any Lender, in his sole and absolute discretion and as the Lender's sole remedy, in lieu of the remedies available pursuant to Section
14.2, the Company shall issue to such Lender additional securities (the "
Indemnification Shares
"), for no additional consideration (other than the par value thereof), so that following the issuance of the Indemnification Shares the percentage holding of such Lender on a Fully Diluted Basis immediately after the conversion of the Credit Line Amount shall be equal to the same percentage holding on a Fully Diluted Basis that such Lender would have held had there not been a Capitalization Breach. The remedy provided in this Section shall not be limited or otherwise affected by or as a result of any information furnished to, or any investigation made by, the Lenders or any of its representatives, unless such information is set forth in this Agreement and/or the Disclosure Schedule.
|
|
14.4
|
Notwithstanding anything to the contrary contained in this Agreement, other than in the case of fraud, intentional misrepresentation or willful misconduct the liability of the Company under this Section
14 shall be limited to the actual Credit Line Amount extended to the Company pursuant to this Agreement that was not released or repaid to the Lender pursuant to this Agreement (including, without limitation, repayment in an Event of Default pursuant to Section
13 of this Agreement).
|
|
14.5
|
Notwithstanding anything to the contrary herein, other than in the case of fraud, willful misconduct or intentional misrepresentation, no party hereto shall have any liability under any provision of this Agreement for any punitive, incidental, consequential, special or indirect damages, including business interruption, loss of future revenue, profits or income, or loss of business reputation or opportunity relating to the breach or alleged breach of this Agreement, except with respect to any act or omission of fraud or willful breach.
|
|
14.6
|
Notwithstanding anything to the contrary contained in this Agreement, other than in the case of fraud, intentional misrepresentation or willful misrepresentation, the Company shall not be liable for any claim for indemnification pursuant to this Section
14, unless and until the aggregate amount of all losses equals or exceeds $80,000, and then such claim may be brought from the first dollar of such losses.
|
|
14.7
|
The parties agree that the sole and exclusive remedy with respect to any and all claims relating to the subject matter of this Agreement and the transactions contemplated hereby shall be pursuant to the indemnification provisions set forth in this Section
14, whether arising in tort, contract or otherwise (except in an Event of Default, in which case the provisions of Section
13 shall apply).
|
15.
|
Taxes; Withholding
|
16.
|
Miscellaneous
|
|
16.1
|
This Agreement (together with the exhibits attached hereto) constitute the full and entire understanding of the Parties with respect to its subject matter and supersedes all prior negotiations, discussions, commitments and understandings between them with respect to the subject matter hereof. In case of any conflict between the provisions of this Agreement and the Amended Articles or the Amended and Restated Shareholders’ Agreement, the provisions of this Agreement shall prevail and the Company's shareholders shall act to amend the Amended Articles or the Amended and Restated Shareholders’ Agreement accordingly.
|
|
16.2
|
References herein to this Agreement shall be deemed to include the exhibits and schedules hereto.
|
|
16.3
|
Any term of this Agreement may be amended and the observance of any term hereof may be waived, discharged, postponed or terminated (either prospectively or retroactively and either generally or in a particular instance, in whole or in part) only with the written consent of the Company and the Majority Lenders.
|
|
16.4
|
Neither Party may assign, transfer or otherwise convey any of its rights or delegate any of its obligations under this Agreement without the prior written consent of the other Party; provided, that a Party may assign its rights without the prior written consent of the other Party to its Permitted Transferees (as such term is defined in the Company's Articles of Association as shall be in effect from time to time,
mutatis mutandis
); and further provided that the Company may assign its rights and obligations under this Agreement without the prior written consent of the Lenders if such assignment is made in the framework of an M&A Event. Any purported assignment in violation of this clause is void. This Agreement shall be binding upon and inure to the benefit of and be enforceable by the Lenders and the Company and their respective successors and assigns.
|
|
16.5
|
All notices and other communications required or permitted hereunder to be given to a Party to this Agreement shall be in writing and shall be sent by facsimile or mailed by registered or certified airmail, postage prepaid, or otherwise delivered by hand or by messenger in accordance with this provision:
|
if to the Lenders:
|
to the respective address set forth on
Exhibit A
|
|
if to the Company:
|
Check-Cap Ltd.
|
|
Check-Cap Building
|
||
Abba Hushi Avenue
|
||
P.O. Box 1271
|
||
Isfiya, 30090
|
||
Mount Carmel, Israel
|
||
Tel: +972-4-8303400
|
||
Fax: +972-4-8211267
|
||
Attention: Guy Neev, CEO
|
||
with a copy to:
|
||
(which shall not constitute service on the Company)
|
||
Fischer Behar Chen Well Orion & Co
|
||
3 Daniel Frisch Street
|
||
Tel-Aviv 64731, Israel
|
||
Tel: +972-3-6944166
|
||
Fax: + 972- 3-6912948
|
||
Attention: Eran Yaniv, Adv.
|
|
16.6
|
No delay or omission to exercise any right, power, or remedy accruing to any Party upon any breach or default under this Agreement, shall be deemed a waiver of any other breach or default theretofore or thereafter occurring. All remedies, either under this Agreement or by law or otherwise afforded to any of the Parties, shall be cumulative and not alternative.
|
|
16.7
|
If any provision of this Agreement is held by a court of competent jurisdiction 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.
|
|
16.8
|
Each Party shall bear its own fees and expenses incurred in connection with the transactions contemplated by this Agreement, except that the Company shall reimburse Fosun Pharma's Israeli legal counsel, subject to and upon the Closing, for Fosun Pharma's legal fees actually incurred with respect to the transactions set forth in this Agreement in an amount not exceeding US$20,000 (exclusive of VAT).
|
|
16.9
|
All article and section headings herein are inserted for convenience only and shall not modify or affect the construction or interpretation of any provision of this Agreement.
|
16.10
|
At any time and from time to time, each Party agrees, without further consideration, to take such actions and to execute and deliver such documents as may be reasonably necessary to effectuate the purposes of this Agreement. Without limiting the foregoing, upon the issuance of any shares pursuant to the terms of this Agreement (including, without limitation, upon the exercise of the Credit Line Warrant and conversion of the Conversion Amount, as defined and in accordance with
Exhibit 4.2
), any Lender that is (i) a non-Israeli resident individual, shall deliver to the Company a copy of his passport; or (ii) an entity organized or incorporated outside of Israel, shall deliver to the Company a copy of its certificate of incorporation and a certificate of good standing, all of which documents shall be certified in accordance with the Israeli Companies Regulations (Reports, Registration Details and Forms), 1999.
|
16.11
|
This Agreement shall be deemed to be a contract made under the laws of the State of Israel, and for all purposes shall be construed in accordance with the laws of said state, without regard to principles of conflict of laws. Any dispute arising under or in relation to this Agreement shall be resolved exclusively in the competent court for Tel Aviv-Jaffa district, and each of the Parties hereby irrevocably submits to the exclusive jurisdiction of such court.
|
16.12
|
This Agreement may be executed in any number of counterparts, each of which shall be an original, but all of which together shall constitute one instrument.
|
Check-Cap Ltd.
By: _________________________
Name: _________________________
Title: _________________________
|
Shanghai Fosun Pharmaceutical Group Co. Ltd.
By: _________________________
Name: _________________________
Title: _________________________
|
Counterpoint Ventures Fund II LP
By: _________________________
Name: _________________________
Title: _________________________
|
Pontifax (Cayman) II L.P.
By: _________________________
Name: _________________________
Title: _________________________
|
Pontifax (Israel) II Individual Investors L.P.
By: _________________________
Name: _________________________
Title: _________________________
|
Pontifax (Israel) II L.P.
By: _________________________
Name: _________________________
Title: _________________________
|
Docor International BV
By: _________________________
Name: _________________________
Title: _________________________
|
Bart Superannuation Pty Ltd.
By: _________________________
Name: _________________________
Title: _________________________
|
Joshua Ehrlich
By: _________________________
Name: _________________________
Title: _________________________
|
Nir Grinberg
By: _________________________
Name: _________________________
Title: _________________________
|
DPC Big Bay Properties Trust
By: _________________________
Name: _________________________
Title: _________________________
|
Avraham Kuzitsky
By: _________________________
Name: _________________________
Title: _________________________
|
Pinchas Dekel
By: _________________________
Name: _________________________
Title: _________________________
|
Minrav Holdings Ltd.
By: _________________________
Name: _________________________
Title: _________________________
|
Sharon Zaworbach
By: _________________________
Name: _________________________
Title: _________________________
|
Moshe Haviv
By: _________________________
Name: _________________________
Title: _________________________
|
H.M.L.K Financial Consulting Ltd.
By: _________________________
Name: _________________________
Title: _________________________
|
Uri Perelman
By: _________________________
Name: _________________________
Title: _________________________
|
Everest Fund L.P.
By: _________________________
Name: _________________________
Title: _________________________
|
Harmony (Ben Dov) Ltd.
By: _________________________
Name: _________________________
Title: _________________________
|
Beetson Nominees (Panama) Inc.
By: _________________________
Name: _________________________
Title: _________________________
|
Red Car Group
By: _________________________
Name: _________________________
Title: _________________________
|
Yossi Avraham
By: _________________________
Name: _________________________
Title: _________________________
|
No.
|
Lender's Name
|
Credit Line Amount
|
Address
|
1.
|
Shanghai Fosun Pharmaceutical Group Co. Ltd. and/or its subsidiary
|
US$ 4,000,000
|
__________________________
__________________________
__________________________
Tel: ______________________
Fax: ______________________
Attention: _________________
with a copy to: (which shall not constitute service on Fosun Pharma)
Herzog Fox & Neeman Law Offices
Asia House
4 Weizmann Street
Tel Aviv 6423904, Israel
Tel: +972-3-6922894
Fax: +972-3-6966464
Attention: Yair Geva, Adv.
|
2.
|
Counterpoint Ventures Fund II LP
|
US$ 255,000
|
__________________________
__________________________
__________________________
Tel: ______________________
Fax: ______________________
Attention: _________________
|
3.
|
Pontifax (Cayman) II LP
|
US$ 733,256
|
__________________________
__________________________
__________________________
Tel: ______________________
Fax: ______________________
Attention: _________________
|
4.
|
Pontifax (Israel) II Individual Investors LP
|
US$ 214,410
|
|
5.
|
Pontifax (Israel) II LP
|
US$ 552,334
|
|
6.
|
Docor International BV
|
US$ 500,000
|
__________________________
__________________________
__________________________
Tel: ______________________
Fax: ______________________
Attention: _________________
|
7.
|
Bart Superannuation Pty Ltd.
|
US$ 500,000
|
__________________________
__________________________
Tel: +61-292335015
Fax: +61-29233411
Attention: Fred Bart
|
8.
|
Joshua Ehrlich
|
US$ 250,000
|
__________________________
__________________________
Tel: + 61-417040226
Fax: (02) 93277075
Attention: Joshua Ehrlich
|
9.
|
Scott Jackson
|
US$ 50,000
|
__________________________
__________________________
__________________________
Tel: ______________________
Fax: ______________________
Attention: _________________
|
10.
|
Minrav Holdings Ltd
|
US$ 500,000
|
__________________________
__________________________
__________________________
Tel: ______________________
Fax: ______________________
Attention: _________________
|
11.
|
Avraham Kuznitsky
|
US$ 250,000
|
__________________________
__________________________
__________________________
Tel: ______________________
Fax: ______________________
Attention: _________________
|
12.
|
Pinchas Dekel
|
US$ 100,000
|
__________________________
__________________________
__________________________
Tel: ______________________
Fax: ______________________
Attention: _________________
|
13.
|
Emil Mor- Business & Financial Consulting Ltd.
|
US$ 100,000
|
__________________________
__________________________
__________________________
Tel: ______________________
Fax: ______________________
Attention: _________________
|
14.
|
Harmony (Ben Dov) Ltd
|
US$ 750,000
|
__________________________
__________________________
__________________________
Tel: ______________________
Fax: ______________________
Attention: _________________
|
15.
|
GE Ventures Limited
|
US$ 350,000
|
__________________________
__________________________
__________________________
Tel: ______________________
Fax: ______________________
Attention: _________________
|
16.
|
Yossi Smira
|
US$ 150,000
|
__________________________
__________________________
__________________________
Tel: ______________________
Fax: ______________________
Attention: _________________
|
No.
|
Lender's Name
|
Credit Line Amount
|
Address
|
17.
|
H.M.L.K. Financial Consulting Ltd.
|
US$ 360,000
|
__________________________
__________________________
__________________________
Tel: ______________________
Fax: ______________________
Attention: _________________
|
18.
|
Sharon Zaworbach
|
US$ 100,000
|
__________________________
__________________________
__________________________
Tel: ______________________
Fax: ______________________
Attention: _________________
|
19.
|
Moshe Haviv
|
US$ 100,000
|
__________________________
__________________________
__________________________
Tel: ______________________
Fax: ______________________
Attention: _________________
|
20.
|
Nir Greenberg
|
US$ 100,000
|
__________________________
__________________________
__________________________
Tel: ______________________
Fax: ______________________
Attention: _________________
|
21.
|
Dor Benvenisty
|
US$ 50,000
|
__________________________
__________________________
__________________________
Tel: ______________________
Fax: ______________________
Attention: _________________
|
22.
|
Norm Jackson
|
US$ 50,000
|
__________________________
__________________________
__________________________
Tel: ______________________
Fax: ______________________
Attention: _________________
|
23.
|
Shevlin Ciral
|
US$ 50,000
|
__________________________
__________________________
__________________________
Tel: ______________________
Fax: ______________________
Attention: _________________
|
24.
|
Everest Fund L.P.
|
US$ 120,000
|
__________________________
__________________________
__________________________
Tel: ______________________
Fax: ______________________
Attention: _________________
|
No.
|
Lender's Name
|
Credit Line Amount
|
Address
|
25.
|
Uri Perekman
|
US$ 70,000
|
__________________________
__________________________
__________________________
Tel: ______________________
Fax: ______________________
Attention: _________________
|
26.
|
DPC Big Bay Properties Trust
|
US$ 100,000
|
__________________________
__________________________
__________________________
Tel: ______________________
Fax: ______________________
Attention: _________________
|
27.
|
Capital Point Ltd.
|
US$ 500,000
|
__________________________
__________________________
__________________________
Tel: ______________________
Fax: ______________________
Attention: _________________
|
28.
|
Yossi Avraham
|
US$ 250,000
|
__________________________
__________________________
__________________________
Tel: ______________________
Fax: ______________________
Attention: _________________
|
29.
|
Red Car Group
|
US$ 200,000
|
__________________________
__________________________
__________________________
Tel: ______________________
Fax: ______________________
Attention: _________________
|
30.
|
Beeston Nominees (Panama) Inc.
|
US$ 695,000
|
__________________________
__________________________
__________________________
Tel: ______________________
Fax: ______________________
Attention: _________________
|
1.
|
Interest
.
|
|
1.1.
|
The Loan Amount shall bear interest at an annual rate of 7% (seven percent), on the basis of a 365-day year; provided that if the Loan Amount is converted or repaid pursuant to this Agreement before the lapse of one year from the Closing Date, the aggregate accrued interest on the Loan Amount shall be at least 5% (five percent) (the "
Interest
"). The Interest shall accrue on the Loan Amount from the date of the deposit of the called Credit Line Amount in the Escrow Account until the date of conversion or repayment of the Loan Amount, as set forth herein.
|
|
1.2.
|
Upon conversion of the Loan Amount in accordance with the terms hereof, all Interest accrued thereon shall be converted together with the Loan Amount or repaid to the Lenders in cash, after deduction of all applicable taxes with respect thereto, as shall be determined by the Company, at its sole discretion. The actual amount to be converted in accordance with the Company's election, as specified in the preceding sentence, shall be hereinafter referred to as the "
Conversion Amount
."
|
2.
|
Conversion of Conversion Amount
|
|
2.1.
|
Automatic Conversion upon a QFR
|
|
2.1.1.
|
To the extent not previously converted or repaid according to the terms hereof, the Conversion Amount shall be automatically converted, immediately prior and subject to the closing of a QFR (as defined below), on the same terms and conditions applicable to the QFR such that the Lenders shall receive the same type of securities issued, and any other rights granted to the investors in such QFR (the "
QFR Securities
"), under the same terms as if the Lenders had participated in the QFR as investors (including any warrants or any other securities granted to the investors therein), but at a conversion price reflecting a 25% discount on the price paid for the shares issued in the QFR (the "
QFR Conversion Price
") (and if the price in such QFR is fixed per each unit offered in the QFR, the discount shall be applicable to such unit price).
|
|
·
|
The QFR unit price is US$10.
|
|
·
|
Each unit is comprised of two (2) Ordinary Shares and one (1) warrant to purchase one (1) Ordinary Share.
|
|
·
|
The discount rate of the Lender is 25%.
|
|
·
|
The exercise price of the warrants issued in the QFR is US$12.
|
|
·
|
The Conversion Amount of the Lender is US$1,500.
|
|
2.1.2.
|
Alternatively, in the event that the QFR is a public offering (including an IPO) ("
PO
"), the Company shall be entitled, at its sole discretion, in lieu of effecting an automatic conversion in accordance with the provisions of Section
2.1.1 above, to: (i) deposit an amount equal to each Lender's Escrow Amount (as defined below) in an escrow account to be managed by a trustee designated by the Company (the "
Trustee
"); and (ii) irrevocably instruct the Trustee to submit an offer, on behalf of such Lender, for the purchase of shares and/or units offered in the PO, at a price per share and/or unit (as applicable) equal to the PO pricing determined by the Company's lead underwriters, for an aggregate amount equal to the Escrow Amount less any applicable taxes, if any, due by such Lender in connection with the placement of the Escrow Amount in the PO as set forth herein. By executing this Agreement, each Lender hereby agrees and instructs the Company and the Trustee to submit such irrevocable letters of instructions as aforesaid, and further undertakes to countersign such letter of instructions and to execute such further documents as may be requested by the Company or the Trustee.
|
|
2.2.
|
Automatic Conversion upon an M&A Event
.
|
|
2.3.
|
Voluntary Conversion
upon a NQFR
.
|
|
2.4.
|
Automatic Conversion upon Maturity Date
.
|
1.
|
EXERCISE OF WARRANT
|
|
1.2.
|
Exercise for Cash
. This Warrant may be exercised by presentation and surrender thereof to the Company at its principal office or at such other office or agency as it may designate from time to time, accompanied by:
|
|
(a)
|
A duly executed notice of exercise, in the form attached hereto as
Schedule
1.2
(the "
Exercise Notice
"); and
|
|
(b)
|
Payment to the Company, for the account of the Company, of the Exercise Price for the number of Warrant Shares purchased payable in immediately available funds by wire transfer to the Company's bank account. The Exercise Price will be paid in United States Dollars or the equivalent sum in NIS according to the Bank of Israel exchange rate as published upon the date immediately prior to the exercise date.
|
|
1.3.
|
Exercise on Net Issuance Basis
. In lieu of payment to the Company as set forth in Section
1.2 above, the Holder may elect to exercise this Warrant into the number of Warrant Shares calculated pursuant to the formula below, by presentation and surrender thereof to the Company at its principal office or at such other office or agency it may designate from time to time, accompanied by a duly executed notice of exercise, in the form attached hereto as
Schedule 1.3
(the "
Net Issuance Notice
"):
|
|
X =
|
the number of Warrant Shares to be issued to the Holder;
|
|
Y =
|
the number of Warrant Shares in respect of which the net issuance election is being made;
|
|
A =
|
the Fair Market Value (as defined below) of one Warrant Share; and
|
|
B =
|
the Exercise Price of one Warrant Share.
|
|
(a)
|
If the net issuance right is exercised in connection with and contingent upon an initial public offering of the Company’s shares, then the initial “price to public” (i.e., before deduction of discounts, commissions or expenses) specified in the final prospectus or registration statement with respect to such offering.
|
|
(b)
|
If the net issuance right is exercised in connection with and contingent upon an Exit Event the price per Share in such Exit Event.
|
|
(c)
|
If the net issuance right is not exercised in connection with and contingent upon an initial public offering or an Exit Event, then as follows:
|
(i)
|
If the Shares are traded on a securities exchange, the Fair Market Value shall be deemed to be the average of the closing prices of the Shares on such exchange over the fifteen (15) trading days immediately prior to (but not including) the Determination Date;
|
(ii)
|
If the Shares are quoted for trading on an over-the-counter system, the Fair Market Value shall be deemed to be the average of the closing bid prices of the Shares over the fifteen (15) trading days immediately prior to (but not including) the Determination Date; and
|
(iii)
|
If there is no public market for the Shares, the Fair Market Value of the shares shall be determined in good faith by the Board of Directors of the Company.
|
|
1.4.
|
In the event that, upon the Last Date, the Fair Market Value of one Warrant Share (or other security issuable upon the exercise hereof) as determined in accordance with Section 1.3 above is greater than the Exercise Price in effect on such date, then, unless otherwise directed in writing by the Holder, this Warrant shall automatically be deemed on and as of such date to be exercised pursuant to Section 1.3 above with respect to all Warrant Shares (or such other securities) for which it shall not previously have been exercised, and the Company shall promptly deliver a certificate representing such number of Warrant Shares (or such other securities) issued upon such exercise to Holder.
|
|
1.5.
|
Issuance of Warrant Shares
. Upon presentation and surrender of this Warrant, accompanied by (a) the duly executed Exercise Notice and the payment of the applicable Exercise Price for the Warrant Shares being purchased pursuant to Section
1.2 above; or (b) the duly executed Net Issuance Notice pursuant to Section
1.3 above, as the case may be, the Company shall promptly (i) issue to the Holder the Warrant Shares to which the Holder is entitled; and (ii) deliver to the Holder the share certificate evidencing such Warrant Shares.
|
|
1.6.
|
Fractional Shares
. No fractions of shares shall be issued in connection with the exercise of this Warrant, and the number of shares issued shall be rounded up to the nearest whole number.
|
|
1.7.
|
Partial Exercise
. If this Warrant is exercised in part only, the Company shall, upon surrender of this Warrant for cancellation, execute and deliver a new Warrant evidencing the rights of the Holder to purchase the balance of the Warrant Shares purchasable hereunder.
|
|
1.8.
|
Additional Documents
. The Holder will sign and deliver any and all documents or approvals required by law, to facilitate the issuance of the Warrant Shares upon exercise of this Warrant.
|
|
1.9.
|
Loss or Destruction of Warrant
. Upon receipt by the Company of evidence reasonably satisfactory to it of the loss, theft, destruction or mutilation of this Warrant, and (in the case of loss, theft or destruction) of reasonable reimbursement of expenses and satisfactory indemnification, and upon surrender and cancellation of this Warrant, if mutilated, the Company will execute and deliver a new Warrant of like tenor and date.
|
2.
|
TAXES
|
|
2.1.
|
The Holder acknowledges that the grant of the Warrant, the issuance of the Warrant Shares and the execution and/or performance of this Warrant may have tax consequences to the Holder and that the Company is not able to ensure or represent to the Holder the nature and extent of such tax consequences.
|
|
2.2.
|
The Company shall pay all of the applicable taxes and other charges payable by the Company in connection with the issuance of the Warrant Shares and the preparation and delivery of share certificates in the name of the Holder (such as transfer taxes in respect of the issuance or delivery of Warrant Shares upon exercise of this Warrant), if any, but shall not pay any taxes payable by the Holder by virtue of the holding, issuance, exercise or sale of this Warrant or the Warrant Shares by the Holder.
|
3.
|
RESERVATION OF SHARES;
PRESERVATION OF RIGHTS OF HOLDER
|
|
3.1.
|
Reservation of Shares
. The Company hereby agrees that, at all times prior to the expiration or exercise of this Warrant, it will maintain and reserve, free from pre-emptive or similar rights, such number of authorized but unissued shares so that this Warrant may be exercised without additional authorization of shares.
|
|
3.2.
|
Preservation of Rights
. The Company will not, by amendment of its organizational documents or through reorganization, recapitalization, consolidation, merger, dissolution, transfer of assets, issue or sale of securities or any other voluntary act, avoid or seek to avoid the observance or performance of any of the covenants, stipulations, conditions or terms to be observed or performed hereunder, but will at all times in good faith assist in the carrying out of all the provisions hereof and in taking of all such actions and making all such adjustments as may be necessary or appropriate in order to fulfill the provisions hereof.
|
4.
|
ADJUSTMENT
|
|
4.1.
|
The number of Warrant Shares purchasable upon the exercise of this Warrant and the Exercise Price shall be subject to adjustment from time to time or upon exercise, as follows:
|
|
(a)
|
If the Company at any time or from time to time after the date hereof effects a subdivision of the outstanding Shares or consolidates the outstanding Shares, then the Exercise Price shall be adjusted to that price determined by multiplying the Exercise Price immediately prior to such event by a fraction:
|
|
(i)
|
the numerator of which shall be the total number of outstanding Shares immediately prior to such event; and
|
|
(ii)
|
the denominator of which shall be the total number of outstanding Shares immediately after such event.
|
|
(b)
|
If the Company at any time or from time to time after the date hereof makes, or fixes a record date for the determination of holders of Shares entitled to receive a dividend or other distribution payable in additional Shares, then in each such event the Exercise Price that is then in effect shall be adjusted as of the time of such issuance or, in the event such record date is fixed, as of the close of business on such record date, by multiplying the Exercise Price then in effect by a fraction:
|
|
(i)
|
the numerator of which is the total number of Shares issued and outstanding immediately prior to the time of such issuance or the close of business on such record date; and
|
|
(ii)
|
the denominator of which is the total number of Shares issued and outstanding immediately prior to the time of such issuance or the close of business on such record date plus the number of Shares issuable in payment of such dividend or distribution;
|
|
(c)
|
If the Company at any time or from time to time after the date hereof makes, or fixes a record date for the determination of holders of Shares entitled to receive, a dividend or other distribution payable in securities of the Company other than Shares, then in each such event provision shall be made so that the Holder shall receive upon exercise of this Warrant, in addition to the number of Shares receivable thereupon, the amount of other securities of the Company which it would have received had this Warrant been exercised for such number of Shares immediately prior to the date of such event (or record date of such event) and had the Holder thereafter, during the period from the date of such event to and including the exercise date, retained such securities receivable by it as aforesaid during such period, subject to all other adjustments called for during such period under this section and the Company's Articles of Association as shall be in effect from time to time, with respect to the rights of the Holder.
|
|
(d)
|
In case the Shares issuable upon exercise of this Warrant are changed into the same or different number of shares of any class or classes of shares, whether by recapitalization, reclassification or otherwise (other than a subdivision or consolidation of shares, share dividend or other reorganization, provided for elsewhere in this Section), then in each such event this Warrant shall be exercised into the kind and amount of shares or other securities and property receivable on such recapitalization, reclassification or other change that the Holder would have been entitled to receive thereupon had the Holder been the registered holder of the number of Shares into which this Warrant might have been exercised immediately prior thereto.
|
|
4.2.
|
Whenever an adjustment is effected hereunder, the Company shall, at its expense, promptly compute such adjustment and deliver to the Holder a certificate setting forth the number of Warrant Shares (or any other securities) for which this Warrant is exercisable and the Exercise Price as a result of such adjustment, a brief statement of the facts requiring such adjustment and the computation thereof and when such adjustment has or will become effective.
|
|
4.3.
|
Except as otherwise provided herein, Sections 4.1(a) to 4.1(d) hereof are intended to operate independently of one another. If an event occurs that requires the application of more than one subsection, all applicable subsections shall be given independent effect, but there shall be no duplicate adjustments if two separate subsections provide the same protection.
|
|
4.4.
|
Notices of Certain Transactions
. In case:
|
|
(a)
|
the Company shall take a record of the holders of its Shares (or other stock or securities at the time deliverable upon the exercise of this Warrant) for the purpose of entitling or enabling them to receive any dividend or other distribution, or
|
|
(b)
|
of the voluntary or involuntary dissolution, liquidation or winding-up of the Company
|
|
4.5.
|
In addition, in the event that the Company consummates a Deferred Closing (as defined in the Credit Line Agreement), the number of Warrant Shares issuable upon exercise of this Warrant shall be increased, such that following the adjustment, the number of the Warrant Shares underlying this Warrant shall be equal to the amount obtained by multiplying (i) such number of Ordinary Shares constituting 2% of the Company's share capital on a Fully Diluted Basis (as defined in the Credit Line Agreement) as of each such Deferred Closing by (ii) a fraction, the numerator of which is [___________]
[such Lender’s portion of the Credit Line Amount in U.S. Dollars to be inserted]
and the denominator of which is US$1,000,000.
|
5.
|
EXERCISE OF THE WARRANT UPON AN EXIT EVENT
|
6.
|
RIGHTS OF THE HOLDER
|
|
6.1.
|
This Warrant shall not entitle the Holder, by virtue hereof, to any voting rights or other rights as a shareholder of the Company, except for the rights expressly set forth herein.
|
|
6.2.
|
The Holder acknowledges that the Warrant Shares shall be subject to such rights, privileges, restrictions and limitations as set forth in this Warrant and the organizational documents of the Company (or any other agreement with respect thereto), as may be amended from time to time, and that, as a result,
inter alia
, of such limitations, it may be difficult or impossible for the Holder to realize his investment and/or to sell or otherwise transfer the Warrant Shares. The Holder further acknowledges that the Company's shares are not publicly traded.
|
7.
|
TERMINATION
|
8.
|
MISCELLANEOUS
|
|
8.1.
|
Entire Agreement; Amendment
. This Warrant sets forth the entire understanding of the parties with respect to the subject matter hereof and supersedes all existing agreements among them concerning such subject matter. All article and section headings herein are inserted for convenience only and shall not modify or affect the construction or interpretation of any provision of this Warrant. Subject to Section
8.9 below, no modification or amendment of this Warrant will be valid unless executed in writing by the Company and the Holder.
|
|
8.2.
|
Waiver
. No failure or delay on the part of any of the parties in exercising any right, power or privilege hereunder and/or under any applicable law or the exercise of such right or power in a manner inconsistent with the provisions of this Warrant or applicable law shall operate as a waiver thereof. Any waiver must be evidenced in writing signed by the party against whom the waiver is sought to be enforced.
|
|
8.3.
|
Successors and Assigns Transfer of this Warrant
. Except as otherwise expressly limited herein, this Warrant shall inure to the benefit of, be binding upon, and be enforceable by the Holder and its respective successors, and administrators. This Warrant may be transferred by the Holder to its Permitted Transferees (as such term is defined in the Company's Articles of Association as shall be in effect from time to time) and any other transfer shall be subject to the same restrictions on transfer set forth in the Amended Shareholders' Agreement (as defined in the Credit Line Agreement) as may be amended from time to time and the Company's Articles of Association as shall be in effect from time to time,
mutatis mutandis.
The transfer shall be recorded on the books of the Company upon the surrender of this Warrant, properly endorsed, to the Company at its principal offices, and the payment to the Company of all transfer taxes and other governmental charges imposed on such transfer. In the event of a partial transfer, the Company shall issue to the holders one or more appropriate new warrants.
|
|
8.4.
|
Governing Law
. This Warrant shall be exclusively governed and construed in accordance with the laws of the State of Israel, without regard to conflicts of laws provisions thereof.
|
|
8.5.
|
Arbitration
. Any dispute, controversy or claim arising in relation to this Warrant, including with regard to its validity, invalidity, breach, enforcement or termination, will be referred to a single arbitrator, who shall be appointed by the Head of the Israeli Bar Association. Arbitration proceedings shall take place in Tel Aviv, Israel, and shall be conducted in English and according to the rules of substantive law (per Section
8.4 above). The arbitrator will not be bound by rules of evidence or procedure and will give the reasons for his judgment. The arbitrator's decision shall be final and enforceable in any court. This paragraph shall constitute an arbitration agreement between the parties.
|
|
8.6.
|
Notices
. Any notice required or permitted to be given to a party pursuant to the provisions of this Warrant will be in writing and will be effective and deemed delivered to such party on the earliest of the following: (a) all notices and other communications delivered in person or by courier service shall be deemed to have been delivered as of actual delivery thereof; (b) those given by facsimile transmission shall be deemed delivered on the following business day after transmission, with confirmed transmission thereof; and/or (c) all notices and other communications sent by registered mail (or air mail if the posting is international) shall be deemed given three (3) days after posting.
|
|
8.7.
|
Severability
. If any provision of this Warrant is held to be unenforceable, this Warrant shall be considered divisible and such provision shall be deemed inoperative to the extent it is deemed unenforceable, and in all other respects this Warrant shall remain in full force and effect;
provided
,
however
, that if any such provision may be made enforceable by limitation thereof, then such provision shall be deemed to be so limited and shall be enforceable to the maximum extent permitted by applicable law.
|
|
8.8.
|
Counterparts
. This Warrant may be executed in any number of counterparts, each of which shall be an original, but all of which together shall constitute one instrument. Facsimile or electronic signatures of a party shall be binding as evidence of such party's agreement hereto and acceptance hereof.
|
|
8.9.
|
Amendments
. To the extent that any amendment(s) to the Credit Line Agreement or the transactions contemplated thereby result in a required amendment to the terms of this Warrant, this Warrant shall be deemed amended to the extent that the amendment(s) to the Credit Line Agreement are completed in accordance with the terms thereof.
|
Dated: October 14, 2014
|
Check-Cap Ltd.
Signature: __________________
Name: Guy Neev
Title: CEO
|
Names
|
Address
|
No. of Shares
|
________________________
|
_____________________________
|
____________________
|
________________________
|
_____________________________
|
____________________
|
Names
|
Address
|
No. of Shares
|
________________________
|
_____________________________
|
____________________
|
________________________
|
_____________________________
|
____________________
|
1.
|
EXERCISE OF WARRANT
|
|
1.1.
|
Warrant Period
. This Warrant, may be exercised, subject to the terms and conditions hereof, in whole or in part, at one time or from time to time, in accordance with the vesting schedule set forth in Section
1.2 below, during the period commencing on October 14, 2014 (the "
Initial Date
"), until the earlier of: (i) eight (8) years thereafter (i.e. October 14, 2022) (the "
Last Date
"); and (ii) the closing of an Exit Event (as defined in Section
5 below); provided that such Exit Event is consummated within 180 days from the Exit Event Notice (each of (i) or (ii), the "
Expiry Date
"). The period between the Initial Date and the Expiry Date shall be referred to hereinafter as the "
Warrant Period
."
|
|
1.2.
|
Vesting Schedule
. This Warrant shall vest on a quarterly basis in eight installments during a period of 24 months from the Initial Date, such that _____ of the Warrant Shares shall become vested and exercisable on January 14, 2015, and an additional ______ of the Warrant Shares shall become vested and exercisable at the end of each three (3) month period thereafter until 100% of the Warrant Shares are vested and exercisable. Notwithstanding the foregoing, subject to and upon the closing of an initial public offering, reverse merger, private placement, PIPE (private investment in public equity) transaction or any other form of equity financing in the Company, any unvested portion of this Warrant shall become fully vested and exercisable.
|
|
1.3.
|
Exercise for Cash
. Subject to the vesting schedule set forth above, this Warrant may be exercised by presentation and surrender thereof to the Company at its principal office or at such other office or agency as it may designate from time to time, accompanied by:
|
|
(a)
|
A duly executed notice of exercise, in the form attached hereto as
Schedule 1.3
(the "
Exercise Notice
"); and
|
|
(b)
|
Payment to the Company, for the account of the Company, of the Exercise Price for the number of Warrant Shares purchased payable in immediately available funds by wire transfer to the Company's bank account. The Exercise Price will be paid in United States Dollars or the equivalent sum in NIS according to the Bank of Israel exchange rate as published upon the date immediately prior to the exercise date.
|
|
1.4.
|
Exercise on Net Issuance Basis
. In lieu of payment to the Company as set forth in Section 1.3 above and subject to the vesting schedule set forth above, the Holder may elect to exercise this Warrant into the number of Warrant Shares calculated pursuant to the formula below, by presentation and surrender thereof to the Company at its principal office or at such other office or agency it may designate from time to time, accompanied by a duly executed notice of exercise, in the form attached hereto as
Schedule 1.4
(the "
Net Issuance Notice
"):
|
|
Y*(A - B)
X = -----------------
A
Where:
|
|
X =
|
the number of Warrant Shares to be issued to the Holder;
|
|
Y =
|
the number of Warrant Shares in respect of which the net issuance election is being made;
|
|
A =
|
the Fair Market Value (as defined below) of one Warrant Share; and
|
|
B =
|
the Exercise Price of one Warrant Share.
|
|
(a)
|
If the net issuance right is exercised in connection with and contingent upon an initial public offering of the Company’s shares, then the initial “price to public” (i.e., before deduction of discounts, commissions or expenses) specified in the final prospectus or registration statement with respect to such offering.
|
|
(b)
|
If the net issuance right is exercised in connection with and contingent upon an Exit Event, the price per Share in such Exit Event.
|
|
(c)
|
If the net issuance right is not exercised in connection with and contingent upon an initial public offering or an Exit Event, then as follows:
|
(i)
|
If the Shares are traded on a securities exchange, the Fair Market Value shall be deemed to be the average of the closing prices of the Shares on such exchange over the fifteen (15) trading days immediately prior to (but not including) the Determination Date;
|
(ii)
|
If the Shares are quoted for trading on an over-the-counter system, the Fair Market Value shall be deemed to be the average of the closing bid prices of the Shares over the fifteen (15) trading days immediately prior to (but not including) the Determination Date; and
|
(iii)
|
If there is no public market for the Shares, the Fair Market Value of the shares shall be determined in good faith by the Board of Directors of the Company.
|
|
1.5.
|
In the event that, upon the Last Date, the Fair Market Value of one Warrant Share (or other security issuable upon the exercise hereof) as determined in accordance with Section
1.4 above is greater than the Exercise Price in effect on such date, then, unless otherwise directed in writing by the Holder, this Warrant shall automatically be deemed on and as of such date to be exercised pursuant to Section
1.4 above with respect to all Warrant Shares (or such other securities) for which it shall not previously have been exercised, and the Company shall promptly deliver a certificate representing such number of Warrant Shares (or such other securities) issued upon such exercise to Holder.
|
|
1.6.
|
Issuance of Warrant Shares
. Upon presentation and surrender of this Warrant, accompanied by (a) the duly executed Exercise Notice and the payment of the applicable Exercise Price for the Warrant Shares being purchased pursuant to Section
1.3 above; or (b) the duly executed Net Issuance Notice pursuant to Section
1.4 above, as the case may be, the Company shall promptly (i) issue to the Holder the Warrant Shares to which the Holder is entitled; and (ii) deliver to the Holder the share certificate evidencing such Warrant Shares.
|
|
1.7.
|
Fractional Shares
. No fractions of shares shall be issued in connection with the exercise of this Warrant, and the number of shares issued shall be rounded up to the nearest whole number.
|
|
1.8.
|
Partial Exercise
. If this Warrant is exercised in part only, the Company shall, upon surrender of this Warrant for cancellation, execute and deliver a new Warrant evidencing the rights of the Holder to purchase the balance of the Warrant Shares purchasable hereunder.
|
|
1.9.
|
Additional Documents
. The Holder will sign and deliver any and all documents or approvals required by law, to facilitate the issuance of the Warrant Shares upon exercise of this Warrant.
|
|
1.10.
|
Loss or Destruction of Warrant
. Upon receipt by the Company of evidence reasonably satisfactory to it of the loss, theft, destruction or mutilation of this Warrant, and (in the case of loss, theft or destruction) of reasonable reimbursement of expenses and satisfactory indemnification, and upon surrender and cancellation of this Warrant, if mutilated, the Company will execute and deliver a new Warrant of like tenor and date.
|
2.
|
TAXES
|
|
2.1.
|
The Holder acknowledges that the grant of the Warrant, the issuance of the Warrant Shares and the execution and/or performance of this Warrant may have tax consequences to the Holder and that the Company is not able to ensure or represent to the Holder the nature and extent of such tax consequences.
|
|
2.2.
|
The Company shall pay all of the applicable taxes and other charges payable by the Company in connection with the issuance of the Warrant Shares and the preparation and delivery of share certificates in the name of the Holder (such as transfer taxes in respect of the issuance or delivery of Warrant Shares upon exercise of this Warrant), if any, but shall not pay any taxes payable by the Holder by virtue of the holding, issuance, exercise or sale of this Warrant or the Warrant Shares by the Holder.
|
3.
|
RESERVATION OF SHARES;
PRESERVATION OF RIGHTS OF HOLDER
|
|
3.1.
|
Reservation of Shares
. The Company hereby agrees that, at all times prior to the expiration or exercise of this Warrant, it will maintain and reserve, free from pre-emptive or similar rights, such number of authorized but unissued shares so that this Warrant may be exercised without additional authorization of shares.
|
|
3.2.
|
Preservation of Rights
. The Company will not, by amendment of its organizational documents or through reorganization, recapitalization, consolidation, merger, dissolution, transfer of assets, issue or sale of securities or any other voluntary act, avoid or seek to avoid the observance or performance of any of the covenants, stipulations, conditions or terms to be observed or performed hereunder, but will at all times in good faith assist in the carrying out of all the provisions hereof and in taking of all such actions and making all such adjustments as may be necessary or appropriate in order to fulfill the provisions hereof.
|
4.
|
ADJUSTMENT
|
|
4.1.
|
The number of Warrant Shares purchasable upon the exercise of this Warrant and the Exercise Price shall be subject to adjustment from time to time or upon exercise, as follows:
|
|
(a)
|
If the Company at any time or from time to time after the date hereof effects a subdivision of the outstanding Shares or consolidates the outstanding Shares, then the Exercise Price shall be adjusted to that price determined by multiplying the Exercise Price immediately prior to such event by a fraction:
|
|
(i)
|
the numerator of which shall be the total number of outstanding Shares immediately prior to such event; and
|
|
(ii)
|
the denominator of which shall be the total number of outstanding Shares immediately after such event.
|
|
(b)
|
If the Company at any time or from time to time after the date hereof makes, or fixes a record date for the determination of holders of Shares entitled to receive a dividend or other distribution payable in additional Shares, then in each such event the Exercise Price that is then in effect shall be adjusted as of the time of such issuance or, in the event such record date is fixed, as of the close of business on such record date, by multiplying the Exercise Price then in effect by a fraction:
|
|
(i)
|
the numerator of which is the total number of Shares issued and outstanding immediately prior to the time of such issuance or the close of business on such record date; and
|
|
(ii)
|
the denominator of which is the total number of Shares issued and outstanding immediately prior to the time of such issuance or the close of business on such record date plus the number of Shares issuable in payment of such dividend or distribution;
|
|
(c)
|
If the Company at any time or from time to time after the date hereof makes, or fixes a record date for the determination of holders of Shares entitled to receive, a dividend or other distribution payable in securities of the Company other than Shares, then in each such event provision shall be made so that the Holder shall receive upon exercise of this Warrant, in addition to the number of Shares receivable thereupon, the amount of other securities of the Company which it would have received had this Warrant been exercised for such number of Shares immediately prior to the date of such event (or record date of such event) and had the Holder thereafter, during the period from the date of such event to and including the exercise date, retained such securities receivable by it as aforesaid during such period, subject to all other adjustments called for during such period under this section and the Company's Articles of Association as shall be in effect from time to time, with respect to the rights of the Holder.
|
|
(d)
|
In case the Shares issuable upon exercise of this Warrant are changed into the same or different number of shares of any class or classes of shares, whether by recapitalization, reclassification or otherwise (other than a subdivision or consolidation of shares, share dividend or other reorganization, provided for elsewhere in this Section), then in each such event this Warrant shall be exercised into the kind and amount of shares or other securities and property receivable on such recapitalization, reclassification or other change that the Holder would have been entitled to receive thereupon had the Holder been the registered holder of the number of Shares into which this Warrant might have been exercised immediately prior thereto.
|
|
4.2.
|
Whenever an adjustment is effected hereunder, the Company shall, at its expense, promptly compute such adjustment and deliver to the Holder a certificate setting forth the number of Warrant Shares (or any other securities) for which this Warrant is exercisable and the Exercise Price as a result of such adjustment, a brief statement of the facts requiring such adjustment and the computation thereof and when such adjustment has or will become effective.
|
|
4.3.
|
Except as otherwise provided herein, Sections 4.1(a) to 4.1(d) hereof are intended to operate independently of one another. If an event occurs that requires the application of more than one subsection, all applicable subsections shall be given independent effect, but there shall be no duplicate adjustments if two separate subsections provide the same protection.
|
|
4.4.
|
Notices of Certain Transactions
. In case:
|
|
(a)
|
the Company shall take a record of the holders of its Shares (or other stock or securities at the time deliverable upon the exercise of this Warrant) for the purpose of entitling or enabling them to receive any dividend or other distribution, or
|
|
(b)
|
of the voluntary or involuntary dissolution, liquidation or winding-up of the Company
then, and in each such case, the Company will mail or cause to be mailed to the Holder a notice specifying, as the case may be, (i) the date on which a record is to be taken for the purpose of such dividend or distribution, and stating the amount and character of such dividend or distribution, or (ii) the effective date on which such voluntary dissolution, liquidation or winding-up is to take place, and the time, if any is to be fixed, as of which the holders of record of Shares (or such other shares or securities at the time deliverable upon such voluntary dissolution, liquidation or winding-up) are to be determined. Such notice shall be mailed at least ten (10) days prior to the record date or effective date for the event specified in such notice.
|
5.
|
EXERCISE OF THE WARRANT UPON AN EXIT EVENT
|
6.
|
RIGHTS OF THE HOLDER
|
|
6.1.
|
This Warrant shall not entitle the Holder, by virtue hereof, to any voting rights or other rights as a shareholder of the Company, except for the rights expressly set forth herein.
|
|
6.2.
|
The Holder acknowledges that the Warrant Shares shall be subject to such rights, privileges, restrictions and limitations as set forth in this Warrant and the organizational documents of the Company (or any other agreement with respect thereto), as may be amended from time to time, and that, as a result,
inter alia
, of such limitations, it may be difficult or impossible for the Holder to realize his investment and/or to sell or otherwise transfer the Warrant Shares. The Holder further acknowledges that the Company's shares are not currently publicly traded.
|
7.
|
TERMINATION
|
8.
|
MISCELLANEOUS
|
|
8.1.
|
Entire Agreement; Amendment
. This Warrant sets forth the entire understanding of the parties with respect to the subject matter hereof and supersedes all existing agreements among them concerning such subject matter. All article and section headings herein are inserted for convenience only and shall not modify or affect the construction or interpretation of any provision of this Warrant. No modification or amendment of this Warrant will be valid unless executed in writing by the Company and the Holder.
|
|
8.2.
|
Waiver
. No failure or delay on the part of any of the parties in exercising any right, power or privilege hereunder and/or under any applicable law or the exercise of such right or power in a manner inconsistent with the provisions of this Warrant or applicable law shall operate as a waiver thereof. Any waiver must be evidenced in writing signed by the party against whom the waiver is sought to be enforced.
|
|
8.3.
|
Successors and Assigns Transfer of this Warrant
. Except as otherwise expressly limited herein, this Warrant shall inure to the benefit of, be binding upon, and be enforceable by the Holder and its respective successors, and administrators. This Warrant may be transferred by the Holder to its Permitted Transferees (as such term is defined in the Company's Articles of Association as shall be in effect from time to time) and any other transfer shall be subject to the same restrictions on transfer set forth in the Amended Shareholders' Agreement (as defined in the Credit Line Agreement) as may be amended from time to time, and the Company's Articles of Association as shall be in effect from time to time,
mutatis mutandis.
The transfer shall be recorded on the books of the Company upon the surrender of this Warrant, properly endorsed, to the Company at its principal offices, and the payment to the Company of all transfer taxes and other governmental charges imposed on such transfer. In the event of a partial transfer, the Company shall issue to the holders one or more appropriate new warrants.
|
|
8.4.
|
Governing Law
. This Warrant shall be exclusively governed and construed in accordance with the laws of the State of Israel, without regard to conflicts of laws provisions thereof.
|
|
8.5.
|
Arbitration
. Any dispute, controversy or claim arising in relation to this Warrant, including with regard to its validity, invalidity, breach, enforcement or termination, will be referred to a single arbitrator, who shall be appointed by the Head of the Israeli Bar Association. Arbitration proceedings shall take place in Tel Aviv, Israel, and shall be conducted in English and according to the rules of substantive law (per Section
8.4 above). The arbitrator will not be bound by rules of evidence or procedure and will give the reasons for his judgment. The arbitrator's decision shall be final and enforceable in any court. This paragraph shall constitute an arbitration agreement between the parties.
|
|
8.6.
|
Notices
. Any notice required or permitted to be given to a party pursuant to the provisions of this Warrant will be in writing and will be effective and deemed delivered to such party on the earliest of the following: (a) all notices and other communications delivered in person or by courier service shall be deemed to have been delivered as of actual delivery thereof; (b) those given by facsimile transmission shall be deemed delivered on the following business day after transmission, with confirmed transmission thereof; and/or (c) all notices and other communications sent by registered mail (or air mail if the posting is international) shall be deemed given three (3) days after posting.
|
|
8.7.
|
Severability
. If any provision of this Warrant is held to be unenforceable, this Warrant shall be considered divisible and such provision shall be deemed inoperative to the extent it is deemed unenforceable, and in all other respects this Warrant shall remain in full force and effect;
provided
,
however
, that if any such provision may be made enforceable by limitation thereof, then such provision shall be deemed to be so limited and shall be enforceable to the maximum extent permitted by applicable law.
|
|
8.8.
|
Counterparts
. This Warrant may be executed in any number of counterparts, each of which shall be an original, but all of which together shall constitute one instrument. Facsimile or electronic signatures of a party shall be binding as evidence of such party's agreement hereto and acceptance hereof.
|
Dated: _________, 2014
|
Check-Cap Ltd.
Signature: __________________
Name: Guy Neev
Title: CEO
|
Names
|
Address
|
No. of Shares
|
________________________
|
_____________________________
|
____________________
|
________________________
|
_____________________________
|
____________________
|
Names
|
Address
|
No. of Shares
|
________________________
|
_____________________________
|
____________________
|
________________________
|
_____________________________
|
____________________
|
1.
|
EXERCISE OF WARRANT
|
|
1.1.
|
Warrant Period
. This Warrant, may be exercised, subject to the terms and conditions hereof, in whole or in part, at one time or from time to time, subject to and following the vesting of the Warrant as set forth in Section
1.2 below, until the earlier of: (i) October 14, 2022 (the "
Last Date
"); and (ii) the closing of an Exit Event (as defined in Section
5 below); provided that such Exit Event is consummated within 180 days from the Exit Event Notice (each of (i) or (ii), the "
Expiry Date
").
|
|
1.2.
|
Vesting Schedule
. This Warrant shall vest and become exercisable only upon the consummation of the IPO and provided that the IPO is consummated on or prior to the Expiry Date. For the avoidance of doubt, if the IPO is not consummated on or prior to the Expiry Date, the Warrant shall not be exercisable and shall expire.
|
|
1.3.
|
Exercise for Cash
. Subject to the vesting schedule set forth above, this Warrant may be exercised by presentation and surrender thereof to the Company at its principal office or at such other office or agency as it may designate from time to time, accompanied by:
|
|
(a)
|
A duly executed notice of exercise, in the form attached hereto as
Schedule 1.3
(the "
Exercise Notice
"); and
|
|
(b)
|
Payment to the Company, for the account of the Company, of the Exercise Price for the number of Warrant Shares purchased payable in immediately available funds by wire transfer to the Company's bank account. The Exercise Price will be paid in United States Dollars or the equivalent sum in NIS according to the Bank of Israel exchange rate as published upon the date immediately prior to the exercise date.
|
|
1.4.
|
Exercise on Net Issuance Basis
. In lieu of payment to the Company as set forth in Section 1.3 above and subject to the vesting schedule set forth above, the Holder may elect to exercise this Warrant into the number of Warrant Shares calculated pursuant to the formula below, by presentation and surrender thereof to the Company at its principal office or at such other office or agency it may designate from time to time, accompanied by a duly executed notice of exercise, in the form attached hereto as
Schedule 1.4
(the "
Net Issuance Notice
"):
|
|
Y*(A - B)
X = -----------------
A
Where:
|
|
X =
|
the number of Warrant Shares to be issued to the Holder;
|
|
Y =
|
the number of Warrant Shares in respect of which the net issuance election is being made;
|
|
A =
|
the Fair Market Value (as defined below) of one Warrant Share; and
|
|
B =
|
the Exercise Price of one Warrant Share.
|
|
(a)
|
If the net issuance right is exercised in connection with and contingent upon an Exit Event, the price per Share in such Exit Event.
|
|
(b)
|
If the net issuance right is not exercised in connection with and contingent upon an Exit Event, then as follows:
|
(i)
|
If the Shares are traded on a securities exchange, the Fair Market Value shall be deemed to be the average of the closing prices of the Shares on such exchange over the fifteen (15) trading days immediately prior to (but not including) the Determination Date;
|
(ii)
|
If the Shares are quoted for trading on an over-the-counter system, the Fair Market Value shall be deemed to be the average of the closing bid prices of the Shares over the fifteen (15) trading days immediately prior to (but not including) the Determination Date; and
|
(iii)
|
If there is no public market for the Shares, the Fair Market Value of the shares shall be determined in good faith by the Board of Directors of the Company.
|
|
1.5.
|
In the event that, upon the Last Date, the Fair Market Value of one Warrant Share (or other security issuable upon the exercise hereof) as determined in accordance with Section
1.4 above is greater than the Exercise Price in effect on such date, then, unless otherwise directed in writing by the Holder, this Warrant shall automatically be deemed on and as of such date to be exercised pursuant to Section
1.4 above with respect to all Warrant Shares (or such other securities) for which it shall not previously have been exercised, and the Company shall promptly deliver a certificate representing such number of Warrant Shares (or such other securities) issued upon such exercise to Holder.
|
|
1.6.
|
Issuance of Warrant Shares
. Upon presentation and surrender of this Warrant, accompanied by (a) the duly executed Exercise Notice and the payment of the applicable Exercise Price for the Warrant Shares being purchased pursuant to Section
1.3 above; or (b) the duly executed Net Issuance Notice pursuant to Section
1.4 above, as the case may be, the Company shall promptly (i) issue to the Holder the Warrant Shares to which the Holder is entitled; and (ii) deliver to the Holder the share certificate evidencing such Warrant Shares.
Upon receipt by the Company of this Warrant and the applicable duly executed notice of exercise (and the Exercise Price for the Warrant Shares being purchased, if applicable), together with any other documents and/or approvals that may be required by law, the Holder shall be deemed to be the holder of record of the Warrant Shares issuable upon such exercise, notwithstanding that the share transfer books of the Company shall then be closed or that certificates representing such shares shall not then be actually delivered to the Holder.
|
|
1.7.
|
Fractional Shares
. No fractions of shares shall be issued in connection with the exercise of this Warrant, and the number of shares issued shall be rounded up to the nearest whole number.
|
|
1.8.
|
Partial Exercise
. If this Warrant is exercised in part only, the Company shall, upon surrender of this Warrant for cancellation, execute and deliver a new Warrant evidencing the rights of the Holder to purchase the balance of the Warrant Shares purchasable hereunder.
|
|
1.9.
|
Additional Documents
. The Holder will sign and deliver any and all documents or approvals required by law, to facilitate the issuance of the Warrant Shares upon exercise of this Warrant.
|
|
1.10.
|
Loss or Destruction of Warrant
. Upon receipt by the Company of evidence reasonably satisfactory to it of the loss, theft, destruction or mutilation of this Warrant, and (in the case of loss, theft or destruction) of reasonable reimbursement of expenses and satisfactory indemnification, and upon surrender and cancellation of this Warrant, if mutilated, the Company will execute and deliver a new Warrant of like tenor and date.
|
2.
|
TAXES
|
|
2.1.
|
The Holder acknowledges that the grant of the Warrant, the issuance of the Warrant Shares and the execution and/or performance of this Warrant may have tax consequences to the Holder and that the Company is not able to ensure or represent to the Holder the nature and extent of such tax consequences.
|
|
2.2.
|
The Company shall pay all of the applicable taxes and other charges payable by the Company in connection with the issuance of the Warrant Shares and the preparation and delivery of share certificates in the name of the Holder (such as transfer taxes in respect of the issuance or delivery of Warrant Shares upon exercise of this Warrant), if any, but shall not pay any taxes payable by the Holder by virtue of the holding, issuance, exercise or sale of this Warrant or the Warrant Shares by the Holder.
|
3.
|
RESERVATION OF SHARES;
PRESERVATION OF RIGHTS OF HOLDER
|
|
3.1.
|
Reservation of Shares
. The Company hereby agrees that, at all times prior to the expiration or exercise of this Warrant, it will maintain and reserve, free from pre-emptive or similar rights, such number of authorized but unissued shares so that this Warrant may be exercised without additional authorization of shares.
|
|
3.2.
|
Preservation of Rights
. The Company will not, by amendment of its organizational documents or through reorganization, recapitalization, consolidation, merger, dissolution, transfer of assets, issue or sale of securities or any other voluntary act, avoid or seek to avoid the observance or performance of any of the covenants, stipulations, conditions or terms to be observed or performed hereunder, but will at all times in good faith assist in the carrying out of all the provisions hereof and in taking of all such actions and making all such adjustments as may be necessary or appropriate in order to fulfill the provisions hereof.
|
4.
|
ADJUSTMENT
|
|
4.1.
|
The number of Warrant Shares purchasable upon the exercise of this Warrant and the Exercise Price shall be subject to adjustment from time to time or upon exercise, as follows:
|
|
(a)
|
If the Company at any time or from time to time after the date hereof effects a subdivision of the outstanding Shares or consolidates the outstanding Shares, then the Exercise Price shall be adjusted to that price determined by multiplying the Exercise Price immediately prior to such event by a fraction:
|
|
(i)
|
the numerator of which shall be the total number of outstanding Shares immediately prior to such event; and
|
|
(ii)
|
the denominator of which shall be the total number of outstanding Shares immediately after such event.
|
|
Upon each adjustment of the Exercise Price as provided in this paragraph (a), the Holder shall thereafter be entitled to acquire, at the Exercise Price resulting from such adjustment, the number of Shares (calculated to the nearest Share) obtained by multiplying the Exercise Price in effect immediately prior to such adjustment by the number of Shares which may be acquired hereunder immediately prior to such adjustment and dividing the product thereof by the Exercise Price resulting from such adjustment.
|
|
(b)
|
If the Company at any time or from time to time after the date hereof makes, or fixes a record date for the determination of holders of Shares entitled to receive a dividend or other distribution payable in additional Shares, then in each such event the Exercise Price that is then in effect shall be adjusted as of the time of such issuance or, in the event such record date is fixed, as of the close of business on such record date, by multiplying the Exercise Price then in effect by a fraction:
|
|
(i)
|
the numerator of which is the total number of Shares issued and outstanding immediately prior to the time of such issuance or the close of business on such record date; and
|
|
(ii)
|
the denominator of which is the total number of Shares issued and outstanding immediately prior to the time of such issuance or the close of business on such record date plus the number of Shares issuable in payment of such dividend or distribution;
|
|
provided, however
, that if such record date is fixed and such dividend is not fully paid or if such distribution is not fully made on the date fixed therefor, the Exercise Price shall be recomputed accordingly as of the close of business on such record date and thereafter the Exercise Price shall be adjusted pursuant to this section to reflect the actual payment of such dividend or distribution. Upon each adjustment of the Exercise Price as provided in this paragraph (b), the Holder shall thereafter be entitled to acquire, at the Exercise Price resulting from such adjustment, the number of Shares (calculated to the nearest Share) obtained by multiplying the Exercise Price in effect immediately prior to such adjustment by the number of Shares which may be acquired hereunder immediately prior to such adjustment and dividing the product thereof by the Exercise Price resulting from such adjustment.
|
|
(c)
|
If the Company at any time or from time to time after the date hereof makes, or fixes a record date for the determination of holders of Shares entitled to receive, a dividend or other distribution payable in securities of the Company other than Shares, then in each such event provision shall be made so that the Holder shall receive upon exercise of this Warrant, in addition to the number of Shares receivable thereupon, the amount of other securities of the Company which it would have received had this Warrant been exercised for such number of Shares immediately prior to the date of such event (or record date of such event) and had the Holder thereafter, during the period from the date of such event to and including the exercise date, retained such securities receivable by it as aforesaid during such period, subject to all other adjustments called for during such period under this section and the Company's Articles of Association as shall be in effect from time to time, with respect to the rights of the Holder.
|
|
(d)
|
In case the Shares issuable upon exercise of this Warrant are changed into the same or different number of shares of any class or classes of shares, whether by recapitalization, reclassification or otherwise (other than a subdivision or consolidation of shares, share dividend or other reorganization, provided for elsewhere in this Section), then in each such event this Warrant shall be exercised into the kind and amount of shares or other securities and property receivable on such recapitalization, reclassification or other change that the Holder would have been entitled to receive thereupon had the Holder been the registered holder of the number of Shares into which this Warrant might have been exercised immediately prior thereto.
|
|
4.2.
|
Whenever an adjustment is effected hereunder, the Company shall, at its expense, promptly compute such adjustment and deliver to the Holder a certificate setting forth the number of Warrant Shares (or any other securities) for which this Warrant is exercisable and the Exercise Price as a result of such adjustment, a brief statement of the facts requiring such adjustment and the computation thereof and when such adjustment has or will become effective.
|
|
4.3.
|
Except as otherwise provided herein, Sections 4.1(a) to 4.1(d) hereof are intended to operate independently of one another. If an event occurs that requires the application of more than one subsection, all applicable subsections shall be given independent effect, but there shall be no duplicate adjustments if two separate subsections provide the same protection.
|
|
4.4.
|
Notices of Certain Transactions
. In case:
|
|
(a)
|
the Company shall take a record of the holders of its Shares (or other stock or securities at the time deliverable upon the exercise of this Warrant) for the purpose of entitling or enabling them to receive any dividend or other distribution, or
|
|
(b)
|
of the voluntary or involuntary dissolution, liquidation or winding-up of the Company
then, and in each such case, the Company will mail or cause to be mailed to the Holder a notice specifying, as the case may be, (i) the date on which a record is to be taken for the purpose of such dividend or distribution, and stating the amount and character of such dividend or distribution, or (ii) the effective date on which such voluntary dissolution, liquidation or winding-up is to take place, and the time, if any is to be fixed, as of which the holders of record of Shares (or such other shares or securities at the time deliverable upon such voluntary dissolution, liquidation or winding-up) are to be determined. Such notice shall be mailed at least ten (10) days prior to the record date or effective date for the event specified in such notice.
|
5.
|
EXERCISE OF THE WARRANT UPON AN EXIT EVENT
|
6.
|
RIGHTS OF THE HOLDER
|
|
6.1.
|
This Warrant shall not entitle the Holder, by virtue hereof, to any voting rights or other rights as a shareholder of the Company, except for the rights expressly set forth herein.
|
|
6.2.
|
The Holder acknowledges that the Warrant Shares shall be subject to such rights, privileges, restrictions and limitations as set forth in this Warrant and the organizational documents of the Company (or any other agreement with respect thereto), as may be amended from time to time, and that, as a result,
inter alia
, of such limitations, it may be difficult or impossible for the Holder to realize his investment and/or to sell or otherwise transfer the Warrant Shares. The Holder further acknowledges that the Company's shares are currently not publicly traded.
|
7.
|
TERMINATION
|
8.
|
MISCELLANEOUS
|
|
8.1.
|
Entire Agreement; Amendment
. This Warrant sets forth the entire understanding of the parties with respect to the subject matter hereof and supersedes all existing agreements among them concerning such subject matter. All article and section headings herein are inserted for convenience only and shall not modify or affect the construction or interpretation of any provision of this Warrant. No modification or amendment of this Warrant will be valid unless executed in writing by the Company and the Holder.
|
|
8.2.
|
Waiver
. No failure or delay on the part of any of the parties in exercising any right, power or privilege hereunder and/or under any applicable law or the exercise of such right or power in a manner inconsistent with the provisions of this Warrant or applicable law shall operate as a waiver thereof. Any waiver must be evidenced in writing signed by the party against whom the waiver is sought to be enforced.
|
|
8.3.
|
Successors and Assigns Transfer of this Warrant
. Except as otherwise expressly limited herein, this Warrant shall inure to the benefit of, be binding upon, and be enforceable by the Holder and its respective successors, and administrators. This Warrant may be transferred by the Holder to its Permitted Transferees (as such term is defined in the Company's Articles of Association as shall be in effect from time to time) and any other transfer shall be subject to the same restrictions on transfer set forth in the Amended and Restated Shareholders' Agreement as may be amended from time to time, and the Company's Articles of Association as shall be in effect from time to time,
mutatis mutandis.
The transfer shall be recorded on the books of the Company upon the surrender of this Warrant, properly endorsed, to the Company at its principal offices, and the payment to the Company of all transfer taxes and other governmental charges imposed on such transfer. In the event of a partial transfer, the Company shall issue to the holders one or more appropriate new warrants.
|
|
8.4.
|
Governing Law
. This Warrant shall be exclusively governed and construed in accordance with the laws of the State of Israel, without regard to conflicts of laws provisions thereof.
|
|
8.5.
|
Arbitration
. Any dispute, controversy or claim arising in relation to this Warrant, including with regard to its validity, invalidity, breach, enforcement or termination, will be referred to a single arbitrator, who shall be appointed by the Head of the Israeli Bar Association. Arbitration proceedings shall take place in Tel Aviv, Israel, and shall be conducted in English and according to the rules of substantive law (per Section
8.4 above). The arbitrator will not be bound by rules of evidence or procedure and will give the reasons for his judgment. The arbitrator's decision shall be final and enforceable in any court. This paragraph shall constitute an arbitration agreement between the parties.
|
|
8.6.
|
Notices
. Any notice required or permitted to be given to a party pursuant to the provisions of this Warrant will be in writing and will be effective and deemed delivered to such party on the earliest of the following: (a) all notices and other communications delivered in person or by courier service shall be deemed to have been delivered as of actual delivery thereof; (b) those given by facsimile transmission shall be deemed delivered on the following business day after transmission, with confirmed transmission thereof; and/or (c) all notices and other communications sent by registered mail (or air mail if the posting is international) shall be deemed given three (3) days after posting.
|
|
8.7.
|
Severability
. If any provision of this Warrant is held to be unenforceable, this Warrant shall be considered divisible and such provision shall be deemed inoperative to the extent it is deemed unenforceable, and in all other respects this Warrant shall remain in full force and effect;
provided
,
however
, that if any such provision may be made enforceable by limitation thereof, then such provision shall be deemed to be so limited and shall be enforceable to the maximum extent permitted by applicable law.
|
|
8.8.
|
Counterparts
. This Warrant may be executed in any number of counterparts, each of which shall be an original, but all of which together shall constitute one instrument. Facsimile or electronic signatures of a party shall be binding as evidence of such party's agreement hereto and acceptance hereof.
|
Dated: _________, 2014
|
Check-Cap Ltd.
Signature: __________________
Name: Guy Neev
Title: CEO
|
Names
|
Address
|
No. of Shares
|
________________________
|
_____________________________
|
____________________
|
________________________
|
_____________________________
|
____________________
|
Names
|
Address
|
No. of Shares
|
________________________
|
_____________________________
|
____________________
|
________________________
|
_____________________________
|
____________________
|
WHEREAS
,
|
the Parties are parties to that certain Credit Line Agreement, dated August 20, 2014 (the "
Agreement
"). Capitalized terms used, but not defined herein, shall have the meaning ascribed to such terms in the Agreement, of which this Addendum constitutes an integral part; and
|
WHEREAS
,
|
the Parties desire to clarify and amend certain provisions in the Agreement, as more fully set forth herein.
|
1.
|
The Agreement shall be clarified and amended as follows:
|
|
(a)
|
In Section 6 of the Agreement
, the words "the Fifth Amended and Restated Articles of Association" in the second sentence, shall be deleted in their entirety and replaced by the words "the Sixth Amended and Restated Articles of Association." Accordingly,
Exhibit 6(a)
of the Agreement shall be replaced with the Sixth Amended and Restated Articles of Association in the form attached hereto as
Exhibit A
.
|
|
(b)
|
Section 7.2.3 of the Agreement
shall be amended and restated to read in its entirety as follows: "The Company, the Lenders and the parties to the Amended and Restated Shareholders’ Agreement dated March 17, 2011 (either as an original signatory or by virtue of a joinder thereto) shall execute and deliver the Amended Shareholders' Agreement."
|
|
(c)
|
In Section 10.2.2 of the Agreement
, the words "907,154,180 Ordinary Shares" in subsection (i) shall be deleted in their entirety and replaced with the words "867,154,180 Ordinary Shares," and the words "5,000,000 Preferred D3 Shares" in subsection (ix) shall be deleted in their entirety and replaced with the words "45,000,000 Preferred D3 Shares."
|
|
(d)
|
Section 11.3 of the Agreement
shall be amended and restated to read in its entirety as follows: "The Lender is either (i) an "accredited investor" as defined in Rule 501(a) under the U.S. Securities Act of 1933, as amended (the "
Securities Act
"), and the rules and regulations promulgated thereunder; or (ii) outside the United States and is not a "U.S. Person," as such term is defined in Rule 902 of Regulation S under the Securities Act."
|
|
(e)
|
In Section 2.2 of Exhibit 4.2 of the Agreement
(
Automatic Conversion Upon an M&A Event
), the last sentence in the first paragraph shall be amended and restated to read in its entirety as follows: "In the event that during the period commencing on the Effective Date and ending on the closing of the M&A event, the Company shall not have issued shares to New Investors against equity investment in the Company, then the Preferred D-3 Shares of the Company shall be deemed the M&A Senior Shares and the M&A Conversion Price shall be equal to the lower of (i) a price per share reflecting a 25% discount on the original issued price of the Preferred D-3 Shares; and (ii) a price per share reflecting a 25% discount on the lowest price per share consideration paid with respect to the Preferred D-3 Shares in the M&A Event."
|
2.
|
Except as otherwise provided herein, the provisions of the Agreement (including its exhibits and schedules) shall remain in full force and effect. In the event of any inconsistency between the provisions of this Addendum and the terms of the Agreement, the provisions of this Addendum will prevail.
|
3.
|
This Addendum may be signed in counterparts and delivered electronically or via facsimile, each such counterpart (whether delivered electronically, via facsimile or otherwise), when executed, shall be deemed an original and all of which together constitute one and the same agreement.
|
Check-Cap Ltd.
By _________________________
Name: _________________________
Title: _________________________
|
Shanghai Fosun Pharmaceutical Group Co. Ltd.
By: _________________________
Name: _________________________
Title: _________________________
|
Counterpoint Ventures Fund II LP
By: _________________________
Name: _________________________
Title: _________________________
|
|
Pontifax (Cayman) II L.P.
By: _________________________
Name: _________________________
Title: _________________________
|
Pontifax (Israel) II Individual Investors L.P.
By: _________________________
Name: _________________________
Title: _________________________
|
|
Pontifax (Israel) II L.P.
By: _________________________
Name: _________________________
Title: _________________________
|
Docor International BV
By: _________________________
Name: _________________________
Title: _________________________
|
Bart Superannuation Pty Ltd.
By: _________________________
Name: _________________________
Title: _________________________
|
Joshua Ehrlich
By: _________________________
Name: _________________________
Title: _________________________
|
Nir Grinberg
By: _________________________
Name: _________________________
Title: _________________________
|
DPC Big Bay Properties Trust
By: _________________________
Name: _________________________
Title: _________________________
|
|
Avraham Kuzitsky
By: _________________________
Name: _________________________
Title: _________________________
|
Pinchas Dekel
By: _________________________
Name: _________________________
Title: _________________________
|
|
Minrav Holdings Ltd.
By: _________________________
Name: _________________________
Title: _________________________
|
Sharon Zaworbach
By: _________________________
Name: _________________________
Title: _________________________
|
|
Moshe Haviv
By: _________________________
Name: _________________________
Title: _________________________
|
H.M.L.K Financial Consulting Ltd.
By: _________________________
Name: _________________________
Title: _________________________
|
Yossi Smira
By: _________________________
Name: _________________________
Title: _________________________
|
Capital Point Ltd.
By: _________________________
Name: _________________________
Title: _________________________
|
|
Emil Mor- Business & Financial Consulting Ltd.
By: _________________________
Name: _________________________
Title: _________________________
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Norman Jackson
By: _________________________
Name: _________________________
Title: _________________________
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Shevlin Ciral
By: _________________________
Name: _________________________
Title: _________________________
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Scott Jackson
By: _________________________
Name: _________________________
Title: _________________________
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GE Ventures Limited
By: _________________________
Name: _________________________
Title: _________________________
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Dor Benvenisty
By: _________________________
Name: _________________________
Title: _________________________
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Uri Perelman
By: _________________________
Name: _________________________
Title: _________________________
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Everest Fund L.P.
By: _________________________
Name: _________________________
Title: _________________________
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Harmony (Ben Dov) Ltd.
By: _________________________
Name: _________________________
Title: _________________________
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Beetson Nominees (Panama) Inc.
By: _________________________
Name: _________________________
Title: _________________________
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Red Car Group
By: _________________________
Name: _________________________
Title: _________________________
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Yossi Avraham
By: _________________________
Name: _________________________
Title: _________________________
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WHEREAS
,
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the Parties are parties to that certain Credit Line Agreement dated August 20, 2014, as amended by the Addendum to Credit Line Agreement dated October 14, 2014 (together and collectively with all exhibits and schedules thereto, the "
Agreement
"). Capitalized terms used, but not defined herein, shall have the meaning ascribed to such terms in the Agreement, of which this Addendum constitutes an integral part; and
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WHEREAS
,
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the Parties desire to clarify and amend certain provisions in the Agreement, as more fully set forth herein.
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1.
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The Parties hereto acknowledge and agree that in the event that the Company shall exercise its right under Section 5.1 of the Agreement, the Lenders’ investment and acquisition of securities of the Company pursuant thereto shall be made in a separate private placement that shall be consummated simultaneously with the consummation of the IPO (the "
Simultaneous Private Placement
") and such investment shall not be part of the IPO itself.
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2.
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Accordingly, the phrases "in an IPO" and "in the IPO" in the Agreement, the Irrevocable Letters of Instructions delivered by the Lenders pursuant to Section 7.2.10 of the Agreement and the Escrow Agreement (including the Exhibits thereto), shall be replaced with the phrases "in a Simultaneous Private Placement" and "in the Simultaneous
Private Placement," respectively.
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3.
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Each Lender hereby acknowledges and agrees to the representation and warranties set forth on
Exhibit A
hereto.
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4.
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Except as otherwise provided herein, the provisions of the Agreement shall remain in full force and effect. In the event of any inconsistency between the provisions of this Addendum and the terms of the Agreement, the provisions of this Addendum will prevail.
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5.
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This Addendum may be signed in counterparts and delivered electronically or via facsimile, each such counterpart (whether delivered electronically, via facsimile or otherwise), when executed, shall be deemed an original and all of which together constitute one and the same agreement.
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Check-Cap Ltd.
By: _________________________
Name: _________________________
Title: _________________________
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Shanghai Fosun Pharmaceutical Group Co. Ltd.
By: _________________________
Name: _________________________
Title: _________________________
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Counterpoint Ventures Fund II LP
By: _________________________
Name: _________________________
Title: _________________________
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Pontifax (Cayman) II L.P.
By: _________________________
Name: _________________________
Title: _________________________
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Pontifax (Israel) II Individual Investors L.P.
By: _________________________
Name: _________________________
Title: _________________________
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Pontifax (Israel) II L.P.
By: _________________________
Name: _________________________
Title: _________________________
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Docor International BV
By: _________________________
Name: _________________________
Title: _________________________
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Yossi Smira
By: _________________________
Name: _________________________
Title: _________________________
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Capital Point Ltd.
By: _________________________
Name: _________________________
Title: _________________________
|
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Emil Mor- Business & Financial Consulting Ltd.
By: _________________________
Name: _________________________
Title: _________________________
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Norman Jackson
By: _________________________
Name: _________________________
Title: _________________________
|
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Shevlin Ciral
By: _________________________
Name: _________________________
Title: _________________________
|
Scott Jackson
By: _________________________
Name: _________________________
Title: _________________________
|
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GE Ventures Limited
By: _________________________
Name: _________________________
Title: _________________________
|
Dor Benvenisty
By: _________________________
Name: _________________________
Title: _________________________
|
Uri Perelman
By: _________________________
Name: _________________________
Title: _________________________
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Everest Fund L.P.
By: _________________________
Name: _________________________
Title: _________________________
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Harmony (Ben Dov) Ltd.
By: _________________________
Name: _________________________
Title: _________________________
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Beetson Nominees (Panama) Inc.
By: _________________________
Name: _________________________
Title: _________________________
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Red Car Group
By: _________________________
Name: _________________________
Title: _________________________
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Yossi Avraham
By: _________________________
Name: _________________________
Title: _________________________
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(1)
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Each Lender acknowledges and understands that any securities purchased by and issued to such Lender pursuant to the Agreement, including, without limitation, in connection with the Simultaneous Private Placement in accordance with Section 5 above and upon conversion of the Conversion Amount or placement of the Escrow Amount in accordance with Exhibit 4.2 of the Agreement
(i) will be acquired from the Company in a transaction not involving a public offering in the United States within the meaning of the Securities Act; and (ii) have not been and will not be registered under the Securities Act. Each Lender further acknowledges that if in the future it decides to offer, resell, pledge or otherwise transfer such securities, such securities may be offered, resold, pledged or otherwise transferred only pursuant to an effective registration statement filed under the Securities Act or in a transaction that is exempt from the registration requirements of the Securities Act. Each Lender further acknowledges that such Lender is acquiring such securities solely for investment purposes, for such Lender’s own account and not for the account or benefit of any other person, and not with a view towards the distribution or dissemination thereof and that such Lender has no present arrangement to sell such securities to or through any person or entity. Each Lender acknowledges that it is able to bear the economic risk of its investment in such securities for an indefinite period of time and that such securities must be held indefinitely unless such securities are subsequently registered under the Securities Act or an exemption from registration is available. Each Lender represents that it is sophisticated in financial matters and is able to evaluate the risks and benefits of the investment in such securities. Each Lender acknowledges, in making the decision to acquire such securities, it has relied upon an independent investigation of the Company and has not relied upon any information or representations made by any third parties or upon any oral or written representations or assurances from the Company, its officers, directors or employees or any other representatives or agents of the Company, other than as set forth in this Agreement. Each Lender acknowledges that it is familiar with the business, operations and financial condition of the Company and has had an opportunity to ask questions of, and receive answers from, the Company’s officers and directors concerning the Company and the terms and conditions of the offering of such securities and has had full access to such other information concerning the Company as such Lender has requested. Each Lender understands that such securities are being offered and sold to such Lender in reliance on specific provisions of United States federal and state securities laws and that the Company is relying upon the truth and accuracy of the representations, warranties, agreements, acknowledgments and understandings of the Lender set forth in this Agreement in order to determine the applicability of such provisions.
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(2)
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Each Lender acknowledges and understands that any securities purchased by and issued to the Lender pursuant to the Agreement, including, without limitation, in connection with the Simultaneous Private Placement in accordance with Section 5 or upon conversion of the Conversion Amount or placement of the Escrow Amount in accordance with Exhibit 4.2 of the Agreement will bear the following legend:
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